<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 16, 1997
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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TSI INTERNATIONAL SOFTWARE LTD.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 7372 06-1132156
(PRIMARY STANDARD (I.R.S. EMPLOYER
(STATE OR OTHER INDUSTRIAL IDENTIFICATION NO.)
JURISDICTION OF CLASSIFICATION CODE
INCORPORATION OR NUMBER)
ORGANIZATION)
----------------
45 DANBURY ROAD
WILTON, CT 06897
(203)761-8600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
CONSTANCE F. GALLEY
PRESIDENT AND CHIEF EXECUTIVE OFFICER
TSI INTERNATIONAL SOFTWARE LTD.
45 DANBURY ROAD
WILTON, CT 06897
(203)761-8600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
----------------
COPIES TO:
MARK C. STEVENS, ESQ. LAWRENCE S. WITTENBERG, ESQ.
JEFFREY R. VETTER, ESQ. HEATHER M. STONE, ESQ.
G. CHIN CHAO, ESQ. TESTA, HURWITZ & THIBEAULT, LLP
FENWICK & WEST LLP HIGH STREET TOWER
TWO PALO ALTO SQUARE 125 HIGH STREET
PALO ALTO, CA 94306 BOSTON, MA 02110
(415) 494-0600 (617) 248-7000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
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, check the following box and
list the Securities Act registration statement number of 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 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. [_]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
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<S> <C> <C>
Common Stock, $0.01 par value per
share............................ $40,000,000.00 $12,121.21
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</TABLE>
(1) Estimated pursuant to Rule 457(o) solely for the purpose of calculating
the amount of the registration fee.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+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 MAY 16, 1997
SHARES
[LOGO]
COMMON STOCK
Of the shares of Common Stock offered hereby, shares are being sold by
TSI International Software Ltd. ("TSI" or the "Company") and shares are being
sold by the Selling Stockholders. See "Principal and Selling Stockholders." The
Company will not receive any of the proceeds from the sale of shares by the
Selling Stockholders. Prior to this offering, there has been no public market
for the Common Stock of the Company. It is currently estimated that the initial
public offering price will be between $ and $ per share. See "Underwriting"
for information relating to the method of determining the initial public
offering price.
-----------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 6.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
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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<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS COMPANY(1) STOCKHOLDERS
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<S> <C> <C> <C> <C>
Per Share..................... $ $ $ $
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Total(2)...................... $ $ $ $
</TABLE>
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(1) Before deducting expenses payable by the Company, estimated at $ .
(2) Certain of the Selling Stockholders have granted to the Underwriters a 30-
day option to purchase an aggregate of up to an additional shares of
Common Stock solely to cover over-allotments, if any. See "Underwriting."
If such option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to Selling Stockholders
will be $ , $ and $ , respectively.
-----------
The Common Stock is offered by the Underwriters as stated 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 delivery of such shares will be
made through the offices of Robertson, Stephens & Company LLC ("Robertson,
Stephens & Company"), San Francisco, California, on or about , 1997.
ROBERTSON, STEPHENS & COMPANY
SOUNDVIEW FINANCIAL GROUP, INC.
WESSELS, ARNOLD & HENDERSON
The date of this Prospectus is , 1997.
<PAGE>
[PICTURES TO COME]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE>
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, BY ANY SELLING STOCKHOLDER OR BY ANY UNDERWRITER.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT
RELATES, OR AN OFFER TO, OR THE SOLICITATION OF, ANY PERSON IN ANY
JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary................................................................ 4
Risk Factors........................................................... 6
Use of Proceeds........................................................ 17
Dividend Policy........................................................ 17
Capitalization......................................................... 18
Dilution............................................................... 19
Selected Financial Data................................................ 20
Management's Discussion and Analysis of Financial Condition and Results
of Operations......................................................... 21
Business............................................................... 31
Management............................................................. 42
Certain Transactions................................................... 51
Principal and Selling Stockholders..................................... 52
Description of Capital Stock........................................... 54
Shares Eligible for Future Sale........................................ 56
Underwriting........................................................... 58
Legal Matters.......................................................... 59
Experts................................................................ 59
Additional Information................................................. 59
Index to Financial Statements.......................................... F-1
</TABLE>
----------------
The Company was incorporated in Connecticut in 1985 and reincorporated in
Delaware in September 1993. The Company's principal executive offices are
located at 45 Danbury Road, Wilton, CT 06897 and its telephone number is (203)
761-8600. The Company has additional offices in Boca Raton, Florida,
Bannockburn, Illinois and Cobham, England.
The Company intends to furnish its stockholders with annual reports
containing financial statements certified by an independent public accounting
firm and, upon request, quarterly reports containing unaudited financial
statements for the first three quarters of each year.
TSI, the TSI logo, Mercator, Trading Partner, OnCall and KEY/MASTER are
registered trademarks, and Mercator for R/3, Trading Partner EC, Trading
Partner PC, Trading Partner PC/32 and OnCall*EDI are trademarks, of the
Company. This Prospectus also contains trademarks and trade names of other
companies.
3
<PAGE>
SUMMARY
This Prospectus contains forward-looking statements which 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 under "Risk Factors" and elsewhere in this
Prospectus. The following summary is qualified in its entirety by the more
detailed information, including "Risk Factors," and the Financial Statements
and Notes thereto, appearing elsewhere in this Prospectus.
THE COMPANY
TSI International Software Ltd. ("TSI" or the "Company") is a leading
provider of software and related services that enable organizations to
integrate their business applications both internally and with external
business partners. The Company's flagship product, Mercator, is a data
transformation engine which permits enterprises to exchange information between
internal systems, to implement and integrate advanced client/server
applications such as SAP's R/3 enterprise resource planning ("ERP") system and
to integrate electronic data interchange ("EDI") data and Web-based
applications with their core business systems. In addition to Mercator, the
Company's Trading Partner products permit businesses to exchange information
with business partners and to integrate EDI data with back office applications.
The evolution of enterprise computing has resulted in a proliferation of
business software applications across disparate and heterogeneous computing
systems. To improve effectiveness, efficiency and competitive positioning,
organizations are increasingly seeking to integrate and coordinate these
applications, both within the enterprise and with a growing number of external
business partners. The traditional approach to application integration -- in-
house custom development of interfaces -- is limited in its effectiveness and
is expensive, with integration costs for purchased business applications often
exceeding the cost of the applications themselves. The requirement for
integration, and the need for software tools which automate the integration
process, is increased with each new client/server, electronic commerce or Web-
based application added to the enterprise.
TSI's products provide comprehensive off-the-shelf integration solutions that
can be quickly implemented and easily maintained and that provide support for a
broad range of applications, platforms, and data types. Mercator was the first
product to be certified by SAP for use with its Application Link Enabling
("ALE") architecture, an inter-application messaging technology developed by
SAP as a standard for interfacing with R/3. Mercator addresses the need of SAP
customers to integrate R/3 with legacy and third-party applications in less
time and at lower cost than developing in-house custom interfaces. Similarly,
for external applications, the Company's Mercator and Trading Partner tools
permit customers to integrate business processes across their supply and demand
chains by leveraging the Internet and other transport mechanisms for EDI.
The Company's strategy is to be the market leader in providing solutions that
integrate business applications within the enterprise and between business
partners. Specifically, the Company seeks to extend its technology leadership
in application integration, particularly with respect to its Mercator product
line, and intends to target the market for enterprise application integration
with tools and solutions for the SAP R/3 and other enterprise applications
markets. In addition to these market and product strategies, the Company
intends to expand its existing channels of distribution, leverage its customer
base by marketing additional products and services to existing customers, and
to expand its professional services capability to augment its software
offerings.
The Company markets its products and services through its direct sales force
and a network of value added resellers ("VARs"), independent software vendors
("ISVs"), systems integrators ("SIs") and distributors. TSI has directly
licensed its products to over 6,000 customers worldwide, representing a broad
range of industries. The Company's customers include Allegiance Corporation,
American Express Travel Related Services, Inc., CIGNA Corporation, Citibank,
N.A., Federal Express Corporation, Hewlett-Packard Company, Hoechst AG,
International Business Machines Corporation, Lucent Technologies, Inc., NYNEX
Corporation and Prudential Insurance Company of America.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company...... shares
Common Stock offered by the Selling
Stockholders............................ shares
Common Stock to be outstanding after the
Offering................................ shares(1)
Use of Proceeds.......................... Repayment of indebtedness and general
corporate purposes, including working
capital. See "Use of Proceeds."
Proposed Nasdaq National Market symbol... TSFW
</TABLE>
SUMMARY FINANCIAL INFORMATION
(In thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------------------------- ---------------
1992 1993 1994 1995 1996 1996 1997
----------- ------- ------- ------- ------- ------- -------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Total revenues.......... $11,358 $12,843 $13,934 $16,061 $19,004 $ 4,089 $ 5,508
Operating income (loss). (4,794) (1,002) 95 907 1,414 162 352
Net income (loss)....... (4,864) (1,228) (113) 823 1,228 121 313
Net income (loss) per
share(2)............... $ 0.22 $ 0.31 $ 0.03 $ 0.07
Weighted average number
of common and common
equivalent shares
outstanding(2)......... 3,740 3,961 3,767 4,270
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1997
-----------------------
ACTUAL AS ADJUSTED(3)
------- --------------
(unaudited)
<S> <C> <C>
BALANCE SHEET DATA:
Cash.................................................... $ 79 $
Working capital......................................... (158)
Total assets............................................ 8,721
Total stockholders' equity (deficiency)................. (2,032)
</TABLE>
- --------
(1) Based on shares outstanding as of March 31, 1997. Excludes (i) 735,238
shares of Common Stock issuable upon the exercise of options outstanding as
of March 31, 1997 under the Company's 1993 Stock Option Plan (the "1993
Plan") at a weighted average exercise price of $0.79 per share, (ii)
728,938 shares of Common Stock issuable upon exercise of outstanding
warrants that will remain outstanding upon the completion of this offering
("Warrants") at an exercise price of $3.00 per share and (iii) an aggregate
of 1,655,776 additional shares of Common Stock reserved for issuance under
the Company's 1997 Equity Incentive Plan, 1997 Directors Stock Option Plan
and 1997 Employee Stock Purchase Plan.
(2) For an explanation of the determination of the number of shares used in
computing per share amounts, see Note 1 of Notes to Financial Statements.
(3) Adjusted to reflect the sale of the shares offered by the Company
hereby at an assumed initial public offering price per share of $ and
the application of the net proceeds therefrom, after deducting the
estimated underwriting discounts and commissions and estimated offering
expenses. See "Capitalization" and "Use of Proceeds."
Unless otherwise indicated, all information in this Prospectus assumes no
exercise of the Underwriters' over-allotment option. See "Underwriting." Except
as otherwise noted herein, all information in this Prospectus has been adjusted
to give effect to the Company's reincorporation in Delaware in September 1993,
and reflects (i) a 2-for-1 stock split to be effected immediately prior to the
consummation of this offering and (ii) the conversion, upon completion of this
offering, of all outstanding shares of Preferred Stock of the Company into an
aggregate of 1,843,038 shares of Common Stock.
5
<PAGE>
RISK FACTORS
This Prospectus contains forward-looking statements which 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 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.
UNCERTAIN PROFITABILITY; ACCUMULATED DEFICIT
Although the Company has been profitable since 1995, the Company incurred
significant operating losses through 1993 and, at March 31, 1997, the
Company's accumulated deficit was approximately $9.7 million. There can be no
assurance that the Company's profitability will continue. The Company
introduced its Mercator product line in December 1993 and released the latest
version of this product in May 1996. The relatively recent introduction of the
Mercator product line and the relative immaturity of its market, together with
the factors described under "-- Potential Fluctuations in Quarterly Results;
Seasonality," make the prediction of future operating results impossible. The
Company's past financial performance should not be considered indicative of
future results. Although the Company has experienced growth in revenues and
net income in recent periods, there can be no assurance that revenues or net
income will continue to increase or not decrease. Future operating results
will depend on many factors, including the growth of the market for business
application integration software and related services, demand for and market
acceptance of the Company's products and related services, particularly its
Mercator products and related services, demand for and market acceptance of
the SAP R/3 system, the level of competition, the Company's success in
expanding its direct sales force, indirect distribution channels and its
professional services business, the ability of the Company to further develop
and market its products, product enhancements and new products, general
economic conditions and other factors. See "-- Potential Fluctuations in
Operating Results; Seasonality" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
POTENTIAL FLUCTUATIONS IN OPERATING RESULTS; SEASONALITY
The Company's quarterly and annual operating results have varied
significantly in the past and are expected to do so in the future.
Accordingly, the Company believes that period to period comparisons of its
results of operations are not necessarily meaningful and should not be relied
upon as indications of future performance. The Company's revenues and results
of operations are difficult to forecast and could be adversely affected by
many factors, including, among others: the size, timing and terms of
individual license transactions; the sales cycle for the Company's products;
demand for and market acceptance of the Company's products and related
services (particularly its Mercator products); the number of businesses
implementing the SAP R/3 system as well as the number of such businesses
requiring third party business application integration software and related
services; the Company's ability to expand, and market acceptance of, its
professional services business; the timing of expenditures by the Company in
anticipation of product releases or increased revenue; the timing of product
enhancements and product introductions by the Company and its competitors;
market acceptance of enhanced versions of the Company's existing products and
of new products; changes in pricing policies of the Company and its
competitors; variations in the mix of products and services sold by the
Company; the mix of channels through which products and services are sold; the
success of the Company in penetrating international markets; the buying
patterns and budgeting cycles of customers; personnel changes, the Company's
ability to attract and retain qualified sales, professional services and
research and development personnel and the rate at which such personnel become
productive; and general economic conditions. In particular, the ability of the
Company to achieve growth in the future will depend on its success in adding a
substantial number of sales, professional services and research and
development personnel. Competition for such personnel is intense and there can
be no assurance the Company will be able to attract and retain these
personnel.
6
<PAGE>
Licensing of the Company's software products historically has accounted for
a substantial portion of the Company's revenues, and the Company anticipates
that this trend will continue for the foreseeable future. Software license
revenues are difficult to forecast for a number of reasons. The Company
typically does not have a material backlog of unfilled orders, and revenues in
any quarter are substantially dependent on orders booked and shipped in that
quarter. The length of the sales cycles for the Company's products can vary
significantly from customer to customer and from product to product and, in
certain instances, can be as long as nine months or more. Furthermore, the
terms and conditions of individual license transactions, including prices and
discounts, may be negotiated based on volumes and commitments, and may vary
considerably from customer to customer. In addition, the Company has generally
recognized a substantial portion of its quarterly software licensing revenues
in the last month of each quarter. Accordingly, the cancellation or deferral
of even a small number of purchases of the Company's products has in the past
and could in the future have a material adverse effect on the Company's
business, operating results and financial condition.
The Company's future revenues will also be difficult to predict and the
Company has, in the past, failed to achieve its revenue expectations for
certain periods. The Company's expense levels are based, in part, on its
expectation of future revenues, and expense levels are, to a large extent,
fixed in the short term. The Company may be unable to adjust spending in a
timely manner to compensate for any unexpected revenue shortfall. If revenue
levels are below expectations for any reason, operating results are likely to
be materially and adversely affected. Net income may be disproportionately
affected by a reduction in revenue because a large portion of the Company's
expenses is related to headcount that cannot be easily reduced without
adversely affecting the Company's business. In addition, the Company currently
intends to increase its operating expenses by expanding its research and
product development staff, particularly research and development personnel to
be devoted to the Company's Mercator product line, increasing its professional
services and sales and marketing operations, expanding distribution channels
and hiring personnel in other operating areas. The Company expects to
experience a significant time lag between the date professional services,
sales and technical personnel are hired and the date such personnel become
fully productive. The timing of such expansion and the rate at which new
technical, professional services and sales personnel become productive as well
as the timing of the introduction and success of new distribution channels
could cause material fluctuations in quarterly results of operations.
Furthermore, to the extent such increased operating expenses precede or are
not subsequently followed by increased revenues, the Company's business,
operating results and financial condition could be materially and adversely
affected.
Due to the foregoing factors, it is likely that in some future quarter the
Company's revenue or operating results will not meet the expectations of
public market analysts and investors. In such event, the price of the
Company's Common Stock would likely be materially and adversely affected.
While the Company has not historically experienced any significant seasonal
fluctuations in its revenues or results of operations, it is not uncommon for
software companies to experience strong fourth quarters followed by weaker
first quarters, in some cases with sequential declines in revenues or
operating profit. The Company believes that many software companies exhibit
this pattern in their sales cycles primarily due to customers' buying patterns
and budget cycles. There can be no assurance that the Company will not display
this pattern in future years. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
DEPENDENCE ON MERCATOR PRODUCT LINE
The Company introduced its Mercator products in 1993. In recent years, a
significant portion of the Company's revenue has been attributable to licenses
of its Mercator products and related services, and the Company expects that
revenue attributable to its Mercator products and related services will
represent an increasing portion of the Company's total revenue for the
foreseeable future. The development and marketing of its Mercator product line
has required the Company to, among other things, focus its attention and
resources away from some of its traditional products, market its products to a
different customer base and shift a large portion of its development efforts
to the Mercator product line. Accordingly, the Company's
7
<PAGE>
future operating results are highly dependent on the market acceptance and
growth of its Mercator product line and enhancements thereto. There can be no
assurance that market acceptance of the Mercator product line will increase or
remain at current levels or that the Company will be able to successfully
market the Mercator product line and develop extensions and enhancements to
this product line on a long-term basis. In the event the Company's current or
future competitors release new products that provide, or are perceived as
providing, more advanced features, greater functionality, better performance,
better compatibility with other systems or lower prices than the Mercator
product line, demand for the Company's products and services would likely
decline. See "-- Risks Associated with Technological Change, Product
Enhancements and New Product Development" and "-- Competition." A decline in
demand for, or market acceptance of, the Mercator product line as a result of
competition, technological change or other factors would have a material
adverse effect on the Company's business, operating results and financial
condition. See "Business -- Products and Services."
DEPENDENCE ON SAP R/3 SYSTEM IMPLEMENTATIONS
A substantial portion of the Company's sales of its Mercator products and
related services has been attributable to sales of Mercator for R/3 and
related services. The Company believes that its future revenue growth, if any,
will also depend in part upon continued sales of Mercator for R/3 and related
services. The Company has devoted and must continue to devote substantial
resources to identifying potential customers in the R/3 market, building
relationships with strategic partners and attracting and retaining skilled
technical, sales and professional services personnel with expertise in R/3
systems. Personnel with expertise in the R/3 system are in high demand and as
such are typically difficult to hire and retain. Regardless of the investments
the Company makes in pursuing this new market, there can be no assurance that
the Company will be successful in implementing a sales and marketing strategy
appropriate for this market or in attracting and retaining the necessary
skilled personnel.
Demand for and market acceptance of Mercator for R/3 and related services
will be dependent on the continued market acceptance of the SAP R/3 system. As
a result, any factor adversely affecting demand for or use of SAP's R/3 system
could have a material adverse effect on the Company's business, operating
results and financial condition. Implementation of the SAP R/3 system is a
costly and time-consuming process and there can be no assurance that
businesses will choose to purchase such systems. Furthermore, there can be no
assurance that businesses which may implement such systems will wish to commit
the additional resources required to implement Mercator for R/3. In addition,
SAP could in the future introduce business application integration solutions
competitive with Mercator for R/3 and related services. Moreover, any changes
in or new versions of SAP's R/3 system could materially and adversely affect
the Company's business, operating results and financial condition if the
Company were not able to successfully develop or implement any related changes
to Mercator for R/3 in a timely fashion. The Company will also be required to
maintain ALE certification for Mercator for R/3. In order to maintain such
certification, the Company's product must adhere to SAP's technical
specifications which are updated by SAP from time to time, and the Company has
no control over whether and when such specifications will be changed. Any
material change by SAP in such specifications could require the Company to
devote significant development resources to updating this product to comply
with such specifications. In such event, there can be no assurance that the
Company would be able to successfully modify Mercator for R/3 on a timely
basis, if at all, and any failure to do so could materially and adversely
affect the Company's business, operating results and financial condition.
RISKS ASSOCIATED WITH TECHNOLOGICAL CHANGE, PRODUCT ENHANCEMENTS AND NEW
PRODUCT DEVELOPMENT
The market for the Company's products and services is characterized by
extremely rapid technological change, frequent new product introductions and
enhancements, evolving industry standards, and rapidly changing customer
requirements. The introduction of products incorporating new technologies and
the
8
<PAGE>
emergence of new industry standards could render existing products obsolete
and unmarketable. Accordingly, the life cycles of the Company's products are
difficult to estimate. The Company's future success will depend in part upon
its ability to anticipate changes and enhance its current products and develop
and introduce new products that keep pace with technological advancements and
address the increasingly sophisticated needs of its customers. The Company's
products may be rendered obsolete if the Company fails to anticipate or react
to change. Development of enhancements to existing products and new products
depends, in part, on the timing of releases of new versions of applications
systems by vendors, the introduction of new applications, systems or computing
platforms, the timing of changes in platforms, the release of new standards or
changes to existing standards, and changing customer requirements, among other
factors. 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, evolving industry standards and changing customer
requirements, that the Company will not experience difficulties that could
delay or prevent the successful development, introduction and marketing of
these products or product enhancements, or that its product enhancements or
new products will adequately meet the requirements of the marketplace and
achieve any significant degree of market acceptance. The Company has in the
past experienced delays in the introduction of product enhancements and new
products and may experience such delays in the future. Furthermore, as the
number of applications, systems and platforms supported by the Company's
products increases, the Company could experience difficulties in developing on
a timely basis product enhancements which address the increased number of new
versions of applications, systems or platforms served by its existing
products. Failure of the Company, for technological or other reasons, to
develop and introduce product enhancements or new products in a timely and
cost-effective manner or to anticipate and respond adequately to changing
market conditions, as well as any significant delay in product development or
introduction, could cause customers to delay or decide against purchases of
the Company's products, which could have a material adverse effect on the
Company's business, operating results and financial condition.
The Company may, in the future, seek to develop and market enhancements to
existing products or new products which are targeted for applications, systems
or platforms which the Company believes will achieve commercial acceptance.
These efforts could require the Company to devote significant development and
sales and marketing personnel as well as other resources to such efforts which
would otherwise be available for other purposes. There can be no assurance
that the Company will be able to successfully identify such applications,
systems or platforms, or that such applications, systems or platforms will
achieve commercial acceptance or that the Company will realize a sufficient
return on its investment. Failure of these targeted applications, systems or
platforms to achieve commercial acceptance or the failure of the Company to
achieve a sufficient return on its investment could have a material adverse
effect on the Company's business, operating results and financial condition.
In addition, the introduction or announcement by the Company, or by one or
more of its current or future competitors, of products embodying new
technologies or features could render the Company's existing products obsolete
or unmarketable. There can be no assurance that the introduction or
announcement of enhanced or new product offerings by the Company or its
current or future competitors will not cause customers to defer or cancel
purchases of existing Company products. Such deferment or cancellation of
purchases could have a material adverse effect on the Company's business,
operating results and financial condition.
DEPENDENCE UPON DEVELOPMENT OF DISTRIBUTION CHANNELS
An integral part of the Company's strategy is to expand both its direct
sales force and its indirect sales channels such as VARs, ISVs, SIs and
distributors. Although VARs, ISVs, SIs and distributors have not accounted for
a substantial percentage of the Company's total revenues historically, the
Company is increasing resources dedicated to developing and expanding its
indirect distribution channels. There can be no assurance that the Company
will be successful in expanding the number of indirect distribution channels
for its products.
9
<PAGE>
Furthermore, any new VARs, ISVs, SIs or distributors may offer competing
products, or have no minimum purchase requirements of the Company's products.
There can also be no assurance that such third parties will provide adequate
levels of services and technical support. The inability of the Company to
enter into additional indirect distribution arrangements, the failure of such
third parties to perform under agreements with the Company and to penetrate
their markets, or the inability of the Company to retain and manage VARs,
ISVs, SIs and distributors with the technical and industry expertise required
to market the Company's products successfully could have a material adverse
effect on the Company's business, operating results and financial condition.
There can be no assurance that the Company's planned efforts to expand its use
of VARs, ISVs, SIs and distributors will be successful. To the extent that the
Company is successful in increasing its sales through indirect sales channels,
it expects that those sales will be at lower per unit prices than sales
through direct channels, and revenue to the Company for each such sale will be
less than if the Company had licensed the same product to the customer
directly.
Selling through indirect channels may limit the Company's contacts with its
customers. As a result, the Company's ability to accurately forecast sales,
evaluate customer satisfaction and recognize emerging customer requirements
may be hindered. The Company's strategy of marketing its products directly to
end-users and indirectly through VARs, ISVs, SIs and distributors may result
in distribution channel conflicts. The Company's direct sales efforts may
compete with those of its indirect channels and, to the extent different
resellers target the same customers, resellers may also come into conflict
with each other. Although the Company has attempted to manage its distribution
channels to avoid potential conflicts, there can be no assurance that channel
conflicts will not materially and adversely affect its relationships with
existing VARs, ISVs, SIs or distributors or adversely affect its ability to
attract new VARs, ISVs, SIs and distributors.
The Company also plans to expand its direct sales force. The Company's
future success will depend in part upon the ability of the Company to attract,
integrate, train, motivate and retain new sales personnel. There can be no
assurance that the Company's efforts to expand its direct sales force will be
successful or that the cost of such efforts will not exceed the revenue
generated. In addition, the Company expects to experience a significant time
lag between the date sales personnel are hired and the date such personnel
become fully productive. The Company's inability to manage its sales force
expansion effectively could have a material adverse effect on the Company's
business, operating results and financial condition.
DEPENDENCE ON KEY PERSONNEL; NEED TO ATTRACT AND RETAIN SALES, PROFESSIONAL
SERVICES AND TECHNICAL PERSONNEL
The Company's future success depends in large part on the continued service
of its key technical, professional services and sales personnel, as well as
senior management. The loss of the services of any of one or more of the
Company's key employees could have a material adverse effect on the Company's
business, operating results and financial condition. All employees are
employed at-will and the Company has no fixed-term employment agreements with
its employees. The Company's future success also depends on its ability to
attract, train and retain highly qualified sales, technical, professional
services and managerial personnel, particularly sales, professional services
and technical personnel with expertise in the SAP R/3 system. An increase in
the Company's sales staff is required to expand both the Company's direct and
indirect sales activities and to achieve revenue growth. Competition for such
personnel is intense, particularly for personnel with expertise in the SAP R/3
system, and there can be no assurance that the Company can attract, assimilate
or retain such personnel. The Company has at times experienced and continues
to experience difficulty in recruiting qualified technical and sales
personnel, and anticipates such difficulties in the future. The Company has in
the past experienced and in the future expects to continue to experience a
significant time lag between the date technical, professional services and
sales personnel are hired and the date such personnel become fully productive.
If the Company is unable to hire and train on a timely basis and subsequently
retain such personnel in the future, the Company's business, operating results
and financial condition could be materially and adversely affected.
10
<PAGE>
MANAGEMENT OF GROWTH
The Company's business has grown in recent periods, with total revenues
increasing from $13.9 million in 1994 to $16.1 million in 1995 and $19.0
million in 1996 and increasing from $4.1 million for the first quarter of 1996
to $5.5 million for the comparable period of 1997. The growth of the Company's
business has placed, and is expected to continue to place, a strain on the
Company's administrative, financial, sales and operational resources and
increased demands on its systems and controls. In particular, the Company
noted an increase in days sales outstanding from December 31, 1996 to March
31, 1997 from approximately 70 days to approximately 86 days, and an increase
in total accounts receivable from $4.4 million to $5.3 million. The Company
believes this increase resulted from difficulties in implementing a new
financial accounting system which have since been resolved, and from a lack of
sufficient collections resources in light of the Company's increased sales
levels.
To deal with these concerns, the Company has implemented or is in the
process of implementing and will be required to implement in the future a
variety of new and upgraded operational and financial systems, procedures and
controls and to hire additional administrative personnel. There can be no
assurance that the Company will be able to complete the implementation of
these systems, procedures and controls or hire such personnel in a timely
manner. The failure of the Company or its management to respond to, and
manage, its growth and changing business conditions, or to adapt its
operational, management and financial control systems to accommodate its
growth could have a material adverse effect on the Company's business,
operating results and financial condition. To promote growth in the Company's
sales and operations, the Company will also have to expand its sales and
marketing organizations, expand and develop its distribution channels, fund
increasing levels of product development and increase the size of its
training, professional services and customer support organization to
accommodate expanded operations, and there can be no assurance that the
Company will be successful in these endeavors. See "Business -- Employees" and
"Management."
DEPENDENCE ON THE INTERNET AND INTRANETS
The Company believes that demand for business application integration
solutions such as those offered by the Company will depend in part upon the
adoption by businesses and end-users of the Internet and intranets as a
platform for electronic commerce and communications both within and outside
the enterprise. The Internet and intranets are new and evolving, and there can
be no assurance of their widespread adoption, particularly for electronic
commerce and communications among businesses. Critical issues concerning the
Internet and intranets, including security, reliability, cost, ease of use and
access and quality of service, remain unresolved at this time, inhibiting
adoption by many enterprises and end-users. If the Internet and intranets are
not widely used by businesses and end-users, particularly for electronic
commerce, this could have an adverse effect on the Company's business,
operating results and financial condition.
COMPETITION
The market for the Company's products and services is extremely competitive
and subject to rapid change. Because there are relatively low barriers to
entry in the software market, the Company expects additional competition from
other established and emerging companies. The Company believes that the
competitive factors affecting the market for the Company's products and
services include product functionality and features; quality of professional
services offerings; product quality, performance and price; ease of product
implementation; quality of customer support services; customer training and
documentation; and vendor and product reputation. The relative importance of
each of these factors depends upon the specific customer environment. Although
the Company believes that its products and services currently compete
favorably with respect to such factors, there can be no assurance that the
Company can maintain its competitive position against current and potential
competitors.
In the business application integration market, the Company's Mercator
products and related services compete primarily against solutions developed
internally by individual businesses to meet their specific
11
<PAGE>
business application integration needs. As a result, the Company must educate
prospective customers as to the advantages of the Company's products and
services as opposed to internally developed solutions and there can be no
assurance that the Company will be able to adequately educate potential
customers to the benefits provided by the Company's products and services. In
the EDI market, the Company's Trading Partner products compete with products
offered by companies offering proprietary Value-Added Network ("VAN") services
as part of their EDI solution and the Company's PC-based Trading Partner
products also compete with PC-based products offered by a number of other EDI
software vendors.
Many of the Company's current and potential competitors have longer operating
histories, significantly greater financial, technical, product development and
marketing resources, greater name recognition and larger customer bases than
the Company. The Company's present or future competitors may be able to develop
products comparable or superior to those offered by the Company, adapt more
quickly than the Company to new technologies, evolving industry trends or
customer requirements, or devote greater resources to the development,
promotion and sale of their products than the Company. Accordingly, there can
be no assurance that the Company will be able to compete effectively in its
markets, that competition will not intensify or that future competition will
not have a material adverse effect on the Company's business, operating results
and financial condition.
The Company expects that it will face increasing pricing pressures from its
current competitors and new market entrants. The Company's competitors may
engage in pricing practices that reduce the average selling prices of the
Company's products and related services. To offset declining average selling
prices, the Company believes that it must successfully introduce and sell
enhancements to existing products and new products on a timely basis and
develop enhancements to existing products and new products that incorporate
features that can be sold at higher average selling prices. To the extent that
enhancements to existing products and new products are not developed in a
timely manner, do not achieve customer acceptance or do not generate higher
average selling prices, the Company's gross margins may decline, and such
decline could have a material adverse effect on the Company's business,
operating results and financial condition. See "Business -- Competition."
DEPENDENCE ON PROPRIETARY TECHNOLOGY
The Company's success is dependent upon its proprietary software technology.
The Company does not currently have any patents and relies principally on trade
secret, copyright and trademark laws, nondisclosure and other contractual
agreements and technical measures to protect its technology. The Company also
believes that factors such as the technological and creative skills of its
personnel, product enhancements and new product developments are essential to
establishing and maintaining a technology leadership position. The Company
enters into confidentiality and/or license agreements with its employees,
distributors and customers, and limits access to and distribution of its
software, documentation and other proprietary information. There can be no
assurance that the steps taken by the Company will prevent misappropriation of
its technology, and such protections do not preclude competitors from
developing products with functionality or features similar to the Company's
products. Furthermore, there can be no assurance that third parties will not
independently develop competing technologies that are substantially equivalent
or superior to the Company's technologies. In addition, effective copyright and
trade secret protection may be unavailable or limited in certain foreign
countries. Any failure by or inability of the Company to protect its
proprietary technology could have a material adverse effect on the Company's
business, operating results and financial condition.
Although the Company does not believe its products infringe the proprietary
rights of any third parties, there can be no assurance that infringement claims
will not be asserted against the Company or its customers in the future.
Furthermore, the Company may initiate claims or litigation against third
parties for infringement of the Company's proprietary rights or to establish
the validity of the Company's proprietary rights. Litigation, either as
plaintiff or defendant, would cause the Company to incur substantial costs and
divert management resources from productive tasks whether or not such
litigation is resolved in the Company's favor, which could have a material
adverse effect on the Company's business, operating results and financial
condition. Parties
12
<PAGE>
making claims against the Company could secure substantial damages, as well as
injunctive or other equitable relief which could effectively block the
Company's ability to license its products in the United States or abroad. Such
a judgment could have a material adverse effect on the Company's business,
operating results and financial condition. If it appears necessary or
desirable, the Company may seek licenses to intellectual property that it is
allegedly infringing. There can be no assurance, however, that licenses could
be obtained on commercially reasonable terms, if at all, or that the terms of
any offered licensed will be acceptable to the Company. The failure to obtain
the necessary licenses or other rights could have a material adverse effect on
the Company's business, operating results and financial condition. As the
number of software products in the industry increases and the functionality of
these products further overlaps, the Company believes that software developers
may become increasingly subject to infringement claims. Any such claims, with
or without merit, can be time consuming and expensive to defend and could
adversely affect the Company's business, operating results and financial
condition. There are currently no pending claims that the Company's products,
trademarks or other proprietary rights infringe upon the proprietary rights of
third parties. See "Business -- Proprietary Technology."
RISKS ASSOCIATED WITH INTERNATIONAL EXPANSION
Although international revenues currently account for only approximately 10%
of the Company's total revenues, the Company intends to expand its sales and
marketing resources outside of the United States, which will require
significant management attention and financial resources. The Company also
expects to commit additional time and development resources to customizing its
products for selected international markets and to developing international
sales and support channels. None of the Company's products is currently a
"double byte" product, which is required to localize these products in certain
non-English character set markets such as Asia. The Company believes that it
will be required to develop double byte versions of its products and engage in
other localization activities. There can be no assurance that such efforts
will be successful.
International operations involve a number of additional risks, including the
impact of possible recessionary environments in economies outside the United
States, longer receivables collection periods and greater difficulty in
accounts receivable collection, unexpected changes in regulatory requirements,
dependence on independent resellers, reduced protection for intellectual
property rights in some countries, tariffs and other trade barriers, foreign
currency exchange rate fluctuations, difficulties in staffing and managing
foreign operations, the burdens of complying with a variety of foreign laws,
potentially adverse tax consequences and political and economic instability.
To the extent the Company's international operations expand, the Company
expects that an increasing portion of its international license and service
and other revenues will be denominated in foreign currencies, subjecting the
Company to fluctuations in foreign currency exchange rates. The Company does
not currently engage in foreign currency hedging transactions. However, as the
Company continues to expand its international operations, exposures to gains
and losses on foreign currency transactions may increase. The Company may
choose to limit such exposure by the purchase of forward foreign exchange
contracts or similar hedging strategies. There can be no assurance that any
currency exchange strategy would be successful in avoiding exchange-related
losses. There can be no assurance that the foregoing factors will not have a
material adverse effect on the Company's future international revenue and,
consequently, on the Company's business, operating results and financial
condition. The Company believes that its growth will require expansion of its
sales in foreign markets and expects to rely principally on resellers in those
markets, rather than substantially increase its direct sales force to serve
those markets. There can be no assurance that the Company will be able to
sustain or increase revenue derived from international sources.
RISK OF SOFTWARE DEFECTS; PRODUCT LIABILITY
Software products as complex as those offered by the Company may contain
defects or failures when introduced or when new versions are released. The
Company has in the past discovered software defects in certain of its products
and may experience delays or lost revenue to correct such defects in the
future.
13
<PAGE>
Although the Company has corrected known material defects in its current
products and has not experienced material adverse effects resulting from any
such defects to date, there can be no assurance that, despite testing by the
Company, errors will not be found in new products or releases after
commencement of commercial shipments, resulting in loss of market share or
failure to achieve market acceptance. Any such occurrence could have a material
adverse effect upon the Company's business, operating results and financial
condition.
The Company's license agreements with its customers typically contain
provisions designed to limit the Company's exposure to potential product
liability claims. It is possible, however, that the limitation of liability
provisions contained in the Company's license agreements, especially unsigned
"shrink-wrap" licenses, may not be effective under the laws of certain
jurisdictions. Consequently, the sale and support of the Company's software
entails the risk of such claims in the future. The Company currently has a
standard business owner's insurance policy but does not have insurance
specifically for software product liability risks or software errors and
omissions. Any product liability claim brought against the Company could have a
material adverse effect upon the Company's business, operating results and
financial condition.
POTENTIAL ACQUISITIONS
If appropriate opportunities present themselves, the Company intends to
acquire businesses, products or technologies that the Company believes are
strategic, although the Company currently has no understandings, commitments or
agreements with respect to any material acquisition and no material acquisition
is currently being pursued. There can be no assurance that the Company will be
able to successfully identify, negotiate or finance such acquisitions, or to
integrate such acquisitions with its current business. The process of
integrating an acquired business, product or technology into the Company may
result in unforeseen operating difficulties and expenditures and may absorb
significant management attention that would otherwise be available for ongoing
development of the Company's business. Moreover, there can be no assurance that
the anticipated benefits of any acquisition will be realized. Acquisitions
could result in potentially dilutive issuances of equity securities, the
incurrence of debt, contingent liabilities and/or amortization expenses related
to goodwill and other intangible assets, which could materially adversely
affect the Company's business, operating results and financial condition. Any
such future acquisitions of other technologies, products or companies may
require the Company to obtain additional equity or debt financing, which may
not be available or may be dilutive.
NO PRIOR MARKET; VOLATILITY OF STOCK PRICE
Prior to this offering, there has been no public market for the Company's
Common Stock, and there can be no assurance that an active public market will
develop or be sustained after this offering. The initial public offering price
will be determined by negotiations among the Company and the representatives of
the Underwriters based on several factors and may not be indicative of the
market price of the Common Stock after this offering. See "Underwriting" for a
discussion of the factors to be considered in determining the initial public
offering price. The market price of the shares of Common Stock is likely to be
highly volatile and may be significantly affected by factors such as actual or
anticipated fluctuations in the Company's operating results, announcements of
technological innovations or new products by the Company or its competitors,
developments with respect to patents, copyrights or proprietary rights,
conditions and trends in the software or other industries, general market
conditions and other factors. In addition, the stock market has from time to
time experienced significant price and volume fluctuations that have
particularly affected the market prices for the common stocks of technology
companies. These broad market fluctuations may adversely affect the market
price of the Company's Common Stock. In the past, following periods of
volatility in the market price of a company's securities, securities class
action litigation has often resulted. There can be no assurance that such
litigation will not occur in the future with respect to the Company. Such
litigation could result in substantial costs and a diversion of management's
attention and resources, which could have a material adverse effect upon the
Company's business, operating results and financial condition.
CONTROL BY EXISTING STOCKHOLDERS; FACTORS INHIBITING TAKEOVER
Upon completion of this offering, officers, directors and affiliated entities
of the Company will beneficially own approximately % of the outstanding Common
Stock of the Company ( % if the Underwriters' over-
14
<PAGE>
allotment option is exercised in full). As a result, such persons and entities
will be able to control the management and affairs of the Company and exercise
significant influence over all matters requiring stockholder approval,
including election of directors, any merger, consolidation or sale of all or
substantially all of the Company's assets, and any other significant corporate
transaction. The concentration of ownership could have the effect of delaying
or preventing a change in control of the Company. See "Principal and Selling
Stockholders." Immediately prior to the completion of this offering, the
Company's Certificate of Incorporation will be amended and restated to include
a provision that allows the Board of Directors to issue up to 5,000,000 shares
of Preferred Stock and to determine the price, rights, preferences,
privileges, and restrictions, including voting rights, of those shares without
any further vote or action by the stockholders. Preferred Stock could be
issued, without stockholder approval, that could have voting, liquidation and
dividend rights superior to that of existing stockholders. The issuance of
Preferred Stock could adversely affect the voting powers of holders of Common
Stock and the likelihood that such holders would receive dividend payments and
payments on liquidation. The Company has no current plans to issue any
Preferred Stock. In addition, Section 203 of the Delaware General Corporation
Law ("Section 203") restricts certain business combinations with any
"interested stockholder" as defined by such statute. The issuance of Preferred
Stock as well as the provisions of Section 203 could also make it more
difficult for a third party to acquire control of the outstanding voting stock
of the Company and thereby have the effect of delaying or preventing a change
in control of the Company. See "Description of Capital Stock--Delaware Anti-
Takeover Law."
IMMEDIATE AND SUBSTANTIAL DILUTION
The initial public offering price is substantially higher than the net
tangible book value per share of Common Stock. Investors purchasing shares of
Common Stock in this offering will therefore incur immediate and substantial
dilution of $ in the net tangible book value per share of the Common Stock
(at an assumed initial public offering price of $ per share and after
deducting the estimated underwriting discount and estimated offering
expenses). To the extent that options or Warrants to purchase the Company's
Common Stock are exercised, there will be further dilution. See "Dilution."
UNCERTAINTY AS TO USE OF PROCEEDS
Except for the repayment of amounts outstanding under its credit line, the
Company has no specific plans as to the use of a significant portion of the
net proceeds from this offering, other than general working capital purposes.
Accordingly, the Company's management will retain broad discretion to allocate
the net proceeds from this offering to uses that the stockholders may not deem
desirable and there can be no assurance that the proceeds can or will yield a
significant return. See "Use of Proceeds."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of large amounts of the Company's Common Stock in the public market
could adversely affect the market price of the Common Stock and could impair
the Company's future ability to raise capital through offerings of its equity
securities. A substantial number of outstanding shares of Common Stock and
shares of Common Stock issuable upon the exercise of outstanding stock options
and Warrants will become available for resale in the public market at
prescribed times. Upon completion of this offering, there will be shares
of Common Stock of the Company outstanding. The shares offered hereby will
be eligible for immediate sale in the public market without restriction. No
other shares will be immediately eligible for resale in the public market
without restriction under the Securities Act of 1933, as amended (the
"Securities Act"), but shares will be eligible for resale in the public
market pursuant to Rule 144(k) and Rule 701 of the Securities Act beginning
approximately 90 days after the effective date of this Prospectus and
shares will be eligible for resale subject to certain volume and other
restrictions of Rule 144. The Selling Stockholders, the officers and directors
of the Company and certain other stockholders, who in the aggregate will hold
upon completion of this offering shares of Common Stock, have agreed that
they will not, without the prior written consent of Robertson, Stephens &
Company sell or otherwise dispose of any shares of Common Stock beneficially
owned by them for a period of 180 days from the effective date of this
15
<PAGE>
Prospectus. Following the expiration of the 180-day lockup period (or earlier
with the consent of Robertson, Stephens & Company), these shares will be
eligible for sale except that shares owned by "affiliates" of the Company
as the term is defined in Rule 144 under the Securities Act in some cases will
be subject to the restrictions of Rule 144. Within 90 days after this
offering, the Company intends to register approximately 2,391,014 shares of
the Company's Common Stock reserved for issuance under its stock option plans
and stock purchase plan.
Following this offering, the holders of shares of the Company's Common
Stock and holders of Warrants to purchase 728,938 shares of Common Stock will
have certain rights to register those shares of Common Stock under the
Securities Act. See "Shares Eligible for Future Sale."
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<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common
Stock offered by the Company hereby are estimated to be approximately $ (at
an assumed initial public offering price of $ per share) after deducting
the estimated underwriting discount and commissions and estimated offering
expenses. The Company will not receive any proceeds from the sale of Common
Stock by the Selling Stockholders.
The Company expects to use a portion of such proceeds for the repayment of
indebtedness under the Company's bank credit line. A portion of this
indebtedness bears interest at the rate of the bank's prime lending rate plus
1.0% and the remainder bears interest at the rate of the applicable LIBOR rate
plus 3.0% (for a weighted average interest rate of approximately 8.86% at
March 31, 1997). The Company has no current specific plans for the remainder
of the net proceeds of this offering, but the Company expects to use such net
proceeds for general corporate purposes, including working capital. A portion
of the proceeds may also be used to acquire or invest in complementary
businesses or products or to obtain the right to use complementary
technologies. The Company presently has no commitments or understandings for
any such acquisitions or investments, and is not presently engaged in any
discussions or negotiations for any such acquisitions or investments. Pending
use of the net proceeds for the above purposes, the Company intends to invest
such funds in short-term, interest-bearing, investment-grade obligations.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its Common
Stock. The Company currently anticipates that it will retain all future
earnings for use in its business and does not anticipate paying any cash
dividends on its Common Stock in the foreseeable future. The payment of any
future dividends will be at the discretion of the Company's Board of Directors
and will depend upon, among other things, future earnings, operations, capital
requirements, the general financial condition of the Company, general business
conditions and contractual restrictions on payment of dividends, if any. The
Company's credit agreement with its bank prohibits the payment of dividends
without the bank's written consent.
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CAPITALIZATION
The following table sets forth, as of March 31, 1997, (i) the actual
capitalization of the Company, (ii) the capitalization of the Company on a pro
forma basis to give effect to the automatic conversion of all outstanding
shares of Preferred Stock into an aggregate of 1,843,038 shares of Common Stock
upon the closing of this offering, and (iii) such pro forma capitalization as
adjusted to give effect to the sale of the shares of Common Stock offered
by the Company hereby at an assumed offering price of $ per share and the
application of the net proceeds therefrom.
<TABLE>
<CAPTION>
MARCH 31, 1997
-----------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
----------- ----------- -------------
(In thousands, except share data)
<S> <C> <C> <C>
Short-term debt-equipment
obligations................ 66 66 66
=========== =========== ===========
Long-term debt:
Notes payable--bank....... 3,590 3,590 --
Equipment obligations..... 43 43 43
----------- ----------- -----------
Total long-term debt.... 3,633 3,633 109
=========== =========== ===========
Stockholders' equity
(deficiency)(1):
Preferred stock, $0.01 par
value per share;
1,638,166 shares
authorized, 860,969
shares issued and
outstanding, actual;
5,000,000 shares
authorized, no shares
issued or outstanding,
pro forma and pro forma
as adjusted.............. 9 -- --
Common stock, $0.01 par
value per share;
3,888,166 shares
authorized, 2,000,000
shares issued and
outstanding, actual;
20,000,000 shares
authorized, 3,767,386
shares issued and
outstanding, pro forma;
20,000,000 shares
authorized, shares
issued and outstanding,
pro forma as adjusted(2). 20 29
Paid-in capital........... 7,899 7,899
Accumulated deficit....... (9,724) (9,724) (9,724)
Cumulative foreign
currency translation
adjustment............... (170) (170) (170)
Treasury stock at cost.... (65) (65) (65)
----------- ----------- -----------
Total stockholders'
equity (deficiency)..... (2,032) (2,032)
----------- ----------- -----------
Total capitalization.... 601 601
=========== =========== ===========
</TABLE>
- --------
(1)See Note 6 of Notes to Financial Statements.
(2) Excludes (i) 735,238 shares of Common Stock issuable upon exercise of stock
options outstanding as of March 31, 1997 under the 1993 Plan and (ii)
728,938 shares of Common Stock issuable upon exercise of Warrants which
will remain outstanding after the consummation of this offering.
18
<PAGE>
DILUTION
The pro forma net tangible book value of the Company as of March 31, 1997,
was $(2.0 million) or approximately $(0.54) per share of Common Stock. Pro
forma net tangible book value per share represents total tangible assets of
the Company, less total liabilities, divided by the number of shares of Common
Stock outstanding, assuming conversion of all outstanding shares of Preferred
Stock into an aggregate of 1,843,038 shares of Common Stock. Net tangible book
value dilution per share represents the difference between the amount per
share paid by purchasers of shares of Common Stock in the offering made hereby
and the pro forma tangible book value per share of Common Stock immediately
after the offering.
After giving effect to the sale of shares of Common Stock offered by the
Company hereby (at an assumed initial public offering price of $ per share
and after deducting the estimated underwriting discounts and commissions and
estimated offering expenses), the pro forma net tangible book value of the
Company as of March 31, 1997 would have been $ or approximately $ per
share. This represents an immediate increase in net tangible book value of
$ per share to existing stockholders and an immediate dilution of $ per
share to purchasers of Common Stock in this offering, as illustrated in the
following table:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share...................... $
Net tangible book value per share at March 31, 1997................ $
Increase per share attributable to new investors...................
---
Pro forma net tangible book value per share after the offering.......
---
Net tangible book value dilution per share to new investors.......... $
===
</TABLE>
The following table sets forth on a pro forma basis as of March 31, 1997,
the difference between the existing stockholders and the purchasers of shares
in this offering (at an assumed initial public offering price of $ per share)
with respect to the number of shares purchased from the Company, the total
consideration paid and the average price per share paid:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
----------------- ------------------- PRICE
NUMBER(1) PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)........ 3,767,386 % $ 7,927,400 % $0.48
New investors...................
--------- ----- ----------- -----
Totals........................ 100.0% $ 100.0%
========= ===== =========== =====
</TABLE>
- --------
(1) Sales by the Selling Stockholders in this offering will reduce the number
of shares of Common Stock held by existing stockholders to , or %
( , or % if the Underwriters' over-allotment option is exercised in
full) of the total shares of Common Stock outstanding immediately after
this offering, and will increase the number of shares of Common Stock held
by new investors to , or % ( , or % if the Underwriters' over-
allotment option is exercised in full) of the total number of shares of
Common Stock outstanding immediately after this offering. See "Principal
and Selling Stockholders."
As of March 31, 1997, there were options outstanding to purchase a total of
735,238 shares of Common Stock at a weighted average exercise price of $0.79
per share and Warrants outstanding to purchase a total of 728,938 shares of
Common Stock at an exercise price of $3.00 per share, which Warrants will
remain outstanding after the consummation of this offering. To the extent that
any of these options or Warrants are exercised, there will be further dilution
to new investors. See "Capitalization," "Management -- Employee Benefit
Plans," "Description of Capital Stock" and Note 6 of Notes to Financial
Statements.
19
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data are qualified by reference to and
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Financial Statements
and Notes thereto included elsewhere in this Prospectus. The statements of
operations data presented below for each of the years in the three year period
ended December 31, 1996 and the balance sheet data as of December 31, 1995 and
1996 are derived from the financial statements of the Company, which financial
statements have been audited by KPMG Peat Marwick LLP, independent certified
public accountants, and are included elsewhere herein. The statements of
operations data presented below for the year ended December 31, 1993, and the
balance sheet data as of December 31, 1992, 1993, and 1994 are derived from
audited financial statements not included in this Prospectus. The statements
of operations data for the year ended December 31, 1992 is unaudited. The
statements of operations data presented below for the three months ended March
31, 1996 and 1997 and the balance sheet data as of March 31, 1997 are derived
from unaudited financial statements included elsewhere herein. The unaudited
financial statements include all adjustments (consisting only of normal
recurring adjustments) that the Company considers necessary for a fair
presentation of its financial position and results of operations for these
periods. The results of operations for the three months ended March 31, 1997
are not necessarily indicative of the results that may be expected for the
year ending December 31, 1997 or any other future period.
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
---------------------------------------------- ----------------
1992 1993 1994 1995 1996 1996 1997
----------- ------- ------- ------- ------- ------- -------
(unaudited) (unaudited)
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA:
Revenues:
Software licensing..... $ 4,292 $ 5,242 $ 6,275 $ 7,553 $ 9,310 $ 1,783 $ 2,731
Service, maintenance
and other............. 7,066 7,601 7,659 8,508 9,694 2,306 2,777
------- ------- ------- ------- ------- ------- -------
Total revenues........ 11,358 12,843 13,934 16,061 19,004 4,089 5,508
------- ------- ------- ------- ------- ------- -------
Cost of revenues:
Software licensing..... 1,080 934 1,035 725 495 93 174
Service, maintenance
and other............. 2,418 2,276 2,522 2,200 2,006 432 548
------- ------- ------- ------- ------- ------- -------
Total cost of
revenues............. 3,498 3,210 3,557 2,925 2,501 525 722
------- ------- ------- ------- ------- ------- -------
Gross profit............ 7,860 9,633 10,377 13,136 16,503 3,564 4,786
------- ------- ------- ------- ------- ------- -------
Operating expenses:
Product development.... 3,807 2,498 2,231 3,068 3,452 779 1,073
Selling and marketing.. 6,598 6,218 6,124 7,160 8,715 1,894 2,584
General and
administrative........ 2,249 1,919 1,927 2,001 2,922 729 777
------- ------- ------- ------- ------- ------- -------
Total operating
expenses............. 12,654 10,635 10,282 12,229 15,089 3,402 4,434
------- ------- ------- ------- ------- ------- -------
Operating income (loss). (4,794) (1,002) 95 907 1,414 162 352
Other income (expense),
net.................... (70) (226) (208) (84) (186) (41) (39)
------- ------- ------- ------- ------- ------- -------
Net income (loss)....... $(4,864) $(1,228) $ (113) $ 823 $ 1,228 $ 121 $ 313
======= ======= ======= ======= ======= ======= =======
Net income (loss) per
share(1)............... $ 0.22 $ 0.31 $ 0.03 $ 0.07
======= ======= ======= =======
Weighted average number
of common and common
equivalent shares
outstanding(1)......... 3,740 3,961 3,767 4,270
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------- MARCH 31,
1992 1993 1994 1995 1996 1997
------ ------ ------ ------ ------- -----------
(unaudited)
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash.................... $ 39 $ 178 $ 450 $ 143 $ 41 $ 79
Working capital......... (1,664) (2,195) (2,630) (2,128) (1,220) (158)
Total assets............ 8,869 7,218 6,387 6,237 7,521 8,721
Total stockholders'
(deficiency)........... (3,679) (4,306) (4,393) (3,570) (2,294) (2,032)
</TABLE>
- -------
(1) For an explanation of the determination of the number of shares used in
computing per share amounts, see Note 1 of Notes to Financial Statements.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains forward-looking statements which involve
risks and uncertainties. The Company's actual results could differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including those set forth under "Risk Factors" and elsewhere
in this Prospectus. The following discussion should be read in conjunction
with the Financial Statements and Notes thereto included elsewhere in this
Prospectus.
OVERVIEW
The Company was incorporated in Connecticut in 1985 and reincorporated in
Delaware in September 1993. In June 1991, the Company began developing its
Mercator product and in December 1993 released Version 1.0 of Mercator. The
Company released the latest version of Mercator in May 1996 and released its
Mercator for R/3 product in June 1996.
Historically, the Company has derived a majority of its revenues from
products other than Mercator, primarily its Trading Partner family of products
and its KEY/MASTER product. However, revenue related to Mercator has grown
significantly in each of the last three years and has increased as a
percentage of total revenues. The Company believes that future growth in
revenues, if any, will be mainly attributable to its Mercator product line. In
view of the relatively recent introduction of Mercator, the Company believes
it cannot accurately predict the amount of revenues that will be attributable
to such products or the life of such products. To the extent the Company's
Mercator products do not achieve market acceptance, the Company's business,
operating results and financial condition will be materially and adversely
affected.
The Company's revenues are derived principally from two sources: (i) license
fees for the use of the Company's software products and (ii) service fees for
maintenance, consulting services and training related to the Company's
software products. The Company generally recognizes revenue from software
license fees upon shipment, unless the Company has significant post-delivery
obligations, in which case revenues are recognized when such obligations are
satisfied. The Company's KEY/MASTER product is licensed under term-use
contracts rather than for a one-time license fee, and the Company recognizes
revenue from such arrangements on a present-value basis at the inception of
the contract. Revenues from consulting and training are recognized as services
are performed, and maintenance revenues are recognized ratably over the
maintenance period, typically one year. The Company does not actively market
new term-use contracts for KEY/MASTER but continues to receive KEY/MASTER
revenues, principally maintenance revenues. As a result, KEY/MASTER accounts
for a larger proportion of maintenance revenue than license revenues and
increases the percentage of the Company's total revenues represented by
services, maintenance and other revenues. The Company intends to increase the
scope of its service offerings with the goal of increasing license revenues
from sales of its products. The Company does not believe that the mix of
software licensing and service, maintenance and other revenues will change
substantially in the future.
Mercator can be used by IT professionals as well as VARs, ISVs, SIs or other
third parties who resell, embed or otherwise bundle Mercator with their
products. To date, license fee revenues have been derived principally from
direct sales of software products through the Company's direct sales force.
Although the Company believes that such direct sales will continue to account
for a significant portion of software licensing revenues, the Company intends
to increase its use of distributors and resellers. Furthermore, the Company's
planned expansion of its sales organization is expected to cause sales and
marketing expenses to increase.
The Company markets its products in North America primarily through its
direct sales and telesales organizations. Throughout the rest of the world,
the Company markets its products through distributors, resellers and direct
sales. International revenue accounted for 10.4% and 9.4% of total revenues
for 1996 and the first three months of 1997, respectively. The Company
maintains an international sales and support office
21
<PAGE>
in the United Kingdom. The Company intends to increase its international
direct sales force and focus on establishing additional international
distributor and reseller relationships. See "Risk Factors -- Risks Associated
with International Expansion."
The size of the Company's orders can range from a few thousand dollars to
over $100,000 per order. The loss or delay of large individual orders,
therefore, can have a significant impact on the revenues and other quarterly
results of the Company. In addition, the Company has generally recognized a
substantial portion of its quarterly software licensing revenues in the last
month of each quarter, and as a result, revenue for any particular quarter may
be difficult to predict in advance. Because the Company's operating expenses
are relatively fixed, a delay in the recognitions of revenue from a limited
number of license transactions could cause significant variations in operating
results from quarter to quarter and could result in significant losses. To the
extent such expenses precede, or are not subsequently followed by, increased
revenue, the Company's operating results would be materially and adversely
affected. As a result of these and other factors, operating results for any
quarter are subject to variation, and the Company believes that period-to-
period comparisons of its results of operations are not necessarily meaningful
and should not be relied upon as indications of future performance.
In accordance with Statement of Financial Accounting Standards No. 86,
Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise
Marketed, software development costs are expensed as incurred until
technological feasibility has been established, at which time such costs are
capitalized until the product is available for general release to customers.
To date, the establishment of technological feasibility of the Company's
products and general release of such software have substantially coincided. As
a result, software development costs qualifying for capitalization have been
insignificant, and therefore, the Company has not capitalized any software
development costs.
22
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage of
total revenues represented by certain items from the Company's Statements of
Operations.
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
----------------------------- ----------------
1994 1995 1996 1996 1997
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Revenues:
Software licensing.......... 45.0% 47.0% 49.0% 43.6% 49.6%
Service, maintenance and
other...................... 55.0 53.0 51.0 56.4 50.4
-------- -------- -------- ------- -------
Total revenues............ 100.0 100.0 100.0 100.0 100.0
-------- -------- -------- ------- -------
Cost of revenues:
Software licensing.......... 7.4 4.5 2.6 2.3 3.2
Service, maintenance and
other...................... 18.1 13.7 10.6 10.5 9.9
-------- -------- -------- ------- -------
Total cost of revenues.... 25.5 18.2 13.2 12.8 13.1
-------- -------- -------- ------- -------
Gross profit.................. 74.5 81.8 86.8 87.2 86.9
-------- -------- -------- ------- -------
Operating expenses:
Product development......... 16.0 19.1 18.2 19.1 19.5
Selling and marketing....... 44.0 44.6 45.9 46.3 46.9
General and administrative.. 13.8 12.5 15.3 17.8 14.1
-------- -------- -------- ------- -------
Total operating expenses.. 73.8 76.2 79.4 83.2 80.5
-------- -------- -------- ------- -------
Operating income (loss)....... 0.7 5.6 7.4 4.0 6.4
Other income (expense), net... (1.5) (0.5) (0.9) (1.0) (0.7)
-------- -------- -------- ------- -------
Net income (loss)............. (0.8)% 5.1% 6.5% 3.0% 5.7%
======== ======== ======== ======= =======
Gross profit:
Software licensing.......... 83.5% 90.4% 94.7% 94.8% 93.6%
Service, maintenance and
other...................... 67.1 74.1 79.3 81.3 80.3
</TABLE>
THREE MONTHS ENDED MARCH 31, 1997 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1996
Revenues
Total Revenues. The Company's total revenues increased 35% from $4.1 million
in the first three months of 1996 to $5.5 million in the comparable period of
1997.
Software Licensing. Software licensing revenues increased 53% from $1.8
million in the first three months of 1996 to $2.7 million in the comparable
period of 1997, primarily as a result of a 96% increase in Mercator license
revenues.
Service, Maintenance and Other. Service, maintenance and other revenues
increased 20% from $2.3 million in the first three months of 1996 to $2.8
million in the comparable period of 1997, primarily as a result of a 136%
increase in professional services revenues primarily associated with sales of
Mercator and, to a lesser extent, an increase in Mercator maintenance revenue,
partially offset by a slight decrease in KEY/MASTER maintenance revenues.
Maintenance revenues attributable to KEY/MASTER were $1.2 million and $1.1
million for the first three months of 1996 and 1997, respectively.
Cost of Revenues
Cost of software licensing revenues consists primarily of media, manuals,
distribution costs and the cost of third party software that the Company
resells. Cost of service, maintenance and other revenues consists primarily of
personnel-related costs in providing maintenance, technical support,
consulting and training to customers. Gross margin on software licensing
revenues is higher than gross margin on service, maintenance and other
revenues, reflecting the low materials, packaging and other costs of software
products compared
23
<PAGE>
with the relatively high personnel costs associated with providing
maintenance, technical support, consulting and training services. Cost of
service, maintenance and other revenues also varies based upon the mix of
maintenance, technical support, consulting and training services.
Cost of Software Licensing. Cost of software licensing revenues increased
87% from $93,000 in the first three months of 1996 to $174,000 in the
comparable period of 1997, primarily due to increased sales of software
licenses. Software licensing gross margin remained relatively constant at 95%
and 94% in the first three months of 1996 and 1997, respectively.
Cost of Service, Maintenance and Other. Cost of service, maintenance and
other revenues increased 27% from $432,000 in the first three months of 1996
to $548,000 in the comparable period of 1997, primarily due to increased
professional services rendered, particularly Mercator-related services.
Service, maintenance and other gross margin remained relatively constant at
81% and 80% in the first three months of 1996 and 1997, respectively.
Operating Expenses
Product Development. Product development expenses include expenses
associated with the development of new products and enhancements to existing
products and consist primarily of salaries, recruiting and other personnel-
related expenses, depreciation of development equipment, supplies, travel and
allocated facilities and communications costs. Product development expenses
increased 38% from $779,000 in the first three months of 1996 to $1.1 million
in the comparable period of 1997, primarily due to increased product
development activities relating to the Company's Mercator product line.
Product development expenses as a percentage of total revenue did not change
significantly in the first three months of 1997 as compared to the first three
months of 1996. The Company believes that a significant level of research and
development expenditures is required to remain competitive. Accordingly, the
Company anticipates that it will continue to devote substantial resources to
research and development. The Company expects that the dollar amount of
research and development expenses will increase through at least the remainder
of 1997. To date, all research and development expenditures have been expensed
as incurred.
Selling and Marketing. Selling and marketing expenses consist of sales and
marketing personnel costs, including sales commissions, recruiting, travel,
advertising, public relations, seminars, trade shows, product descriptive
literature and allocated facilities and communications costs. Selling and
marketing expenses increased 36% from $1.9 million in the first three months
of 1996 to $2.6 million in the comparable period of 1997, primarily due to the
increased number of sales and marketing personnel to address Mercator
marketing opportunities and increased expenditures for Mercator-related
marketing programs. Selling and marketing expenses as a percentage of total
revenues did not change significantly in the first three months of 1997 as
compared to the first three months of 1996. The Company expects to continue
hiring additional sales and marketing personnel and to increase promotional
expenses through at least the remainder of 1997 to address Mercator marketing
opportunities and anticipates that sales and marketing expenses will increase
in absolute dollar amount.
General and Administrative. General and administrative expenses consist
primarily of salaries, recruiting and other personnel-related expenses for the
Company's administrative, executive and finance personnel as well as outside
legal and audit costs. General and administrative expenses increased 7% from
$729,000 in the first three months of 1996 to $777,000 in the comparable
period of 1997, primarily due to increased administrative expenses to support
the Company's growth. General and administrative expenses as a percentage of
total revenue decreased to 14% in the first three months of 1997 from 18% for
the comparable period of 1996, primarily due to increased revenues during the
first three months of 1997. The Company believes that the dollar amount of its
general and administrative expenses will increase as the Company expands its
administrative staff and incurs additional costs (including directors' and
officers' liability insurance, investor relations programs and increased
professional fees) related to being a public company.
24
<PAGE>
Other Income (Expense), Net
Other income represents interest income earned on the Company's term-use
contracts and was negligible in the first three months of 1996 and 1997. Other
expense, principally interest related to the Company's bank revolving line of
credit, was $82,000 in the first three months of 1996 as compared with $69,000
in the first three months of 1997.
YEAR ENDED DECEMBER 31, 1996 COMPARED WITH YEAR ENDED DECEMBER 31, 1995
Revenues
Total Revenues. Total revenues increased 18% from $16.1 million in 1995 to
$19.0 million in 1996.
Software Licensing. Software licensing revenues increased 23% from $7.6
million in 1995 to $9.3 million in 1996, primarily due to a 74% increase in
Mercator license revenues, partially offset by a decrease in licenses of the
Company's mainframe-based Trading Partner and KEY/MASTER products.
Service, Maintenance and Other. Service, maintenance and other revenues
increased 14% from $8.5 million in 1995 to $9.7 million in 1996, primarily due
to a 53% increase in professional services revenues, particularly professional
services associated with Mercator and, to a lesser extent, an increase in
Mercator maintenance revenue, offset by a slight decrease in maintenance
revenue related to the Company's mainframe-based Trading Partner and
KEY/MASTER products. Maintenance revenues attributable to KEY/MASTER were $4.9
million and $4.6 million for 1995 and 1996, respectively.
Cost of Revenues
Cost of Software Licensing. Cost of software licensing revenues decreased
32% from $725,000 in 1995 to $495,000 in 1996, primarily due to termination of
amortization relating to the Company's acquisition of Foretell Corp. Software
licensing gross margin increased from 90% in 1995 to 95% in 1996, primarily
due to termination of such amortization.
Cost of Service, Maintenance and Other. Cost of service, maintenance and
other revenues decreased 9% from $2.2 million in 1995 to $2.0 million in 1996.
The decrease was primarily due to a decrease in the number of support
personnel related to the Company's mainframe-based Trading Partner and
KEY/MASTER products. Service, maintenance and other gross margin increased
from 74% in 1995 to 79% in 1996, primarily due to the decrease in such support
personnel.
Operating Expenses
Product Development. Product development expenses increased 13% from $3.1
million in 1995 to $3.5 million in 1996, primarily due to increased headcount
associated with the development of Mercator. Product development expenses
represented 19% and 18% of total revenues for 1995 and 1996, respectively.
Selling and Marketing. Selling and marketing expenses increased 22% from
$7.2 million in 1995 to $8.7 million in 1996. This increase was primarily due
to the increased number of sales and marketing personnel required to address
Mercator marketing opportunities and increased spending on Mercator-related
marketing programs. Selling and marketing expenses represented 44% and 46% of
total revenues for 1995 and 1996, respectively.
General and Administrative. General and administrative expenses increased
46% from $2.0 million in 1995 to $2.9 million in 1996. The increase was
primarily due to increased management and MIS staff, increased provision for
bad debts and increased depreciation. General and administrative expenses
represented 13% and 15% of total revenues for 1995 and 1996, respectively.
25
<PAGE>
Other Income (Expense), Net
Other income decreased from $370,000 in 1995 to $135,000 in 1996 due to a
one-time benefit in 1995 of $177,000 from the settlement of a lawsuit in the
Company's favor and a decrease in the amount of interest earned on term
license contracts. Other expense decreased from $454,000 in 1995 to $320,000
in 1996, primarily due to lower interest expense caused by reduced borrowing
levels.
Taxes
At December 31, 1996, the Company had federal net operating loss
carryforwards of $8.6 million, all of which expire through 2009. Due to the
"change in ownership" provisions of the Internal Revenue Code of 1986, the
availability of net operating loss carryforwards and research tax credits to
offset federal taxable income in future periods could be subject to an annual
limitation if a change in ownership for income tax purposes should occur. See
Note 8 of Notes to Financial Statements.
YEAR ENDED DECEMBER 31, 1995 COMPARED WITH YEAR ENDED DECEMBER 31, 1994
Revenues
Total Revenues. Total revenues increased 15% from $13.9 million in 1994 to
$16.1 million in 1995.
Software Licensing. Software licensing revenues increased 20% from $6.3
million in 1994 to $7.6 million in 1995. The increase in software licensing
revenues was primarily due to a 118% increase in Mercator license revenues,
partially offset by a decrease in licenses of the Company's mainframe-based
Trading Partner and KEY/MASTER products.
Service, Maintenance and Other. Service, maintenance and other revenues
increased 11% from $7.7 million in 1994 to $8.5 million in 1995. The increase
in service, maintenance and other revenues was primarily due to increases in
revenues for annual maintenance and professional services relating to the
Company's Mercator and Trading Partner products.
Cost of Revenues
Cost of Software Licensing. Cost of software licensing revenues decreased
30% from $1.0 million in 1994 to $725,000 in 1995. The decrease was primarily
due to lower costs related to the roll-out of the Company's OnCall*EDI product
that occurred in 1994, for which the Company accrued $400,000 in 1994.
Software licensing gross margin increased from 84% in 1994 to 90% in 1995,
primarily due to lower costs related to the roll-out of the Company's
OnCall*EDI product.
Cost of Service, Maintenance and Other. Cost of service, maintenance and
other revenues decreased 13% from $2.5 million in 1994 to $2.2 million in
1995. The decrease was primarily due to a reduction of staff supporting the
Company's mainframe-based Trading Partner and KEY/MASTER products. Service,
maintenance and other gross margin increased from 67% in 1994 to 74% in 1995,
primarily due to such staff reduction.
Operating Expenses
Product Development. Product development expenses increased 38% from $2.2
million in 1994 to $3.1 million in 1995, primarily due to expenses related to
the development of Mercator, particularly increased headcount devoted to
product development activities. Product development expenses represented 16%
and 19% of total revenues in 1994 and 1995, respectively.
Selling and Marketing. Selling and marketing expenses increased 17% from
$6.1 million in 1994 to $7.2 million in 1995. This increase was primarily due
to an increase in sales commissions associated with increased revenues,
increased marketing activities and the establishment of a dedicated business
development group. Selling and marketing expenses represented 44% and 45% of
total revenues for 1994 and 1995, respectively.
26
<PAGE>
General and Administrative. General and administrative expenses increased 4%
from $1.9 million in 1994 to $2.0 million in 1995. This increase was primarily
due to increased personnel and expenses relating to the Company's internal
systems. General and administrative expenses represented 14% and 13% of total
revenues for 1994 and 1995, respectively.
Other Income (Expense), Net
Other income increased from $268,000 in 1994 to $370,000 in 1995 due to a
one-time benefit in 1995 of $177,000 from the settlement of a lawsuit in the
Company's favor, offset by a decrease in the amount of interest earned on
term-use contracts. Other expense decreased from $476,000 in 1994 to $454,000
in 1995.
SELECTED QUARTERLY RESULTS OF OPERATIONS
The following tables set forth certain unaudited quarterly statement of
operations data for each of the nine quarters in the period ended March 31,
1997, as well as such data expressed as a percentage of the Company's total
revenues for the periods indicated. This data has been derived from unaudited
financial statements that have been prepared on the same basis as the audited
financial statements and, in the opinion of management, include all
adjustments, consisting of normal recurring adjustments, necessary for a fair
presentation of the information. The Company's quarterly results have in the
past been and may in the future be subject to significant fluctuations. As a
result, the Company believes that results of operations for interim periods
should not be relied upon as any indication of the results to be expected in
any future period. See "Risk Factors -- Potential Fluctuations in Operating
Results; Seasonality."
<TABLE>
<CAPTION>
QUARTERS ENDED
----------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1995 1995 1995 1995 1996 1996 1996 1996 1997
-------- -------- --------- -------- -------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Software licensing..... $1,733 $1,961 $1,921 $1,938 $1,783 $1,878 $2,597 $3,052 $2,731
Service, maintenance
and other............. 2,164 2,066 2,149 2,129 2,306 2,358 2,449 2,581 2,777
------ ------ ------ ------ ------ ------ ------ ------ ------
Total revenues......... 3,897 4,027 4,070 4,067 4,089 4,236 5,046 5,633 5,508
------ ------ ------ ------ ------ ------ ------ ------ ------
Cost of revenues:
Software licensing..... 197 201 143 184 93 88 128 186 174
Service, maintenance
and other............. 707 665 389 439 432 467 505 602 548
------ ------ ------ ------ ------ ------ ------ ------ ------
Total cost of revenues. 904 866 532 623 525 555 633 788 722
------ ------ ------ ------ ------ ------ ------ ------ ------
Gross profit............ 2,993 3,161 3,538 3,444 3,564 3,681 4,413 4,845 4,786
------ ------ ------ ------ ------ ------ ------ ------ ------
Operating expenses:
Product development.... 680 852 788 748 779 831 882 960 1,073
Selling and marketing.. 1,681 2,033 1,611 1,835 1,894 2,001 2,194 2,626 2,584
General and administra-
tive.................. 481 402 514 604 729 628 761 804 777
------ ------ ------ ------ ------ ------ ------ ------ ------
Total operating ex-
penses................ 2,842 3,287 2,913 3,187 3,402 3,460 3,837 4,390 4,434
------ ------ ------ ------ ------ ------ ------ ------ ------
Operating income (loss). 151 (126) 625 257 162 221 576 455 352
Other income (expense),
net.................... (59) 129 (57) (97) (41) (35) (58) (52) (39)
------ ------ ------ ------ ------ ------ ------ ------ ------
Net income (loss)....... $ 92 $ 3 $ 568 $ 160 $ 121 $ 186 $ 518 $ 403 $ 313
====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
AS A PERCENTAGE OF TOTAL REVENUES
----------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1995 1995 1995 1995 1996 1996 1996 1996 1997
-------- -------- --------- -------- -------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Software licensing..... 44.5% 48.7% 47.2% 47.7% 43.6% 44.3% 51.5% 54.2% 49.6%
Service, maintenance
and other............. 55.5 51.3 52.8 52.3 56.4 55.7 48.5 45.8 50.4
----- ----- ----- ----- ----- ----- ----- ----- -----
Total revenues......... 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- ----- ----- ----- ----- -----
Cost of revenues:
Software licensing..... 5.1 5.0 3.5 4.5 2.3 2.1 2.5 3.3 3.2
Service, maintenance
and other............. 18.1 16.5 9.6 10.8 10.5 11.0 10.0 10.7 9.9
----- ----- ----- ----- ----- ----- ----- ----- -----
Total cost of revenues. 23.2 21.5 13.1 15.3 12.8 13.1 12.5 14.0 13.1
----- ----- ----- ----- ----- ----- ----- ----- -----
Gross profit............ 76.8 78.5 86.9 84.7 87.2 86.9 87.5 86.0 86.9
----- ----- ----- ----- ----- ----- ----- ----- -----
Operating expenses:
Product development.... 17.4 21.2 19.4 18.4 19.1 19.6 17.5 17.0 19.5
Selling and marketing.. 43.1 50.5 39.6 45.1 46.3 47.2 43.5 46.6 46.9
General and administra-
tive.................. 12.3 10.0 12.5 14.9 17.8 14.8 15.1 14.3 14.1
----- ----- ----- ----- ----- ----- ----- ----- -----
Total operating ex-
penses................ 72.9 81.6 71.5 78.4 83.2 81.7 76.1 77.9 80.5
----- ----- ----- ----- ----- ----- ----- ----- -----
Operating income (loss). 3.9 (3.1) 15.4 6.3 4.0 5.2 11.4 8.1 6.4
Other income (expense),
net.................... (1.3) 3.2 (1.4) (2.4) (1.0) (0.8) (1.1) (0.9) (0.7)
----- ----- ----- ----- ----- ----- ----- ----- -----
Net income (loss)....... 2.4% 0.1% 14.0% 3.9% 3.0% 4.4% 10.3% 7.2% 5.7%
===== ===== ===== ===== ===== ===== ===== ===== =====
Gross profit:
Software licensing..... 88.6% 89.8% 92.6% 90.5% 94.8% 95.3% 95.1% 93.9% 93.6%
Service, maintenance
and other............. 67.3 67.8 81.9 79.4 81.3 80.2 79.4 76.7 80.3
</TABLE>
The Company's revenues and operating expenses increased sequentially in each
quarter of 1996 and software licensing revenues decreased in the first quarter
of 1997. The Company believes the decrease in software licensing revenues was
primarily due to the buying patterns and budgeting cycles of its customers.
The increases in revenues and operating expenses during 1996 were primarily
attributable to the increase in Mercator-related revenues as well as Mercator-
related product development and sales and marketing expenses. While the
Company has not historically experienced any significant seasonal fluctuations
in its revenues or results of operations, it is not uncommon for software
companies to experience strong fourth quarters followed by weaker first
quarters, in some cases with sequential declines in revenues or operating
profit. The Company believes that many software companies exhibit this pattern
in their sales cycles primarily due to customers' buying patterns and budget
cycles. There can be no assurance that the Company will not display this
pattern in future years.
The Company's quarterly and annual operating results have varied
significantly in the past and are expected to do so in the future.
Accordingly, the Company believes that period to period comparisons of its
results of operations are not necessarily meaningful and should not be relied
upon as indications of future performance. The Company's revenues and results
of operations are difficult to forecast and could be adversely affected by
many factors, including, among others: the size, timing and terms of
individual license transactions; the sales cycle for the Company's products;
demand for and market acceptance of the Company's products and related
services, particularly its Mercator products; the number of businesses
implementing the SAP R/3 system as well as the number of such businesses
requiring third party business application integration software and related
services; the Company's ability to expand, and market acceptance of, its
professional services business; the timing of expenditures by the Company in
anticipation of product releases or increased revenues; the timing of product
enhancements and product introductions by the Company and its competitors;
market acceptance of enhanced versions of the Company's existing products and
of new products; changes in pricing policies of the Company and its
competitors; variations in the mix of products and services sold by the
Company; the mix of channels through which products and services are sold;
28
<PAGE>
the success of the Company in penetrating international markets; the buying
patterns and budgeting cycles of customers; personnel changes, difficulty in
attracting and retaining qualified sales, professional services and research
and development personnel and the rate at which such personnel become
productive; and general economic conditions. In particular, the ability of the
Company to achieve growth in the future will depend on its success in adding a
substantial number of sales, professional services and research and
development personnel. Competition for such personnel is intense and there can
be no assurance the Company will be able to attract and retain these
personnel.
The Company's future revenues will also be difficult to predict and the
Company has, in the past, failed to achieve its revenue expectations for
certain periods. The Company's expense levels are based, in part, on its
expectation of future revenues, and expense levels are, to a large extent,
fixed in the short term. The Company may be unable to adjust spending in a
timely manner to compensate for any unexpected revenue shortfall. If revenue
levels are below expectations for any reason, operating results are likely to
be materially and adversely affected. Net income may be disproportionately
affected by a reduction in revenues because a large portion of the Company's
expenses is related to headcount that cannot be easily reduced without
adversely affecting the Company's business. In addition, the Company currently
intends to increase its operating expenses by expanding its research and
product development staff, particularly research and development personnel to
be devoted to the Company's Mercator product line, increasing its professional
services and sales and marketing operations, expanding distribution channels
and hiring personnel in other operating areas. The Company expects to
experience a significant time lag between the date professional services,
sales and technical personnel are hired and the date such personnel become
fully productive. The timing of such expansion and the rate at which new
technical, professional services and sales personnel become productive as well
as the timing of the introduction and success of new distribution channels
could cause material fluctuations in quarterly results of operations.
Furthermore, to the extent such increased operating expenses precede or are
not subsequently followed by increased revenues, the Company's business,
operating results and financial condition could be materially and adversely
affected.
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its operations to date primarily through private
sales of equity securities, totaling approximately $8.1 million (as of March
31, 1997), and its $4.0 million bank line of credit and cash generated from
operations. Operating activities provided (used) net cash of $1.3 million,
$1.3 million, $730,000 and $(546,000) during 1994, 1995, 1996 and the first
quarter of 1997, respectively. The Company generated net cash from 1994
through 1996 primarily as a result of its improved profitability during these
periods.
Investing activities (used) net cash of $(237,000), $(354,000), $(828,000)
and $(198,000) during 1994, 1995, 1996 and the first quarter of 1997,
respectively, primarily to fund capital expenditures needed to support
expansion of the Company's business. Financing activities generated (used) net
cash of $(818,000), $(1.3 million), $(102,000) and $787,000, for 1994, 1995,
1996 and the first quarter of 1997, respectively, from (repayments) borrowings
of debt. Since December 31, 1996, the Company has experienced an increase in
accounts receivable. In March 1997, additional borrowings were required to
fund higher levels of receivables. As of March 31, 1997, the Company had
outstanding borrowings of $3.6 million under its $4.0 million bank line of
credit. See "Risk Factors--Management of Growth."
As of March 31, 1997, the Company had debt obligations consisting of $3.6
million in borrowings outstanding under its bank line of credit and $115,000
of capital lease obligations. At December 31, 1996, the Company also had
commitments under operating lease agreements totalling $4.8 million through
2012, including $787,000 for 1997. See Note 10 of Notes to Financial
Statements.
Capital expenditures have been, and future capital expenditures are
anticipated to be, primarily for facilities, equipment and computer software
to support expansion of the Company's operations. As of March 31, 1997, the
Company had no material commitments for capital expenditures. The Company's
bank line of credit generally limits capital expenditures to $400,000 per
quarter.
29
<PAGE>
At March 31, 1997, the Company had $79,000 in cash. Since March 31, 1997,
the Company has raised an additional $1.0 million through the sale of
Preferred Stock to Mitsui & Co., Ltd. and two other foreign investors. The
Company typically operates with a relatively small amount of cash at the end
of any quarter and meets any of its additional cash needs with its bank line
of credit that expires in November 1998. The maximum amount that can be
borrowed under the bank line of credit is $4.0 million, with borrowings
limited to a percentage of eligible accounts receivable and term contracts,
plus the amount of the bank line of credit guaranteed by the Connecticut
Development Authority ($600,000 as of March 31, 1997). Borrowings may take the
form of prime rate loans (which bear interest at the bank's prime rate plus
1.0%) or LIBOR rate loans (which bear interest at the applicable LIBOR rate
plus 3.0%) and, at March 31, 1997, the weighted average interest rate on
amounts outstanding under this credit line was 8.86%. The Company's
obligations under this credit line are secured by substantially all of the
Company's assets. The bank line of credit contains certain financial covenants
and also prohibits cash dividends, mergers and acquisitions. The Company is
currently in compliance with these covenants. See Note 5 of Notes to Financial
Statements.
The Company believes that the net proceeds from this offering, together with
its current cash and cash equivalent balances, its line of credit and net cash
generated by operations, will be sufficient to meet its anticipated cash needs
for working capital, capital expenditures and business expansion for at least
the next 12 months. Thereafter, if cash generated by operations is
insufficient to satisfy the Company's operating requirements, the Company may
seek additional debt or equity financing. There can be no assurance that such
financing will be available on terms acceptable to the Company. The sale of
additional equity or debt securities could result in dilution to the Company's
stockholders.
30
<PAGE>
BUSINESS
INTRODUCTION
TSI is a leading provider of software and related services that enable
organizations to integrate their business applications both internally and
with external business partners. The Company's flagship product, Mercator, is
a data transformation engine which permits enterprises to exchange information
between internal systems, implement and integrate advanced client/server
applications such as SAP's R/3 ERP system and to integrate EDI data and Web-
based applications with their core business systems. To date, the Company has
directly licensed its products to over 6,000 customers worldwide, representing
a broad range of industries. The Company's customers include Allegiance
Corporation, American Express Travel Related Services, Inc., CIGNA
Corporation, Citibank, N.A., Federal Express Corporation, Hewlett-Packard
Company, Hoechst AG, International Business Machines Corporation, Lucent
Technologies, Inc., NYNEX Corporation and Prudential Insurance Company of
America.
INDUSTRY BACKGROUND
As enterprise computing has evolved, corporations have deployed systems and
software in an effort to improve business processes, reduce costs and increase
organizational effectiveness. Organizations are now faced with a proliferation
of software applications and an increasingly heterogeneous and disparate
computing environment across the enterprise. At the same time, organizations
are increasingly seeking to integrate their various business processes and the
applications that support them through such initiatives as business process
reengineering, supply chain management projects and Web-based electronic
commerce. For many organizations, these factors have made it increasingly
critical yet substantially more difficult to provide application-to-
application interoperability and to share information within and beyond the
enterprise.
The number of applications deployed throughout the enterprise has increased
dramatically, now including both enterprise-wide systems such as SAP's R/3 and
function-specific applications such as sales force automation or customer
support. In addition to purchasing applications from independent software
vendors, most organizations continue to run customized, internally developed
solutions for specific applications. The proliferation of both internally
developed and third party applications has both increased the need to
integrate applications and has greatly complicated the integration process.
As the number of applications has increased, the number and variety of the
computing platforms and systems on which they run has also grown
significantly. The evolution of computing from mainframes to client/server and
then to the Internet and corporate intranets has not led to the emergence of a
single preferred platform, but rather has resulted in a coexistence among new
and legacy architectures. The number of technology architectures being
supported is, in fact, increasing. According to Sentry Market Research, the
typical large organization has an average of 13 different operating systems
and 10 different Database Management Systems ("DBMSs") today, as compared with
6 different operating systems and 5 different DBMSs in 1993. This diversity
compounds the difficulty faced by organizations in providing application-to-
application integration.
In addition to these technological trends within the enterprise, the number
of externally linked business partners is increasing. Many corporations,
seeking to improve their market responsiveness, competitive position and
internal efficiency are creating extended "virtual" organizations among
suppliers and customers using electronic commerce technology. Electronic
commerce, which combines standards for exchanging data such as EDI with low-
cost methods for data transport such as the Internet, now accounts for a wide
variety of business transactions including, among others, electronic payments,
purchase orders, invoices, health claims and mortgage applications. The
proliferation of partners, each with its own internal systems and
applications, and the increased demand for creating electronic information
flows across both the supply and demand chains, have exacerbated the
difficulty in integrating applications between business partners.
Historical approaches to integrating applications have been expensive,
difficult to implement and maintain, and limited in their effectiveness. For
example, the costs of integrating R/3 with existing systems
31
<PAGE>
often equals or exceeds the cost of the R/3 application software itself.
Similarly, the cost of integrating EDI with an organization's business
applications often can be the largest single cost component of implementing
EDI solutions. Traditionally, organizations have approached the integration
problem on a case-specific basis, writing individual programs to allow
applications to share information for a specific task or use. Such custom
coding is time consuming, prone to error, inflexible and difficult to maintain
over time. In addition, an individual solution coded for one specific
application generally cannot be used for other integration needs. As the
number of potential interfaces grows with each new application, the inability
to leverage these home-grown solutions becomes increasingly problematic.
Although some software tools are available to assist developers with the
integration task, most are "point" solutions designed for specific platforms,
applications, DBMSs or data formats and typically require custom coding to
create complete solutions.
As a result, organizations require a new approach to integrating business
applications, both within the enterprise and with external business partners.
A comprehensive, off-the-shelf solution is needed that can be rapidly
implemented and easily maintained, does not require custom interface programs,
and supports a heterogenous mix of platforms, architectures, databases and
third-party applications.
TSI'S SOLUTION
TSI develops and markets software products and related services that allow
organizations to facilitate the exchange of information between enterprise
applications as well as with external business partners. Key benefits of the
TSI solution include:
Comprehensive Internal and External Solution. TSI delivers comprehensive
solutions for integrating business applications both within the enterprise and
between business partners. Mercator achieves this by transforming the business
data from any application so that it can be used by other applications without
modifying the applications, without regard to the number of applications
involved, and despite differing data structures, syntax or business rules. In
addition, Mercator is scaleable to support mission-critical enterprise
integration requirements. The Company's EDI solutions permit its customers to
exchange information with business partners and to integrate EDI data with
back office applications. The Company provides external integration solutions
which leverage the Internet as a transport mechanism for EDI and allow
enterprises to integrate Web-based applications and transactions with existing
enterprise systems.
Broad Application, Platform and Data Type Support. To satisfy the wide-
ranging needs of large organizations, TSI's solutions provide comprehensive
application, platform and data type support. Mercator can be used to integrate
internally developed as well as third party systems regardless of the vendor
of an application, the tools or programming language in which the application
is written or the standards on which the application is based. Mercator links
applications running on a wide variety of operating systems running on popular
PC and UNIX systems, such as HP, Sun Solaris and RS/6000, as well as IBM
mainframes and Digital, AS/400 and Stratus hardware. Mercator transforms data
in any format, including user defined, proprietary formats, industry standard
formats such as EDI, IDocs (SAP applications) and HL7 (healthcare standard for
clinical information), and the Company's EDI solutions support the full range
of EDI standards, both national and international.
Pre-Packaged R/3 Solution. The Company's Mercator for R/3 product is an off-
the-shelf solution enabling customers of SAP's R/3 to more easily integrate
R/3 modules with legacy and third-party applications. Mercator for R/3 was the
first product to be certified by SAP for use with its ALE architecture, the
standard SAP has developed for interfacing with R/3. Mercator for R/3 extends
TSI's core Mercator product by providing tools to automatically capture R/3
data definitions and adapters for integrating with R/3's inter-application
messaging system. Mercator for R/3 allows enterprises to preserve the value of
legacy data, utilize best-of-breed software applications and reduce the cost
of implementing R/3 in distributed computing environments.
32
<PAGE>
Ease of Implementation. The Company's Mercator and Trading Partner products
are off-the-shelf products which install easily and are designed to provide a
rapid return on investment. With Mercator, information technology ("IT")
professionals use a graphical user environment to create complete data
transformation solutions without the need to write custom interfaces or tailor
individual modules of code. Mercator provides a set of pre-built "plug-ins,"
including adapters for specific applications, transactions, DBMSs, and
messaging systems, in order to simplify development of business application
integration solutions. The Company's EDI products enable users to be
"commerce-ready" with little or no customization required.
STRATEGY
The Company's strategy is to be the leading supplier of software solutions
and related services for integrating business applications within the
enterprise and between business partners. Key elements of the Company's
strategy include:
Leverage and Extend Technology Leadership. TSI intends to continue to extend
its leading application integration technologies. Mercator for R/3 was the
first product certified by SAP for ALE. The Company continually seeks to
leverage its core Mercator technology by developing pre-packaged solutions for
additional third party applications, data formats, DBMSs, messaging systems
and computing platforms. The Company is the leading provider of Windows-based
EDI software and has recently introduced Trading Partner PC/32, the first EDI
product designed for Windows 95 and Windows NT.
Target the Enterprise Application Market. The Company believes that
significant opportunity exists for software solutions which enable enterprise
wide ERP systems to be integrated with other applications throughout the
organization. In addition to its core Mercator products, the Company currently
markets Mercator for R/3 for users of SAP's R/3 and intends to develop and
market additional pre-packaged versions of Mercator with functionality
targeted specifically at other popular enterprise application suites.
Expand Distribution Channels. In addition to its direct sales force, TSI is
creating marketing programs to focus on third-party vendors of application
software, connectivity tools, systems integration services and other products
and services which complement the Company's core capabilities. The Company
believes that such relationships can provide market visibility for the
Company's products, additional sales opportunities, and an additional source
of services and technical support for the Company's customers. TSI intends to
expand these third-party channels in both domestic and international markets
in addition to continuing to expand its direct sales force.
Leverage Customer Base. The Company intends to market its products and
services in order to expand their use within existing customer accounts. The
Company believes significant opportunity exists to increase the number of
Mercator licenses sold to its existing Mercator and Trading Partner customers.
In addition, the Company believes that its customers are increasingly pursuing
emerging applications such as Web-based electronic commerce and data
warehousing initiatives and that this provides an opportunity to use Mercator
to integrate these new applications with existing enterprise systems.
Expand Professional Services Capability. As the Company's solutions have
become more central to mission critical applications, there has been an
increased demand for comprehensive service offerings to complement the
Company's products. The Company intends to increase the number of its service
professionals and the scope of its service offerings with the goal of
maximizing license revenues from sales of its products. The Company expects
its service offerings to be focused on opportunities and projects which the
Company believes can lead to widespread deployments of Mercator within an
enterprise. The Company intends to augment its own service offerings by
seeking strategic relationships with major system integrators and other
service providers.
33
<PAGE>
PRODUCTS AND SERVICES
The Company's business application integration products include two software
product lines, the Mercator family and the Trading Partner family. The
following table depicts the Company's current business application integration
product offerings and suggested list prices:
<TABLE>
<CAPTION>
ORIGINAL MOST
PRODUCT NAME RELEASE DATE RECENT RELEASE US SUGGESTED LIST PRICE (1)
------------------------------------- ------------ -------------- ---------------------------
<C> <C> <C> <S>
MERCATOR PRODUCTS:
Mercator:
Authoring System.................. 12/93 5/96 $3,000/seat
Execution Engines................. 12/93 5/96 from $600 Windows/DOS to
$50,000 mainframe
Mercator for R/3..................... 6/96 6/96 from $37,500/system
TRADING PARTNER PRODUCTS:
Trading Partner PC................... 6/88 2/97 $1,495
Trading Partner PC/32................ 10/96 10/96 $1,995
Trading Partner Kits................. 10/92 various from $295
Trading Partner EC................... 11/90 10/95 $75,000
</TABLE>
- --------
(1) The terms and conditions, including sales prices and discounts from list
prices, of individual license transactions may be negotiated based on
volumes and commitments and may vary considerably from customer to
customer.
Mercator Products
The Company's flagship Mercator family of products is an integrated set of
tools used by IT professionals to integrate data between different business
applications. Mercator was initially released in December 1993 and, as of March
31, 1997, had been licensed to more than 870 customers worldwide.
Mercator. Mercator enables application integration by transforming or mapping
data between and among the unique data formats of business applications. It
provides a Windows-based Authoring System which is used to define data formats
and mapping solutions, and separate run-time Execution Engines for map
execution. Complete data transformations can be created without writing custom
interface programs. Mercator requires no pre-processing of data prior to
mapping, can transform data between multiple sources and destinations in a
single process, and supports map execution on a wide range of platforms.
Customers who deploy a map to run on multiple platforms must license an
Execution Engine for each platform. The Company currently offers Execution
Engines for Window 3.1, Windows 95, Windows NT, PC DOS, SCO UNIX, HP-UX, Sun
Solaris/OS, AIX, Alpha NT, Digital UNIX, VAX VMS, Open VMS, OS/400, Stratus
FTX, VOS and Continuum, MVS, and MVS/CICS.
Mercator for R/3. Initially released in June 1996, Mercator for R/3 is a
version of Mercator that includes specific extensions to meet the needs of R/3
integration. Mercator for R/3 was the first software product to be certified by
SAP for use with its ALE architecture. Mercator for R/3 extends the core
Mercator product by providing tools to automatically capture R/3 data
definitions, and adapters for integrating with R/3's inter-application
messaging system. In addition, Mercator for R/3 provides data transformation
support for other R/3 data conversion and interfacing requirements including
the initial conversion of data to R/3 from existing systems and interfaces with
data warehouses.
Trading Partner Products
The Company's Trading Partner products consist of a set of EDI management
software products and include Trading Partner PC, a Windows-based product, and
Trading Partner EC, a mainframe-based product.
34
<PAGE>
The Trading Partner products can be sold as stand-alone EDI products, but are
often sold in conjunction with Mercator products to enable businesses to both
manage their EDI relationships and to integrate their EDI data into enterprise
applications. Trading Partner products allow customers to communicate with
their partners through direct connections, VANs or the Internet.
Trading Partner PC. Introduced in 1989, Trading Partner PC was the first
Windows-based EDI translator in the United States and has been licensed to
more than 5,000 businesses worldwide. In October 1996, TSI introduced Trading
Partner PC/32, the first Windows 95 desktop solution in the market. The
Company has developed more than 100 "kits" which support a particular trading
partner's EDI specifications and provide "plug and play" solutions for EDI
trading. The Company markets kits for many major EDI trading partners
including Compaq Computer Corporation, International Business Machines
Corporation, J.C. Penney Company, Inc., Sears, Roebuck and Company, Target
Stores and Wal-Mart Stores, Inc. The Company's OnCall*EDI products are a
series of EDI kits for electronic purchasing for the health care provider
market and has been licensed to more than 1,100 hospitals.
Trading Partner EC. Trading Partner EC is a mainframe-based EDI translation
product which provides EDI management capability for companies with large EDI
programs. It includes Mercator as its core data transformation engine and
offers the user the means to integrate EDI data directly into applications
without the need to write custom interface programs commonly required by other
translator products. Using Mercator, customers who plan to migrate their EDI
program from the mainframe can do so without incurring additional cost and
effort for recreating their EDI interfaces. Trading Partner EC and its
predecessor product have been licensed to more than 200 businesses worldwide.
KEY/MASTER
In addition to the Company's applications integration products described
above, the Company's licenses and supports KEY/MASTER, a legacy data entry
product which is used on mainframe terminals or PCs on local area networks,
and is the leading software product for automating the key entry of high
volume, repetitive data from business documents. KEY/MASTER has been licensed
to more than 900 customers worldwide. Because KEY/MASTER is a mature product,
revenues derived from KEY/MASTER are primarily maintenance-related and the
Company expects in the future to make only minor investments in KEY/MASTER to
meet the needs of its current installed base.
Services
Professional Services. TSI offers consulting and professional services to
customers who wish to have the Company's professionals plan, design or
implement their application integration projects. The Company intends to
expand the number of service professionals and the scope of the services
offered as it continues to address the enterprise application integration
needs of large organizations. The Company believes that enterprises
implementing the R/3 system in particular represent a significant opportunity
for the Company to market its professional services in support of Mercator for
R/3.
Training. In order to assure that its customers are successful in using its
products, TSI provides training in its four training centers or at customer
locations. The Company offers a number of courses ranging from two to five
days in length with educational content including basic product functionality
and hands-on use of the product. The Company recommends that its Mercator
customers attend a basic three-day training course and believes that a
majority of its Mercator customers elect to participate in such training.
CUSTOMERS
As of March 31, 1997, TSI had directly licensed its software to more than
6,000 customers worldwide. Numerous others have licensed the Company's
products through VARs, ISVs, SIs or other third parties who distribute its
products to business partners to facilitate the integration of their
respective business applications.
35
<PAGE>
The Company's customer base includes businesses from many industries,
including finance, banking, healthcare, technology, government, retail,
manufacturing, automotive, oil and gas, utilities, communications, insurance
and transportation. The following is a partial list of the Company's end user
and third party Mercator customers:
END USER CUSTOMERS VARS, ISVS AND SIS
_________________________________ _________________________________
Blue Cross Blue Shield of Actra Business Systems LLC
Massachusetts Allegiance Corporation
Canadian National Railway Company American Express Travel Related
CIGNA Corporation Services, Inc.
Deere & Company American Software, Inc.
Dun & Bradstreet ARI Services Network, Inc.
Eastman Kodak Company Axolotl Corp.
First Chicago NBD Corporation CEBRA Inc.
General Mills, Inc. Citibank, N.A.
Georgia-Pacific Corporation Connect, Inc.
Hoechst AG Federal Express Corporation
Home Savings of America GTE Data Services Incorporated
LitleNet, Inc. HBO & Company
Lucent Technologies Inc. Hewlett-Packard Company
Nestle Canada, Inc. International Business Machines
NYNEX Corporation Corporation
Petroleos de Venezuela, S.A. Pivotpoint, Inc.
Prudential Insurance Company of RS Information Systems, Inc.
America S2 Systems, Inc.
Royal Canadian Mounted Police Software Consulting Partners, Inc.
Sara Lee Hosiery, Inc.
The Toronto Dominion Bank
SALES AND MARKETING
Sales
TSI markets its products and services through both direct and third party
channels. The Company's goal is to achieve broad market penetration by
pursuing multiple channels of distribution.
As of March 31, 1997, the Company's sales organization consisted of 49
employees. The Company's direct field sales force focuses on sales of Mercator
and Trading Partner products to Fortune 1000 companies. The Company also
maintains a telesales organization as part of its direct sales force which
generally targets smaller businesses. The field sales force also includes
alternate channel managers who are responsible for sales through third
parties. The sales organization includes systems engineers who assist with
both pre- and post-sales activities.
An important part of the Company's sales strategy is to continue to develop
its indirect distribution channels such as VARs, ISVs, SIs and distributors.
As of March 31, 1997, approximately 45 third parties had agreements with the
Company to resell, embed or otherwise bundle the Company's products with their
offerings in the United States. See "Risk Factors -- Dependence Upon
Development of Distribution Channels."
The Company markets its products and services outside of North America
through a sales office located in the United Kingdom and through indirect
channels. Although revenues from international customers were approximately
10% of the Company's total revenues during 1996 and the first quarter of 1997,
the international market is important to the Company, and it intends to expand
its sales and marketing efforts
36
<PAGE>
outside North America by adding distributors and additional sales staff. See
"Risk Factors--Risks Associated with International Expansion."
Marketing
TSI utilizes a wide variety of marketing programs which are intended to
attract potential customers and to promote the Company and its brand names.
The Company uses a mix of market research, analyst updates, seminars, direct
mail, print advertising, tradeshows, speaking engagements, public relations,
customer newsletters, and Web site marketing in order to achieve these goals.
The marketing department also produces collateral material for distribution to
prospects including demonstrations, presentation materials, white papers,
brochures, fact sheets, and materials that are specific to the area of
interest. The Company also hosts an annual user conference for its customers
and maintains an Alliance Program designed to support its channel partners
with a variety of programs, incentives, support plans and an annual
conference. As of March 31, 1997, there were 10 employees in the Company's
marketing organization.
TECHNOLOGY
The Company's core Mercator technology provides a platform for creating data
transformation solutions which satisfy application integration requirements
across a variety of computing environments. The architecture of the Mercator
platform is based on object concepts, providing reusability, interoperability
and scaleability during the design process and in the resulting solutions. The
Mercator platform permits the Company to efficiently construct and deliver
integration solutions for specific markets and also allows ISVs and SIs to
embed Mercator functionality within their own offerings.
The central components of the Mercator platform are a Windows-based
Authoring System for creating data transformation "maps" and one or more run-
time Execution Engines for map execution. A map is an executable module that
describes the required transformation and re-ordering of data between source
and destination objects such as files, databases, applications and messages.
The Authoring System provides an intuitive drag-and-drop environment for
defining the source and destination data objects, defining the rules for
mapping the sources to the destinations, and building the resulting map
object. Map objects built using Mercator can be ported automatically to any of
19 different execution environments.
37
<PAGE>
[Set forth on this page is an oval shaped graphic. Within the oval are two
rectangular boxes each with a caption heading, top to bottom, "Authoring System"
and "Execution Engine." Also within the oval is an oval with a caption "Map
Object" with a line from each of the boxes. The oval has an additional oval,
labeled "Transaction Workflow Management" surrounding it and three additional
ovals below the oval, connected by lines, labeled "Adapters," "Importers" and
"Application Solutions," from left to right, respectively.]
[GRAPH APPEARS HERE]
Descriptions of source and destination objects are entered by the user
through Mercator's graphical interface. To simplify data definition, the
Company provides pre-packaged objects for a number of commonly used data
standards and the Company also provides importers for creating objects from
higher level (meta) data definitions. Data object definitions within Mercator
include information regarding their format, structure and business rules,
which eliminates the need to explicitly identify the context of a data object
during map construction and maintains the logical integrity of the resulting
mapping solution.
Once the source and destination objects have been defined, the user creates
maps by specifying the rules for transforming data from the sources to the
destinations. For many mapping tasks, the user need only "drag" a source
object and "drop" it on the destination object. Multiple data sources can be
transformed to multiple destinations in a single mapping operation. The user
has point-and-click access to a variety of pre-built functions to enhance the
mapping rules including support for selection, extraction, computation,
logical operations, parsing, substitution, re-ordering, validation and
conversion.
Using Mercator's Authoring System, map objects are built and tested in the
Windows environment. The resulting Mercator map can be implemented using a
Mercator Execution Engine appropriate to the target platform. Target platforms
currently supported include Windows 3.1, Windows 95, Windows NT, PC DOS, SCO
UNIX, HP-UX, Sun Solaris/OS, AIX, Alpha NT, Digital UNIX, VAX VMS, Open VMS,
OS/400, Stratus FTX and VOS, MVS, and MVS/CICS.
The Company provides adapters and importers which interface to and from
specific databases, messaging systems, and applications enabling connectivity
to a specific source or destination that can be defined directly within a
mapping operation. Adapters are currently available for ODBC-compliant
databases, Oracle7 databases, and SAP's ALE. The Company is developing
adapters for additional databases and messaging systems including MQSeries,
IBM's enterprise messaging software. Importers are currently available for
COBOL copybooks, database tables for ODBC-compliant and Oracle7 databases, and
R/3 IDocs. In addition, the Company provides pre-packaged data objects for
national and international standards for EDI and data definitions for specific
industries such as healthcare and transportation.
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<PAGE>
Mercator was architected so that adapters and importers can be added without
modifying the core Mercator technology. Mercator for R/3, for example, is a
packaged offering which leverages the core Mercator Authoring System and
Execution Engines by providing adapters for communicating with SAP's ALE
architecture and importers for R/3 data definitions ("IDocs"). Other TSI
products also leverage Mercator's core technology. The underlying EDI
translation support for OnCall*EDI is provided by Mercator and Trading Partner
EC incorporates Mercator as the data integration component for integrating EDI
data with existing applications. In addition, TSI customers can use Mercator
to create their own applications where embedded data transformation is a
requirement.
PRODUCT DEVELOPMENT
Since inception, TSI has made substantial investments in research and
development through both internal development and technology acquisition. The
Company expects that most of its enhancements to existing products and new
products will be developed internally. However, the Company will evaluate on
an ongoing basis externally developed technologies for integration into its
product lines.
The Company expects that a substantial majority of its research and
development activities will be related to developing enhancements and
extensions to its Mercator and Trading Partner product lines. Following
Mercator's introduction, product development was initially driven by demand
for additional mapping functionality and support for additional execution
platforms. Later, development focus shifted to automating Mercator support for
specific sources and destinations through an expanded set of adapters and
importers, and development of additional pre-packaged integration solutions
for specific markets.
During the second half of 1997, the Company intends to add a graphical
transaction workflow management tool to the core set of Mercator capabilities.
This tool is designed to support graphical design and specification of
transaction workflows, sources and destinations for maps, triggering events,
and options for map execution. In addition, during the second half of 1997,
the Company intends to release a scaleable client/server electronic commerce
offering based on Mercator technology.
As of March 31, 1997, there were 40 employees in the Company's research and
development organization, more than half of which was dedicated to Mercator.
The Company's product development expenditures for 1994, 1995, 1996 and the
first quarter of 1997 were $2.2 million, $3.1 million, $3.4 million and $1.1
million, respectively. The Company expects that it will continue to commit
significant resources to product development in the future. To date, all
product development expenses have been expensed as incurred.
The market for the Company's products and services is characterized by
extremely rapid technological change, frequent new product introductions and
enhancements, evolving industry standards, and rapidly changing customer
requirements. The introduction of products incorporating new technologies and
the emergence of new industry standards could render existing products
obsolete and unmarketable. The Company's future success will depend in part
upon its ability to anticipate changes and enhance its current products and
develop and introduce new products that keep pace with technological
advancements and address the increasingly sophisticated needs of its
customers. See "Risk Factors -- Risks Associated with Technological Change,
Product Enhancements and New Product Development."
CUSTOMER SUPPORT
TSI believes that a high level of customer service and support is important
to its success, and the Company provides a range of support services to its
customers. The Company maintains product and technology experts on call at all
times and has support call centers located at its offices in Wilton,
Connecticut; Bannockburn, Illinois; and Boca Raton, Florida in the United
States and in its United Kingdom office. The Company is currently installing
an automated Company-wide help desk system to augment its customer support
efforts. This system is currently expected to be implemented during the third
quarter of 1997.
39
<PAGE>
COMPETITION
The market for the Company's products and services is extremely competitive
and subject to rapid change. Because there are relatively low barriers to
entry in the software market, the Company expects additional competition from
other established and emerging companies. The Company believes that the
competitive factors affecting the market for the Company's products and
services include product functionality and features; quality of professional
services offerings; product quality, performance and price; ease of product
implementation; quality of customer support services; customer training and
documentation; and vendor and product reputation. The relative importance of
each of these factors depends upon the specific customer environment. Although
the Company believes that its products and services currently compete
favorably with respect to such factors, there can be no assurance that the
Company can maintain its competitive position against current and potential
competitors.
In the business application integration market, the Company's Mercator
products and related services compete primarily against solutions developed
internally by individual businesses to meet their specific business
application integration needs. As a result, the Company must educate
prospective customers as to the advantages of the Company's products and
services as opposed to internally developed solutions and there can be no
assurance that the Company will be able to adequately educate potential
customers to the benefits provided by the Company's products and services. In
the EDI market, the Company's Trading Partner products compete with products
offered by companies offering proprietary VAN services as part of their EDI
solution and the Company's PC-based Trading Partner products also compete with
PC-based products offered by a number of other EDI software vendors.
Many of the Company's current and potential competitors have longer
operating histories, significantly greater financial, technical, product
development and marketing resources, greater name recognition and larger
customer bases than the Company. The Company's present or future competitors
may be able to develop products comparable or superior to those offered by the
Company, adapt more quickly than the Company to new technologies, evolving
industry trends or customer requirements, or devote greater resources to the
development, promotion and sale of their products than the Company.
Accordingly, there can be no assurance that the Company will be able to
compete effectively in its markets, that competition will not intensify or
that future competition will not have a material adverse effect on the
Company's business, operating results and financial condition.
The Company expects that it will face increasing pricing pressures from its
current competitors and new market entrants. The Company's competitors may
engage in pricing practices that reduce the average selling prices of the
Company's products and related services. To offset declining average selling
prices, the Company believes that it must successfully introduce and sell
enhancements to existing products and new products on a timely basis and
develop enhancements to existing products and new products that incorporate
features that can be sold at higher average selling prices. To the extent that
enhancements to existing products and new products are not developed in a
timely manner, do not achieve customer acceptance or do not generate higher
average selling prices, the Company's gross margins may decline, and such
decline could have a material adverse effect on the Company's business,
operating results and financial condition. See "Risk Factors--Competition."
PROPRIETARY TECHNOLOGY
The Company's success is dependent upon its proprietary software technology.
The Company does not currently have any patents and relies principally on
trade secret, copyright and trademark laws, nondisclosure and other
contractual agreements and technical measures to protect its technology. The
Company also believes that factors such as the technological and creative
skills of its personnel, product enhancements and new product developments are
essential to establishing and maintaining a technology leadership position.
The Company enters into confidentiality and/or license agreements with its
employees, distributors and customers, and limits access to and distribution
of its software, documentation and other proprietary information. There
40
<PAGE>
can be no assurance that the steps taken by the Company will prevent
misappropriation of its technology, and such protections do not preclude
competitors from developing products with functionality or features similar to
the Company's products. Furthermore, there can be no assurance that third
parties will not independently develop competing technologies that are
substantially equivalent or superior to the Company's technologies. In
addition, effective copyright and trade secret protection may be unavailable
or limited in certain foreign countries. Any failure by or inability of the
Company to protect its proprietary technology could have a material adverse
effect on the Company's business, operating results and financial condition.
Although the Company does not believe its products infringe the proprietary
rights of any third parties, there can be no assurance that infringement
claims will not be asserted against the Company or its customers in the
future. Furthermore, the Company may initiate claims or litigation against
third parties for infringement of the Company's proprietary rights or to
establish the validity of the Company's proprietary rights. Litigation, either
as plaintiff or defendant, would cause the Company to incur substantial costs
and divert management resources from productive tasks whether or not such
litigation is resolved in the Company's favor, which could have a material
adverse effect on the Company's business, operating results and financial
condition. Parties making claims against the Company could secure substantial
damages, as well as injunctive or other equitable relief which could
effectively block the Company's ability to license its products in the United
States or abroad. Such a judgment could have a material adverse effect on the
Company's business, operating results and financial condition. If it appears
necessary or desirable, the Company may seek licenses to intellectual property
that it is allegedly infringing. There can be no assurance, however, that
licenses could be obtained on commercially reasonable terms, if at all, or
that the terms of any offered licensed will be acceptable to the Company. The
failure to obtain the necessary licenses or other rights could have a material
adverse effect on the Company's business, operating results and financial
condition. As the number of software products in the industry increases and
the functionality of these products further overlaps, the Company believes
that software developers may become increasingly subject to infringement
claims. Any such claims, with or without merit, can be time consuming and
expensive to defend and could adversely affect the Company's business,
operating results and financial condition. There are currently no pending
claims that the Company's products, trademarks or other proprietary rights
infringe upon the proprietary rights of third parties. See "Risk Factors --
Dependence on Proprietary Technology."
EMPLOYEES
As of March 31, 1997, the Company had 151 full-time employees, including 40
in research and development, 34 in professional services and customer support,
59 in sales and marketing and 18 in finance and administration. The Company's
employees are not represented by any union and the Company believes that its
relations with employees are good. See "Risk Factors -- Dependence on Key
Personnel; Need to Attract and Retain Sales, Professional Services and
Technical Personnel."
FACILITIES
TSI's principal executive offices are located in Wilton, Connecticut and
consist of approximately 19,000 square feet under a lease expiring in 2001.
The Company also leases approximately 12,000 square feet of office space in
Bannockburn, Illinois which is used primarily for its telesales operations,
approximately 8,500 square feet of office space in Boca Raton, Florida, which
is used primarily for research and development activities and approximately
3,200 square feet of office space in the United Kingdom. All of the Company's
offices have fully-equipped training centers. The Company believes that its
existing facilities are adequate to support its current needs and that, if
needed, suitable additional facilities will be available on commercially
reasonable terms.
41
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS, KEY EMPLOYEES AND DIRECTORS
The executive officers, key employees and directors of the Company are as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
-------------------------------- --- ----------------------------------------
<S> <C> <C>
Constance F. Galley(1).......... 55 President and Chief Executive Officer
and Director
Eric A. Amster.................. 43 Vice President, Sales
Robert Bouton................... 56 Vice President, Marketing
Ira A. Gerard................... 49 Vice President, Finance and
Administration, Chief Financial Officer
and Secretary
Paul Lemme...................... 62 Vice President, Professional Services
James Monks..................... 41 Vice President, International Operations
David Raye...................... 36 Vice President, Operations
Edward J. Watson................ 59 Executive Vice President, Business
Development
Saydean Zeldin.................. 56 Vice President, Research and Development
Stewart K.P. Gross(1)(2)........ 37 Director
Ernest E. Keet(1)(2)............ 56 Director
John J. Pendray(1)(2)........... 57 Director
Dennis G. Sisco(1)(2)........... 50 Director
</TABLE>
- --------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
Constance F. Galley has been President, Chief Executive Officer and a
director of the Company since 1985, when the Company commenced operating as an
independent entity. Prior to 1985, Ms. Galley directed the Company's Marketing
and Development Operations when the Company was part of the Dun & Bradstreet
Corporation. Ms. Galley is a member of the Board of Directors of the software
division of ITAA and is the Chairperson of SACIA, the Business Council of
Southwestern Connecticut. Ms. Galley holds a Bachelor of Arts degree in
Chemistry from Duke University.
Eric A. Amster has been Vice President, Sales since joining the Company in
December 1995. From February 1992 until December 1995, Mr. Amster was employed
by General DataComm Industries, Inc., a data communications company, where he
served most recently as Vice President of U.S. Federal and Commercial Sales.
Mr. Amster holds a Bachelor of Science degree in Computer Science from the
University of Maryland.
Robert Bouton has been Vice President, Marketing since joining the Company
in March 1992. Prior to March 1992, Mr. Bouton served in various sales and
marketing capacities in the software industry, including Vice President,
Marketing for CGI Systems. Mr. Bouton holds a Bachelor of Science degree in
Electrical Engineering from Cornell University.
Ira A. Gerard has been Vice President, Finance and Administration, Chief
Financial Officer and Secretary since joining the Company in October 1995.
From March 1994 to October 1995, Mr. Gerard served as Vice President and Chief
Financial Officer of Adage Systems International, Inc., an ERP software
company. From July 1993 to March 1994, Mr. Gerard was an independent
consultant. From December 1989 until July 1993, Mr. Gerard was employed by
Gestetner PLC, a photocopier and photographic equipment company, where he
served most recently as Vice President, Finance and Operations. Mr. Gerard
holds a Bachelor of Arts degree in Economics from Union College and a Master
of Business Administration from Harvard University.
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<PAGE>
Paul Lemme has been the Vice President, Professional Services since joining
the Company in April 1990. Prior to 1990, Mr. Lemme was President of P. Lemme
& Associates, an EDI implementation consulting company. Mr. Lemme is the
author of the book "EDI Success." Mr. Lemme attended The State University of
Iowa.
James Monks has been Vice President, International Operations of the Company
since May 1997 and was Director, International Operations of the Company from
May 1992 until May 1997. From May 1989 until May 1992, Mr. Monks served as the
Company's Director of European Operations and from April 1985 until May 1989,
Mr. Monks served as the Company's U.K. Manager. Prior to April 1985, Mr. Monks
held various technical support and management positions with the Company when
the Company was a part of the Dun & Bradstreet Corporation. Mr. Monks holds an
Honours Degree in Sports Science and Geography from the University of
Loughborough, U.K.
David Raye has been the Vice President, Operations of the Company since May
1994. From August 1991 until May 1994, Mr. Raye served as the Company's
Director of Operations. Prior to August 1991, Mr. Raye served in various
management capacities in the software industry including Director of Marketing
for Informations Sciences and Senior Product Marketing Manager for On-Line
Software, International. Mr. Raye holds a Bachelor of Science degree in
Marketing from Rutgers University and a Master of Business Administration from
St. John's University, New York.
Edward J. Watson has been Executive Vice President, Business Development of
the Company since June 1994. From January 1994 until June 1994, Mr. Watson
managed the Company's PC Division. From November 1990 until January 1994, Mr.
Watson was a consultant to the Company and a General Partner of DownEast
Partners, a consulting company. Prior to 1990, Mr. Watson served in various
management capacities in the software industry, including President of TSI
International (the predecessor of the Company) and Higher Order Software. Mr.
Watson is married to Ms. Saydean Zeldin, the Vice President, Research and
Development of the Company. Mr. Watson attended Oxford University.
Saydean Zeldin has been Vice President, Research and Development of the
Company since October 1994. From November 1990 to October 1994, Ms. Zeldin was
a consultant to the Company and a general partner at DownEast Partners, a
consulting company. Prior to 1990, Ms. Zeldin served in several senior
engineering positions in the software industry, including serving as Founder
and President of Touchstone Engineering, a software company that developed a
management planning system using artificial intelligence technology, and
Founder and Executive Vice President of Higher Order Software. Ms. Zeldin was
also responsible for the re-entry guidance development of the Apollo flight
software at the Instrumentation Laboratory, a laboratory of MIT. Ms. Zeldin is
married to Mr. Watson, the Executive Vice President, Business Development of
the Company. Ms. Zeldin holds a Bachelor of Arts degree in Physics from Temple
University.
Stewart K.P. Gross has served as a director of the Company since April 1993.
Mr. Gross is a Managing Director of E.M. Warburg Pincus & Co., LLC and has
been employed by E.M. Warburg Pincus & Co., LLC since 1987. Prior to 1987, Mr.
Gross was employed at Morgan Stanley & Co. Mr. Gross is a director of Vanstar
Corporation, BEA Systems and several privately-held companies.
Ernest E. Keet has served as a director of the Company since April 1985. Mr.
Keet is the Chief Executive Officer and a director of Axolotl Corp. and from
May 1995 until December 1996, was the President of Axolotl Corp. Mr. Keet has
been the President and a member of the Board of Directors of Vanguard Atlantic
Ltd. since April 1984. Mr. Keet also served as the Chairman and Chief
Executive Officer of ECsoft Ltd. from November 1989 to April 1994.
John J. Pendray has served as a director of the Company since April 1985.
Mr. Pendray has been an Executive in Residence at George Mason University
since November 1996. Prior to joining George Mason University, Mr. Pendray was
the President of the International Group at Cincinnati Bell Information
Systems from March 1993 to August 1996. From July 1992 to March 1993, Mr.
Pendray was an independent consultant. From 1985 until July 1992, Mr. Pendray
was a senior partner at Vanguard Atlantic, Ltd.
43
<PAGE>
Dennis G. Sisco has served as a director of the Company since January 1990.
Mr. Sisco has been the President of D&B Enterprises since December 1988. From
July 1963 until early 1997, Mr. Sisco had also been employed by Cognizant
Corporation, formally the Dun & Bradstreet Corporation, most recently as an
Executive Vice President. Mr. Sisco is also a director of the Gartner Group,
Inc., Oacis Healthcare Holdings Corporation and Aspect Development, Inc.
Directors are elected by the stockholders at each annual meeting of
stockholders to serve until the next annual meeting of stockholders or until
their successors are duly elected and qualified. Executive officers are chosen
by, and serve at the discretion of, the Board of Directors. The current
directors were elected pursuant to a stockholders' agreement pursuant to which
certain stockholders agreed to vote their shares to elect Messrs. Gross, Keet,
Pendray and Sisco and Ms. Galley to the Board of Directors. This agreement
will be terminated upon the closing of this offering. Except for Mr. Watson
and Ms. Zeldin, there are no family relationships among any of the Company's
directors or executive officers.
DIRECTOR COMPENSATION
The Company reimburses the members of its Board for expenses associated with
their attendance at Board meetings and at Board Committee meetings. None of
the members of the Board is entitled to receive fees for attendance at Board
meetings or at Board Committee meetings.
In May 1997, the Company adopted and the Company's stockholders approved the
1997 Directors Stock Option Plan (the "Directors Plan") and reserved a total
of 150,000 shares of the Company's Common Stock for issuance thereunder.
Members of the Board who are not employees of the Company, or any parent or
subsidiary of the Company are eligible to receive stock options under the
Directors Plan. Each eligible director who is or becomes a member of the Board
on or after May 10, 1997 will automatically be granted an option for 10,000
shares. Accordingly, each of Messrs. Gross, Keet, Pendray and Sisco received
options to purchase 10,000 shares of Common Stock in May 1997. Upon each one-
year anniversary of the date such director is granted the 10,000 share option,
he or she will receive an additional option grant for 2,500 shares, provided
such director has served continuously as a member of the Board. Each 10,000
share option granted under the Directors Plan will vest over four years as to
25% of the shares on the last day of each twelve-month period following the
date such 10,000 share option was granted. Each 2,500 share option granted
under the Directors Plan will vest as to 100% of the shares on the last day of
the twelve month period following the date such 2,500 share option was
granted. Each option granted under the Directors Plan prior to the effective
date of this offering will be granted at a per share exercise price equal to
the fair market value of a share of the Company's Common Stock as determined
by the Board. Each option granted after the effective date of this offering
will be granted at a per share exercise price equal to the closing price of a
share of the Company's Common Stock on the Nasdaq National Market on the date
of grant. Options granted under the 1997 Plan generally expire three months
after the termination of the optionee's service to the Company or a parent or
subsidiary of the Company, except in the case of death or disability, in which
case the options may be exercised up to 12 months following the date of death
or termination of service. In the event of a merger, consolidation or certain
other change of control transactions, the vesting of all outstanding options
granted pursuant to the Directors Plan will accelerate and become exercisable
in full prior to the close of such corporate transaction. The Directors Plan
will terminate in May 2007, unless terminated earlier in accordance with the
provisions of the Directors Plan.
44
<PAGE>
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 1996 by (i)
the Company's chief executive officer and (ii) the Company's four other most
highly compensated executive officers whose salary exceeded $100,000 and who
were serving as executive officers at the end of that year (together, the
"Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
AWARDS
------------
SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION SALARY(1) BONUS(2) COMPENSATION OPTIONS
- --------------------------- --------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Constance F. Galley
President, Chief Executive
Officer and Director............ $165,000 $50,000 $ 5,031(3) --
Edward J. Watson
Executive Vice President,
Business Development............ $150,000 $20,000 $ 2,922(3) --
Ira A. Gerard
Vice President, Finance and
Administration, Chief Financial
Officer and Secretary........... $146,000 $20,000 $ 6,516(3) --
Saydean Zeldin
Vice President, Research and
Development..................... $130,000 $20,000 $ 2,922(3) 24,000
Eric A. Amster
Vice President, Sales........... $125,000 -- $85,951(4) 24,000
</TABLE>
- --------
(1) See "-- Compensation Agreements."
(2) Bonus amounts are reported in the year paid.
(3) Represents the portion of health, life and disability insurance premiums
paid by the Company.
(4) Includes sales commissions paid to Mr. Amster by the Company in the amount
of $80,982 in 1996 and $4,918 for the portion of health, life and
disability insurance premiums paid by the Company.
The following table sets forth information regarding option grants pursuant
to the 1993 Plan during 1996 to each of the Named Officers.
OPTION GRANTS IN 1996
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT
ASSUMED
ANNUAL
RATES OF
STOCK PRICE
NUMBER OF PERCENTAGE OF APPRECIATION
SECURITIES TOTAL OPTIONS FOR OPTION
UNDERLYING GRANTED TO TERM(4)
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION -------------
NAME GRANTED(1) 1996(2) PER SHARE(3) DATE 5% 10%
- ---- ---------- ------------- -------------- ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Constance F. Galley(5).. -- -- -- -- -- --
Edward J. Watson........ -- -- -- -- -- --
Ira A. Gerard........... -- -- -- -- -- --
Saydean Zeldin.......... 24,000 24% $2.50 11/25/06 $ $
Eric A. Amster.......... 24,000 24% $2.50 11/25/06
</TABLE>
- --------
(1) Options granted in 1996 vest as to twenty-five percent (25%) of the shares
covered by such option each year following the date of grant, subject to
acceleration under certain circumstances. Under the 1993 Plan, the Board
or a committee of the Board retains discretion, subject to 1993 Plan
limits, to modify the terms of outstanding options. The options have a
term of ten years if the grantee is based in the United States and a term
of seven years if the grantee is based in the United Kingdom subject to
earlier termination in certain situations related to termination of
employment. See "-- Employee Benefit Plans."
45
<PAGE>
(2) Based on a total of 100,000 options granted to all employees during 1996.
(3) All options were granted at an exercise price equal to the fair market
value of the Company's Common Stock as determined by the Board on the date
of the grant. The Company's Common Stock was not publicly traded at the
time of the option grants.
(4) Potential realizable values are calculated based on the fair market value
of the Common Stock at the date of grant (which is assumed to be the
assumed initial public offering price of $ per share) and minus the
exercise price. The 5% and 10% assumed annual rates of compounded stock
appreciation are mandated by the rules of the Securities and Exchange
Commission and do not represent the Company's estimate or projection of
future Common Stock price. There can be no assurance provided to any
executive officer or any other holder of the Company's securities that the
actual stock price appreciation over the option term will be at the
assumed 5% and 10% levels or at any other defined level. Unless the market
price of the Common Stock appreciates over the option term, no value will
be realized from the option grants made to the executive officers.
(5) On May 8, 1997, Ms. Galley was granted an option under the 1993 Plan to
purchase 75,000 shares of Common Stock at an exercise price of $10.00 per
share. This option expires on May 8, 2007.
The following table sets forth information concerning unexercised options
held at December 31, 1996 with respect to each of the Named Officers. No
options were exercised by the Named Officers during 1996.
AGGREGATE OPTION EXERCISES IN 1996 AND YEAR-END VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL YEAR- IN-THE-MONEY OPTIONS
END AT FISCAL YEAR-END ($)(1)
------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Constance F. Galley...... 94,974 19,000 $189,948 $ 38,000
Edward J. Watson......... 80,000 24,000 $160,000 $ 48,000
Ira A. Gerard............ 24,000 72,000 $ 48,000 $144,000
Saydean Zeldin........... 30,250 52,750 $ 60,500 $ 57,500
Eric A. Amster........... 12,000 60,000 $ 24,000 $ 72,000
</TABLE>
- --------
(1) Based on the fair market value of the option shares at December 31, 1996
($2.50 as determined by the Board of Directors) less the exercise price.
COMPENSATION AGREEMENTS
The Company has entered into agreements with the following executive
officers of the Company: Constance Galley, the Company's President and Chief
Executive Officer; Ira Gerard, the Company's Vice President, Finance and
Administration and Chief Financial Officer; Eric Amster, the Company's Vice
President, Sales; Edward Watson, the Company's Executive Vice President, New
Business Development; and Saydean Zeldin, the Company's Vice President,
Research and Development.
Ms. Galley's agreement provides for an annual base salary of $225,000. Ms.
Galley is also eligible to receive an annual bonus based upon the Company
achieving certain financial objectives for such year. This agreement may be
terminated by the Company at any time for any reason. If Ms. Galley is
terminated without cause, she will continue to receive her base salary for a
one-year period following such termination. In the event that the Company is
acquired by a company that does not continue to employ Ms. Galley, she will
continue to receive her base salary for a one-year period following such
termination.
Mr. Gerard's agreement provides for an initial annual base salary of
$146,000 and a grant of an option to purchase an aggregate of 96,000 shares of
Common Stock. Mr. Gerard currently receives a base salary of $160,000. Mr.
Gerard is eligible to receive a bonus of up to $25,000 per year for meeting
corporate objectives for such year. This agreement may be terminated by the
Company at any time for any reason. If Mr. Gerard is terminated without cause,
he will continue to receive his base salary for a six-month period following
such termination. In the event that the Company is acquired by a company that
does not continue to employ Mr. Gerard, he will continue to receive his base
salary for a six-month period following such termination.
Mr. Amster's agreement provides for an annual base salary of $125,000 and a
grant of an option to purchase an aggregate of 48,000 shares of Common Stock.
Mr. Amster is eligible to receive a bonus and
46
<PAGE>
commissions of up to $145,000 per year upon meeting revenue related goals for
such year. This agreement may be terminated by the Company at any time for any
reason. If Mr. Amster is terminated without cause, he will continue to receive
his base salary for a six-month period following such termination.
Mr. Watson's agreement provides for an initial annual base salary of
$150,000. Mr. Watson currently receives a base salary of $160,000. This
agreement may be terminated by the Company at any time for any reason. If Mr.
Watson is terminated without cause, he will continue to receive his base
salary for a six-month period following such termination. In the event that
the Company is acquired by a company that does not continue to employ Mr.
Watson, he will continue to receive his base salary for a one-year period
following such termination.
Ms. Zeldin's agreement provides for an initial annual base salary of
$130,000. Ms. Zeldin currently receives a base salary of $155,000. This
agreement may be terminated by the Company at any time for any reason. If Ms.
Zeldin is terminated without cause, she will continue to receive her base
salary for a six-month period following such termination. In the event that
the Company is acquired by a company that does not continue to employ Ms.
Zeldin, she will continue to receive her base salary for a one-year period
following such termination.
EMPLOYEE BENEFIT PLANS
1997 Equity Incentive Plan. In May 1997, the Board adopted and the Company's
stockholders approved the 1997 Equity Incentive Plan (the "1997 Plan"), under
which 750,000 shares of the Company's Common Stock are reserved for issuance.
In addition to the 750,000 shares reserved for issuance thereunder, shares
that are reserved for issuance but that are not subject to options under the
1993 Plan and shares that are subject to outstanding options which either
terminate without being exercised or that are repurchased by the Company at
the original issue price will be available for issuance under the 1997 Plan.
No options have been issued under the 1997 Plan. The 1997 Plan will become
effective on the effective date of the Registration Statement of which this
Prospectus is a part and will terminate in May 2007, unless terminated earlier
in accordance with the provisions of the 1997 Plan. The 1997 Plan authorizes
the award of options, opportunities to purchase restricted stock and stock
bonuses (an "Award"). The 1997 Plan is administered by a committee appointed
by the Board, currently the Compensation Committee, consisting of Messrs.
Keet, Sisco, Pendray and Gross, all of whom are non-employee directors under
applicable federal securities laws and "outside directors" as defined under
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code").
The Compensation Committee has the authority to construe and interpret the
1997 Plan and any agreement made thereunder, grant Awards and make all other
determinations necessary or advisable for the administration of the 1997 Plan.
The 1997 Plan provides for the grant of both incentive stock options
("ISOs") that qualify under Section 422 of the Code and nonqualified stock
options ("NQSOs"). ISOs may be granted only to employees of the Company or of
a parent or subsidiary of the Company. NQSOs may be granted to employees,
officers, directors, consultants, independent contractors and advisors of the
Company or any parent or subsidiary of the Company, provided such consultants,
independent contractors, and advisors render bona fide services not in
connection with the offer and sale of securities in a capital-raising
transaction ("Eligible Service Providers"). The per share exercise price of
ISOs must be at least equal to the fair market value of a share of the
Company's Common Stock on the date of grant. The per share exercise price of
NQSOs must be at least 85% of the fair market value of the Company's Common
Stock unless the option is an ISO granted to a stockholder owning 10% or more
of the Company's capital stock in which case the exercise price must be at
least 110% of the fair market value of the Company's Common Stock. The maximum
term of options granted under the 1997 Plan is ten years if the grantee is
based in the United States and a maximum term of seven years if the grantee is
based in the United Kingdom, unless the option is an ISO granted to a
stockholder owning 10% or more of the Company's stock in which case the
maximum term is five years. Options granted under the 1997 Plan may not be
transferred in any manner other than by will or by the laws of descent and
distribution and may be exercised during the lifetime of the optionee only by
the optionee. Options granted under the 1997
47
<PAGE>
Plan generally expire three months after the termination of the optionee's
service to the Company or a parent or subsidiary of the Company, except in the
case of death or disability, in which case the options may be exercised up to
12 months following the date of death or termination of service. No person may
receive more than 200,000 shares in any calendar year pursuant to the grant of
Awards under the 1997 Plan. New employees, however, are eligible to receive
Awards up to a total of 300,000 shares in the calendar year in which they are
hired.
Opportunities to purchase shares of the Company's Common Stock ("Restricted
Stock Awards"), and awards of shares of the Company's Common Stock ("Stock
Bonuses"), either of which may be subject to a right of repurchase in favor of
the Company or other restrictions on ownership or transfer, may be given to
Eligible Service Providers. The Compensation Committee which is the
administrator of the 1997 Plan has the authority to determine the restrictions
applicable to the stock. The purchase price of Common Stock sold pursuant to a
Restricted Stock Award must be at least 85% of the fair market value of the
shares on the date of grant. Awards that are granted below 100% of fair market
value are limited under the 1997 Plan. No Eligible Service Provider may receive
more than 100,000 shares pursuant to such Awards under the 1997 Plan and no
more than 200,000 shares may be issued pursuant to such Awards for the term of
the 1997 Plan.
In the event of a merger, consolidation or certain other changes of control
transactions, any outstanding Awards will accelerate by one-year's vesting or
such additional acceleration of vesting as the Compensation Committee in its
discretion may decide, and may be assumed or replaced by the successor
corporation. In lieu of such assumption or replacement, but in addition to the
one-year's additional vesting or such additional acceleration of vesting, the
successor corporation may substitute equivalent Awards or provide substantially
similar consideration to Eligible Service Providers as is provided to
stockholders.
1993 Stock Option Plan. Under the 1993 Plan, 1,038,954 shares of Common Stock
are or have been reserved for issuance under currently outstanding options. In
May 1997 when the 1997 Plan was adopted, the Board resolved that no further
options shall be granted under the 1993 Plan following the closing of this
offering. However, all outstanding options will remain outstanding until
exercised or until they terminate or expire in accordance with their terms. The
terms of options granted under the 1993 Plan and the administration of the plan
are substantially the same as those that pertain to the 1997 Plan.
Profit Participation Plan. The Board maintains the TSI International Software
Ltd. Profit Participation Plan (the "Profit Plan") which allows the Board at
the end of the Company's year-end audit to vote to contribute a portion of the
Company's profits to a profit participation pool which does not include
executive officers or directors of the Company. Distributions from the pool are
usually made to eligible employees in two equal installments, one distribution
upon completion of the fiscal year-end audit and the second distribution at the
end of the next fiscal year. All employees who are employed by the Company at
the end of the fiscal year and who are employed at the time of the
distributions are eligible to receive such a distribution. Employees who are
not employed by the Company for the full fiscal year are eligible to receive
pro-rated distributions based upon the number of months worked in such fiscal
year. Payments under the profit participation pool amounted to $35,000,
$100,000 and $150,000 in 1994, 1995 and 1996, respectively.
401(k) Plan. The Board maintains the TSI International Software Ltd. 401(k)
Saving and Retirement Plan (the "401(k) Plan"), a defined contribution profit-
sharing plan intended to qualify under Section 401 of the Code. All employees
who are at least 21 years old and have been employed by the Company for three
months are eligible to participate in the 401(k) plan. An eligible employee of
the Company may begin to participate in the 401(k) Plan on the first day of the
month coinciding with or following the date on which such employee meets the
eligibility requirements.
A participating employee may make pre-tax contributions, subject to
limitations under the Code, of a percentage (not less than 1% but not to exceed
15%) of his or eligible compensation. Employee contributions and the investment
earnings thereon are fully vested at all times. The Company, at its discretion,
may make matching contributions for the benefit of eligible employees. Forty
percent (40%) of the Company's
48
<PAGE>
contributions and the investment earnings thereon become vested upon the
employee's completion of two years of service with the Company and an
additional twenty percent (20%) for each year of service thereafter.
1997 Employee Stock Purchase Plan. In May 1997, the Board adopted and the
Company's stockholders approved the 1997 Employee Stock Purchase Plan (the
"Purchase Plan") and reserved a total of 500,000 shares of the Company's
Common Stock for issuance thereunder. The Purchase Plan will become effective
upon the effective date of the Registration Statement of which this Prospectus
is a part and will permit eligible employees to acquire shares of the
Company's Common Stock through payroll deductions. Eligible employees may
select a rate of payroll deduction between 2% and 15% of their compensation
and are subject to certain maximum purchase limitations described in the
Purchase Plan. Each offering under the Purchase Plan will be for a period of
12 months (the "Offering Period") and will consist of two six-month purchase
periods (each a "Purchase Period"). The purchase price for the Company's
Common Stock purchased under the Purchase Plan is 85% of the lesser of the
closing price of the Company's Common Stock on the first day of the applicable
Offering Period and the last day of the applicable Purchase Period. For the
purposes of the first Offering Period, eligible employees will be able to
acquire shares at 85% of the lesser of the price at which the shares are
offered to the public in this offering or the closing price of the shares on
the last day of the applicable purchase period in the first Offering Period.
The first Offering Period is expected to begin on the first business day
following the effective date of this Registration Statement and to end on July
31, 1998. The Board of Directors has the power to set the beginning of any
Offering Period and to change the duration of Offering and Purchase Periods.
The Purchase Plan is intended to qualify as an "employee stock purchase plan"
under Section 423 of the Code.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
During 1996, the Company had no separate compensation or stock option
committee or other board committee performing equivalent functions, and these
functions were performed by the Company's Board of Directors of which
Constance F. Galley, President and Chief Executive Officer of the Company, was
and is a member. In May 1997, the Company's Board of Directors appointed a
Compensation Committee which currently consists of Stewart K.P. Gross, Ernest
E. Keet, John J. Pendray and Dennis G. Sisco, each a non-employee director of
the Company.
INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF
LIABILITY
As permitted by Section 145 of the Delaware General Corporation Law, the
Bylaws of the Company provide that (i) the Company is required to indemnify
its directors and executive officers to the fullest extent permitted by the
Delaware General Corporation Law, (ii) to the fullest extent permitted by the
Delaware General Corporation Law, the Company is required to advance all
expenses, as incurred, to its directors and executive officers in connection
with a legal proceeding (subject to certain exceptions), (iii) the rights
conferred in the Bylaws are not exclusive, (iv) the Company may, in its
discretion indemnify or advance expenses to persons whom the Company is not
obligated to indemnify or advance expenses; (v) the Company is authorized to
enter into indemnification agreements with its directors, officers, employees
and agents or any person serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, including employee benefit plans and (vi) the
Company may not retroactively amend the Bylaw provisions relating to
indemnification.
The Company intends to enter into Indemnification Agreements with each of
its current directors and executive officers to give such directors and
officers additional contractual assurances regarding the scope of the
indemnification set forth in the Company's Bylaws and to provide additional
procedural protections. At present, there is no pending litigation or
proceeding involving a director, officer or employee of the Company regarding
which indemnification is sought, nor is the Company aware of any threatened
litigation that may result in claims for indemnification.
As permitted by the Delaware General Corporation Law, the Company's
Certificate of Incorporation includes a provision that eliminates the personal
liability of its directors for monetary damages for breach of fiduciary duty
as a director to the fullest extent permitted by the Delaware General
Corporation Law.
49
<PAGE>
As authorized by the Company's Bylaws, the Company, with approval of the
Board, is seeking, and expects to obtain, directors' and officers' liability
insurance.
In so far as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions or otherwise, the Company has
been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable.
50
<PAGE>
CERTAIN TRANSACTIONS
Since January 1, 1994, there has not been, nor is there currently proposed,
any transaction or series of similar transactions to which the Company was or
is to be a party in which the amount involved exceeds $60,000 and in which any
director, executive officer or holder of more than 5% of any class of voting
securities of the Company or members of such person's immediate family had or
will have a direct or indirect material interest other than (i) the
compensation agreements which are described in "Management," and (ii) the
transactions described below.
From November 1990 until October 1994, Saydean Zeldin, the Company's Vice
President, Research and Development, was a consultant to the Company and a
General Partner at DownEast Partners, a consulting company. Payments to
DownEast Partners for the year ended December 31, 1994 were $122,000.
Edward Watson, the Company's Executive Vice President, Business Development,
was a General Partner of DownEast Partners until January 1994.
From August 1992 to April 1994, the Company subleased its Bannockburn,
Illinois office facility from a subsidiary of Dun & Bradstreet (now Cognizant
Corporation), a holder of more than 5% of the Company's outstanding capital
stock. Payments under the sub-lease were $66,100 for the year ended December
31, 1994. The Company also subleased $130,000 of furniture and fixtures from
the same subsidiary of Dun & Bradstreet (now Cognizant Corporation). The
transaction was accounted for as a capital lease and bore interest at 9% and
required monthly payments of $4,100 through August 1995.
The Company believes that all of the transactions set forth above were made
on terms no less favorable to the Company than could have been obtained from
unaffiliated third parties. All future transactions between the Company and
its officers, directors and principal stockholders and their affiliates will
be approved by a majority of the Board, including a majority of the
independent and disinterested directors of the Board, and will be on terms no
less favorable to the Company than could be obtained from unaffiliated third
parties.
51
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information known to the Company
regarding beneficial ownership of the Company's Common Stock as of April 30,
1997, and as adjusted to reflect the sale of shares offered hereby, by (i) each
person known by the Company to be the beneficial owner of more than 5% of the
Company's Common Stock, (ii) each of the Company's directors, (iii) each Named
Officer (see "Management-- Executive Compensation"), (iv) all executive
officers and directors as a group and (v) each Selling Stockholder.
<TABLE>
<CAPTION>
SHARES SHARES
BENEFICIALLY OWNED BENEFICIALLY OWNED
PRIOR TO OFFERING(1) AFTER OFFERING(1) (2)
EXECUTIVE OFFICERS, DIRECTORS ----------------------- NUMBER OF ------------------------
AND 5% STOCKHOLDERS NUMBER PERCENT SHARES OFFERED NUMBER PERCENT
- ----------------------------- ------------ ---------- -------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Stewart K.P. Gross ..... 1,523,270 40.4 %
Warburg, Pincus Capital
Company, L.P. (3)
Ernest E. Keet ......... 1,383,336 36.7
Vanguard Atlantic, Lim-
ited (4)
Cognizant Corporation
(5).................... 853,486 22.7
Constance F. Galley (6). 274,138 7.28
Ira A. Gerard (7)....... 24,000 *
Eric A. Amster (8)...... 12,000 *
Edward J. Watson (9).... 89,000 2.4
Saydean Zeldin (10)..... 37,750 1.0
John J. Pendray (11).... 132,038 3.5
Dennis G. Sisco (12).... -- *
All executive officers
and directors as a
group
(10 persons) (13)...... 3,475,532 92.3
OTHER SELLING STOCKHOLD-
ERS
- ------------------------
Richard Bankosky (14)... 48,720 1.3
David Raye.............. 434 *
Information Partners
Capital Fund, L.P.
(15)................... 114,972 3.1
</TABLE>
- --------
* Less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission that deem shares to be beneficially
owned by any person who has or shares voting or investment power with
respect to such shares. Unless otherwise indicated below, the persons and
entities named in the table have sole voting and sole investment power
with respect to all shares beneficially owned, subject to community
property laws where applicable. A person is deemed to be the beneficial
owner of securities that can be acquired by such person within 60 days of
April 30, 1997, upon exercise of options or warrants and such securities
are reflected in the above table. Shares of Common Stock subject to
options and warrants that are exercisable within 60 days of April 30, 1997
are deemed to be outstanding and to be beneficially owned by the person
holding such options for the purpose of computing the percentage ownership
of such person but are not treated as outstanding for the purpose of
computing the percentage ownership of any other person.
(2) Assumes that the Underwriters' over-allotment option to purchase up to
shares from certain Selling Stockholders is not exercised. If the
Underwriters' over-allotment options is exercised in full, the Selling
Stockholders will sell an additional shares.
(3) Represents 1,268,416 shares of Common Stock that are held by Warburg,
Pincus Capital Company, L.P. ("Warburg"). Also includes 127,427 shares of
Common Stock issuable to Warburg upon exercise of warrants. Warburg,
Pincus & Co. is the sole General Partner of Warburg and has a 20% interest
in the profits of Warburg. E.M. Warburg, Pincus & Co., LLC manages
Warburg. Lionel I. Pincus is the managing partner of Warburg, Pincus & Co.
and the managing member of E. M. Warburg,
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<PAGE>
Pincus & Co., LLC and may be deemed to control both such entities. The
members of E.M. Warburg, Pincus & Co., LLC are substantially the same as
the partners of Warburg, Pincus & Co. Mr. Gross, a director of the
Company, is a Managing Director and member of E.M. Warburg, Pincus & Co.,
LLC and general partner of Warburg, Pincus & Co. As such, Mr. Gross may be
deemed to have an indirect pecuniary interest (within the meaning of Rule
16a-1 under the Exchange Act) in an indeterminate portion of the shares
beneficially owned by Warburg. Mr. Gross disclaims beneficial ownership
for purposes of Section 16 of the Act or otherwise, of such shares. The
address of Mr. Gross and Warburg is 466 Lexington Avenue, New York, N.Y.
10017.
(4) Includes 1,039,550 shares of Common Stock held of record by Vanguard
Atlantic, Ltd. ("Vanguard") and 90,362 shares of Common Stock held of
record by Mr. Keet. Also includes 126,712 shares of Common Stock issuable
to Vanguard upon exercise of Warrants. Mr. Keet, a director of the
Company, is the President of Vanguard and may be deemed to beneficially
own the shares owned by such entity. Mr. Keet disclaims beneficial
ownership of such shares except to the extent of his indirect pecuniary
interest therein. The address of Vanguard is 304 Main Avenue, Suite 290,
Norwalk, Connecticut 06851 and the address of Mr. Keet is 619 Marina
Boulevard, San Francisco, CA 94123.
(5) Includes 79,195 shares of Common Stock issuable upon exercise of
Warrants. Cognizant Corporation's address is 200 Nyala Farms Road,
Westport, Connecticut 06880.
(6) Includes 97,974 shares of Common Stock subject to options and 8,335
shares of Common Stock issuable upon exercise of Warrants.
(7) Represents 24,000 shares of Common Stock subject to options.
(8) Represents 12,000 shares of Common Stock subject to options.
(9) Represents 81,000 shares of Common Stock subject to options and 2,000
shares of Common Stock issuable upon exercise of Warrants.
(10) Represents 37,750 shares of Common Stock subject to options.
(11) Includes 800 shares of Common Stock subject to options, 20,000 shares of
Common Stock held of record by his wife Linda L. Pendray, 4,000 shares of
Common Stock held of record by each of his children Michael D. Pendray,
Andrew S. Pendray and Stephen L. Pendray. Mr. Pendray disclaims
beneficial ownership of the shares held by his wife and children.
(12) Although no longer employed by Cognizant Corporation, Dennis Sisco serves
on the Board of the Company as Cognizant's nominee.
(13) Includes an aggregate of 253,524 shares of Common Stock subject to
options and 343,669 shares of Common Stock issuable upon exercise of
Warrants.
(14) Includes 1,000 shares of Common Stock issuable upon exercise of Warrants.
(15) The address of Information Partners Capital Fund, L.P. is Two Copley
Place, Boston, Massachusetts 02116.
53
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon the closing of this offering, the authorized capital stock of the
Company will consist of 20,000,000 shares of Common Stock, par value $0.01 per
share, and 5,000,000 shares of Preferred Stock, par value $0.01 per share. Upon
the consummation of this offering, and assuming the conversion of each
outstanding share of Preferred Stock into Common Stock, there will be
outstanding shares of Common Stock and Warrants to purchase 728,938 shares
of Common Stock.
COMMON STOCK
Subject to preferences that may be applicable to any Preferred Stock
outstanding at the time, the holders of outstanding shares of Common Stock are
entitled to receive dividends out of assets legally available therefor at such
times and in such amounts as the Board may from time to time determine. Each
stockholder is entitled to one vote for each share of Common Stock held on all
matters submitted to a vote of stockholders. Cumulative voting for the election
of directors is not provided for in the Company's Certificate of Incorporation,
which means that the holders of a majority of the shares voted can elect all of
the directors then standing for election. The Common Stock is not entitled to
preemptive rights and is not subject to conversion or redemption. Upon
liquidation, dissolution or winding-up of the Company, the assets legally
available for distribution to stockholders are distributable ratably among the
holders of the Common Stock and any participating Preferred Stock outstanding
at that time after payment of liquidation preferences, if any, on any
outstanding Preferred Stock and payment of other claims of creditors. Each
outstanding share of Common Stock is, and all shares of Common Stock to be
outstanding upon completion of this offering will be, fully paid and
nonassessable.
PREFERRED STOCK
Upon the closing of this offering, all outstanding shares of Preferred Stock
(the "Convertible Preferred"), will be converted into shares of Common Stock.
See Note 6 of Notes to Financial Statements for a description of the
Convertible Preferred. The Board is authorized, subject to any limitations
prescribed by Delaware law, to provide for the issuance of additional shares of
Preferred Stock in one or more series, to establish from time to time the
number of shares to be included in each such series, to fix the rights,
preferences and privileges of the shares of each wholly unissued series and any
qualifications, limitations or restrictions thereon, and to increase or
decrease the number of shares of any such series (but not below the number of
shares of such series then outstanding), without any further vote or action by
the stockholders. The Board may authorize the issuance of Preferred Stock with
voting or conversion rights that could adversely affect the voting power or
other rights of the holders of Common Stock. Thus, the issuance of Preferred
Stock may have the effect of delaying, deferring or preventing a change in
control of the Company. The Company has no current plan to issue any shares of
Preferred Stock.
WARRANTS
As of March 31, 1997, the Company had outstanding nine Warrants to purchase
shares of the Company's reserved, but unissued shares of Series D Convertible
Preferred Stock. These Warrants, which will survive the closing of this
offering, will become exercisable into an aggregate of 728,938 shares of Common
Stock. These Warrants have an exercise price of $3.00 per share of Common Stock
and expire in June and August, 2002.
REGISTRATION RIGHTS
Certain investors holding Convertible Preferred (which will be converted into
an aggregate of 1,843,038 shares of Common Stock) and Warrants to purchase
728,938 shares of Common Stock of the Company have certain "demand" rights to
register the shares of Common Stock issuable upon conversion of the Convertible
Preferred and upon exercise of such Warrants to the extent any of such shares
are not included in this offering (the "Registrable Securities") under the
Securities Act. If requested by holders of more than 50% of the Registrable
Securities then outstanding, the Company must file a registration statement
under the Securities Act covering all Registrable Securities requested to be
registered. The Company is required to effect two such "demand" registrations
pursuant to these registration rights. The "demand" rights of any particular
holder of Registrable Securities will expire three years after the consummation
of the Company's initial public offering.
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<PAGE>
In addition, holders of Registrable Securities have certain "piggyback"
registration rights. If the Company proposes to register any of its securities
under the Securities Act other than in connection with the Company's employee
benefit plans or a corporate reorganization, the holders of Registrable
Securities may require the Company to include all or a portion of their shares
in such registration, although the managing underwriter, if any, of any such
offering has certain rights to limit the number of Registrable Securities
proposed to be included in such registration.
Further, if requested by holders of more than 50% of the then outstanding
Registrable Securities (assuming there is a reasonably anticipated aggregate
offering price to the public of at least $500,000), the Company must file a
registration statement on Form S-3 with respect to the resale of such
Registrable Securities when such form becomes available to the Company,
subject to certain conditions.
All expenses incurred in connection with the above registrations (other than
the underwriters' and brokers' discounts and commissions) will be borne by the
Company.
The Company's obligation to register the Registrable Securities will
terminate when all such Registrable Securities have been registered and sold
or are no longer outstanding.
DELAWARE ANTI-TAKEOVER LAW
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law (the "Anti-Takeover Law") regulating corporate
takeovers. The Anti-Takeover Law prevents certain Delaware corporations,
including those whose securities are listed on the Nasdaq National Market,
from engaging, under certain circumstances, in a "business combination" (which
includes a merger or sale of more than 10% of the corporation's assets) with
any "interested stockholder" (a stockholder who owns 15% or more of the
corporation's outstanding voting stock) for three years following the date
that such stockholder became an "interested stockholder." A Delaware
corporation may "opt out" of the Anti-Takeover Law with an express provision
in its original certificate of incorporation or an express provision in its
certificate of incorporation or bylaws resulting from a stockholders'
amendment approved by at least a majority of the outstanding voting shares.
The Company has not "opted out" of the provisions of the Anti-Takeover Law.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Company's Common Stock is The Bank
of New York.
LISTING
The Company has applied to list its Common Stock on the Nasdaq National
Market under the trading symbol "TSFW."
55
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for the Common Stock of the
Company. Future sales of substantial amounts of Common Stock in the public
market could adversely affect market prices prevailing from time to time. Sales
of substantial amounts of Common Stock of the Company in the public market
after the lapse of existing resale restrictions could adversely affect the
prevailing market price and the ability of the Company to raise equity capital
in the future.
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, a person (or persons whose shares are aggregated)
who has beneficially owned Restricted Shares for at least one year (including
the holding period of any prior owner except an affiliate of the Company) would
be entitled to sell within any three-month period a number of shares that does
not exceed the greater of: (i) one percent of the number of shares of Common
Stock then outstanding (which will equal approximately shares immediately
after this offering); or (ii) the average weekly trading volume of the Common
Stock during the four calendar weeks preceding the filing of a Form 144 with
respect to such sale. Sales under Rule 144 are also subject to certain manner
of sale provisions and notice requirements and to the availability of current
public information about the Company. Under Rule 144(k), a person who is not
deemed to have been an affiliate of the Company at any time during the 90 days
preceding a sale, and who has beneficially owned the shares proposed to be sold
for at least two years (including the holding period of any prior owner except
an affiliate of the Company), is entitled to sell such shares without complying
with the manner of sale, public information, volume limitation or notice
provisions of Rule 144. Unless otherwise restricted, "144(k) shares" may
therefore be sold immediately upon the completion of this offering.
Rule 701 permits resales of shares in reliance upon Rule 144 but without
compliance with certain restrictions, including the holding period requirement,
of Rule 144. Any employee, officer or director of or consultant to the Company
who purchased his or her shares pursuant to a written compensatory plan or
contract may be entitled to rely on the resale provisions of Rule 701. Rule 701
permits affiliates to sell their Rule 701 shares under Rule 144 without
complying with the holding period requirements of Rule 144. Rule 701 further
provides that non-affiliates may sell such shares in reliance on Rule 144
without having to comply with the holding period, public information, volume
limitation or notice provisions of Rule 144. In both cases, a holder of Rule
701 shares is required to wait until 90 days after the date of this Prospectus
before selling such shares.
Upon completion of this offering, the Company will have outstanding
approximately shares of Common Stock. In addition to the shares of Common
Stock offered hereby, as of the effective date of the Registration Statement of
which this Prospectus forms a part (the "Effective Date"), there will be an
additional shares of Common Stock outstanding, of which are
"restricted" shares (the "Restricted Shares") under the Securities Act. Certain
stockholders of the Company are subject to lock-up agreements providing that
they will not directly or indirectly offer, sell, pledge, contract to sell,
grant any option to purchase or otherwise dispose of any shares of Common Stock
or any securities convertible into or exercisable or exchangeable for Common
Stock for a period of 180 days after the date of this Prospectus without the
prior written consent of Robertson, Stephens & Company LLC. Taking into account
the lock-up agreements and notwithstanding possible earlier eligibility for
sale under the provisions of Rules 144, 144(k) and 701, the numbers of shares
that will be available for sale in the public market will be as follows: (i) no
Restricted Shares will be eligible for sale as of the Effective Date, (ii)
approximately Restricted Shares will become eligible for sale 90 days after
the Effective Date pursuant to the provisions of Rule 144 or Rule 701, and
(iii) approximately additional Restricted Shares will become eligible for
sale 180 days after the Effective Date upon expiration of certain lock-up
agreements and, as of that date, approximately of such shares will be
subject to certain volume and other resale restrictions pursuant to Rule 144.
At March 31, 1997, options to purchase 735,238 shares of Common Stock were
outstanding, of which options approximately 392,238 shares were then
exercisable. Immediately after this offering, the Company
56
<PAGE>
intends to file a registration statement on Form S-8 under the Securities Act
covering an aggregate of 2,391,014 shares of Common Stock reserved for
issuance pursuant to outstanding options under the 1993 Plan, and reserved for
issuance under the 1997 Plan, Directors Plan and Purchase Plan. As a result of
such registration, shares of Common Stock issuable upon exercise of options
and pursuant to the Purchase Plan will be available for sale in the public
market, subject to Rule 144 volume limitations applicable to affiliates and
subject to lock-up agreements. Beginning 180 days after the Effective Date,
shares issuable upon the exercise of vested options will be eligible for sale
in the public market, if such options are exercised.
57
<PAGE>
UNDERWRITING
The Underwriters named below, acting through their representatives,
Robertson, Stephens & Company LLC, SoundView Financial Group, Inc. and
Wessels, Arnold & Henderson, L.L.C. (the "Representatives"), have severally
agreed with the Company and the Selling Stockholders, subject to the terms and
conditions of the Underwriting Agreement, to purchase the number of shares of
Common Stock set forth opposite their respective names below. The Underwriters
are committed to purchase and pay for all such shares if any are purchased.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
Robertson, Stephens & Company LLC........................................
SoundView Financial Group, Inc...........................................
Wessels, Arnold & Henderson, L.L.C.......................................
----
Total..................................................................
====
</TABLE>
The Representatives have advised the Company that the Underwriters propose
to offer the shares of Common Stock to the public at the initial public
offering price set forth on the cover page of this Prospectus and to certain
dealers at such price less a concession of not in excess of $ per share, of
which $ may be reallowed to other dealers. After the initial public
offering, the public offering price, concession and reallowance to dealers may
be reduced by the Representatives. No such reduction shall change the amount
of proceeds to be received by the Company as set forth on the cover page of
this Prospectus.
Certain of the Selling Stockholders have granted to the Underwriters an
option, exercisable during the 30-day period after the date of this Prospectus
for this offering, to purchase up to additional shares of Common Stock, at
the same price per share as the Company and the Selling Stockholders will
receive for the shares that the Underwriters have agreed to purchase. To
the extent that the Underwriters exercise such option, each of the
Underwriters will have a firm commitment to purchase approximately the same
percentage of such additional shares that the number of shares of Common Stock
to be purchased by it shown in the above table represents as a percentage of
the shares offered hereby. If purchased, such additional shares will be sold
by the Underwriters on the same terms as those on which the shares are being
sold.
The Underwriting Agreement contains covenants of indemnity among the
Underwriters, the Company and the Selling Stockholders against certain civil
liabilities, including liabilities under the Securities Act.
Pursuant to the terms of lock-up agreements, all officers, directors and
certain security holders of the Company have agreed with the Representatives
for a period of 180 days after the effective date of this Prospectus that they
will not, subject to certain exceptions, directly or indirectly offer to sell,
contract to sell, or otherwise sell, dispose of, pledge, grant any rights with
respect to, any shares of Common Stock, any options or warrants to purchase
any shares of Common Stock, or any securities convertible into or exchangeable
for shares of Common Stock, now owned or hereafter acquired directly by such
holders or with respect to which they have the power of disposition, without
the prior written consent of Robertson, Stephens & Company, which may, in its
sole discretion and at any time without notice, release all or any portion of
the securities
58
<PAGE>
subject to lock-up agreements. See "Shares Eligible for Future Sale." In
addition, the Company also has agreed that during the 180 days following the
effective date of this Prospectus the Company will not, without the prior
written consent of Robertson, Stephens & Company, subject to certain
exceptions, offer, issue, sell, contract to sell, or otherwise dispose of any
shares of Common Stock, any options or warrants to purchase any shares of
Common Stock, or any securities convertible into, exercisable for or
exchangeable for shares of Common Stock other than the Company's sales of
shares in this offering, the issuance of Common Stock upon the exercise of
outstanding options and the Company's issuance of options under existing
employee and director stock option plans.
Prior to this offering, there has been no public market for the Common Stock
of the Company. Consequently, the initial public offering price for the Common
Stock was determined through negotiations among the Company and the
Representatives. Among the factors considered in such negotiations were
prevailing market conditions, certain financial information of the Company,
market valuations of other companies that the Company and the Representatives
believe to be comparable to the Company, estimates of the business potential
of the Company, the present state of the Company's development and other
factors deemed relevant.
The Underwriters do not intend to confirm sales of the Common Stock offered
hereby to any accounts over which they exercise discretionary authority.
The Underwriters have reserved approximately shares of Common Stock for
sale, at the initial public offering price, to directors, officers and
employees of the Company, their business affiliates and related parties, in
each case as such persons have expressed an interest in purchasing such shares
in the offering. The number of shares of Common Stock available for sale to
the general public will be reduced to the extent such persons purchase such
reserved shares of Common Stock. Any reserved shares of Common Stock not so
purchased will be offered by the Underwriters to the general public on the
same basis as the other shares of Common Stock offered pursuant to the
offering.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company and the Selling Stockholders by Fenwick & West LLP, Palo
Alto, California. Certain legal matters will be passed upon for the
Underwriters by Testa, Hurwitz & Thibeault, LLP, Boston, Massachusetts.
EXPERTS
The financial statements and schedule of the Company as of December 31, 1995
and 1996, and for each of the years in the three year period ended December
31, 1996 included in this Prospectus and elsewhere in the registration
statement, have been included in reliance upon the reports 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 Commission, a Registration Statement on Form
S-1 under the Securities Act with respect to the shares of Common Stock
offered hereby. This Prospectus does not contain all of the information set
forth in the Registration Statement and the exhibits and schedule thereto. For
further information with respect to the Company and the Common Stock offered
hereby, reference is made to the Registration Statement and the exhibits and
schedule thereto. Statements contained in this Prospectus regarding the
contents of any contract or any other document to which reference is made are
not necessarily complete, and in each instance reference is made to the copy
of such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference. A copy of the Registration Statement and the exhibits and schedule
thereto may be inspected without charge at the offices of the Commission at
Judiciary Plaza, 450 Fifth Street, Washington, D.C. 20549, and copies of all
or any part of the Registration Statement may be obtained from the Public
Reference Section of the Commission, Washington, D.C. 20549 upon the payment
of the fees prescribed by the Commission.
59
<PAGE>
TSI INTERNATIONAL SOFTWARE LTD.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.............................................. F-2
Balance Sheets as of December 31, 1995 and 1996 and (unaudited) March 31,
1997..................................................................... F-3
Statements of Operations for the years ended December 31, 1994, 1995 and
1996 and (unaudited) for the three months ended March 31, 1996 and 1997.. F-4
Statements of Stockholders' (Deficiency) as of December 31, 1994, 1995 and
1996 and (unaudited) as of March 31, 1997................................ F-5
Statements of Cash Flows for the years ended December 31, 1994, 1995 and
1996 and (unaudited) for the three months ended March 31, 1996 and 1997.. F-6
Notes to Financial Statements............................................. F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
TSI International Software Ltd.:
We have audited the accompanying balance sheets of TSI International Software
Ltd. (the "Company") as of December 31, 1996 and 1995, and the related
statements of operations, stockholders' (deficiency) and cash flows for each of
the years in the three year period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of TSI International Software
Ltd. as of December 31, 1996 and 1995, and the results of its operations and
its cash flows for each of the years in the three year period ended December
31, 1996 in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Stamford, Connecticut
April 14, 1997, except for note 6,which is as of May 15, 1997
F-2
<PAGE>
TSI INTERNATIONAL SOFTWARE LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- MARCH 31,
1995 1996 1997
------------ ------------ -----------
(unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash................................ $ 142,500 $ 41,300 $ 79,400
Accounts receivable, less allowances
of $158,100, $319,900 and
(unaudited) $288,800............... 2,932,400 4,380,900 5,296,500
Current portion of investment in
licensing contracts receivable, net
of unearned finance income of
$126,100, $84,200 and (unaudited)
$72,100 (note 3)................... 982,500 742,000 773,800
Prepaid expenses and other current
assets............................. 300,800 388,000 499,200
------------ ------------ -----------
Total current assets.............. 4,358,200 5,552,200 6,648,900
Furniture, fixtures and equipment, net
(note 4)............................. 913,000 1,304,400 1,351,300
Investment in licensing contracts
receivable, net of unearned finance
income of $91,900, $50,100 and
(unaudited) $51,000, less current
portion (note 3)..................... 896,400 551,600 600,200
Other assets.......................... 69,600 113,100 120,500
------------ ------------ -----------
$ 6,237,200 $ 7,521,300 $ 8,720,900
============ ============ ===========
LIABILITIES AND STOCKHOLDERS' (DEFICIENCY)
Current liabilities:
Accounts payable.................... $ 439,100 $ 694,800 $ 611,000
Accrued expenses (note 9)........... 1,266,500 1,486,500 1,610,200
Current portion of deferred
maintenance revenue................ 4,780,200 4,591,200 4,585,400
------------ ------------ -----------
Total current liabilities......... 6,485,800 6,772,500 6,806,600
Long-term debt (note 5)............... 2,840,100 2,790,100 3,590,100
Other long-term liabilities........... 79,300 27,400 42,600
Deferred maintenance revenue, less
current portion...................... 401,600 225,000 313,400
------------ ------------ -----------
Total liabilities................. 9,806,800 9,815,000 10,752,700
------------ ------------ -----------
Stockholders' (deficiency) (note 6):
Convertible preferred stock
($8,219,000 aggregate liquidation
preference)........................ 8,600 8,600 8,600
Common stock (3,888,166 shares
authorized, par value $.01)........ 20,000 20,000 20,000
Additional paid-in capital.......... 7,898,800 7,898,800 7,898,800
Accumulated deficit................. (11,264,500) (10,036,600) (9,723,900)
Cumulative foreign currency
translation adjustment............. (167,500) (119,500) (170,300)
Treasury stock, at cost............. (65,000) (65,000) (65,000)
------------ ------------ -----------
Total stockholders' (deficiency).. (3,569,600) (2,293,700) (2,031,800)
------------ ------------ -----------
$ 6,237,200 $ 7,521,300 $ 8,720,900
============ ============ ===========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
TSI INTERNATIONAL SOFTWARE LTD.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------- ----------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ---------- ----------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Software licensing.... $ 6,275,500 $ 7,552,900 $ 9,309,500 $1,782,500 $2,731,100
Service, maintenance
and other............ 7,658,500 8,508,500 9,694,400 2,306,000 2,776,800
----------- ----------- ----------- ---------- ----------
Total revenues...... 13,934,000 16,061,400 19,003,900 4,088,500 5,507,900
----------- ----------- ----------- ---------- ----------
Cost of revenues:
Software licensing.... 1,034,700 724,900 494,800 93,300 173,500
Service, maintenance
and other............ 2,522,000 2,200,800 2,005,700 431,400 548,200
----------- ----------- ----------- ---------- ----------
Total cost of reve-
nues............... 3,556,700 2,925,700 2,500,500 524,700 721,700
----------- ----------- ----------- ---------- ----------
Gross profit............ 10,377,300 13,135,700 16,503,400 3,563,800 4,786,200
----------- ----------- ----------- ---------- ----------
Operating expenses:
Product development... 2,231,400 3,067,600 3,452,300 779,300 1,073,400
Selling and marketing. 6,123,800 7,159,800 8,715,200 1,893,800 2,583,700
General and adminis-
trative.............. 1,926,900 2,001,200 2,921,500 728,300 777,200
----------- ----------- ----------- ---------- ----------
Total operating ex-
penses............. 10,282,100 12,228,600 15,089,000 3,401,400 4,434,300
----------- ----------- ----------- ---------- ----------
Operating income.... 95,200 907,100 1,414,400 162,400 351,900
Borrowing expenses (note
5)..................... (467,200) (419,800) (285,500) (78,500) (63,100)
Interest income......... 268,100 193,200 135,200 40,200 30,500
Other income (note 11).. -- 176,900 -- -- --
----------- ----------- ----------- ---------- ----------
Income (loss) before
income taxes....... (103,900) 857,400 1,264,100 124,100 319,300
Provision for income
taxes (note 8)......... 8,800 34,600 36,200 3,000 6,600
----------- ----------- ----------- ---------- ----------
Net income (loss)... $ (112,700) $ 822,800 $ 1,227,900 $ 121,100 $ 312,700
=========== =========== =========== ========== ==========
Net income (loss) per
share.................. $ (.03) $ .22 $ .31 $ .03 $ .07
=========== =========== =========== ========== ==========
Weighted average number
of common and common
equivalent shares out-
standing............... 3,719,600 3,739,724 3,961,411 3,767,186 4,270,176
=========== =========== =========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
TSI INTERNATIONAL SOFTWARE LTD.
STATEMENTS OF STOCKHOLDERS' (DEFICIENCY)
<TABLE>
<CAPTION>
SERIES A, B AND C
CONVERTIBLE CUMULATIVE
PREFERRED STOCK COMMON STOCK FOREIGN TREASURY STOCK
------------------ ----------------- ADDITIONAL CURRENCY -------------------
PAR PAR PAID-IN ACCUMULATED TRANSLATION
SHARES VALUE SHARES VALUE CAPITAL DEFICIT ADJUSTMENT SHARES VALUE TOTAL
--------- -------- --------- ------- ---------- ------------ ----------- -------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31,
1993........... 860,969 $ 8,600 2,000,000 $20,000 $8,035,500 $(11,974,600) $(169,300) (123,492) $(225,700) $(4,305,500)
Stock options
exercised...... -- -- -- -- (1,700) -- -- 500 2,000 300
Net loss........ -- -- -- -- -- (112,700) -- -- -- (112,700)
Change in
foreign
currency
adjustment..... -- -- -- -- -- -- 24,900 -- -- 24,900
--------- -------- --------- ------- ---------- ------------ --------- -------- --------- -----------
Balance at
December 31,
1994........... 860,969 8,600 2,000,000 20,000 8,033,800 (12,087,300) (144,400) (122,992) (223,700) (4,393,000)
Stock options
exercised...... -- -- -- -- (135,000) -- -- 47,440 158,700 23,700
Net income...... -- -- -- -- -- 822,800 -- -- -- 822,800
Change in
foreign
currency
adjustment..... -- -- -- -- -- -- (23,100) -- -- (23,100)
--------- -------- --------- ------- ---------- ------------ --------- -------- --------- -----------
Balance at
December 31,
1995........... 860,969 8,600 2,000,000 20,000 7,898,800 (11,264,500) (167,500) (75,552) (65,000) (3,569,600)
Net income...... -- -- -- -- -- 1,227,900 -- -- -- 1,227,900
Change in
foreign
currency
adjustment..... -- -- -- -- -- -- 48,000 -- -- 48,000
--------- -------- --------- ------- ---------- ------------ --------- -------- --------- -----------
Balance at
December 31,
1996........... 860,969 8,600 2,000,000 20,000 7,898,800 (10,036,600) (119,500) (75,552) (65,000) (2,293,700)
Net income
(unaudited).... -- -- -- -- -- 312,700 -- -- -- 312,700
Change in
foreign
currency
adjustment
(unaudited).... -- -- -- -- -- -- (50,800) -- -- (50,800)
--------- -------- --------- ------- ---------- ------------ --------- -------- --------- -----------
Balance at March
31, 1997
(unaudited).... 860,969 $ 8,600 2,000,000 $20,000 $7,898,800 $ (9,723,900) $(170,300) (75,552) $ (65,000) $(2,031,800)
========= ======== ========= ======= ========== ============ ========= ======== ========= ===========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
TSI INTERNATIONAL SOFTWARE LTD.
STATEMENTS OF CASH FLOWS
REPRESENTING INCREASES (DECREASES) IN CASH
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------ --------------------
1994 1995 1996 1996 1997
---------- ----------- ----------- --------- ---------
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operat-
ing activities:
Net income (loss)...... $ (112,700) $ 822,800 $ 1,227,900 $ 121,100 $ 312,700
Adjustments to recon-
cile net income (loss)
to net cash provided
by operating activi-
ties:
Depreciation and amor-
tization of fixed as-
sets.................. 309,900 351,000 436,100 86,500 150,900
Amortization of li-
censes and purchased
software (note 4)..... 291,000 291,300 -- -- --
Provision for losses
on accounts receiv-
able.................. 99,000 65,000 431,700 17,500 19,900
Changes in operating
assets and liabili-
ties:
Accounts receivable... (203,700) (977,200) (1,930,500) 303,300 (981,600)
Investment in licens-
ing contracts re-
ceivable............. 1,004,500 502,900 585,300 228,600 (80,400)
Prepaid expenses and
other current as-
sets................. (25,400) 69,800 (87,200) 40,200 (111,200)
Other assets.......... (21,600) (18,400) (43,500) (7,700) (7,400)
Accounts payable...... (79,600) 133,500 255,700 33,100 (83,800)
Accrued expenses...... (112,100) 155,000 220,000 39,600 123,700
Other long-term lia-
bilities............. (45,800) (57,400) -- -- 28,200
Deferred maintenance
revenue.............. 224,500 (16,100) (365,600) (232,400) 82,600
---------- ----------- ----------- --------- ---------
Net cash provided
(used) by operating
activities.......... 1,328,000 1,322,200 729,900 629,800 (546,400)
---------- ----------- ----------- --------- ---------
Cash used by investing
activities -- Purchase
of furniture, fixtures
and equipment.......... (237,300) (354,300) (827,500) (118,600) (197,800)
Cash flows from financ-
ing activities:
Net borrowings (repay-
ments) under revolving
line of credit........ (646,000) (1,150,000) (50,000) (550,000) 800,000
Payments under capital
leases................ (172,100) (143,500) (51,900) (18,300) (13,000)
Stock options exer-
cised................. 300 23,700 -- -- --
---------- ----------- ----------- --------- ---------
Net cash (used) pro-
vided by financing
activities.......... (817,800) (1,269,800) (101,900) (568,300) 787,000
---------- ----------- ----------- --------- ---------
Effect of exchange rate
changes on cash........ (500) (5,600) 98,300 (9,400) (4,700)
---------- ----------- ----------- --------- ---------
Net change in cash... 272,400 (307,500) (101,200) (66,500) 38,100
Cash at beginning of pe-
riod................... 177,600 450,000 142,500 142,500 41,300
---------- ----------- ----------- --------- ---------
Cash at end of period... $ 450,000 $ 142,500 $ 41,300 $ 76,000 $ 79,400
========== =========== =========== ========= =========
Supplemental informa-
tion:
Cash paid for:
Interest............... $ 291,000 $ 352,200 $ 278,900 $ 72,400 $ 65,400
Income taxes........... -- 21,000 27,100 20,000 20,000
Non-cash investing ac-
tivity --
Acquisition of equip-
ment under capital
leases................ $ 132,900 $ 104,600 $ -- $ -- $ 30,000
========== =========== =========== ========= =========
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
TSI INTERNATIONAL SOFTWARE LTD.
NOTES TO FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company
TSI International Software Ltd. (the "Company") develops, markets, licenses,
and supports computer software and related services which allow organizations
to integrate their business applications within the enterprise and with
outside business partners. The Company's customers are located primarily
throughout the U.S. and Western Europe and represent a broad range of
industries.
(a) Revenue Recognition
Software licensing revenues are recognized upon shipment of the product if
there are no significant post-delivery obligations, or at a later date once
such obligations are satisfied. Maintenance contract revenue is recognized
ratably over the term of the contracts, which are generally for one year. The
unrecognized portion of maintenance revenue is classified as deferred
maintenance revenue in the accompanying balance sheets. Consulting and
training revenues are recognized as services are performed.
The Company licenses its KEY/MASTER product on a term-use basis for 15 to 60
month periods. The contracts provide for maintenance and generally do not have
renewal or purchase options. At contract inception, the present value of the
payments to be received under the contract is apportioned between software
licensing revenue and maintenance revenue and recognized as described above.
The present value of the payments to be received are recorded as the
investment in licensing contracts receivable. License interest revenue is
recognized over the term of the contract at a constant rate of return.
(b) Product Development Costs
Statement of Financial Accounting Standards (SFAS) No. 86, "Accounting for
the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed",
requires that software development costs: (i) be expensed as incurred until
technological feasibility (as defined therein) is achieved; and (ii)
capitalized subsequent to achieving technological feasibility and prior to the
product being available to customers. The establishment of technological
feasibility of the Company's products has essentially coincided with the
products' general release to customers. Accordingly, the Company expenses all
software development costs as incurred.
Purchased software with alternative future use is capitalized and amortized
over its expected useful life.
(c) Furniture, Fixtures and Equipment
Furniture, fixtures and equipment are carried at cost less accumulated
depreciation computed using the straight-line method over their estimated
useful lives. Furniture, fixtures and equipment held under capital leases and
leasehold improvements are amortized on a straight-line basis over the lease
term.
(d) Income Taxes
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 and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. Valuation allowances
are provided for any portion of the deferred tax assets which are not more
likely than not to be realized.
F-7
<PAGE>
TSI INTERNATIONAL SOFTWARE LTD.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(e) Net Income (Loss) Per Share
Net income (loss) per share is usually calculated using the weighted average
number of common and common equivalent shares outstanding during each period,
after retroactive adjustment for stock splits (see note 6). In addition, the
Securities and Exchange Commission requires that shares issued within one year
of an Initial Public Offering (IPO) be shown as outstanding for all periods
presented. Further, in connection with an IPO, all outstanding preferred stock
will be converted into common stock on the basis described in note 6 and,
accordingly, are shown as outstanding for all periods presented. Following are
the components of common stock used to calculate net income (loss) per share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
----------------------------- -------------------
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
(unaudited)
<S> <C> <C> <C> <C> <C>
Weighted average common
shares outstanding....... 1,876,562 1,896,686 1,924,148 1,924,148 1,924,148
Increment for shares is-
sued within one year of
an IPO................... 100,000 100,000 100,000 100,000 100,000
Common shares expected to
be issued for conversion
of preferred stock....... 1,743,038 1,743,038 1,743,038 1,743,038 1,743,038
Dilutive effect of stock
options.................. -- -- 194,225 -- 502,990
--------- --------- --------- --------- ---------
Weighted average common
and common equivalent
shares outstanding....... 3,719,600 3,739,724 3,961,411 3,767,186 4,270,176
========= ========= ========= ========= =========
</TABLE>
(f) Cash Equivalents
The Company considers securities with maturities of three months or less,
when purchased, to be cash equivalents.
(g) 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.
(h) Accounting Changes
During 1996, the Company adopted SFAS No. 121 -- "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
SFAS No. 121 requires companies to review assets for possible impairment and
provides guidelines for recognition of impairment losses related to long-lived
assets, certain intangibles and assets to be disposed of. The impact of the
adoption of SFAS No. 121 was not material.
Also during 1996, the Company adopted SFAS No. 123 -- "Accounting for Stock-
Based Compensation." In accordance with SFAS No. 123, the Company elected not
to record any compensation expense for stock options granted to employees at
fair value and will disclose in the notes to its financial statements the
impact on net income and net income per share as if the fair value based
compensation cost had been recognized (see note 6).
F-8
<PAGE>
TSI INTERNATIONAL SOFTWARE LTD.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(2) FOREIGN OPERATIONS
The Company's balance sheets include foreign branch assets of $1,565,100,
$2,574,400, and $2,642,600 and liabilities of $258,800, $282,200, and $270,700
at December 31, 1995 and 1996, and (unaudited) March 31, 1997, respectively.
The foreign net income (loss) for the years ended December 31, 1994, 1995, and
1996, and (unaudited) the three months ended March 31, 1996 and 1997, after
allocation of corporate charges, was ($106,700), $133,700, $586,200, $129,600,
and $(115,600) respectively.
With the exception of direct sales activities in the United Kingdom and
Canada, the Company utilizes distributors and agents to market its products
outside the United States. Revenues generated through these third parties
amounted to $230,400, $147,100, $288,700, $91,500, and $35,700 for the years
ended December 31, 1994, 1995, and 1996, and (unaudited) for the three months
ended March 31, 1996 and 1997 respectively.
(3) INVESTMENT IN LICENSING CONTRACTS
The net investment in licensing contracts at December 31, 1996 is comprised
of future minimum contract payments receivable, net of unearned interest
income. The interest rate implicit in term-use licensing contracts was 9.5%
for contracts entered into during the years 1995 and 1996 and (unaudited) for
the first quarter of 1997. Total minimum contract payments receivable at
December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997........................................................... $ 826,200
1998........................................................... 394,100
1999........................................................... 147,800
2000........................................................... 48,000
2001........................................................... 11,800
----------
1,427,900
Less unearned interest income.................................. (134,300)
----------
1,293,600
Less current portion........................................... (742,000)
----------
Non current portion............................................ $ 551,600
==========
</TABLE>
There were no transactions during the three months ended March 31, 1997
which would significantly alter these receivables.
(4) CAPITAL ASSETS
(a) Furniture, Fixtures, and Equipment
Furniture, fixtures and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ MARCH 31, USEFUL LIFE
1995 1996 1997 RANGE
----------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C>
Computer systems......... $ 1,778,700 $ 2,421,700 $ 2,610,000 3-7 years
Furniture and fixtures... 465,800 545,500 553,800 3-7 years
Office equipment......... 302,800 325,800 331,400 3-7 years
Leasehold improvements... 287,600 328,500 326,400 3-10 years
Automobiles.............. 59,000 99,900 97,600 5 years
----------- ----------- -----------
2,893,900 3,721,400 3,919,200
Less accumulated depreci-
ation and amortization.. (1,980,900) (2,417,000) (2,567,900)
----------- ----------- -----------
$ 913,000 $ 1,304,400 $ 1,351,300
=========== =========== ===========
</TABLE>
F-9
<PAGE>
TSI INTERNATIONAL SOFTWARE LTD.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
Computer systems and equipment under capital leases, included in the above
totals, net of accumulated depreciation, was $203,000, $56,200, and $64,300 as
of December 31, 1995 and 1996 and (unaudited) March 31, 1997, respectively.
(b) Purchased Software
In 1990, the Company acquired software from Foretell Corporation which was
available for sale to customers at the time of purchase. The cost of
$1,484,200 was amortized over a five year period which ended in 1995.
Amortization expense for years 1994 and 1995 was $291,000 and $272,100,
respectively.
(5) LONG-TERM DEBT
Since August 1994, the Company has had a line of credit facility with a
bank. The underlying loan agreement, as amended, which expires in November
1998 and is partially guaranteed by the Connecticut Development Authority
(CDA): (a) provides for Company borrowings equal to the lesser of $4,000,000
or the sum of: (i) 80% of eligible accounts receivable, (ii) lesser
percentages of certain other receivables; and (iii) the effective dollar
amount of the guarantee of the CDA (approximately $600,000); (b) requires
interest on borrowings at either the bank's prime rate plus 1.0% or the LIBOR
rate plus 3.0%; (c) collateralizes all assets of the Company as security for
the borrowings; (d) requires the Company to maintain several financial
covenants; and (e) imposes other restrictions, including (i) prohibition on
losses, cash dividends and key management changes and (ii) limitations on
additional debt, mergers and acquisitions, stock repurchases and sales of
assets (except in the normal course of business). The Company was in
compliance with all financial covenants at December 31, 1996 but (unaudited)
was not in compliance with the indebtedness to EBITDA ratio covenant at March
31, 1997. The Company has received a waiver for this non-compliance.
All repayments are due at maturity. Borrowings based on prime can be prepaid
without penalty.
Borrowing costs and effective interest rates under this agreement were as
follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
---------------------------- --------------------
1994 1995 1996 1996 1997
-------- -------- -------- --------- ---------
(unaudited)
<S> <C> <C> <C> <C> <C>
Interest expense........ $395,400 $368,300 $250,200 $ 65,600 $ 60,000
Guarantee fees to CDA... 63,500 31,500 23,600 7,900 3,100
Commitment fees......... 8,300 20,000 11,700 5,000 --
-------- -------- -------- --------- ---------
$467,200 $419,800 $285,500 $ 78,500 $ 63,100
======== ======== ======== ========= =========
Effective interest rate. 10.13% 11.41% 9.51% 11.69% 8.41%
======== ======== ======== ========= =========
</TABLE>
F-10
<PAGE>
TSI INTERNATIONAL SOFTWARE LTD.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(6) STOCKHOLDERS' (DEFICIENCY)
(a) Recent Developments
On May 8, 1997, the Board of Directors approved an IPO of the Company's
common stock and in connection therewith also approved at the closing of the
IPO: (i) an increase in the number of authorized shares of common stock and
preferred stock to 20,000,000 shares and 5,000,000 shares, respectively; and
(ii) a two-for-one common stock split. The accompanying financial statements
have been retroactively adjusted to reflect this common stock split. Pursuant
to the Company's Certificate of Incorporation, the closing of the IPO will
cause the conversion of all preferred shares into 1,843,038 shares of common
stock.
The Board of Directors also approved the following stock-based plans:
<TABLE>
<CAPTION>
SHARES FORMS OF ISSUANCES
TYPE OF PLAN RESERVED OR GRANTS AWARDED
------------ --------- ------------------
<S> <C> <C>
Equity Incentive 750,000 Options, restricted shares and awards.
(replacing the 1993 Grants (under the 1993 Plan) of 95,000
Stock Option Plan) options at exercise prices from $7.50 to
$10.00 a share.
Directors Stock Option 150,000 Grants of 40,000 options at exercise price
of $10.00 a share.
Employee Stock Purchase 500,000 No grants made.
---------
1,400,000
=========
</TABLE>
In addition, on May 15, 1997, three new investors acquired a total of 50,000
shares of Series E convertible preferred stock at $20 a share. At the closing
of the IPO, these shares will be converted into 100,000 shares of common
stock.
(b) Preferred and Common Stock
The Company's Certificate of Incorporation authorizes 1,638,166 shares of
preferred stock, and 3,888,166 shares of common stock, each with a par value
of $.01 a share.
All of the classes of Preferred Stock (a) have the right to vote on an as-
converted basis; (b) convert into common stock; and (c) have certain anti-
dilution rights. The authorized shares of preferred stock have been designated
as follows:
<TABLE>
<S> <C>
Series A Convertible Preferred Stock ("Series A stock")............ 297,405
Series B Convertible Preferred Stock ("Series B stock")............ 115,761
Series C Convertible Preferred Stock ("Series C stock")............ 725,000
Series D Convertible Preferred Stock ("Series D stock")............ 364,469
Undesignated....................................................... 135,531
---------
1,638,166
=========
</TABLE>
Upon liquidation, dissolution or winding up of the Company, before any
distribution in respect of the Series A stock, Series B stock or common stock,
the holders of the Series C stock are entitled to receive an amount equal to
$6.00 a share plus any declared and unpaid dividends. In addition, the Series
C stock is
F-11
<PAGE>
TSI INTERNATIONAL SOFTWARE LTD.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
entitled to receive preferential non-cumulative dividends, when declared, at
an annual per share amount of $0.48 through December 31, 1997 and cumulative
dividends at $0.72 a share thereafter. The Series C stock may be redeemed at
the Company's option after June 30, 1997 at $6.00 a share plus all accumulated
and unpaid dividends. Further, before any distribution in respect of the
common stock, the holders of shares of the Series B stock and subsequently the
Series A stock are entitled to receive an amount equal to $13.39 a share plus
any declared and unpaid dividends. In addition, the holders of the Series B
and A stock are entitled to receive preferential non-cumulative dividends,
when declared, at an annual per share amount of $1.07 through December 31,
1997 and cumulative dividends at $1.61 a share thereafter. The Series B and A
stock may be redeemed at the Company's option after June 30, 1997 at $13.39 a
share, plus all accumulated and unpaid dividends. No dividends have been or
are required to be declared on these shares.
At December 31, 1996 the following shares of preferred stock were
outstanding:
<TABLE>
<S> <C>
Series A stock....................................................... 297,405
Series B stock....................................................... 115,761
Series C stock....................................................... 447,803
-------
Total outstanding.................................................. 860,969
Series C stock issuable to prevent dilution.......................... 10,550
-------
871,519
=======
</TABLE>
Certain owners of preferred and common stock hold warrants to purchase
Series D stock at $3.00 a share. The warrants expire in 2002 and are not
expected to be exercised prior to the proposed IPO. After the IPO, the
warrants are exercisable for 728,938 shares of common stock.
(c) Stock Option Plan
The Company maintains a 1993 Stock Option Plan ("Plan") which provides that
the Company may grant options for employees to purchase up to 1,038,954 shares
of the Company's common stock. Options issued to date have been granted at
fair market value, as determined by the Company's Board of Directors. No
options may be granted for a term greater than 10 years.
Transactions under the Plan are summarized below:
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Shares under option at January 1........................... 493,178 613,238
Options exercised.......................................... (47,440) --
Options granted............................................ 245,000 100,000
Options canceled........................................... (77,500) (4,000)
------- -------
Shares under option at December 31......................... 613,238 709,238
======= =======
Options exercisable at December 31......................... 272,738 384,238
======= =======
</TABLE>
Options were granted in 1995 and prior years at an exercise price of $0.50 a
share and options were granted during 1996 at exercise prices of $1.00 and
$2.50 a share. All options vest ratably over a four year period from the date
of grant.
There were 281,776 shares available for grant at December 31, 1996 and
(unaudited) 26,000 options were granted at $2.50 a share during the three
months ended March 31, 1997.
F-12
<PAGE>
TSI INTERNATIONAL SOFTWARE LTD.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
As discussed in Note 1, the Company adopted SFAS No. 123 during 1996 and
elected not to recognize compensation expense relating to employee stock
options where the exercise price of the option equaled the fair value (as
estimated by the Company) of the stock on the date of grant. As a non-public
entity, the Company utilized the minimum value method to determine
compensation based on the fair value of the options on the date of grant in
accordance with SFAS No. 123. Following are the resultant pro forma amounts of
net income and net income per share:
<TABLE>
<CAPTION>
1995 1996
-------- ----------
<S> <C> <C>
Net income -- as reported............................... $822,800 $1,227,900
Net income -- pro forma................................. $819,500 $1,216,600
Primary net income per share -- as reported............. $ .22 $ .31
Primary net income per share -- pro forma............... $ .22 $ .31
</TABLE>
The pro forma effect on net income for 1995 and 1996 is not representative
of the pro forma effect on net income in future years because it does not take
into consideration pro forma compensation expense related to grants made prior
to 1995.
The fair value of each option granted in 1995 and 1996 was $.31 and $1.31,
respectively based on estimates on the date of grant using the modified Black-
Scholes option pricing model using the following weighted average assumptions:
<TABLE>
<S> <C>
Risk-free interest rate................................................ 6.27%
Expected life in years................................................. 6
Expected volatility.................................................... 0%
Expected dividend yield................................................ 0%
</TABLE>
(7) EMPLOYEE BONUS AND SAVINGS PLANS
The Company maintains a bonus plan for all non-executive officer employees.
The bonus plan is reviewed annually by the Board of Directors and provides for
payments based upon a percentage of pretax income, as defined. Bonus payments
of $40,000, $100,000, and $200,000 were authorized during 1994, 1995, and
1996, respectively.
On July 1, 1990, the Company established a defined contribution plan under
Section 401(k) of the Internal Revenue Code which provides for voluntary
employee salary deferrals but does not require Company matching funds. The
defined contribution plan covers substantially all employees. Employees are
eligible to contribute to the defined contribution plan upon completion of
three months of service with the Company. Contributions are subject to
established limitations as determined by the Internal Revenue Service. There
have been no Company contributions to the plan to date.
(8) INCOME TAXES
The provision for income taxes is composed solely of Federal Alternative
Minimum Taxes (AMT). The AMT for the Company's fiscal year ended April 30,
1995 of $13,200 was prorated to calendar 1994 ($8,800) and 1995 ($4,400). The
AMT for the period May 1 to December 31, 1995 was approximately $32,000. The
AMT for the year ended December 31, 1996 was approximately $36,200.
At December 31, 1996, the Company had: (a) federal tax net operating loss
carryforwards of $8,646,000 expiring between the years 2000 and 2009; (b)
research and experimentation credits of $590,000 expiring between 2003 and
2008; and (c) AMT credit carryforwards of $68,100 which have no expiration
date. Section
F-13
<PAGE>
TSI INTERNATIONAL SOFTWARE LTD.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
382 of the Internal Revenue Code imposes a limitation on the amount of tax
loss carryforwards which can be utilized in any year after there has been a
50% or greater ownership change of the Company. The ownership change is based
on the number of shares of stock or the aggregate market value of the stock
within any consecutive three year period. Future years' utilization of the
Company's tax loss carryforwards could be subject to this limitation.
At December 31, 1995 and 1996, the components of net deferred taxes
(utilizing a 41.4% combined tax rate) were:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Deferred tax liabilities.............................. $1,306,900 $1,024,900
Deferred tax assets, net of valuation allowances of
$5,798,200 and $5,294,900 in 1995 and 1996........... 1,306,900 $1,024,900
---------- ----------
Net deferred taxes.................................. $ -- --
========== ==========
</TABLE>
Significant temporary differences which give rise to deferred tax (a)
liabilities and (b) assets are: (a) investment in licensing contracts
receivable and depreciation; and (b) net operating loss carryforwards and
deferred maintenance revenues.
The decrease in the valuation allowance of $503,300 in 1996 is the result of
the utilization of net operating loss carryforwards.
(9) ACCRUED EXPENSES
Included in accrued expenses as of December 31, 1995 and 1996 and
(unaudited) March 31, 1997 are compensation costs (regular payroll, bonus and
profit sharing) of $336,500, $548,300 and $804,200, respectively.
(10) COMMITMENTS AND CONTINGENCIES
The Company rents premises and furniture, fixtures and equipment under
operating leases which expire at various dates through 2010.
Future minimum payments, by year and in the aggregate, under operating and
capital leases at December 31, 1996 are:
<TABLE>
<CAPTION>
CAPITAL OPERATING
-------- ----------
<S> <C> <C>
1997................................................... $ 82,200 $ 787,300
1998................................................... 24,100 743,700
1999................................................... 9,000 705,900
2000................................................... -- 708,200
2001................................................... -- 453,900
Thereafter............................................. -- 1,404,300
-------- ----------
Total................................................ $115,300 $4,803,300
==========
Less amount representing interest...................... (10,200)
--------
Present value of minimum capital lease payments...... $105,100
========
</TABLE>
F-14
<PAGE>
TSI INTERNATIONAL SOFTWARE LTD.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
There were no significant modifications to the Company's portfolio of leases
during the three months ended March 31, 1997.
Certain of the aforementioned leases provide for additional payments
relating to taxes and other operating expenses. Rental expense for the years
ended December 31, 1994, 1995, and 1996 and (unaudited) the three months ended
March 31, 1996 and 1997 under all operating leases aggregated approximately
$770,900, $820,900, $717,300, $201,600, and $193,100, respectively.
(11) LITIGATION SETTLEMENT
In April 1995 the Company received cash in settlement of a lawsuit which,
after payment of legal expenses, resulted in a non-operating gain of $176,900.
(12) CONDENSED QUARTERLY INFORMATION (UNAUDITED)
The following condensed quarterly information has been prepared by
management on a basis consistent with the Company's audited financial
statements. Such quarterly information may not be indicative of future
results. Amounts are in thousands, except per share data.
<TABLE>
<CAPTION>
1995
-------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
Total revenues.............................. $3,897 $4,027 $4,070 $4,067
Gross profit................................ 2,993 3,161 3,538 3,444
Net income.................................. 92 3 568 160
Net income per share........................ $ .03 $ -- $ .15 $ .04
Weighted average number of common and common
equivalent shares outstanding.............. 3,720 3,720 3,752 3,767
<CAPTION>
1996
-------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
Total revenues.............................. $4,089 $4,236 $5,046 $5,633
Gross profit................................ 3,564 3,681 4,413 4,845
Net income.................................. 121 186 518 403
Net income per share........................ $ .03 $ .05 $ .13 $ .10
Weighted average number of common and common
equivalent shares outstanding.............. 3,767 3,869 4,072 4,138
</TABLE>
F-15
<PAGE>
[COMPANY LOGO]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth expenses, other than the underwriting
discount and commissions, to be paid by the Registrant in connection with this
offering. All amounts shown are estimates except for the Securities and
Exchange Commission registration fee, the NASD filing fee and the Nasdaq
National Market filing fee:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee.............. $12,121
NASD filing fee.................................................. 4,500
Nasdaq National Market filing fee................................ *
Accounting fees and expenses..................................... 125,000
Legal fees and expenses.......................................... 300,000
Printing and engraving expenses.................................. 135,000
Blue sky fees and expenses....................................... 15,000
Transfer agent and registrar fees and expenses................... 10,000
Miscellaneous.................................................... *
-------
Total.......................................................... $
=======
</TABLE>
- --------
* To be filed by amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by the Delaware General Corporation Law, the Registrant's
Certificate of Incorporation includes a provision that eliminates the personal
liability of its directors for monetary damages for breach of fiduciary duty
as a director to the fullest extent permitted by the Delaware General
Corporation Law. As permitted by Section 145 of the Delaware General
Corporation Law, the Bylaws of the Registrant provide that (i) the Registrant
is required to indemnify its directors and executive officers and the
directors and executive officers to the fullest extent permitted by the
Delaware General Corporation Law, (ii) to the fullest extent permitted by the
Delaware General Corporation Law, the Registrant is required to advance all
expenses, as incurred, to its directors and executive officers in connection
with a legal proceeding (subject to certain exceptions), (iii) the rights
conferred in the Bylaws are not exclusive, (iv) the Registrant may, in its
discretion indemnify or advance expenses to persons whom the Registrant is not
obligated to indemnify or advance expenses; (v) the Registrant is authorized
to enter into indemnification agreements with its directors, officers,
employees and agents or any person serving at the request of the Registrant as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, including employee benefit plans and
(vi) the Registrant may not retroactively amend the Bylaw provisions relating
to indemnification.
The Registrant intends to enter into indemnity agreements with each of its
directors and executive officers. The indemnity agreements provide that
directors and executive officers will be indemnified and held harmless to the
fullest possible extent permitted by law including against all expenses
(including attorneys' fees), judgments, fines and settlement amounts paid or
reasonably incurred by them in any action, suit or proceeding, including any
derivative action by or in the right of the Registrant, on account of their
services as directors, officers, employees or agents of the Registrant or as
directors, officers, employees or agents of any other company or enterprise
when they are serving in such capacities at the request of the Registrant. The
Registrant will not be obligated pursuant to the agreements to indemnify or
advance expenses to an indemnified party with respect to proceedings or claims
(i) initiated by the indemnified party and not by way of defense, except with
respect to a proceeding authorized by the Board and successful proceedings
brought to enforce a right to indemnification under the indemnity agreements,
(ii) for any amounts paid in settlement of a proceeding unless the Registrant
consents to such settlement; (iii) on account of any suit in which judgment is
rendered against the indemnified party for an accounting of profits made from
the purchase or sale by the indemnified party of securities of the Registrant
pursuant to the provisions of (S)16(b) of the
II-1
<PAGE>
Securities Exchange Act of 1934 and related laws; (iv) on account of conduct
by an indemnified party that is finally adjudged to have been in bad faith or
conduct that the indemnified party did not reasonably believe to be in, or not
opposed to, the best interests of the Registrant; (v) on account of any
criminal action or proceeding arising out of conduct that the indemnified
party had reasonable cause to believe was unlawful; or (vi) if a final
decision by a court having jurisdiction in the matter shall determine that
such indemnification is not lawful.
The indemnity agreement requires a director or executive officer to
reimburse the Registrant for expenses advanced only to the extent it is
ultimately determined that the director or executive officer is not entitled,
under Delaware law, the Bylaws, his or her indemnity agreement or otherwise to
be indemnified for such expenses. The indemnity agreement provides that it is
not exclusive of any rights a director or executive officer may have under the
Certificate of Incorporation, Bylaws, other agreements, any majority-in-
interest vote of the stockholders or vote of disinterested directors, Delaware
law, or otherwise.
The indemnification provision in the Bylaws, and the indemnity agreements
entered into between the Registrant and its directors and executive officers,
may be sufficiently broad to permit indemnification of the Registrant's
directors and executive officers for liabilities arising under the Securities
Act.
As authorized by the Registrant's Bylaws, the Registrant, with approval by
the Registrants Board, has is seeking, and expects to obtain, directors and
officers liability insurance.
Reference is made to the following documents filed as exhibits to this
Registration Statement regarding relevant indemnification provisions described
above and elsewhere herein:
<TABLE>
<CAPTION>
DOCUMENT EXHIBIT NUMBER
-------- --------------
<S> <C>
Form of Underwriting Agreement............................. 1.01
Registrant's Certificate of Incorporation.................. 3.01
Registrant's Bylaws........................................ 3.04
1989 Stock Purchase Agreement, as amended.................. 4.03
Form of Indemnification Agreement.......................... 10.07
</TABLE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The following table sets forth information regarding all securities sold by
the Registrant and its Connecticut predecessor since May 1, 1994.
<TABLE>
<CAPTION>
AGGREGATE
NUMBER PURCHASE FORM OF
CLASS OF PURCHASERS DATE OF SALE TITLE OF SECURITIES OF SHARES PRICE CONSIDERATION
------------------- ------------ ------------------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Officers, directors and 05/94-05/97 Options to Purchase 515,000 -- --
employees Shares of Common Stock
granted under the
Company's 1993 Stock
Option Plan (1)
Officers, directors and 05/94-05/97 Common Stock purchased 47,940 $ 23,970 cash
employees upon exercise of stock
options
Mitsui & Co., Ltd., May 15, 1997 Series E Convertible 50,000 $1,000,000 cash
Mitsui Knowledge Preferred Stock
Industry Co., Ltd. and
Nippon Venture Capital
Co., Ltd.
</TABLE>
- --------
(1) With respect to the grant of stock options, exemption from registration
under the Securities Act was unnecessary in that none of such transactions
involved a "sale" of securities as such term is used in Section 2(3) of
the Securities Act.
II-2
<PAGE>
All sales of Common Stock made pursuant to the exercise of stock options
granted under the Registrant's stock option plan and issuances to independent
contractors were made pursuant to the exemption from the registration
requirements of the Securities Act afforded by Rule 701 promulgated under the
Securities Act.
All other sales were made in reliance on Registration S promulgated under
the Securities Act or Section 4(2) of the Securities Act and/or Regulation D
promulgated under the Securities Act. This sale was made to three purchasers,
two of which are affiliated, in connection with a distribution arrangement
without general solicitation or advertising. The purchasers were not United
States residents and were sophisticated investors with access to all relevant
information necessary to evaluate the investment who represented to the
Registrant that the shares were being acquired for investment.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed herewith:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------
<C> <S>
1.01 --Form of Underwriting Agreement.
3.01 --Registrant's Certificate of Incorporation.
3.02 --Form of Amended and Restated Certificate of Incorporation to be
filed prior to the consummation of this offering.*
3.03 --Registrant's Bylaws.
4.01 --Form of Specimen Certificate for Registrant's Common Stock.*
4.02 --Stockholders Agreement dated as of June 1, 1989, as amended.
4.03 --1989 Stock Purchase Agreement dated as of June 1, 1989, as
amended.
5.01 --Opinion of Fenwick & West LLP regarding legality of the
securities being issued.*
10.01 --Registrant's 1993 Stock Option Plan and related documents.
10.02 --Registrant's 1997 Equity Incentive Plan.
10.03 --Registrant's 1997 Directors Stock Option Plan.
10.04 --Registrant's 1997 Employee Stock Purchase Plan.
10.05 --Registrant's 401(k) Plan.*
10.06 --Registrant's Profit Participation Plan.*
10.07 --Form of Indemnification Agreement to be entered into by
Registrant with each of its directors and executive officers.*
10.08 --Lease Agreement dated as of January 2, 1990 between Registrant
and Robert D. Scinto, as amended.
10.09 --Office Building Lease dated as of February 4, 1994 between
Registrant and American National Bank and Trust Company of
Chicago, not individually but solely as Trustee under Trust No.
42978, as amended.
10.10 --Lease Agreement dated as of July 1, 1996 between Registrant and
Boca Corners, L.P., Ltd., as amended.
10.11 --Credit Agreement dated as of July 31, 1994 between Registrant
and The Bank of New York, as amended.
10.12 --Security Agreement dated as of July 31, 1994 between Registrant
and The Bank of New York.
10.13 --Guarantee Agreement dated as of August 22, 1994 by and between
the Connecticut Development Authority and The Bank of New York,
as amended.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------
<C> <S>
10.14 --Letter Agreement, between Registrant and Constance Galley.*
10.15 --Letter Agreement dated as of December 5, 1995 between Registrant
and Eric Amster.
10.16 --Letter Agreement dated as of October 5, 1995, between Registrant
and Ira Gerard.
10.17 --Letter Agreement dated as of January 1, 1994 between Registrant
and Edward Watson.
10.18 --Letter Agreement dated as of October 1, 1994, between Registrant
and Saydean Zeldin.
10.19 --Series E Preferred Stock Purchase Agreement dated as of May 15,
1997 between the Company and the Purchasers named therein.
23.01 --Consent of Fenwick & West LLP (included in Exhibit 5.01).*
23.02 --Consent of KPMG Peat Marwick LLP, Independent Accountants.
27.01 --Financial Data Schedule (EDGAR version only).
24.01 --Power of Attorney (see Page II-6 of this Registration Statement).
</TABLE>
- --------
* To be filed by amendment.
(b) The following financial statement schedule is filed herewith:
Schedule II -- Valuation and Qualifying Accounts
Other financial statement schedules are omitted because the information
called for is not required or is shown either in the Financial Statements or
the Notes thereto.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 14 above, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h)
II-4
<PAGE>
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Wilton, State of
Connecticut, on the 16th day of May, 1997.
TSI INTERNATIONAL SOFTWARE LTD.
/s/ Constance F. Galley
By: _________________________________
CONSTANCE F. GALLEY
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that each individual whose signature
appears below constitutes and appoints Constance F. Galley and Ira A. Gerard
and each of them, his true and lawful attorneys-in-fact and agents, with full
power of substitution, for him and in his or her name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to sign any registration
statement for the same offering covered by this Registration Statement that is
to be effective upon filing pursuant to Rule 462 promulgated under the
Securities Act, and all post-effective amendments thereto, and to file the
same, with all exhibits thereto and all documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorneys-in-
fact and agents, and each of them, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the premises, as fully to all intents and purposes as he or she might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents or any of them, or his, her or their substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act, this Registration
Statement was signed by the following persons in the capacities and on the
dates indicated.
NAME TITLE DATE
PRINCIPAL EXECUTIVE OFFICER:
/s/ Constance F. Galley President, Chief May 16, 1997
_____________________________________ Executive Officer
CONSTANCE F. GALLEY and a Director
PRINCIPAL FINANCIAL AND PRINCIPAL ACCOUNTING OFFICER:
/s/ Ira A. Gerard Vice President, May 16 1997
_____________________________________ Finance and
IRA A. GERARD Administration and
Chief Financial
Officer
II-6
<PAGE>
NAME TITLE DATE
DIRECTORS:
/s/ Stewart K.P. Gross Director May 16, 1997
_____________________________________
STEWART K.P. GROSS
/s/ Ernest E. Keet Director May 16, 1997
_____________________________________
ERNEST E. KEET
/s/ John J. Pendray Director May 16, 1997
_____________________________________
JOHN J. PENDRAY
/s/ Dennis G. Sisco Director May 16, 1997
_____________________________________
DENNIS G. SISCO
II-7
<PAGE>
INDEPENDENT AUDITORS' REPORT ON SCHEDULE
The Board of Directors
TSI International Software Ltd.
The audits referred to in our report dated April 14, 1997 included the
related financial statement schedule for the years ended December 31, 1994,
1995, and 1996, included in the registration statement. This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion of this financial statement schedule
based on our audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly in
all material respects, the information set forth therein.
KPMG Peat Marwick LLP
Stamford, Connecticut
April 14, 1997
S-1
<PAGE>
TSI INTERNATIONAL SOFTWARE LTD
FINANCIAL STATEMENT SCHEDULE
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
CHARGED BALANCE
BALANCE AT TO COSTS CHARGED TO AT END
BEGINNING AND OTHER OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS(1) DEDUCTIONS(2) PERIOD
----------- ---------- -------- ----------- ------------- --------
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful
Accounts Receivable:
Year ended December 31,
1994................... $399,600 $99,000 $96,600 $(443,100) $152,100
Year ended December 31,
1995................... 152,100 65,000 65,800 (124,800) 158,100
Year ended December 31,
1996................... 158,100 431,700 1,400 (271,300) 319,900
Three months ended March
31, 1996............... 158,100 17,500 -- (14,100) 161,500
Three months ended March
31, 1997............... 319,900 19,900 94,000 (145,000) 288,800
</TABLE>
- --------
(1) Recoveries of balances previously written off.
(2) Write-offs of receivables and reversals of unneeded balances.
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------
<C> <S>
1.01 --Form of Underwriting Agreement.
3.01 --Registrant's Certificate of Incorporation.
3.02 --Form of Amended and Restated Certificate of Incorporation to be
filed prior to the consummation of this offering.*
3.03 --Registrant's Bylaws.
4.01 --Form of Specimen Certificate for Registrant's Common Stock.*
4.02 --Stockholders Agreement dated as of June 1, 1989, as amended.
4.03 --1989 Stock Purchase Agreement dated as of June 1, 1989, as
amended.
5.01 --Opinion of Fenwick & West LLP regarding legality of the securities
being issued.*
10.01 --Registrant's 1993 Stock Option Plan, and related documents.
10.02 --Registrant's 1997 Equity Incentive Plan.
10.03 --Registrant's 1997 Directors Stock Option Plan.
10.04 --Registrant's 1997 Employee Stock Purchase Plan.
10.05 --Registrant's 401(k) Plan.*
10.06 --Registrant's Profit Participation Plan.*
10.07 --Form of Indemnification Agreement to be entered into by Registrant
with each of its directors and executive officers.*
10.08 --Lease Agreement dated as of January 2, 1990 between Registrant and
Robert D. Scinto, as amended.
10.09 --Office Building Lease dated as of February 4, 1994 between
Registrant and American National Bank and Trust Company of Chicago,
not individually but solely as Trustee under Trust No. 42978, as
amended.
10.10 --Lease Agreement dated as of July 1, 1996 between Registrant and
Boca Corners, L.P., Ltd., as amended.
10.11 --Credit Agreement dated as of July 31, 1994 between Registrant and
The Bank of New York, as amended.
10.12 --Security Agreement dated as of July 31, 1994 between Registrant
and The Bank of New York.
10.13 --Guarantee Agreement dated as of August 22, 1994 by and between the
Connecticut Development Authority and The Bank of New York, as
amended.
10.14 --Letter Agreement, between Registrant and Constance Galley.*
10.15 --Letter Agreement dated as of December 5, 1995 between Registrant
and Eric Amster.
10.16 --Letter Agreement dated as of October 5, 1995, between Registrant
and Ira Gerard.
10.17 --Letter Agreement dated as of January 1, 1994 between Registrant
and Edward Watson.
10.18 --Letter Agreement dated as of October 1, 1994, between Registrant
and Saydean Zeldin.
10.19 --Series E Preferred Stock Purchase Agreement dated as of May 15,
1997 between the Company and the Purchasers named therein.
23.01 --Consent of Fenwick & West LLP (included in Exhibit 5.01).*
23.02 --Consent of KPMG Peat Marwick LLP, Independent Accountants.
27.01 --Financial Data Schedule (EDGAR version only).
24.01 --Power of Attorney (see Page II-6 of this Registration Statement).
</TABLE>
- --------
* To be filed by amendment.
<PAGE>
- --------------------------------------------------------------------------------
EXHIBIT 1.01
____________ Shares/1/
TSI INTERNATIONAL SOFTWARE LTD.
Common Stock
UNDERWRITING AGREEMENT
----------------------
April __, 1997
ROBERTSON, STEPHENS & COMPANY LLC
SoundView Financial Group, Inc.
Wessels, Arnold & Henderson, L.L.C.
As Representatives of the several Underwriters
c/o Robertson, Stephens & Company LLC
555 California Street
Suite 2600
San Francisco, California 94104
Ladies/Gentlemen:
TSI International Software Ltd., a Delaware corporation (the
"Company"), and certain shareholders of the Company named in Schedule B hereto
(hereafter called the "Selling Stockholders") address you as the Representatives
of each of the persons, firms and corporations listed in Schedule A hereto
(herein collectively called the "Underwriters") and hereby confirm their
respective agreements with the several Underwriters as follows:
1. Description of Shares. The Company proposes to issue and sell
---------------------
_________ shares of its authorized and unissued Common Stock, par value $.001
per share, to the several Underwriters. The Selling Stockholders, acting
severally and not jointly, propose to sell an aggregate of ________ shares of
the Company's authorized and outstanding Common Stock, par value $.001 per
share, to the several Underwriters. The _________ shares of Common Stock, par
value $.001 per share, of the Company to be sold by the Company are hereinafter
called the "Company Shares" and the _________ shares of Common Stock, par value
$.001 per share, to be sold by the Selling Stockholders are hereinafter called
the "Selling Stockholder Shares." The Company Shares and the Selling Stockholder
Shares are hereinafter collectively referred to as the "Firm Shares." Certain
Selling Stockholders also propose to grant, severally and jointly, to the
- -----------------------
/1/ Plus option purchase up to ________ additional shares from certain
stockholders of the Company to cover over-allotments.
<PAGE>
-2-
Underwriters an option to purchase up to ________ additional shares of the
Company's Common Stock, par value $.001 per share (the "Option Shares"), as
provided in Section 8 hereof. As used in this Agreement, the term "Shares" shall
include the Firm Shares and the Option Shares. All shares of Common Stock, par
value $.001 per share, of the Company to be outstanding after giving effect to
the sales contemplated hereby, including the Shares, are hereinafter referred to
as "Common Stock."
2. Representations, Warranties and Agreements of the Company. The Company
---------------------------------------------------------
represents and warrants to and agrees with each Underwriter that:
(a) A registration statement on Form S-1 (File No. 333-_____) with
respect to the Shares, including a prospectus subject to completion, has been
prepared by the Company in conformity with the requirements of the Securities
Act of 1933, as amended (the "Act"), and the applicable rules and regulations
(the "Rules and Regulations") of the Securities and Exchange Commission (the
"Commission") under the Act and has been filed with the Commission; such
amendments to such registration statement, such amended prospectuses subject to
completion and such abbreviated registration statements pursuant to Rule 462(b)
of the Rules and Regulations as may have been required prior to the date hereof
have been similarly prepared and filed with the Commission; and the Company will
file such additional amendments to such registration statement, such amended
prospectuses subject to completion and such abbreviated registration statements
as may hereafter be required. Copies of such registration statement and
amendments, of each related prospectus subject to completion (the "Preliminary
Prospectuses") and of any abbreviated registration statement pursuant to Rule
462(b) of the Rules and Regulations have been delivered to you.
If the registration statement relating to the Shares has been declared
effective under the Act by the Commission, the Company will prepare and promptly
file with the Commission the information omitted from the registration statement
pursuant to Rule 430A(a) or, if Robertson, Stephens & Company LLC, on behalf of
the several Underwriters, shall agree to the utilization of Rule 434 of the
Rules and Regulations, the information required to be included in any term sheet
filed pursuant to Rule 434(b) or (c), as applicable, of the Rules and
Regulations pursuant to subparagraph (1), (4) or (7) of Rule 424(b) of the Rules
and Regulations or as part of a post-effective amendment to the registration
statement (including a final form of prospectus). If the registration statement
relating to the Shares has not been declared effective under the Act by the
Commission, the Company will prepare and promptly file an amendment to the
registration statement, including a final form of prospectus, or, if Robertson,
Stephens & Company LLC, on behalf of the several Underwriters, shall agree to
the utilization of Rule 434 of the Rules and Regulations, the information
required to be included in any term sheet filed pursuant to Rule 434(b) or (c),
as applicable, of the Rules and Regulations. The term "Registration Statement"
as used in this Agreement shall mean such registration statement, including
financial statements, schedules and exhibits, in the form in which it became or
becomes, as the case may be, effective (including, if the Company omitted
information from the registration statement pursuant to Rule 430A(a) or files a
term sheet pursuant to Rule 434 of the Rules and Regulations, the information
deemed to be a part of the registration statement at the time it became
effective pursuant to Rule 430A(b) or Rule 434(d) of the Rules and Regulations)
and, in the event of any amendment thereto or the filing of
<PAGE>
-3-
any abbreviated registration statement pursuant to Rule 462(b) of the Rules and
Regulations relating thereto after the effective date of such registration
statement, shall also mean (from and after the effectiveness of such amendment
or the filing of such abbreviated registration statement) such registration
statement as so amended, together with any such abbreviated registration
statement. The term "Prospectus" as used in this Agreement shall mean the
prospectus relating to the Shares as included in such Registration Statement at
the time it becomes effective (including, if the Company omitted information
from the Registration Statement pursuant to Rule 430A(a) of the Rules and
Regulations, the information deemed to be a part of the Registration Statement
at the time it became effective pursuant to Rule 430A(b) of the Rules and
Regulations); provided, however, that if in reliance on Rule 434 of the Rules
-------- -------
and Regulations and with the consent of Robertson, Stephens & Company LLC, on
behalf of the several Underwriters, the Company shall have provided to the
Underwriters a term sheet pursuant to Rule 434(b) or (c), as applicable, prior
to the time that a confirmation is sent or given for purposes of Section
2(10)(a) of the Act, the term "Prospectus" shall mean the "prospectus subject to
completion" (as defined in Rule 434(g) of the Rules and Regulations) last
provided to the Underwriters by the Company and circulated by the Underwriters
to all prospective purchasers of the Shares (including the information deemed to
be a part of the Registration Statement at the time it became effective pursuant
to Rule 434(d) of the Rules and Regulations). Notwithstanding the foregoing, if
any revised prospectus shall be provided to the Underwriters by the Company for
use in connection with the offering of the Shares that differs from the
prospectus referred to in the immediately preceding sentence (whether or not
such revised prospectus is required to be filed with the Commission pursuant to
Rule 424(b) of the Rules and Regulations), the term "Prospectus" shall refer to
such revised prospectus from and after the time it is first provided to the
Underwriters for such use. If in reliance on Rule 434 of the Rules and
Regulations and with the consent of Robertson, Stephens & Company LLC, on behalf
of the several Underwriters, the Company shall have provided to the Underwriters
a term sheet pursuant to Rule 434(b) or (c), as applicable, prior to the time
that a confirmation is sent or given for purposes of Section 2(10)(a) of the
Act, the Prospectus and the term sheet, together, will not be materially
different from the prospectus in the Registration Statement.
(b) The Commission has not issued any order preventing or suspending the
use of any Preliminary Prospectus or instituted proceedings for that purpose,
and each such Preliminary Prospectus has conformed in all material respects to
the requirements of the Act and the Rules and Regulations and, as of its date,
has not included any untrue statement of a material fact or omitted to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and at the time the
Registration Statement became or becomes, as the case may be, effective and at
all times subsequent thereto up to and on the Closing Date (hereinafter defined)
and on any later date on which Option Shares are to be purchased, (i) the
Registration Statement and the Prospectus, and any amendments or supplements
thereto, contained and will contain all material information required to be
included therein by the Act and the Rules and Regulations and will in all
material respects conform to the requirements of the Act and the Rules and
Regulations, (ii) the Registration Statement, and any amendments or supplements
thereto, did not and will not include any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading, and (iii) the Prospectus, and any
amendments or supplements thereto, did not and will not include any untrue
statement of a material fact or omit to state a material fact necessary to make
<PAGE>
-4-
the statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that none of the representations and
-------- -------
warranties contained in this subparagraph (b) shall apply to information
contained in or omitted from the Registration Statement or Prospectus, or any
amendment or supplement thereto, in reliance upon, and in conformity with,
written information relating to any Underwriter furnished to the Company by such
Underwriter specifically for use in the preparation thereof.
(c) Each of the Company and its subsidiaries has been duly incorporated and
is validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation with full power and authority (corporate and
other) to own, lease and operate its properties and conduct its business as
described in the Prospectus; the Company owns all of the outstanding capital
stock of its subsidiaries free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest; each of the Company and its
subsidiaries is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction in which the ownership or leasing of its
properties or the conduct of its business requires such qualification, except
where the failure to be so qualified or be in good standing would not have a
material adverse effect on the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company and its subsidiaries
considered as one enterprise; no proceeding has been instituted in any such
jurisdiction, revoking, limiting or curtailing, or seeking to revoke, limit or
curtail, such power and authority or qualification; each of the Company and its
subsidiaries is in possession of and operating in compliance with all
authorizations, licenses, certificates, consents, orders and permits from state,
federal and other regulatory authorities which are material to the conduct of
its business, all of which are valid and in full force and effect; neither the
Company nor any of its subsidiaries is in violation of its respective charter or
bylaws or in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any material bond,
debenture, note or other evidence of indebtedness, or in any material lease,
contract, indenture, mortgage, deed of trust, loan agreement, joint venture or
other agreement or instrument to which the Company or any of its subsidiaries is
a party or by which it or any of its subsidiaries or their respective properties
may be bound; and neither the Company nor any of its subsidiaries is in material
violation of any law, order, rule, regulation, writ, injunction, judgment or
decree of any court, government or governmental agency or body, domestic or
foreign, having jurisdiction over the Company or any of its subsidiaries or over
their respective properties of which it has knowledge. The Company does not own
or control, directly or indirectly, any corporation, association or other
entity.
(d) The Company has full legal right, power and authority to enter into
this Agreement and perform the transactions contemplated hereby. This Agreement
has been duly authorized, executed and delivered by the Company and is a valid
and binding agreement on the part of the Company, enforceable in accordance with
its terms, except as rights to indemnification hereunder may be limited by
applicable law and except as the enforcement hereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by general equitable
principles; the performance of this Agreement and the consummation of the
transactions herein contemplated will not result in a material breach or
violation of any of the terms and provisions of, or constitute a default under,
(i) any bond, debenture, note or other evidence of indebtedness, or under any
lease, contract,
<PAGE>
-5-
indenture, mortgage, deed of trust, loan agreement, joint venture or other
agreement or instrument to which the Company or any of its subsidiaries is a
party or by which it or any of its subsidiaries or their respective properties
may be bound, (ii) the charter or bylaws of the Company or any of its
subsidiaries, or (iii) any law, order, rule, regulation, writ, injunction,
judgment or decree of any court, government or governmental agency or body,
domestic or foreign, having jurisdiction over the Company or any of its
subsidiaries or over their respective properties. No consent, approval,
authorization or order of or qualification with any court, government or
governmental agency or body, domestic or foreign, having jurisdiction over the
Company or any of its subsidiaries or over their respective properties is
required for the execution and delivery of this Agreement and the consummation
by the Company or any of its subsidiaries of the transactions herein
contemplated, except such as may be required under the Act or under state or
other securities or Blue Sky laws, all of which requirements have been satisfied
in all material respects.
(e) There is not any pending or, to the best of the Company's knowledge,
threatened action, suit, claim or proceeding against the Company, any of its
subsidiaries or any of their respective officers or any of their respective
properties, assets or rights before any court, government or governmental agency
or body, domestic or foreign, having jurisdiction over the Company or any of its
subsidiaries or over their respective officers or properties or otherwise which
(i) might result in any material adverse change in the condition (financial or
otherwise), earnings, operations, business or business prospects of the Company
and its subsidiaries considered as one enterprise or might materially and
adversely affect their properties, assets or rights, (ii) might prevent
consummation of the transactions contemplated hereby or (iii) is required to be
disclosed in the Registration Statement or Prospectus and is not so disclosed;
and there are no agreements, contracts, leases or documents of the Company or
any of its subsidiaries of a character required to be described or referred to
in the Registration Statement or Prospectus or to be filed as an exhibit to the
Registration Statement by the Act or the Rules and Regulations which have not
been accurately described in all material respects in the Registration Statement
or Prospectus or filed as exhibits to the Registration Statement.
(f) All outstanding shares of capital stock of the Company (including the
Selling Stockholder Shares) have been duly authorized and validly issued and are
fully paid and nonassessable, have been issued in compliance with all federal
and state securities laws, were not issued in violation of or subject to any
preemptive rights or other rights to subscribe for or purchase securities, and
the authorized and outstanding capital stock of the Company is as set forth in
the Prospectus under the caption "Capitalization" and conforms in all material
respects to the statements relating thereto contained in the Registration
Statement and the Prospectus (and such statements correctly state the substance
of the instruments defining the capitalization of the Company); the Firm Shares
to be purchased from the Company hereunder have been duly authorized for
issuance and sale to the Underwriters pursuant to this Agreement and, when
issued and delivered by the Company against payment therefor in accordance with
the terms of this Agreement, will be duly and validly issued and fully paid and
nonassessable, and will be sold free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest; and no preemptive right,
co-sale right, registration right, right of first refusal or other similar right
of shareholders exists with respect to any of the Firm Shares to be purchased
from the Company hereunder or the issuance and sale thereof other than those
that have been expressly waived prior to
<PAGE>
-6-
the date hereof and those that will automatically expire upon and will not apply
to the consummation of the transactions contemplated on the Closing Date. No
further approval or authorization of any shareholder, the Board of Directors of
the Company or others is required for the issuance and sale or transfer of the
Shares except as may be required under the Act or under state or other
securities or Blue Sky laws. All issued and outstanding shares of capital stock
of each subsidiary of the Company have been duly authorized and validly issued
and are fully paid and nonassessable, and were not issued in violation of or
subject to any preemptive right, or other rights to subscribe for or purchase
shares and are owned by the Company free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest. Except as disclosed in the
Prospectus and the financial statements of the Company, and the related notes
thereto, included in the Prospectus, neither the Company nor any subsidiary has
outstanding any options to purchase, or any preemptive rights or other rights to
subscribe for or to purchase, any securities or obligations convertible into, or
any contracts or commitments to issue or sell, shares of its capital stock or
any such options, rights, convertible securities or obligations. The description
of the Company's stock option, stock bonus and other stock plans or
arrangements, and the options or other rights granted and exercised thereunder,
set forth in the Prospectus accurately and fairly presents the information
required to be shown with respect to such plans, arrangements, options and
rights.
(g) KPMG Peat Marwick LLP, which has examined the consolidated financial
statements of the Company, together with the related schedules and notes, as of
December 31, 1996 and 1995 and for each of the years in the three (3) years
ended December 31, 1996 filed with the Commission as a part of the Registration
Statement, which are included in the Prospectus, are independent accountants
within the meaning of the Act and the Rules and Regulations; the audited
consolidated financial statements of the Company, together with the related
schedules and notes, and the unaudited consolidated financial information,
forming part of the Registration Statement and Prospectus, fairly present the
financial position and the results of operations of the Company and its
subsidiaries at the respective dates and for the respective periods to which
they apply; and all audited consolidated financial statements of the Company,
together with the related schedules and notes, and the unaudited consolidated
financial information, filed with the Commission as part of the Registration
Statement, have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved except as may be
otherwise stated therein. The selected and summary financial and statistical
data included in the Registration Statement present fairly the information shown
therein and have been compiled on a basis consistent with the audited financial
statements presented therein. No other financial statements or schedules are
required to be included in the Registration Statement.
(h) Subsequent to the respective dates as of which information is given in
the Registration Statement and Prospectus, there has not been (i) any material
adverse change in the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company and its subsidiaries considered as
one enterprise, (ii) any transaction that is material to the Company and its
subsidiaries considered as one enterprise, except transactions entered into in
the ordinary course of business, (iii) any obligation, direct or contingent,
that is material to the Company and its subsidiaries considered as one
enterprise, incurred by the Company or its subsidiaries, except obligations
incurred in the ordinary course of business, (iv) any change in the capital
stock or outstanding indebtedness of the Company or any of its subsidiaries that
is material
<PAGE>
-7-
to the Company and its subsidiaries considered as one enterprise, (v) any
dividend or distribution of any kind declared, paid or made on the capital stock
of the Company or any of its subsidiaries, or (vi) any loss or damage (whether
or not insured) to the property of the Company or any of its subsidiaries which
has been sustained or will have been sustained which has a material adverse
effect on the condition (financial or otherwise), earnings, operations, business
or business prospects of the Company and its subsidiaries considered as one
enterprise.
(i) Except as set forth in the Registration Statement and Prospectus, (i)
each of the Company and its subsidiaries has good and marketable title to all
properties and assets described in the Registration Statement and Prospectus as
owned by it, free and clear of any pledge, lien, security interest, encumbrance,
claim or equitable interest, other than such as would not have a material
adverse effect on the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company and its subsidiaries considered as
one enterprise, (ii) the agreements to which the Company or any of its
subsidiaries is a party described in the Registration Statement and Prospectus
are valid agreements, enforceable by the Company and its subsidiaries (as
applicable), except as the enforcement thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by general equitable
principles and, to the best of the Company's knowledge, the other contracting
party or parties thereto are not in material breach or material default under
any of such agreements, and (iii) each of the Company and its subsidiaries has
valid and enforceable leases for all properties described in the Registration
Statement and Prospectus as leased by it, except as the enforcement thereof may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights generally or by
general equitable principles. Except as set forth in the Registration Statement
and Prospectus, the Company owns or leases all such properties as are necessary
to its operations as now conducted or as proposed to be conducted.
(j) The Company and its subsidiaries have timely filed all necessary
federal, state and foreign income and franchise tax returns and have paid all
taxes shown thereon as due, and there is no tax deficiency that has been or, to
the best of the Company's knowledge, might be asserted against the Company or
any of its subsidiaries that might have a material adverse effect on the
condition (financial or otherwise), earnings, operations, business or business
prospects of the Company and its subsidiaries considered as one enterprise; and
all tax liabilities are adequately provided for on the books of the Company and
its subsidiaries.
(k) The Company and its subsidiaries maintain insurance with insurers of
recognized financial responsibility of the types and in the amounts generally
deemed adequate for their respective businesses and consistent with insurance
coverage maintained by similar companies in similar businesses, including, but
not limited to, insurance covering real and personal property owned or leased by
the Company or its subsidiaries against theft, damage, destruction, acts of
vandalism and all other risks customarily insured against, all of which
insurance is in full force and effect; neither the Company nor any such
subsidiary has been refused any insurance coverage sought or applied for; and
neither the Company nor any such subsidiary has any reason to believe that it
will not be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a
<PAGE>
-8-
cost that would not materially and adversely affect the condition (financial or
otherwise), earnings, operations, business or business prospects of the Company
and its subsidiaries considered as one enterprise.
(l) To the best of Company's knowledge, no labor disturbance by the
employees of the Company or any of its subsidiaries exists or is imminent; and
the Company is not aware of any existing or imminent labor disturbance by the
employees of any of its principal suppliers, subassemblers, value added
resellers, subcontractors, original equipment manufacturers, authorized dealers
or international distributors that might be expected to result in a material
adverse change in the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company and its subsidiaries considered as
one enterprise. No collective bargaining agreement exists with any of the
Company's employees and, to the best of the Company's knowledge, no such
agreement is imminent.
(m) Each of the Company and its subsidiaries owns or possesses adequate
rights to use all patents, patent rights, inventions, trade secrets, know-how,
trademarks, service marks, trade names and copyrights which are necessary to
conduct its businesses as described in the Registration Statement and
Prospectus; the expiration of any patents, patent rights, trade secrets,
trademarks, service marks, trade names or copyrights would not have a material
adverse effect on the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company and its subsidiaries considered as
one enterprise; the Company has not received any notice of, and has no knowledge
of, any infringement of or conflict with asserted rights of the Company by
others with respect to any patent, patent rights, inventions, trade secrets,
know-how, trademarks, service marks, trade names or copyrights; and the Company
has not received any notice of, and has no knowledge of, any infringement of or
conflict with asserted rights of others with respect to any patent, patent
rights, inventions, trade secrets, know-how, trademarks, service marks, trade
names or copyrights which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, might have a material adverse effect on
the condition (financial or otherwise), earnings, operations, business or
business prospects of the Company and its subsidiaries considered as one
enterprise.
(n) The Common Stock has been approved for quotation on The Nasdaq
National Market, subject to official notice of issuance.
(o) The Company has been advised concerning the Investment Company Act of
1940, as amended (the "1940 Act"), and the rules and regulations thereunder, and
has in the past conducted, and intends in the future to conduct, its affairs in
such a manner as to ensure that it will not become an "investment company" or a
company "controlled" by an "investment company" within the meaning of the 1940
Act and such rules and regulations.
(p) The Company has not distributed and will not distribute prior to the
later of (i) the Closing Date, or any date on which Option Shares are to be
purchased, as the case may be, and (ii) completion of the distribution of the
Shares, any offering material in connection with the offering and sale of the
Shares other than any Preliminary Prospectuses, the Prospectus, the Registration
Statement and other materials, if any, permitted by the Act.
<PAGE>
-9-
(q) Neither the Company nor any of its subsidiaries has at any time during
the last five (5) years (i) made any unlawful contribution to any candidate for
foreign office or failed to disclose fully any contribution in violation of law,
or (ii) made any payment to any federal or state governmental officer or
official, or other person charged with similar public or quasi-public duties,
other than payments required or permitted by the laws of the United States or
any jurisdiction thereof.
(r) The Company has not taken and will not take, directly or indirectly,
any action designed to or that might reasonably be expected to cause or result
in stabilization or manipulation of the price of the Common Stock to facilitate
the sale or resale of the Shares.
(s) Each officer and director of the Company, each Selling Stockholder and
each beneficial owner of __________ or more shares of Common Stock has agreed in
writing that such person will not, for a period of 180 days from the date
appearing on the final prospectus related to the offering of the Shares (the
"Lock-up Period"), offer to sell, contract to sell, or otherwise sell, dispose
of, loan, pledge or grant any rights with respect to (collectively, a
"Disposition") any shares of Common Stock, any options or warrants to purchase
any shares of Common Stock or any securities convertible into or exchangeable
for shares of Common Stock (collectively, "Securities") now owned or hereafter
acquired directly by such person or with respect to which such person has or
hereafter acquires the power of disposition, otherwise than (i) as a bona fide
gift or gifts, provided the donee or donees thereof agree in writing to be bound
by this restriction, (ii) as a distribution to partners or shareholders of such
person, provided that the distributees thereof agree in writing to be bound by
the terms of this restriction, or (iii) with the prior written consent of
Robertson, Stephens & Company LLC. The foregoing restriction has been expressly
agreed to preclude the holder of the Securities from engaging in any hedging or
other transaction which is designed to or reasonably expected to lead to or
result in a Disposition of Securities during the Lock-up Period, even if such
Securities would be disposed of by someone other than such holder. Such
prohibited hedging or other transactions would include, without limitation, any
short sale (whether or not against the box) or any purchase, sale or grant of
any right (including, without limitation, any put or call option) with respect
to any Securities or with respect to any security (other than a broad-based
market basket or index) that includes, relates to or derives any significant
part of its value from Securities. Furthermore, such person has also agreed and
consented to the entry of stop transfer instructions with the Company's transfer
agent against the transfer of the Securities held by such person except in
compliance with this restriction. The Company has provided to counsel for the
Underwriters a complete and accurate list of all securityholders of the Company
and the number and type of securities held by each securityholder. The Company
has provided to counsel for the Underwriters true, accurate and complete copies
of all of the agreements pursuant to which its officers, directors and
shareholders have agreed to such or similar restrictions (the "Lock-up
Agreements") presently in effect or effected hereby. The Company hereby
represents and warrants that it will not release any of its officers, directors
or other shareholders from any Lock-up Agreements currently existing or
hereafter effected without the prior written consent of Robertson, Stephens &
Company LLC.
<PAGE>
-10-
(t) Except as set forth in the Registration Statement and Prospectus, (i)
the Company is in compliance with all rules, laws and regulations relating to
the use, treatment, storage and disposal of toxic substances and protection of
health or the environment ("Environmental Laws") which are applicable to its
business, (ii) the Company has received no notice from any governmental
authority or third party of an asserted claim under Environmental Laws, which
claim is required to be disclosed in the Registration Statement and the
Prospectus, (iii) the Company will not be required to make future material
capital expenditures to comply with Environmental Laws and (iv) no property
which is owned, leased or occupied by the Company has been designated as a
Superfund site pursuant to the Comprehensive Response, Compensation, and
Liability Act of 1980, as amended (42 U.S.C. (S) 9601, et seq.), or otherwise
-- ---
designated as a contaminated site under applicable state or local law.
(u) The Company and each of its subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(v) There are no outstanding loans, advances (except normal advances for
business expenses in the ordinary course of business) or guarantees of
indebtedness by the Company to or for the benefit of any of the officers or
directors of the Company or any of the members of the families of any of them,
except as disclosed in the Registration Statement and the Prospectus.
(w) The Company has complied with all provisions of Section 517.075,
Florida Statutes relating to doing business with the Government of Cuba or with
any person or affiliate located in Cuba.
3. Representations, Warranties and Agreements of the Selling Stockholders.
----------------------------------------------------------------------
Each Selling Stockholder, severally and not jointly, represents and warrants to
and agrees with each Underwriter and the Company that:
(a) Such Selling Stockholder now has, on the Closing Date, and on any
later date on which Option Shares are purchased, will have valid marketable
title to the Shares to be sold by such Selling Stockholder, free and clear of
any pledge, lien, security interest, encumbrance, claim or equitable interest
other than pursuant to this Agreement; and upon delivery of such Shares
hereunder and payment of the purchase price as herein contemplated, each of the
Underwriters will obtain valid marketable title to the Shares purchased by it
from such Selling Stockholder, free and clear of any pledge, lien, security
interest pertaining to such Selling Stockholder or such Selling Stockholder's
property, encumbrance, claim or equitable interest, including any liability for
estate or inheritance taxes, or any liability to or claims of any creditor,
devisee, legatee or beneficiary of such Selling Stockholder.
<PAGE>
-11-
(b) Such Selling Stockholder has duly authorized (if applicable), executed
and delivered, in the form heretofore furnished to the Representatives, a
Selling Stockholder's Irrevocable Power of Attorney (the "Power of Attorney")
appointing ___________ and ___________ as attorneys-in-fact (collectively, the
"Attorneys" and individually, an "Attorney") and a Letter of Transmittal and
Custody Agreement (the "Custody Agreement") with ______________________________,
as custodian (the "Custodian"); each of the Power of Attorney and the Custody
Agreement constitutes a valid and binding agreement on the part of such Selling
Stockholder, enforceable in accordance with its terms, except as the enforcement
thereof may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally or by general equitable principles; and each of such Selling
Stockholder's Attorneys, acting alone, is authorized to execute and deliver this
Agreement and the certificate referred to in Section 7(h) hereof on behalf of
such Selling Stockholder, to determine the purchase price to be paid by the
several Underwriters to such Selling Stockholder as provided in Section 3
hereof, to authorize the delivery of the Selling Stockholder Shares and the
Option Shares to be sold by such Selling Stockholder under this Agreement and to
duly endorse (in blank or otherwise) the certificate or certificates
representing such Shares or a stock power or powers with respect thereto, to
accept payment therefor, and otherwise to act on behalf of such Selling
Stockholder in connection with this Agreement.
(c) All consents, approvals, authorizations and orders required for the
execution and delivery by such Selling Stockholder of the Power of Attorney and
the Custody Agreement, the execution and delivery by or on behalf of such
Selling Stockholder of this Agreement and the sale and delivery of the Selling
Stockholder Shares and the Option Shares to be sold by such Selling Stockholder
under this Agreement (other than, at the time of the execution hereof (if the
Registration Statement has not yet been declared effective by the Commission),
the issuance of the order of the Commission declaring the Registration Statement
effective and such consents, approvals, authorizations or orders as may be
necessary under state or other securities or Blue Sky laws) have been obtained
and are in full force and effect; such Selling Stockholder, if other than a
natural person, has been duly organized and is validly existing in good standing
under the laws of the jurisdiction of its organization as the type of entity
that it purports to be; and such Selling Stockholder has full legal right, power
and authority to enter into and perform its obligations under this Agreement and
such Power of Attorney and Custody Agreement, and to sell, assign, transfer and
deliver the Shares to be sold by such Selling Stockholder under this Agreement.
(d) Such Selling Stockholder will not, during the Lock-up Period, effect
the Disposition of any Securities now owned or hereafter acquired directly by
such Selling Stockholder or with respect to which such Selling Stockholder has
or hereafter acquires the power of disposition, otherwise than (i) as a bona
fide gift or gifts, provided the donee or donees thereof agree in writing to be
bound by this restriction, (ii) as a distribution to partners or shareholders of
such Selling Stockholder, provided that the distributees thereof agree in
writing to be bound by the terms of this restriction, or (iii) with the prior
written consent of Robertson, Stephens & Company LLC. The foregoing restriction
is expressly agreed to preclude the holder of the Securities from engaging in
any hedging or other transaction which is designed to or reasonably expected to
lead to or result in a Disposition of Securities during the Lock-up Period, even
if such Securities would be
<PAGE>
-12-
disposed of by someone other than the Selling Stockholder. Such prohibited
hedging or other transactions would including, without limitation, any short
sale (whether or not against the box) or any purchase, sale or grant of any
right (including, without limitation, any put or call option) with respect to
any Securities or with respect to any security (other than a broad-based market
basket or index) that includes, relates to or derives any significant part of
its value from Securities. Such Selling Stockholder also agrees and consents to
the entry of stop transfer instructions with the Company's transfer agent
against the transfer of the securities held by such Selling Stockholder except
in compliance with this restriction.
(e) Certificates in negotiable form for all Shares to be sold by such
Selling Stockholder under this Agreement, together with a stock power or powers
duly endorsed in blank by such Selling Stockholder, have been placed in custody
with the Custodian for the purpose of effecting delivery hereunder.
(f) This Agreement has been duly authorized by each Selling Stockholder
that is not a natural person and has been duly executed and delivered by or on
behalf of such Selling Stockholder and is a valid and binding agreement of such
Selling Stockholder, enforceable in accordance with its terms, except as rights
to indemnification hereunder may be limited by applicable law and except as the
enforcement hereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally or by general equitable principles; and the performance of this
Agreement and the consummation of the transactions herein contemplated will not
result in a breach or violation of any of the terms and provisions of or
constitute a default under any bond, debenture, note or other evidence of
indebtedness, or under any lease, contract, indenture, mortgage, deed of trust,
loan agreement, joint venture or other agreement or instrument to which such
Selling Stockholder is a party or by which such Selling Stockholder, or any
Selling Stockholder Shares or any Option Shares to be sold by such Selling
Stockholder hereunder, may be bound or, to the best of such Selling
Stockholders' knowledge, result in any violation of any law, order, rule,
regulation, writ, injunction, judgment or decree of any court, government or
governmental agency or body, domestic or foreign, having jurisdiction over such
Selling Stockholder or over the properties of such Selling Stockholder, or, if
such Selling Stockholder is other than a natural person, result in any violation
of any provisions of the charter, bylaws or other organizational documents of
such Selling Stockholder.
(g) Such Selling Stockholder has not taken and will not take, directly or
indirectly, any action designed to or that might reasonably be expected to cause
or result in stabilization or manipulation of the price of the Common Stock to
facilitate the sale or resale of the Shares.
(h) Such Selling Stockholder has not distributed and will not distribute
any prospectus or other offering material in connection with the offering and
sale of the Shares.
(i) All information furnished by or on behalf of such Selling Stockholder
relating to such Selling Stockholder and the Selling Stockholder Shares that is
contained in the representations and warranties of such Selling Stockholder in
such Selling Stockholder's Power of Attorney or set forth in the Registration
Statement or the Prospectus is, and at the time the
<PAGE>
-13-
Registration Statement became or becomes, as the case may be, effective and at
all times subsequent thereto up to and on the Closing Date, and on any later
date on which Option Shares are to be purchased, was or will be, true, correct
and complete, and does not, and at the time the Registration Statement became or
becomes, as the case may be, effective and at all times subsequent thereto up to
and on the Closing Date (hereinafter defined), and on any later date on which
Option Shares are to be purchased, will not, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make such information not misleading.
(j) Such Selling Stockholder will review the Prospectus and will comply
with all agreements and satisfy all conditions on its part to be complied with
or satisfied pursuant to this Agreement on or prior to the Closing Date, or any
later date on which Option Shares are to be purchased, as the case may be, and
will advise one of its Attorneys and Robertson, Stephens & Company LLC prior to
the Closing Date or such later date on which Option Shares are to be purchased,
as the case may be, if any statement to be made on behalf of such Selling
Stockholder in the certificate contemplated by Section 6(h)would be inaccurate
if made as of the Closing Date or such later date on which Option Shares are to
be purchased, as the case may be.
(k) Such Selling Stockholder does not have, or has waived prior to the
date hereof, any preemptive right, co-sale right or right of first refusal or
other similar right to purchase any of the Shares that are to be sold by the
Company or any of the other Selling Stockholders to the Underwriters pursuant to
this Agreement; such Selling Stockholder does not have, or has waived prior to
the date hereof, any registration right or other similar right to participate in
the offering made by the Prospectus, other than such rights of participation as
have been satisfied by the participation of such Selling Stockholder in the
transactions to which this Agreement relates in accordance with the terms of
this Agreement; and such Selling Stockholder does not own any warrants, options
or similar rights to acquire, and does not have any right or arrangement to
acquire, any capital stock, rights, warrants, options or other securities from
the Company, other than those described in the Registration Statement and the
Prospectus.
(l) Such Selling Stockholder is not aware (without having conducted any
investigation or inquiry) that any of the representations and warranties of the
Company set forth in Section 2 above is untrue or inaccurate in any material
respect.
4. Purchase, Sale and Delivery of Shares. On the basis of the
-------------------------------------
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company and the Selling Stockholders
agree, severally and not jointly, to sell to the Underwriters, and each
Underwriter agrees, severally and not jointly, to purchase from the Company and
the Selling Stockholders, respectively, at a purchase price of $_____ per share,
the respective number of Firm Shares as hereinafter set forth and Selling
Stockholder Shares set forth opposite the names of the Company and the Selling
Stockholders in Schedule B hereto. The obligation of each Underwriter to the
Company and to each Selling Stockholder shall be to purchase from the Company or
such Selling Stockholder that number of Firm Shares or Selling Stockholder
Shares, as the case
<PAGE>
-14-
may be, which (as nearly as practicable, as determined by you) is in the same
proportion to the number of Company Shares or Selling Stockholder Shares, as the
case may be, set forth opposite the name of the Company or such Selling
Stockholder in Schedule B hereto as the number of Firm Shares which is set forth
opposite the name of such Underwriter in Schedule A hereto (subject to
adjustment as provided in Section 10) is to the total number of Firm Shares to
be purchased by all the Underwriters under this Agreement.
It is understood that _____ of the Firm Shares will initially be reserved
by the Underwriters for offer and sale upon the terms and conditions set forth
in the Prospectus to employees and persons having business relationships with
the Company and its subsidiaries who have heretofore delivered to the
Representatives offers or indications of interest to purchase Firm Shares in
form satisfactory to the Representatives and that any allocation of such Firm
Shares among such persons will be made in accordance with timely directions
received by the Representatives from the Company; provided, that under no
--------
circumstances will the Representatives or any Underwriter be liable to the
Company or to any such person for any action taken or omitted in good faith in
connection with such offering to employees and persons having business
relationships with the Company and its subsidiaries. It is further understood
that any such Firm Shares which are not purchased by such persons will be
offered by the Underwriters to the public upon the terms and conditions set
forth in the Prospectus.
The certificates in negotiable form for the Selling Stockholder Shares have
been placed in custody (for delivery under this Agreement) under the Custody
Agreement. Each Selling Stockholder agrees that the certificates for the Selling
Stockholder Shares of such Selling Stockholder so held in custody are subject to
the interests of the Underwriters hereunder, that the arrangements made by such
Selling Stockholder for such custody, including the Power of Attorney is to that
extent irrevocable and that the obligations of such Selling Stockholder
hereunder shall not be terminated by the act of such Selling Stockholder or by
operation of law, whether by the death or incapacity of such Selling Stockholder
or the occurrence of any other event, except as specifically provided herein or
in the Custody Agreement. If any Selling Stockholder should die or be
incapacitated, or if any other such event should occur, before the delivery of
the certificates for the Selling Stockholder Shares hereunder, the Selling
Stockholder Shares to be sold by such Selling Stockholder shall, except as
specifically provided herein or in the Custody Agreement, be delivered by the
Custodian in accordance with the terms and conditions of this Agreement as if
such death, incapacity or other event had not occurred, regardless of whether
the Custodian shall have received notice of such death or other event.
Delivery of definitive certificates for the Firm Shares to be purchased by
the Underwriters pursuant to this Section 4 shall be made against payment of the
purchase price therefor by the several Underwriters by certified or official
bank check or checks drawn in next-day funds, payable to the order of the
Company with regard to the Shares being purchased from the Company, and to the
order of the Custodian for the respective accounts of the Selling Stockholders
with regard to the Shares being purchased from such Selling Stockholders (and
the Company and such Selling Stockholders agree not to deposit and to cause the
Custodian not to deposit any such check in the bank on which it is drawn, and
not to take any other action with the purpose or effect of receiving immediately
available funds, until the business day following the date of its delivery to
the Company or the Custodian, as the case may be, and, in the event of any
breach of the foregoing, the Company or the Selling Stockholders, as the case
may be, shall reimburse the Underwriters for
<PAGE>
-15-
the interest lost and any other expenses borne by them by reason of such
breach), at the offices of Testa, Hurwitz & Thibeault, LLP, High Street Tower,
125 High Street, Boston, MA 02110 (or at such other place as may be agreed upon
among the Representatives and the Company and the Attorneys), at 7:00 A.M., San
Francisco time (a) on the third (3rd) full business day following the first day
that Shares are traded, (b) if this Agreement is executed and delivered after
1:30 P.M., San Francisco time, the fourth (4th) full business day following the
day that this Agreement is executed and delivered or (c) at such other time and
date not later than seven (7) full business days following the first day that
Shares are traded as the Representatives and the Company and the Attorneys may
determine (or at such time and date to which payment and delivery shall have
been postponed pursuant to Section 11 hereof), such time and date of payment and
delivery being herein called the "Closing Date;" provided, however, that if the
-------- -------
Company has not made available to the Representatives copies of the Prospectus
within the time provided in Section 5(d) hereof, the Representatives may, in
their sole discretion, postpone the Closing Date until no later than two (2)
full business days following delivery of copies of the Prospectus to the
Representatives. The certificates for the Firm Shares to be so delivered will be
made available to you at such office or such other location including, without
limitation, in New York City, as you may reasonably request for checking at
least one (1) full business day prior to the Closing Date and will be in such
names and denominations as you may request, such request to be made at least two
(2) full business days prior to the Closing Date. If the Representatives so
elect, delivery of the Firm Shares may be made by credit through full fast
transfer to the accounts at The Depository Trust Company designated by the
Representatives.
It is understood that you, individually, and not as the Representatives of
the several Underwriters, may (but shall not be obligated to) make payment of
the purchase price on behalf of any Underwriter or Underwriters whose check or
checks shall not have been received by you prior to the Closing Date for the
Firm Shares to be purchased by such Underwriter or Underwriters. Any such
payment by you shall not relieve any such Underwriter or Underwriters of any of
its or their obligations hereunder.
After the Registration Statement becomes effective, the several
Underwriters intend to make an initial public offering (as such term is
described in Section 12 hereof) of the Firm Shares at an initial public offering
price of $_____ per share. After the initial public offering, the several
Underwriters may, in their discretion, vary the public offering price.
The information set forth in the last paragraph on the front cover page
(insofar as such information relates to the Underwriters), on the inside front
cover concerning stabilization and over-allotment by the Underwriters, and under
the _____ and _____ paragraphs under the caption "Underwriting" in any
Preliminary Prospectus and in the Prospectus constitutes the only information
furnished by the Underwriters to the Company for inclusion in any Preliminary
Prospectus, the Prospectus or the Registration Statement, and you, on behalf of
the respective Underwriters, represent and warrant to the Company and the
Selling Stockholders that the statements made therein do not include any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
<PAGE>
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5. Further Agreements of the Company. The Company agrees with the several
---------------------------------
Underwriters that:
(a) The Company will use its best efforts to cause the Registration
Statement and any amendment thereof, if not effective at the time and date that
this Agreement is executed and delivered by the parties hereto, to become
effective as promptly as possible; the Company will use its best efforts to
cause any abbreviated registration statement pursuant to Rule 462(b) of the
Rules and Regulations as may be required subsequent to the date the Registration
Statement is declared effective to become effective as promptly as possible; the
Company will notify you, promptly after it shall receive notice thereof, of the
time when the Registration Statement, any subsequent amendment to the
Registration Statement or any abbreviated registration statement has become
effective or any supplement to the Prospectus has been filed; if the Company
omitted information from the Registration Statement at the time it was
originally declared effective in reliance upon Rule 430A(a) of the Rules and
Regulations, the Company will provide evidence satisfactory to you that the
Prospectus contains such information and has been filed, within the time period
prescribed, with the Commission pursuant to subparagraph (1) or (4) of Rule
424(b) of the Rules and Regulations or as part of a post-effective amendment to
such Registration Statement as originally declared effective which is declared
effective by the Commission; if the Company files a term sheet pursuant to Rule
434 of the Rules and Regulations, the Company will provide evidence satisfactory
to you that the Prospectus and term sheet meeting the requirements of Rule
434(b) or (c), as applicable, of the Rules and Regulations, have been filed,
within the time period prescribed, with the Commission pursuant to subparagraph
(7) of Rule 424(b) of the Rules and Regulations; if for any reason the filing of
the final form of Prospectus is required under Rule 424(b)(3) of the Rules and
Regulations, it will provide evidence satisfactory to you that the Prospectus
contains such information and has been filed with the Commission within the time
period prescribed; it will notify you promptly of any request by the Commission
for the amending or supplementing of the Registration Statement or the
Prospectus or for additional information; promptly upon your request, it will
prepare and file with the Commission any amendments or supplements to the
Registration Statement or Prospectus which, in the opinion of counsel for the
several Underwriters ("Underwriters' Counsel"), may be necessary or advisable in
connection with the distribution of the Shares by the Underwriters; it will
promptly prepare and file with the Commission, and promptly notify you of the
filing of, any amendments or supplements to the Registration Statement or
Prospectus which may be necessary to correct any statements or omissions, if, at
any time when a prospectus relating to the Shares is required to be delivered
under the Act, any event shall have occurred as a result of which the Prospectus
or any other prospectus relating to the Shares as then in effect would include
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; in case any Underwriter is required
to deliver a prospectus nine (9) months or more after the effective date of the
Registration Statement in connection with the sale of the Shares, it will
prepare promptly upon request, but at the expense of such Underwriter, such
amendment or amendments to the Registration Statement and such prospectus or
prospectuses as may be necessary to permit compliance with the requirements of
Section 10(a)(3) of the Act; and it will file no amendment or supplement to the
Registration Statement or Prospectus which shall not previously have been
submitted to you a reasonable time prior to the proposed filing thereof or to
which you shall reasonably object in writing, subject, however, to compliance
with the Act and the
<PAGE>
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Rules and Regulations and the provisions of this Agreement.
(b) The Company will advise you, promptly after it shall receive notice or
obtain knowledge, of the issuance of any stop order by the Commission suspending
the effectiveness of the Registration Statement or of the initiation or threat
of any proceeding for that purpose; and it will promptly use its best efforts to
prevent the issuance of any stop order or to obtain its withdrawal at the
earliest possible moment if such stop order should be issued.
(c) The Company will use its best efforts to qualify the Shares for
offering and sale under the securities laws of such jurisdictions as you may
designate and to continue such qualifications in effect for so long as may be
required for purposes of the distribution of the Shares, except that the Company
shall not be required in connection therewith or as a condition thereof to
qualify as a foreign corporation or to execute a general consent to service of
process in any jurisdiction in which it is not otherwise required to be so
qualified or to so execute a general consent to service of process. In each
jurisdiction in which the Shares shall have been qualified as above provided,
the Company will make and file such statements and reports in each year as are
or may be required by the laws of such jurisdiction.
(d) The Company will furnish to you, as soon as available, and, in the case
of the Prospectus and any term sheet or abbreviated term sheet under Rule 434,
in no event later than the first (1st) full business day following the first day
that Shares are traded, copies of the Registration Statement (three of which
will be signed and which will include all exhibits), each Preliminary
Prospectus, the Prospectus and any amendments or supplements to such documents,
including any prospectus prepared to permit compliance with Section 10(a)(3) of
the Act, all in such quantities as you may from time to time reasonably request.
Notwithstanding the foregoing, if Robertson, Stephens & Company LLC, on behalf
of the several Underwriters, shall agree to the utilization of Rule 434 of the
Rules and Regulations, the Company shall provide to you copies of a Preliminary
Prospectus updated in all respects through the date specified by you in such
quantities as you may from time to time reasonably request.
(e) The Company will make generally available to its securityholders as
soon as practicable, but in any event not later than the forty-fifth (45th) day
following the end of the fiscal quarter first occurring after the first
anniversary of the effective date of the Registration Statement, an earnings
statement (which will be in reasonable detail but need not be audited) complying
with the provisions of Section 11(a) of the Act and covering a twelve (12) month
period beginning after the effective date of the Registration Statement.
(f) During a period of five (5) years after the date hereof, the Company
will furnish to its shareholders as soon as practicable after the end of each
respective period, annual reports (including financial statements audited by
independent certified public accountants) and unaudited quarterly reports of
operations for each of the first three quarters of the fiscal year, and will
furnish to you and the other several Underwriters hereunder, upon request (i)
concurrently with furnishing such reports to its shareholders, statements of
operations of the Company for each of the first three (3) quarters in the form
furnished to the Company's shareholders, (ii) concurrently with furnishing to
its shareholders, a balance sheet of the Company as of the end of such fiscal
year,
<PAGE>
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together with statements of operations, of shareholders' equity, and of
cash flows of the Company for such fiscal year, accompanied by a copy of the
certificate or report thereon of independent certified public accountants, (iii)
as soon as they are available, copies of all reports (financial or other) mailed
to shareholders, (iv) as soon as they are available, copies of all reports and
financial statements furnished to or filed with the Commission, any securities
exchange or the National Association of Securities Dealers, Inc. ("NASD"), (v)
every material press release and every material news item or article in respect
of the Company or its affairs which was generally released to shareholders or
prepared by the Company or any of its subsidiaries, and (vi) any additional
information of a public nature concerning the Company or its subsidiaries, or
its business which you may reasonably request. During such five (5) year period,
if the Company shall have active subsidiaries, the foregoing financial
statements shall be on a consolidated basis to the extent that the accounts of
the Company and its subsidiaries are consolidated, and shall be accompanied by
similar financial statements for any significant subsidiary which is not so
consolidated.
(g) The Company will apply the net proceeds from the sale of the Shares
being sold by it in the manner set forth under the caption "Use of Proceeds" in
the Prospectus.
(h) The Company will maintain a transfer agent and, if necessary under the
jurisdiction of incorporation of the Company, a registrar (which may be the same
entity as the transfer agent) for its Common Stock.
(i) The Company will file Form SR in conformity with the requirements of
the Act and the Rules and Regulations.
(j) If the transactions contemplated hereby are not consummated by reason
of any failure, refusal or inability on the part of the Company or any Selling
Stockholder to perform any agreement on their respective parts to be performed
hereunder or to fulfill any condition of the Underwriters' obligations
hereunder, or if the Company shall terminate this Agreement pursuant to Section
12(a) hereof, or if the Underwriters shall terminate this Agreement pursuant to
Section 12(b)(i), the Company will reimburse the several Underwriters for all
out-of-pocket expenses (including fees and disbursements of Underwriters'
Counsel) incurred by the Underwriters in investigating or preparing to market or
marketing the Shares.
(k) If at any time during the ninety (90) day period after the Registration
Statement becomes effective, any rumor, publication or event relating to or
affecting the Company shall occur as a result of which in your opinion the
market price of the Common Stock has been or is likely to be materially affected
(regardless of whether such rumor, publication or event necessitates a
supplement to or amendment of the Prospectus), the Company will, after written
notice from you advising the Company to the effect set forth above, forthwith
prepare, consult with you concerning the substance of and disseminate a press
release or other public statement, reasonably satisfactory to you, responding to
or commenting on such rumor, publication or event.
(l) During the Lock-up Period, the Company will not, without the prior
written consent of Robertson Stephens & Company LLC, effect the Disposition of,
directly or indirectly, any Securities other than the sale of the Firm Shares to
be sold by the Company hereunder and the
<PAGE>
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Company's issuance of options or Common Stock under the Company's presently
authorized 1993 Stock Option Plan (the "Option Plan").
(m) During a period of ninety (90) days from the effective date of the
Registration Statement, the Company will not file a registration statement
registering shares under the Option Plan or other employee benefit plan.
6. Expenses.
--------
(a) The Company and the Selling Stockholders agree with each
Underwriter that:
(i) The Company and the Selling Stockholders will pay and
bear all costs and expenses in connection with the preparation,
printing and filing of the Registration Statement (including
financial statements, schedules and exhibits), Preliminary
Prospectuses and the Prospectus and any amendments or supplements
thereto; the printing of this Agreement, the Agreement Among
Underwriters, the Selected Dealer Agreement, the Preliminary Blue Sky
Survey and any Supplemental Blue Sky Survey, the Underwriters'
Questionnaire and Power of Attorney, and any instruments related to
any of the foregoing; the issuance and delivery of the Shares
hereunder to the several Underwriters, including transfer taxes, if
any, the cost of all certificates representing the Shares and
transfer agents' and registrars' fees; the fees and disbursements of
counsel for the Company; all fees and other charges of the Company's
independent certified public accountants; the cost of furnishing to
the several Underwriters copies of the Registration Statement
(including appropriate exhibits), Preliminary Prospectus and the
Prospectus, and any amendments or supplements to any of the
foregoing; NASD filing fees and the cost of qualifying the Shares
under the laws of such jurisdictions as you may designate (including
filing fees and fees and disbursements of Underwriters' Counsel in
connection with such NASD filings and Blue Sky qualifications); and
all other expenses directly incurred by the Company and the Selling
Stockholders in connection with the performance of their obligations
hereunder. Any additional expenses incurred as a result of the sale
of the Shares by the Selling Stockholders will be borne collectively
by the Company and the Selling Stockholders. The provisions of this
Section 6(a)(i) are intended to relieve the Underwriters from the
payment of the expenses and costs which the Selling Stockholders and
the Company hereby agree to pay, but shall not affect any agreement
which the Selling Stockholders and the Company may make, or may have
made, for the sharing of any of such expenses and costs. Such
agreements shall not impair the obligations of the Company and the
Selling Stockholders hereunder to the several Underwriters.
(ii) In addition to its other obligations under Section 9(a)
hereof, the Company agrees that, as an interim measure during the
pendency of any claim, action, investigation, inquiry or other
proceeding described in Section 9(a) hereof, it will reimburse the
Underwriters on a monthly basis for all reasonable legal or other
expenses incurred in connection with investigating or defending any
such claim, action, investigation, inquiry or other proceeding,
notwithstanding the absence of a judicial determination as to the
propriety
<PAGE>
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and enforceability of the Company's obligation to reimburse the
Underwriters for such expenses and the possibility that such payments
might later be held to have been improper by a court of competent
jurisdiction. To the extent that any such interim reimbursement
payment is so held to have been improper, the Underwriters shall
promptly return such payment to the Company together with interest,
compounded daily, determined on the basis of the prime rate (or other
commercial lending rate for borrowers of the highest credit standing)
listed from time to time in The Wall Street Journal which represents
the base rate on corporate loans posted by a substantial majority of
the nation's thirty (30) largest banks (the "Prime Rate"). Any such
interim reimbursement payments which are not made to the Underwriters
within thirty (30) days of a request for reimbursement shall bear
interest at the Prime Rate from the date of such request.
(iii) In addition to their other obligations under Section
9(b) hereof, each Selling Stockholder agrees that, as an interim
measure during the pendency of any claim, action, investigation,
inquiry or other proceeding described in Section 9(b) hereof relating
to such Selling Stockholder, it will reimburse the Underwriters on a
monthly basis for all reasonable legal or other expenses incurred in
connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the
absence of a judicial determination as to the propriety and
enforceability of such Selling Stockholder's obligation to reimburse
the Underwriters for such expenses and the possibility that such
payments might later be held to have been improper by a court of
competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, the
Underwriters shall promptly return such payment to the Selling
Stockholders, together with interest, compounded daily, determined on
the basis of the Prime Rate. Any such interim reimbursement payments
which are not made to the Underwriters within thirty (30) days of a
request for reimbursement shall bear interest at the Prime Rate from
the date of such request.
(b) In addition to their other obligations under Section 9(c)
hereof, the Underwriters severally and not jointly agree that, as an interim
measure during the pendency of any claim, action, investigation, inquiry or
other proceeding described in Section 9(c) hereof, they will reimburse the
Company and each Selling Stockholder on a monthly basis for all reasonable legal
or other expenses incurred in connection with investigating or defending any
such claim, action, investigation, inquiry or other proceeding, notwithstanding
the absence of a judicial determination as to the propriety and enforceability
of the Underwriters' obligation to reimburse the Company and each such Selling
Stockholder for such expenses and the possibility that such payments might later
be held to have been improper by a court of competent jurisdiction. To the
extent that any such interim reimbursement payment is so held to have been
improper, the Company and each such Selling Stockholder shall promptly return
such payment to the Underwriters together with interest, compounded daily,
determined on the basis of the Prime Rate. Any such interim reimbursement
payments which are not made to the Company and each such Selling Stockholder
within thirty (30) days of a request for reimbursement shall bear interest at
the Prime Rate from the date of such request.
<PAGE>
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(c) It is agreed that any controversy arising out of the operation
of the interim reimbursement arrangements set forth in Sections 6(a)(ii),
6(a)(iii) and 6(b) hereof, including the amounts of any requested reimbursement
payments, the method of determining such amounts and the basis on which such
amounts shall be apportioned among the reimbursing parties, shall be settled by
arbitration conducted under the provisions of the Constitution and Rules of the
Board of Governors of the New York Stock Exchange, Inc. or pursuant to the Code
of Arbitration Procedure of the NASD. Any such arbitration must be commenced by
service of a written demand for arbitration or a written notice of intention to
arbitrate, therein electing the arbitration tribunal. In the event the party
demanding arbitration does not make such designation of an arbitration tribunal
in such demand or notice, then the party responding to said demand or notice is
authorized to do so. Any such arbitration will be limited to the operation of
the interim reimbursement provisions contained in Sections 6(a)(ii), 6(a)(iii)
and 6(b) hereof and will not resolve the ultimate propriety or enforceability of
the obligation to indemnify for expenses which is created by the provisions of
Sections 9(a), 9(b) and 9(c) hereof or the obligation to contribute to expenses
which is created by the provisions of Section 9(e) hereof.
7. Conditions of Underwriters' Obligations. The obligations of the
---------------------------------------
several Underwriters to purchase and pay for the Shares as provided herein shall
be subject to the accuracy, as of the date hereof and the Closing Date and any
later date on which Option Shares are to be purchased, as the case may be, of
the representations and warranties of the Company and the Selling Stockholders
herein, to the performance by the Company and the Selling Stockholders of their
respective obligations hereunder and to the following additional conditions:
(a) The Registration Statement shall have become effective not
later than 2:00 P.M., San Francisco time, on the date following the date of this
Agreement, or such later date as shall be consented to in writing by you; and no
stop order suspending the effectiveness thereof shall have been issued and no
proceedings for that purpose shall have been initiated or, to the knowledge of
the Company, any Selling Stockholder or any Underwriter, threatened by the
Commission, and any request of the Commission for additional information (to be
included in the Registration Statement or the Prospectus or otherwise) shall
have been complied with to the satisfaction of Underwriters' Counsel.
(b) All corporate proceedings and other legal matters in connection
with this Agreement, the form of Registration Statement and the Prospectus, and
the registration, authorization, issue, sale and delivery of the Shares, shall
have been reasonably satisfactory to Underwriters' Counsel, and such counsel
shall have been furnished with such papers and information as they may
reasonably have requested to enable them to pass upon the matters referred to in
this Section.
(c) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date, or any later date on which Option Shares are to be
purchased, as the case may be, there shall not have been any change in the
condition (financial or otherwise), earnings, operations, business or business
prospects of the Company and its subsidiaries considered as one enterprise from
that set forth in the Registration Statement or Prospectus, which, in your sole
judgment, is
<PAGE>
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material and adverse and that makes it, in your sole judgment, impracticable or
inadvisable to proceed with the public offering of the Shares as contemplated by
the Prospectus.
(d) You shall have received on the Closing Date and on any later
date on which Option Shares are to be purchased, as the case may be, the
following opinion of counsel for the Company and the Selling Stockholders, dated
the Closing Date or such later date on which Option Shares are to be purchased
addressed to the Underwriters and with reproduced copies or signed counterparts
thereof for each of the Underwriters, to the effect that:
(i) The Company and each subsidiary has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation;
(ii) The Company and each subsidiary has the corporate power
and authority to own, lease and operate its properties and to conduct its
business as described in the Prospectus;
(iii) The Company and each subsidiary is duly qualified to do
business as a foreign corporation and is in good standing in each
jurisdiction, if any, in which the ownership or leasing of its properties
or the conduct of its business requires such qualification, except where
the failure to be so qualified or be in good standing would not have a
material adverse effect on the condition (financial or otherwise),
earnings, operations or business of the Company and its subsidiaries
considered as one enterprise. To such counsel's knowledge, the Company does
not own or control, directly or indirectly, any corporation, association or
other entity other than [list subsidiaries];
(iv) The authorized, issued and outstanding capital stock of
the Company is as set forth in the Prospectus under the caption
"Capitalization" as of the dates stated therein, the issued and outstanding
shares of capital stock of the Company (including the Selling Stockholder
Shares) have been duly and validly issued and are fully paid and
nonassessable, and, to such counsel's knowledge, will not have been issued
in violation of or subject to any preemptive right, co-sale right,
registration right, right of first refusal or other similar right;
(v) All issued and outstanding shares of capital stock of
each subsidiary of the Company have been duly authorized and validly issued
and are fully paid and nonassessable, and, to such counsel's knowledge,
have not been issued in violation of or subject to any preemptive right,
co-sale right, registration right, right of first refusal or other similar
right and are owned by the Company free and clear of any pledge, lien,
security interest, encumbrance, claim or equitable interest;
(vi) The Firm Shares or the Option Shares, as the case may be,
to be issued by the Company pursuant to the terms of this Agreement have
been duly authorized and, upon issuance and delivery against payment
therefor in accordance with the terms hereof, will be duly and validly
issued and fully paid and nonassessable, and will not have
<PAGE>
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been issued in violation of or subject to any preemptive right, co-sale
right, registration right, right of first refusal or other similar right.
(vii) The Company has the corporate power and authority to
enter into this Agreement and to issue, sell and deliver to the
Underwriters the Shares to be issued and sold by it hereunder;
(viii) This Agreement has been duly authorized by all necessary
corporate action on the part of the Company and has been duly executed and
delivered by the Company and, assuming due authorization, execution and
delivery by you, is a valid and binding agreement of the Company,
enforceable in accordance with its terms, except insofar as indemnification
provisions may be limited by applicable law and except as enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws relating to or affecting creditors' rights generally or by
general equitable principles;
(ix) The Registration Statement has become effective under
the Act and, to such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been instituted or are pending or
threatened under the Act;
(x) The Registration Statement and the Prospectus, and each
amendment or supplement thereto (other than the financial statements
(including supporting schedules) and financial data derived therefrom as to
which such counsel need express no opinion), as of the effective date of
the Registration Statement, complied as to form in all material respects
with the requirements of the Act and the applicable Rules and Regulations;
(xi) The information in the Prospectus under the caption
"Description of Capital Stock," to the extent that it constitutes matters
of law or legal conclusions, has been reviewed by such counsel and is a
fair summary of such matters and conclusions; and the forms of certificates
evidencing the Common Stock and filed as exhibits to the Registration
Statement comply with Delaware law;
(xii) The description in the Registration Statement and the
Prospectus of the charter and bylaws of the Company and of statutes are
accurate and fairly present the information required to be presented by the
Act and the applicable Rules and Regulations;
(xiii) To such counsel's knowledge, there are no agreements,
contracts, leases or documents to which the Company is a party of a
character required to be described or referred to in the Registration
Statement or Prospectus or to be filed as an exhibit to the Registration
Statement which are not described or referred to therein or filed as
required;
(xiv) The performance of this Agreement and the consummation
of the transactions herein contemplated (other than performance of the
Company's indemnification obligations hereunder, concerning which no
opinion need be expressed) will not (a) result in any violation of the
Company's charter or bylaws or (b) to such
<PAGE>
-24-
counsel's knowledge, result in a material breach or violation of any of the
terms and provisions of, or constitute a default under, any bond,
debenture, note or other evidence of indebtedness, or any lease, contract,
indenture, mortgage, deed of trust, loan agreement, joint venture or other
agreement or instrument known to such counsel to which the Company is a
party or by which its properties are bound, or any applicable statute, rule
or regulation known to such counsel or, to such counsel's knowledge, any
order, writ or decree of any court, government or governmental agency or
body having jurisdiction over the Company or any of its subsidiaries, or
over any of their properties or operations;
(xv) No consent, approval, authorization or order of or
qualification with any court, government or governmental agency or body
having jurisdiction over the Company or any of its subsidiaries, or over
any of their properties or operations is necessary in connection with the
consummation by the Company of the transactions herein contemplated, except
such as have been obtained under the Act or such as may be required under
state or other securities or Blue Sky laws in connection with the purchase
and the distribution of the Shares by the Underwriters;
(xvi) To such counsel's knowledge, there are no legal or
governmental proceedings pending or threatened against the Company or any
of its subsidiaries of a character required to be disclosed in the
Registration Statement or the Prospectus by the Act or the Rules and
Regulations, other than those described therein;
(xvii) To such counsel's knowledge, neither the Company nor any
of its subsidiaries is presently (a) in material violation of its
respective charter or bylaws, or (b) in material breach of any applicable
statute, rule or regulation known to such counsel or, to such counsel's
knowledge, any order, writ or decree of any court or governmental agency or
body having jurisdiction over the Company or any of its subsidiaries, or
over any of their properties or operations;
(xviii) To such counsel's knowledge, except as set forth in the
Registration Statement and Prospectus, no holders of Common Stock or other
securities of the Company have registration rights with respect to
securities of the Company and, except as set forth in the Registration
Statement and Prospectus, all holders of securities of the Company having
rights known to such counsel to registration of such shares of Common Stock
or other securities, because of the filing of the Registration Statement by
the Company have, with respect to the offering contemplated thereby, waived
such rights or such rights have expired by reason of lapse of time
following notification of the Company's intent to file the Registration
Statement or have included securities in the Registration Statement
pursuant to the exercise of and in full satisfaction of such rights;
(xix) Each Selling Stockholder which is not a natural person
has full right, power and authority to enter into and to perform its
obligations under the Power of Attorney and Custody Agreement to be
executed and delivered by it in connection with the transactions
contemplated herein; the Power of Attorney and Custody Agreement of each
Selling Stockholder that is not a natural person has been duly authorized
by such Selling
<PAGE>
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Stockholder; the Power of Attorney and Custody Agreement of each Selling
Stockholder has been duly executed and delivered by or on behalf of such
Selling Stockholder; and the Power of Attorney and Custody Agreement of
each Selling Stockholder constitutes the valid and binding agreement of
such Selling Stockholder, enforceable in accordance with its terms, except
as the enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally or by general equitable principles;
(xx) Each of the Selling Stockholders has full right, power
and authority to enter into and to perform its obligations under this
Agreement and to sell, transfer, assign and deliver the Shares to be sold
by such Selling Stockholder hereunder;
(xxi) This Agreement has been duly authorized by each Selling
Stockholder that is not a natural person and has been duly executed and
delivered by or on behalf of each Selling Stockholder; and
(xxii) Upon the delivery of and payment for the Shares as
contemplated in this Agreement, each of the Underwriters will receive valid
marketable title to the Shares purchased by it from such Selling
Stockholder, free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest. In rendering such opinion, such
counsel may assume that the Underwriters are without notice of any defect
in the title of the Shares being purchased from the Selling Stockholders.
In addition, such counsel shall state that such counsel has
participated in conferences with officials and other representatives of the
Company, the Representatives, Underwriters' Counsel and the independent
certified public accountants of the Company, at which such conferences the
contents of the Registration Statement and Prospectus and related matters were
discussed, and although they have not verified the accuracy or completeness of
the statements contained in the Registration Statement or the Prospectus,
nothing has come to the attention of such counsel which leads them to believe
that, at the time the Registration Statement became effective and at all times
subsequent thereto up to and on the Closing Date and on any later date on which
Option Shares are to be purchased, the Registration Statement and any amendment
or supplement thereto (other than the financial statements including supporting
schedules and other financial and statistical information derived therefrom, as
to which such counsel need express no comment) contained any untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, or at the
Closing Date or any later date on which the Option Shares are to be purchased,
as the case may be, the Registration Statement, the Prospectus and any amendment
or supplement thereto (except as aforesaid) contained any untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
Counsel rendering the foregoing opinion may rely as to questions of
law not involving the laws of the United States or the States of California and
Delaware upon opinions of local counsel, and as to questions of fact upon
representations or certificates of officers of the
<PAGE>
-26-
Company, the Selling Stockholders or officers of the Selling Stockholders (when
the Selling Stockholder is not a natural person), and of government officials,
in which case their opinion is to state that they are so relying and that they
have no knowledge of any material misstatement or inaccuracy in any such
opinion, representation or certificate. Copies of any opinion, representation or
certificate so relied upon shall be delivered to you, as Representatives of the
Underwriters, and to Underwriters' Counsel.
(e) You shall have received on the Closing Date and on any later
date on which Option Shares are to be purchased, as the case may be, an opinion
of Testa, Hurwitz & Thibeault, LLP, in form and substance satisfactory to you,
with respect to the sufficiency of all such corporate proceedings and other
legal matters relating to this Agreement and the transactions contemplated
hereby as you may reasonably require, and the Company shall have furnished to
such counsel such documents as they may have requested for the purpose of
enabling them to pass upon such matters.
(f) You shall have received on the Closing Date and on any later
date on which Option Shares are to be purchased, as the case may be, a letter
from KPMG Peat Marwick LLP addressed to the Underwriters, dated the Closing Date
or such later date on which Option Shares are to be purchased, as the case may
be, confirming that they are independent certified public accountants with
respect to the Company within the meaning of the Act and the applicable
published Rules and Regulations and based upon the procedures described in such
letter delivered to you concurrently with the execution of this Agreement
(herein called the "Original Letter"), but carried out to a date not more than
five (5) business days prior to the Closing Date or such later date on which
Option Shares are to be purchased, as the case may be, (i) confirming, to the
extent true, that the statements and conclusions set forth in the Original
Letter are accurate as of the Closing Date or such later date on which Option
Shares are to be purchased, as the case may be, and (ii) setting forth any
revisions and additions to the statements and conclusions set forth in the
Original Letter which are necessary to reflect any changes in the facts
described in the Original Letter since the date of such letter, or to reflect
the availability of more recent financial statements, data or information. The
letter shall not disclose any change in the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company and its
subsidiaries considered as one enterprise from that set forth in the
Registration Statement or Prospectus, which, in your sole judgment, is material
and adverse and that makes it, in your sole judgment, impracticable or
inadvisable to proceed with the public offering of the Shares as contemplated by
the Prospectus. The Original Letter from KPMG Peat Marwick, LLP shall be
addressed to or for the use of the Underwriters in form and substance
satisfactory to the Underwriters and shall (i) represent, to the extent true,
that they are independent certified public accountants with respect to the
Company within the meaning of the Act and the applicable published Rules and
Regulations, (ii) set forth their opinion with respect to their examination of
the consolidated balance sheet of the Company as of December 31, 1996 and
related consolidated statements of operations, shareholders' equity, and cash
flows for the twelve (12) months ended December 31, 1996, (iii) state that KPMG
Peat Marwick, LLP has performed the procedures set out in Statement on Auditing
Standards No. 71 ("SAS 71") for a review of interim financial information and
providing the report of KPMG Peat Marwick, LLP as described in SAS 71 on the
financial statements for each of the quarters in the [one] [two]-quarter period
ended [March 31, 1997] [June 30, 1997] (the "Quarterly Financial Statements"),
(iv) state that in the course of such review, nothing came to their attention
that leads
<PAGE>
-27-
them to believe that any material modifications need to be made to any of the
Quarterly Financial Statements in order for them to be in compliance with
generally accepted accounting principles consistently applied across the periods
presented, and (v) address other matters agreed upon by KPMG Peat Marwick, LLP
and you. In addition, you shall have received from KPMG Peat Marwick, LLP a
letter addressed to the Company and made available to you for the use of the
Underwriters stating that their review of the Company's system of internal
accounting controls, to the extent they deemed necessary in establishing the
scope of their examination of the Company's consolidated financial statements as
of December 31, 1996, did not disclose any weaknesses in internal controls that
they considered to be material weaknesses.
(g) You shall have received on the Closing Date and on any later
date on which Option Shares are to be purchased, as the case may be, a
certificate of the Company, dated the Closing Date or such later date on which
Option Shares are to be purchased, as the case may be, signed by the Chief
Executive Officer and Chief Financial Officer of the Company, to the effect
that, and you shall be satisfied that:
(i) The representations and warranties of the Company in this
Agreement are true and correct, as if made on and as of the Closing
Date or any later date on which Option Shares are to be purchased, as
the case may be, and the Company has complied with all the agreements
and satisfied all the conditions on its part to be performed or
satisfied at or prior to the Closing Date or any later date on which
Option Shares are to be purchased, as the case may be;
(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or threatened under the
Act;
(iii) When the Registration Statement became effective and at
all times subsequent thereto up to the delivery of such certificate,
the Registration Statement and the Prospectus, and any amendments or
supplements thereto, contained all material information required to
be included therein by the Act and the Rules and Regulations and in
all material respects conformed to the requirements of the Act and
the Rules and Regulations, the Registration Statement, and any
amendment or supplement thereto, did not and does not include any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, the Prospectus, and any amendment or
supplement thereto, did not and does not include any untrue statement
of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which
they were made, not misleading, and, since the effective date of the
Registration Statement, there has occurred no event required to be
set forth in an amended or supplemented Prospectus which has not been
so set forth; and
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus,
there has not been (a) any material adverse change in the condition
(financial or otherwise), earnings, operations, business or business
<PAGE>
-28-
prospects of the Company and its subsidiaries considered as one
enterprise, (b) any transaction that is material to the Company and
its subsidiaries considered as one enterprise, except transactions
entered into in the ordinary course of business, (c) any obligation,
direct or contingent, that is material to the Company and its
subsidiaries considered as one enterprise, incurred by the Company or
its subsidiaries, except obligations incurred in the ordinary course
of business, (d) any change in the capital stock or outstanding
indebtedness of the Company or any of its subsidiaries that is
material to the Company and its subsidiaries considered as one
enterprise, (e) any dividend or distribution of any kind declared,
paid or made on the capital stock of the Company or any of its
subsidiaries, or (f) any loss or damage (whether or not insured) to
the property of the Company or any of its subsidiaries which has been
sustained or will have been sustained which has a material adverse
effect on the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company and its
subsidiaries considered as one enterprise.
(h) You shall be satisfied that, and you shall have received a
certificate, dated the Closing Date, or any later date on which Option Shares
are to be purchased, as the case may be, from the Attorneys for each Selling
Stockholder to the effect that, as of the Closing Date, or any later date on
which Option Shares are to be purchased, as the case may be, they have not been
informed that:
(i) The representations and warranties made by such Selling
Stockholder herein are not true or correct in any material respect on
the Closing Date or on any later date on which Option Shares are to
be purchased, as the case may be; or
(ii) Such Selling Stockholder has not complied with any
obligation or satisfied any condition which is required to be
performed or satisfied on the part of such Selling Stockholder at or
prior to the Closing Date or any later date on which Option Shares
are to be purchased, as the case may be.
(i) The Company shall have obtained and delivered to you an
agreement from each officer and director of the Company, each Selling
Stockholder and each beneficial owner of ________ or more shares of Common Stock
in writing prior to the date hereof that such person will not, during the Lock-
up Period, effect the Disposition of any Securities now owned or hereafter
acquired directly by such person or with respect to which such person has or
hereafter acquires the power of disposition, otherwise than (i) as a bona fide
gift or gifts, provided the donee or donees thereof agree in writing to be bound
by this restriction, (ii) as a distribution to partners or shareholders of such
person, provided that the distributees thereof agree in writing to be bound by
the terms of this restriction, or (iii) with the prior written consent of
Robertson, Stephens & Company LLC. The foregoing restriction shall have been
expressly agreed to preclude the holder of the Securities from engaging in any
hedging or other transaction which is designed to or reasonably expected to lead
to or result in a Disposition of Securities during the Lock-up Period, even if
such Securities would be disposed of by someone other than the such holder. Such
prohibited hedging or other transactions would including, without limitation,
any short sale (whether or not against the box) or any purchase, sale or grant
of any right (including, without limitation, any put or call option) with
respect to any Securities or with respect to any security
<PAGE>
-29-
(other than a broad-based market basket or index) that includes, relates to or
derives any significant part of its value from Securities. Furthermore, such
person will have also agreed and consented to the entry of stop transfer
instructions with the Company's transfer agent against the transfer of the
Securities held by such person except in compliance with this restriction.
(j) The Company and the Selling Stockholders shall have furnished
to you such further certificates and documents as you shall reasonably request
(including certificates of officers of the Company, the Selling Stockholders or
officers of the Selling Stockholders (when the Selling Stockholder is not a
natural person) as to the accuracy of the representations and warranties of the
Company and the Selling Stockholders herein, as to the performance by the
Company and the Selling Stockholders of their respective obligations hereunder
and as to the other conditions concurrent and precedent to the obligations of
the Underwriters hereunder.
All such opinions, certificates, letters and documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
to Underwriters' Counsel. The Company and the Selling Stockholders will furnish
you with such number of conformed copies of such opinions, certificates, letters
and documents as you shall reasonably request.
8. Option Shares.
-------------
(a) On the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein set forth,
certain of the Selling Stockholders hereby grants to the several Underwriters,
for the purpose of covering over-allotments in connection with the distribution
and sale of the Firm Shares only, a nontransferable option to purchase up to an
aggregate of ________ Option Shares at the purchase price per share for the Firm
Shares set forth in Section 4 hereof. Such option may be exercised by the
Representatives on behalf of the several Underwriters on one (1) or more
occasions in whole or in part during the period of thirty (30) days after the
date on which the Firm Shares are initially offered to the public, by giving
written notice to the Attorneys. The number of Option Shares to be purchased by
each Underwriter upon the exercise of such option shall be the same proportion
of the total number of Option Shares to be purchased by the several Underwriters
pursuant to the exercise of such option as the number of Firm Shares purchased
by such Underwriter (set forth in Schedule A hereto) bears to the total number
of Firm Shares purchased by the several Underwriters (set forth in Schedule A
hereto), adjusted by the Representatives in such manner as to avoid fractional
shares.
Delivery of definitive certificates for the Option Shares to be
purchased by the several Underwriters pursuant to the exercise of the option
granted by this Section 8 shall be made against payment of the purchase price
therefor by the several Underwriters by certified or official bank check or
checks drawn in next-day funds, payable to the order of the Attorneys (and the
Attorneys agree not to deposit any such check in the bank on which it is drawn,
and not to take any other action with the purpose or effect of receiving
immediately available funds, until the business day following the date of its
delivery to the Attorneys). In the event of any breach of the foregoing, the
Selling Stockholders who propose to sell the Option Shares shall reimburse the
Underwriters for the interest lost and any other expenses borne by them by
reason of such breach. Such delivery and payment shall take place at the offices
of Testa, Hurwitz & Thibeault, LLP, High Street Tower,
<PAGE>
-30-
125 High Street, Boston, MA 02110 or at such other place as may be agreed upon
among the Representatives and the Attorneys (i) on the Closing Date, if written
notice of the exercise of such option is received by the Attorneys at least two
(2) full business days prior to the Closing Date, or (ii) on a date which shall
not be later than the third (3rd) full business day following the date the
Attorneys receive written notice of the exercise of such option, if such notice
is received by the Attorneys less than two (2) full business days prior to the
Closing Date.
The certificates for the Option Shares to be so delivered will be
made available to you at such office or such other location including, without
limitation, in New York City, as you may reasonably request for checking at
least one (1) full business day prior to the date of payment and delivery and
will be in such names and denominations as you may request, such request to be
made at least two (2) full business days prior to such date of payment and
delivery. If the Representatives so elect, delivery of the Option Shares may be
made by credit through full fast transfer to the accounts at The Depository
Trust Company designated by the Representatives.
It is understood that you, individually, and not as the
Representatives of the several Underwriters, may (but shall not be obligated to)
make payment of the purchase price on behalf of any Underwriter or Underwriters
whose check or checks shall not have been received by you prior to the date of
payment and delivery for the Option Shares to be purchased by such Underwriter
or Underwriters. Any such payment by you shall not relieve any such Underwriter
or Underwriters of any of its or their obligations hereunder.
(b) Upon exercise of any option provided for in Section 8(a)
hereof, the obligations of the several Underwriters to purchase such Option
Shares will be subject (as of the date hereof and as of the date of payment and
delivery for such Option Shares) to the accuracy of and compliance with the
representations, warranties and agreements of the Company and the Selling
Stockholders selling Option Shares herein, to the accuracy of the statements of
the Company, the Selling Stockholders selling Option Shares and officers of the
Company made pursuant to the provisions hereof, to the performance by the
Company and the Selling Stockholders selling Option Shares of their respective
obligations hereunder, to the conditions set forth in Section 7 hereof, and to
the condition that all proceedings taken at or prior to the payment date in
connection with the sale and transfer of such Option Shares shall be
satisfactory in form and substance to you and to Underwriters' Counsel, and you
shall have been furnished with all such documents, certificates and opinions as
you may request in order to evidence the accuracy and completeness of any of the
representations, warranties or statements, the performance of any of the
covenants or agreements of the Company and the Selling Stockholders selling
Option Shares or the satisfaction of any of the conditions herein contained.
9. Indemnification and Contribution.
--------------------------------
(a) The Company agrees to indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject (including, without
limitation, in its capacity as an Underwriter or as a "qualified independent
underwriter" within the meaning of Schedule E of the Bylaws of the NASD), under
the Act, the Securities Exchange Act of 1934 (the "Exchange Act") or otherwise,
specifically
<PAGE>
-31-
including, but not limited to, losses, claims, damages or liabilities (or
actions in respect thereof) arising out of or based upon (i) any breach of any
representation, warranty, agreement or covenant of the Company herein contained,
(ii) any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement or any amendment or supplement thereto,
or the omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading, or
(iii) any untrue statement or alleged untrue statement of any material fact
contained in any Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, and agrees to reimburse each Underwriter for any legal or other
expenses reasonably incurred by it in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that the
-------- -------
Company 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
the Registration Statement, such Preliminary Prospectus or the Prospectus, or
any such amendment or supplement thereto, in reliance upon, and in conformity
with, written information relating to any Underwriter furnished to the Company
by such Underwriter, directly or through you, specifically for use in the
preparation thereof and, provided further, that the indemnity agreement provided
-------- -------
in this Section 9(a) with respect to any Preliminary Prospectus shall not inure
to the benefit of any Underwriter from whom the person asserting any losses,
claims, damages, liabilities or actions based upon any untrue statement or
alleged untrue statement of material fact or omission or alleged omission to
state therein a material fact purchased Shares, if a copy of the Prospectus in
which such untrue statement or alleged untrue statement or omission or alleged
omission was corrected had not been sent or given to such person within the time
required by the Act and the Rules and Regulations, unless such failure is the
result of noncompliance by the Company with Section 5(d) hereof.
The indemnity agreement in this Section 9(a) shall extend upon the
same terms and conditions to, and shall inure to the benefit of, each person, if
any, who controls any Underwriter within the meaning of the Act or the Exchange
Act. This indemnity agreement shall be in addition to any liabilities which the
Company may otherwise have.
(b) Each Selling Stockholder, severally and not jointly, agrees to
indemnify and hold harmless each Underwriter against any losses, claims, damages
or liabilities, joint or several, to which such Underwriter may become subject
(including, without limitation, in its capacity as an Underwriter or as a
"qualified independent underwriter" within the meaning of Schedule E or the
Bylaws of the NASD) under the Act, the Exchange Act or otherwise, specifically
including, but not limited to, losses, claims, damages or liabilities (or
actions in respect thereof) arising out of or based upon (i) any breach of any
representation, warranty, agreement or covenant of such Selling Stockholder
herein contained, (ii) any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement or any amendment or
supplement thereto, or the omission or alleged omission to state therein a
<PAGE>
-32-
material fact required to be stated therein or necessary to make the statements
therein not misleading, or (iii) any untrue statement or alleged untrue
statement of any material fact contained in any Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto, or the omission or alleged
omission to state therein a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, in the case of subparagraphs (ii) and (iii) of this Section 9(b) to
the extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company or such Underwriter
by such Selling Shareholder, directly or through such Selling Stockholder's
representatives, specifically for use in the preparation thereof, and agrees to
reimburse each Underwriter for any legal or other expenses reasonably incurred
by it in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the indemnity agreement
-------- -------
provided in this Section 9(b) with respect to any Preliminary Prospectus shall
not inure to the benefit of any Underwriter from whom the person asserting any
losses, claims, damages, liabilities or actions based upon any untrue statement
or alleged untrue statement of a material fact or omission or alleged omission
to state therein a material fact purchased Shares, if a copy of the Prospectus
in which such untrue statement or alleged untrue statement or omission or
alleged omission was corrected had not been sent or given to such person within
the time required by the Act and the Rules and Regulations, unless such failure
is the result of noncompliance by the Company with Section 5(d) hereof.
The indemnity agreement in this Section 9(b) shall extend upon the
same terms and conditions to, and shall inure to the benefit of, each person, if
any, who controls any Underwriter within the meaning of the Act or the Exchange
Act. This indemnity agreement shall be in addition to any liabilities which such
Selling Stockholder may otherwise have.
(c) Each Underwriter, severally and not jointly, agrees to
indemnify and hold harmless the Company and each Selling Stockholder against any
losses, claims, damages or liabilities, joint or several, to which the Company
or such Selling Stockholder may become subject under the Act or otherwise,
specifically including, but not limited to, losses, claims, damages or
liabilities (or actions in respect thereof) arising out of or based upon (i) any
breach of any representation, warranty, agreement or covenant of such
Underwriter herein contained, (ii) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement or any
amendment or supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or (iii) any untrue statement or alleged
untrue statement of any material fact contained in any Preliminary Prospectus or
the Prospectus or any amendment or supplement thereto, or the omission or
alleged omission to state therein a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, in the case of subparagraphs (ii) and (iii) of this
Section 9(c) to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company by such
Underwriter, directly or through you, specifically for use in the preparation
thereof, and agrees to reimburse the Company and each such Selling Stockholder
for any legal or other expenses reasonably incurred by the Company and each such
Selling Stockholder in connection with investigating or defending any such loss,
claim, damage, liability or action.
<PAGE>
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The indemnity agreement in this Section 9(c) shall extend upon the
same terms and conditions to, and shall inure to the benefit of, each officer of
the Company who signed the Registration Statement and each director of the
Company, each Selling Stockholder and each person, if any, who controls the
Company or any Selling Stockholder within the meaning of the Act or the Exchange
Act. This indemnity agreement shall be in addition to any liabilities which each
Underwriter may otherwise have.
(d) Promptly after receipt by an indemnified party under this
Section 9 of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against any indemnifying
party under this Section 9, notify the indemnifying party in writing of the
commencement thereof but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
otherwise than under this Section 9. In case any such action is brought against
any indemnified party, and it notified the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it shall elect by written notice delivered to
the indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party; provided, however, that if the
-------- -------
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such indemnified
party of the indemnifying party's election so to assume the defense of such
action and approval by the indemnified party of counsel, the indemnifying party
will not be liable to such indemnified party under this Section 9 for any legal
or other expenses subsequently incurred by such indemnified party in connection
with the defense thereof unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the next preceding sentence
(it being understood, however, that the indemnifying party shall not be liable
for the expenses of more than one separate counsel (together with appropriate
local counsel) approved by the indemnifying party representing all the
indemnified parties under Section 9(a), 9(b) or 9(c) hereof who are parties to
such action), (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of commencement of the action or (iii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party. In no event shall any
indemnifying party be liable in respect of any amounts paid in settlement of any
action unless the indemnifying party shall have approved the terms of such
settlement; provided that such consent shall not be unreasonably withheld. No
--------
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which any indemnified party is or could have been a party and indemnification
could have been sought hereunder by such indemnified party, unless such
settlement includes an unconditional release of such indemnified party from all
liability on all claims that are the subject matter of such proceeding.
<PAGE>
-34-
(e) In order to provide for just and equitable contribution in
any action in which a claim for indemnification is made pursuant to this Section
9 but it is judicially determined (by the entry of a final judgment or decree by
a court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 9 provides for
indemnification in such case, all the parties hereto shall contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(after contribution from others) in such proportion so that the Underwriters
severally and not jointly are responsible pro rata for the portion represented
by the percentage that the underwriting discount bears to the initial public
offering price, and the Company and the Selling Stockholders are responsible for
the remaining portion, provided, however, that (i) no Underwriter shall be
-------- -------
required to contribute any amount in excess of the amount by which the
underwriting discount applicable to the Shares purchased by such Underwriter
exceeds the amount of damages which such Underwriter has otherwise required to
pay and (ii) no person guilty of a fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who is not guilty of such fraudulent misrepresentation. The contribution
agreement in this Section 9(e) shall extend upon the same terms and conditions
to, and shall inure to the benefit of, each person, if any, who controls any
Underwriter, the Company or any Selling Stockholder within the meaning of the
Act or the Exchange Act and each officer of the Company who signed the
Registration Statement and each director of the Company.
(f) The liability of each Selling Stockholder under the
representations, warranties and agreements contained herein and under the
indemnity agreements contained in the provisions of this Section 9 shall be
limited to an amount equal to the initial public offering price of the Selling
Stockholder Shares sold by such Selling Stockholder to the Underwriters minus
the amount of the underwriting discount paid thereon to the Underwriters by such
Selling Stockholder. The Company and such Selling Stockholders may agree, as
among themselves and without limiting the rights of the Underwriters under this
Agreement, as to the respective amounts of such liability for which they each
shall be responsible.
(g) The parties to this Agreement hereby acknowledge that they are
sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof including, without limitation, the
provisions of this Section 9, and are fully informed regarding said provisions.
They further acknowledge that the provisions of this Section 9 fairly allocate
the risks in light of the ability of the parties to investigate the Company and
its business in order to assure that adequate disclosure is made in the
Registration Statement and Prospectus as required by the Act and the Exchange
Act.
10. Representations, Warranties, Covenants and Agreements to Survive
----------------------------------------------------------------
Delivery. All representations, warranties, covenants and agreements of the
- ---------
Company, the Selling Stockholders and the Underwriters herein or in certificates
delivered pursuant hereto, and the indemnity and contribution agreements
contained in Section 9 hereof shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any Underwriter
or any person controlling any Underwriter within the meaning of the Act or the
Exchange Act, or by or on behalf of the Company or any Selling Stockholder, or
any of their officers, directors or controlling persons
<PAGE>
-35-
within the meaning of the Act or the Exchange Act, and shall survive the
delivery of the Shares to the several Underwriters hereunder or termination of
this Agreement.
11. Substitution of Underwriters. If any Underwriter or Underwriters
----------------------------
shall fail to take up and pay for the number of Firm Shares agreed by such
Underwriter or Underwriters to be purchased hereunder upon tender of such Firm
Shares in accordance with the terms hereof, and if the aggregate number of Firm
Shares which such defaulting Underwriter or Underwriters so agreed but failed to
purchase does not exceed 10% of the Firm Shares, the remaining Underwriters
shall be obligated, severally in proportion to their respective commitments
hereunder, to take up and pay for the Firm Shares of such defaulting Underwriter
or Underwriters.
If any Underwriter or Underwriters so defaults and the aggregate
number of Firm Shares which such defaulting Underwriter or Underwriters agreed
but failed to take up and pay for exceeds 10% of the Firm Shares, the remaining
Underwriters shall have the right, but shall not be obligated, to take up and
pay for (in such proportions as may be agreed upon among them) the Firm Shares
which the defaulting Underwriter or Underwriters so agreed but failed to
purchase. If such remaining Underwriters do not, at the Closing Date, take up
and pay for the Firm Shares which the defaulting Underwriter or Underwriters so
agreed but failed to purchase, the Closing Date shall be postponed for twenty-
four (24) hours to allow the several Underwriters the privilege of substituting
within twenty-four (24) hours (including non-business hours) another underwriter
or underwriters (which may include any nondefaulting Underwriter) satisfactory
to the Company. If no such underwriter or underwriters shall have been
substituted as aforesaid by such postponed Closing Date, the Closing Date may,
at the option of the Company, be postponed for a further twenty-four (24) hours,
if necessary, to allow the Company the privilege of finding another underwriter
or underwriters, satisfactory to you, to purchase the Firm Shares which the
defaulting Underwriter or Underwriters so agreed but failed to purchase. If it
shall be arranged for the remaining Underwriters or substituted underwriter or
underwriters to take up the Firm Shares of the defaulting Underwriter or
Underwriters as provided in this Section 11, (i) the Company shall have the
right to postpone the time of delivery for a period of not more than seven (7)
full business days, in order to effect whatever changes may thereby be made
necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees promptly to file any
amendments to the Registration Statement, supplements to the Prospectus or other
such documents which may thereby be made necessary, and (ii) the respective
number of Firm Shares to be purchased by the remaining Underwriters and
substituted underwriter or underwriters shall be taken as the basis of their
underwriting obligation. If the remaining Underwriters shall not take up and pay
for all such Firm Shares so agreed to be purchased by the defaulting Underwriter
or Underwriters or substitute another underwriter or underwriters as aforesaid
and the Company shall not find or shall not elect to seek another underwriter or
underwriters for such Firm Shares as aforesaid, then this Agreement shall
terminate.
In the event of any termination of this Agreement pursuant to the preceding
paragraph of this Section 11, neither the Company nor any Selling Stockholder
shall be liable to any Underwriter (except as provided in Sections 6 and 9
hereof) nor shall any Underwriter (other than an Underwriter who shall have
failed, otherwise than for some reason permitted under this Agreement, to
purchase the number of Firm Shares agreed by such Underwriter to be purchased
<PAGE>
-36-
hereunder, which Underwriter shall remain liable to the Company, the Selling
Stockholders and the other Underwriters for damages, if any, resulting from such
default) be liable to the Company or any Selling Stockholder (except to the
extent provided in Sections 6 and 9 hereof).
The term "Underwriter" in this Agreement shall include any
person substituted for an Underwriter under this
Section 11.
12. Effective Date of this Agreement and Termination.
------------------------------------------------
(a) This Agreement shall become effective at the earlier of (i) 6:30
A.M., San Francisco time, on the first full business day following the effective
date of the Registration Statement, or (ii) the time of the initial public
offering of any of the Shares by the Underwriters after the Registration
Statement becomes effective. The time of the initial public offering shall mean
the time of the release by you, for publication, of the first newspaper
advertisement relating to the Shares, or the time at which the Shares are first
generally offered by the Underwriters to the public by letter, telephone,
telegram or telecopy, whichever shall first occur. By giving notice as set forth
in Section 13 before the time this Agreement becomes effective, you, as
Representatives of the several Underwriters, or the Company, may prevent this
Agreement from becoming effective without liability of any party to any other
party, except as provided in Sections 5(j), 6 and 9 hereof.
(b) You, as Representatives of the several Underwriters, shall have
the right to terminate this Agreement by giving notice as hereinafter specified
at any time on or prior to the Closing Date or on or prior to any later date on
which Option Shares are to be purchased, as the case may be, (i) if the Company
or any Selling Stockholder shall have failed, refused or been unable to perform
any agreement on its part to be performed, or because any other condition of the
Underwriters' obligations hereunder required to be fulfilled is not fulfilled,
including, without limitation, any change in the condition (financial or
otherwise), earnings, operations, business or business prospects of the Company
and its subsidiaries considered as one enterprise from that set forth in the
Registration Statement or Prospectus, which, in your sole judgment, is material
and adverse, or (ii) if additional material governmental restrictions, not in
force and effect on the date hereof, shall have been imposed upon trading in
securities generally or minimum or maximum prices shall have been generally
established on the New York Stock Exchange or on the American Stock Exchange or
in the over the counter market by the NASD, or trading in securities generally
shall have been suspended on either such exchange or in the over the counter
market by the NASD, or if a banking moratorium shall have been declared by
federal, New York or California authorities, or (iii) if the Company shall have
sustained a loss by strike, fire, flood, earthquake, accident or other calamity
of such character as to interfere materially with the conduct of the business
and operations of the Company regardless of whether or not such loss shall have
been insured, or (iv) if there shall have been a material adverse change in the
general political or economic conditions or financial markets as in your
reasonable judgment makes it inadvisable or impracticable to proceed with the
offering, sale and delivery of the Shares, or (v) if there shall have been an
outbreak or escalation of hostilities or of any other insurrection or armed
conflict or the declaration by the United States of a national emergency which,
in the reasonable opinion of the Representatives, makes it impracticable or
inadvisable to proceed with the public offering of the Shares as contemplated by
the Prospectus. In the event of termination pursuant to subparagraph (i) above,
the
<PAGE>
-37-
Company shall remain obligated to pay costs and expenses pursuant to Sections
5(j), 6 and 9 hereof. Any termination pursuant to any of subparagraphs (ii)
through (v) above shall be without liability of any party to any other party
except as provided in Sections 6 and 9 hereof.
If you elect to prevent this Agreement from becoming effective or to
terminate this Agreement as provided in this Section 12, you shall promptly
notify the Company by telephone, telecopy or telegram, in each case confirmed by
letter. If the Company shall elect to prevent this Agreement from becoming
effective, the Company shall promptly notify you by telephone, telecopy or
telegram, in each case, confirmed by letter.
13. Notices. All notices or communications hereunder, except as
-------
herein otherwise specifically provided, shall be in writing and if sent to you
shall be mailed, delivered, telegraphed (and confirmed by letter) or telecopied
(and confirmed by letter) to you c/o Robertson, Stephens & Company LLC, 555
California Street, Suite 2600, San Francisco, California 94104, telecopier
number (415) 781-0278, Attention: General Counsel; if sent to the Company, such
notice shall be mailed, delivered, telegraphed (and confirmed by letter) or
telecopied (and confirmed by letter) to 45 Danbury Road, Wilton, Connecticut
06897, telecopier number (203) 762-9677, Attention: Constance Galley, Chief
Executive Officer; if sent to one or more of the Selling Stockholders, such
notice shall be sent mailed, delivered, telegraphed (and confirmed by letter) or
telecopied (and confirmed by letter) to __________ and _________, as
Attorneys-in-Fact for the Selling Stockholders, at ______________________,
telecopier number (___) ________.
14. Parties. This Agreement shall inure to the benefit of and be binding
-------
upon the several Underwriters and the Company and the Selling Stockholders and
their respective executors, administrators, successors and assigns. Nothing
expressed or mentioned in this Agreement is intended or shall be construed to
give any person or entity, other than the parties hereto and their respective
executors, administrators, successors and assigns, and the controlling persons
within the meaning of the Act or the Exchange Act, officers and directors
referred to in Section 9 hereof, any legal or equitable right, remedy or claim
in respect of this Agreement or any provisions herein contained, this Agreement
and all conditions and provisions hereof being intended to be and being for the
sole and exclusive benefit of the parties hereto and their respective executors,
administrators, successors and assigns and said controlling persons and said
officers and directors, and for the benefit of no other person or entity. No
purchaser of any of the Shares from any Underwriter shall be construed a
successor or assign by reason merely of such purchase.
In all dealings with the Company and the Selling Stockholders under
this Agreement, you shall act on behalf of each of the several Underwriters, and
the Company and the Selling Stockholders shall be entitled to act and rely upon
any statement, request, notice or agreement made or given by you jointly or by
Robertson, Stephens & Company LLC on behalf of you.
15. Applicable Law. This Agreement shall be governed by, and construed in
--------------
accordance with, the laws of the State of California.
<PAGE>
-38-
16. Counterparts. This Agreement may be signed in several counterparts,
------------
each of which will constitute an original.
If the foregoing correctly sets forth the understanding among the
Company, the Selling Stockholders and the several Underwriters, please so
indicate in the space provided below for that purpose, whereupon this letter
shall constitute a binding agreement among the Company, the Selling Stockholders
and the several Underwriters.
<PAGE>
-39-
Very truly yours,
TSI INTERNATIONAL SOFTWARE LTD.
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
SELLING STOCKHOLDERS
By:
---------------------------------------
Attorney-in-Fact for the Selling
Stockholders named in Schedule B hereto
By:
---------------------------------------
Attorney-in-Fact for the Selling
Stockholders named in Schedule B hereto
Accepted as of the date first above written:
ROBERTSON, STEPHENS & COMPANY LLC
SOUNDVIEW FINANCIAL GROUP, INC.
WESSELS, ARNOLD & HENDERSON, L.L.C.
On their behalf and on behalf of each of the
several Underwriters named in Schedule A hereto.
By: ROBERTSON, STEPHENS & COMPANY LLC
By: ROBERTSON, STEPHENS & COMPANY GROUP, L.L.C.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Number of
Firm Shares
Underwriters To Be Purchased
- -------------------------------------------------------------------------------------------------
<S> <C>
Robertson, Stephens & Company LLC...............................
SoundView Financial Group, Inc. ...............................
Wessels, Arnold & Henderson, L.L.C..............................
[NAMES OF OTHER UNDERWRITERS]
------------
Total......................................................
============
</TABLE>
<PAGE>
SCHEDULE B
<TABLE>
<CAPTION>
Number of Firm Shares To Be
Company Sold
- -----------------------------------------------------------------------------------------
<S> <C>
----------
Total
==========
</TABLE>
<TABLE>
<CAPTION>
Number of
Selling Stockholder
Name of Selling Stockholder Shares to be Sold
- -----------------------------------------------------------------------------------------
<S> <C>
----------
Total
==========
</TABLE>
<PAGE>
EXHIBIT 3.01
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
TSI INTERNATIONAL SOFTWARE LTD.
Constance Galley and Ira Gerard, President and Secretary, respectively,
of TSI International Software Ltd., a corporation organized and existing under
the General Corporation Law of the State of Delaware, in accordance with the
provisions of Section 242 and 245 thereof, DO HEREBY CERTIFY:
FIRST: The name of the corporation is TSI International Software Ltd.
TSI International Software Ltd. was originally incorporated under the same name,
and the original Certificate of Incorporation of the Corporation was filed with
the Secretary of State of the State of Delaware on September 9, 1993.
SECOND: That this amendment and restatement of the Corporation's
Certificate of Incorporation set forth in the following resolution has been
approved by the Corporation's Board of Directors and stockholders and was duly
adopted in accordance with the provisions of Section 242 and 245 of the General
Corporation Law of the State of Delaware, and written notice of the adoption of
this Amended and Restated Certificate of Incorporation has been given as
provided by Section 228 of the General Corporation Law of the State of Delaware
to every stockholder entitled to such notice.
NOW, THEREFORE, BE IT RESOLVED, that the Certificate of Incorporation of
this Corporation be, and it hereby is, amended and restated to read in its
entirety as follows:
ARTICLE I
The name of the corporation is TSI International Software Ltd.
ARTICLE II
The address of the registered office of the corporation in the State of
Delaware is 1013 Centre Road, City of Wilmington, County of New Castle. The name
of its registered agent at that address is The Prentice-Hall Corporation System,
Inc.
ARTICLE III
The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
<PAGE>
ARTICLE IV
The designation of each class of shares, the authorized number of shares
of each such class, the par value of each share thereof, and the terms,
limitations, relative rights and preferences of such classes of shares are as
follows:
I. The capital stock of the Corporation shall be 5,526,332 shares,
each with a par value of $0.01 per share, of which 3,888,166 shares shall be
denominated Common Stock and 1,638,166 shares shall be denominated Preferred
Stock, of which 297,405 shares shall be designated as Series A Convertible
Preferred Stock ("Series A Stock"), 115,761 shares shall be designated as Series
B Convertible Preferred Stock ("Series B Stock"), 725,000 shares shall be
designated as Series C Convertible Preferred Stock ("Series C Stock"), 364,469
shares shall be designated as Series D Convertible Preferred Stock ("Series D
Stock"), 50,000 shares shall be designated as Series E Convertible Preferred
Stock ("Series E Stock") and 85,531 shares shall remain undesignated. The Board
of Directors of the Corporation is authorized to establish one or more series of
such undesignated Preferred Stock from time to time and to fix and determine the
terms, limitations and relative rights and preferences of each such series.
II. The terms, limitations and relative rights and preferences of
the Common Stock are as follows:
1. Except as otherwise provided herein, the voting power
for the election of directors and for all other purposes shall be vested in the
holders of the Common Stock, who shall be entitled to one vote for each share of
stock held by them of record, and in the holders of the Preferred Stock.
2. The holders of Common Stock shall be entitled to such
dividends as the Board of Directors of the Corporation may from time to time
declare to the extent permitted by law or contract.
III. The terms, limitations and relative rights and preferences of
the Preferred Stock are as follows:
1. Dividends. (a) From and after the date of issuance
---------
through December 31, 1997, the holders of Series A Stock, Series B Stock, Series
C Stock and Series D Stock shall be entitled to receive dividends, when, as and
if declared by not less than two-thirds of the members then constituting the
entire Board of Directors of the Corporation, out of funds legally available
therefor, of $1.0712 per annum for each share of Series A Stock and Series B
Stock, and of $0.48 per annum for each share of Series C Stock and Series D
Stock. No dividend pursuant to this Subparagraph 1(a) of this Certificate may
be declared on Series A Stock, Series B Stock, Series C Stock or Series D Stock
unless the Board shall declare a full such dividend on the Series A Stock,
Series B Stock, Series C Stock and Series D Stock. Such dividends, if so
declared, shall be payable semi-annually on January 1 and July 1 of each year
and shall be non-cumulative.
(b) From and after January 1, 1998, the holders of
Series A Stock, Series B Stock, Series C Stock and Series D Stock shall be
entitled to dividends of $ 1.6068 per annum
2
<PAGE>
for each share of Series A Stock and Series B Stock, and of $ 0.72 per annum for
each share of Series C Stock and Series D Stock, payable semiannually on January
1 and July 1 of each year, commencing July 1, 1998. Such dividends shall be
cumulative and shall accrue from and after January 1, 1998. The foregoing
dividends shall be declared by the Board of Directors of the Corporation and
paid to the holders of Series A Stock, Series B Stock, Series C Stock and Series
D Stock to the extent permitted by law. Any such dividend payments may be made,
at the option of the Corporation, in cash or by the issuance by the Corporation
of additional fully paid and nonassessable shares of Series A Stock at the rate
of .12 of a share for each $1.6068 of such accrued dividends on Series A Stock,
Series B Stock at the rate of .12 of a share for each $1.6068 of such accrued
dividends on Series B Stock, Series C Stock at the rate of .12 of a share for
each $0.72 of such accrued dividends on Series C Stock and Series D Stock at the
rate of .12 of a share for each $0.72 of such accrued dividends on Series D
Stock; provided that the dividend under this Section payable on a given date
with respect to the: (i) Series D Stock may be paid in shares of Series D Stock
only if all the holders of Series A Stock receive at least the same percentage
of their dividend pursuant to Subparagraph 1(b) of the Certificate on such date
in shares of Series A Stock; (ii) Series C Stock may be paid in shares of Series
C Stock only if all holders of Series A Stock and Series B Stock receive their
dividend pursuant to Subparagraph 1(b) of this Certificate on such date
exclusively in shares of Series A Stock and Series B Stock, respectively; and
(iii) Series B Stock may be paid in shares of Series B Stock only if all the
holders of Series A Stock receive their dividend pursuant to Subparagraph 1(b)
of this Certificate on such date exclusively in shares of Series A Stock. The
issuance of such additional shares of Series A Stock, Series B Stock, Series C
Stock and/or Series D Stock, as the case may be, shall constitute full payment
of such dividends.
(c) The holders of the Series E Stock shall be
entitled to dividends when, as and if declared by the Board of Directors to the
extent permitted by law. Such dividends will not be mandatory or cumulative.
2. Liquidation. (a) In the event of a voluntary or
-----------
involuntary liquidation, dissolution or winding up of the Corporation or the
sale, lease, conveyance or other disposition of all or substantially all of its
property and business, the holders of Series C Stock shall be entitled to
receive $6.00 per share (subject to proportionate adjustments in the event of
stock splits or other similar events), plus an amount equal to all declared
and/or accrued and unpaid dividends, before any distribution or payment is made
to the holders of Series E Stock, Series D Stock, Series B Stock, Series A
Stock or Common Stock. If, upon any such sale, liquidation, dissolution or
winding up of the Corporation, the assets distributable among the holders of
all Series C Stock shall be insufficient to permit the payment in full to such
holders of the amount herein above and in this Certificate provided, then the
entire assets of the Corporation shall be applied ratably to the payment of
such amount to the holders of Series C Stock then outstanding pari passu on an
---- -----
as-if converted to Common Stock basis until the Series C Stockholders have
received their full liquidation preference under this Section 2.
(b) In the event of a voluntary or involuntary
liquidation, dissolution or winding up of the Corporation or the sale, lease,
conveyance or other disposition of all or substantially all of its property and
business, the holders of Series B Stock shall be entitled, subject to the
rights of the Series C Stock as set forth above, to receive $13.39 per share
(subject to
3
<PAGE>
proportionate adjustments in the event of stock splits or other similar events),
plus an amount equal to all declared and/or accrued and unpaid dividends, before
any distribution or payment is made to the holders of Series E Stock, Series D
Stock, Series A Stock or Common Stock. If, upon any such sale, liquidation,
dissolution or winding up of the Corporation, and after the payment in full of
all amounts to which the holders of Series C Stock are entitled as provided
above, the assets distributable among the holders of all Series B Stock shall be
insufficient to permit the payment in full to such holders of the amount herein
above and in this Certificate provided, then the entire remaining assets of the
Corporation shall be applied ratably to the payment of such amount to the
holders of Series B Stock then outstanding pari passu on an as-if converted to
---- ----
Common Stock basis until the Series B Stockholders have received their full
liquidation preference under this Section 2.
(c) In the event of a voluntary or involuntary
liquidation, dissolution or winding up of the Corporation or the sale, lease,
conveyance or other disposition of all or substantially all of its property and
business, the holders of Series A Stock and Series D Stock shall be entitled,
subject to the rights of the Series C Stock and Series B Stock as set forth in
this Certificate, to receive $13.39 per share or $6.00 per share, respectively
(subject to proportionate adjustments in the event of stock splits or other
similar events), plus an amount equal to all declared and/or accrued and unpaid
dividends pari passu with the Series D Stock and Series A Stock, respectively,
---- -----
before any distribution or payment is made to the holders of Series E Stock,
Common Stock or any Junior Stock (as defined in paragraph 7 below). If, upon
any such sale, liquidation, dissolution or winding up of the Corporation, and
after the payment in full of all amounts to which the holders of Series C Stock
and Series B Stock are entitled as provided above, the assets distributable
among the holders of all Series D Stock and Series A Stock shall be insufficient
to permit the payment in full to such holders of the amount herein above and in
this Certificate provided, then the entire remaining assets of the Corporation
shall be applied ratably, based on the relative liquidation preferences of the
Series D Stock and Series A Stock, to the payment of such amount to the holders
of Series D Stock and Series A Stock then outstanding until the Series D
Stockholders and Series A Stockholders have received their full liquidation
preferences under this Section 2.
(d) In the event of a voluntary or involuntary
liquidation, dissolution or winding up of the Corporation or the sale, lease,
conveyance or other disposition of all or substantially all of its property and
business, the holders of Series E Stock shall be entitled, subject to the
rights of the Series D Stock, Series C Stock, Series B Stock and Series A Stock
as set forth in this Certificate, to receive $20.00 per share (subject to
proportionate adjustments in the event of stock splits or other similar
events), plus an amount equal to all declared and unpaid dividends, before any
distribution or payment is made to the holders of Common Stock or any Junior
Stock (as defined in paragraph 7 below). If upon any such sale, liquidation,
dissolution or winding up of the Corporation, and after the payment in full of
all amounts to which the holders of the Series D Stock, Series C Stock, Series
B Stock and Series A Stock are entitled above, the assets distributable among
the holders of all Series E Stock shall be insufficient to permit the payment
in full to such holders of the amount herein above and in this Certificate
provided, then the entire remaining assets of the Corporation shall be applied
ratably to the payment of such amount to the holders of Series E Stock then
outstanding pari passu on an as-if converted to Common Stock basis until the
Series E Stockholders have received their full liquidation preference.
4
<PAGE>
(e) In the event of a voluntary or involuntary
liquidation, dissolution or winding up of the Corporation or the sale, lease,
conveyance or other disposition of all or substantially all of its property and
business, and subject to the rights of the Series E Stock, Series D Stock,
Series C Stock, Series B Stock and Series A Stock as set forth above, after
payment of the foregoing liquidation preferences to the holders of the Series E
Stock, Series D Stock, Series C Stock, Series B Stock and Series A Stock, all
remaining assets of the Corporation shall be distributed ratably among the
holders of the Corporation's Common Stock.
(f) Neither the merger nor the consolidation of the
Corporation, nor the sale, lease or conveyance of all or part of its property
and business as an entirety, shall be deemed to be a liquidation, dissolution
or winding up of the Corporation within the meaning of this paragraph 2, unless
such sale, lease or conveyance shall be in connection with a plan of
liquidation, dissolution or winding up of the Corporation.
3. Redemption. (a) The shares of Series A Stock, Series B
----------
Stock, Series C Stock and Series D Stock at the time outstanding may be
redeemed, in whole only and not in part, and only if all of the shares of
Series A Stock, Series B Stock, Series C Stock and Series D Stock are redeemed
pursuant to Section 3 of this Certificate, by the Corporation at its option
expressed by a resolution adopted by its Board of Directors, at any time on and
after June 30, 1997, at a price equal to the sum of $13.39 per share of Series
A Stock and Series B Stock and $6.00 per share of Series C Stock and Series D
Stock (subject to proportionate adjustments in the event of stock splits or
other similar events), plus an amount equal to all declared and/or accrued and
unpaid dividends thereon to the date fixed for redemption (the "Redemption
Price").
(b) If, pursuant to subparagraph 3(a) above, the
Corporation shall redeem shares of Series A Stock, Series B Stock, Series C
Stock and Series D Stock, the Corporation shall give written notice of such
redemption to each holder of record of shares of Series A Stock, Series B
Stock, Series C Stock and Series D Stock to be redeemed not less than 30 nor
more than 60 days prior to the date fixed for redemption, by certified mail
enclosed in a postage paid envelope addressed to such holder at such holder's
address as the same shall appear on the books of the Corporation. Such notice
shall (i) state that the Corporation has elected to redeem such shares, (ii)
state the date fixed for redemption, (iii) state the Redemption Price, (iv)
state that the shares called for redemption are convertible until the close of
business on the second day preceding the date fixed for redemption and (v) call
upon such holder to surrender to the Corporation on or after said date at its
principal place of business designated in such notice, a certificate or
certificates representing the number of shares of Series A Stock, Series B
Stock, Series C Stock and Series D Stock to be redeemed in accordance with such
notice. On or after the date fixed in such notice for redemption, each holder
of shares of Series A Stock, Series B Stock, Series C Stock and Series D Stock
to be so redeemed shall present and surrender the certificate or certificates
for such shares to the Corporation at the place designated in said notice and
thereupon the Redemption Price of such shares shall be paid to, or to the order
of, the person whose name appears on such certificate or certificates as the
owner thereof. From and after the date fixed in any such notice as the date
for redemption, unless default shall be made by the Corporation in providing
for the payment of the Redemption Price pursuant to such notice, all rights of
the holders of the Series A Stock, Series B Stock, Series C Stock and Series D
Stock so redeemed, except the right to receive the Redemption Price (but
without interest thereon) shall cease and terminate; provided, however, that on
or before
5
<PAGE>
the date fixed for redemption in such notice, the Corporation shall deposit with
a bank or trust company having a capital stock and surplus of at least
$500,000,000 in trust to be applied to the redemption of the Series A Stock,
Series B Stock, Series C Stock and Series D Stock so called for redemption, an
amount sufficient to redeem the Series A Stock, Series B Stock, Series C Stock
and Series D Stock called for redemption. Any moneys so deposited which relate
to Series A Stock, Series B Stock, Series C Stock and Series D Stock called for
redemption which prior to redemption are converted into Common Stock as provided
herein shall be promptly repaid to the Corporation. Any moneys so deposited for
Series A Stock, Series B Stock, Series C Stock and Series D Stock which remain
unclaimed at the end of one year from the date of such deposit shall be repaid
to the Corporation, but the Corporation shall remain obligated to make payment
thereof to the holders of such Series A Stock, Series B Stock, Series C Stock
and Series D Stock entitled thereto (subject to any applicable escheat or
similar laws).
(c) Any shares of Series A Stock, Series B Stock,
Series C Stock and Series D Stock redeemed by the Corporation shall be retired
and shall not be reissued and the Corporation may, from time to time, take such
appropriate corporate action as may be necessary to reduce the number of
authorized shares of Series A Stock, Series B Stock, Series C Stock and Series
D Stock.
(d) The Series E Stock is not redeemable.
4. Conversion. (a) The holder of any share or shares of
----------
Series A Stock, Series B Stock, Series C, Series D Stock or Series E Stock
shall have the right, at such holder's option, to convert all or any portion of
such shares into one fully paid and nonassessable share of Common Stock for each
share of Series A Stock, Series B Stock, Series C Stock, Series D Stock or
Series E Stock or at the rate which results from the making of any adjustment
specified in subparagraph 4(g) hereof, if applicable (the number of shares of
Common Stock issuable at any time, giving effect to the latest prior adjustment
pursuant to subparagraph 4(g) hereof, if any and if applicable, in exchange for
one share of Series A Stock, Series B Stock, Series C Stock, Series D Stock or
Series E Stock being hereinafter called the "Conversion Rate"). To the extent
permitted by law, when shares of Series A Stock, Series B Stock, Series C Stock,
Series D Stock or Series E Stock are converted, all dividends declared or
accrued, as applicable, and unpaid on the stock so converted to the date of
conversion (whether or not currently payable) shall be immediately due and
payable in cash or in shares of Series A Stock at the rate of .12 of a share for
each $1.6068 of such dividend on Series A Stock, shares of Series B Stock at the
rate of .12 of a share for each $1.6068 of such dividend on Series B Stock,
shares of Series C Stock at the rate of .12 of a share for each $0.72 of such
dividend on Series C Stock and shares of Series D Stock at the rate of .12 of a
share for each $0.72 of such dividend on Series D Stock and shares of Series E
Stock at the rate determined in good faith by the Company's Board of Directors
and must accompany the shares of Common Stock issued upon such conversion.
(b) The Series A Stock, Series B Stock, Series C
Stock, Series D Stock or Series E Stock shall be convertible at the principal
office of the Corporation into fully paid and nonassessable shares of Common
Stock at the Conversion Rate. In case of the redemption, pursuant to
subparagraph 3(a) above, of any shares of Series A Stock, Series B Stock, Series
C Stock or Series D Stock, such right of conversion shall cease and terminate,
as to the shares to be
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redeemed, at the close of business on the second day preceding the date fixed
for such redemption, unless default shall be made in the payment of the
Redemption Price for the shares to be so redeemed.
(c) In order to convert shares of Series A Stock,
Series B Stock, Series C Stock, Series D Stock or Series E Stock into shares of
Common Stock pursuant to the right of conversion set forth in subparagraph 4(a)
above, the holder thereof shall surrender the certificate or certificates
representing such shares of Series A Stock, Series B Stock, Series C Stock,
Series D Stock or Series E Stock duly endorsed to the Corporation or in blank,
at the principal office of the Corporation and shall give written notice to the
Corporation that such holder elects to convert the same, stating in such notice
the name or names in which holder wishes the certificate or certificates
representing shares of Common Stock to be issued. The Corporation shall,
within five (5) business days, deliver at said office or other place to such
holder of Series A Stock, Series B Stock, Series C Stock, Series D Stock or
Series E Stock, or to such holder's nominee or nominees, a certificate or
certificates for the number of shares of Common Stock to which such holder
shall be entitled as aforesaid, together with any cash to which such holder
shall be entitled in lieu of fractional shares in an amount equal to the same
fraction of the Conversion Amount (as defined in paragraph 7 below) of a whole
share of Common Stock on the business day preceding the day of conversion.
Shares of Series A Stock, Series B Stock, Series C Stock, Series D Stock or
Series E Stock shall be deemed to have been converted as of the date of the
surrender of such shares for conversion as provided above, and the person or
persons entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such shares of Common Stock on such date. Upon conversion of only a portion of
the number of shares covered by a certificate representing shares of Series A
Stock, Series B Stock, Series C Stock, Series D Stock or Series E Stock
surrendered for conversion, at the expense of the Corporation, a new
certificate covering the number of shares of Series A Stock, Series B Stock,
Series C Stock, Series D Stock or Series E Stock representing the unconverted
portion of the certificate so surrendered, which new certificate shall entitle
the holder thereof to the rights of the shares of Series A Stock, Series B
Stock, Series C Stock, Series D Stock or Series E Stock represented thereby to
the same extent as if the certificate theretofore covering such unconverted
shares had not been surrendered for conversion.
(d) Notwithstanding the provisions of subparagraph
4(a) hereof, the issued and outstanding shares of Series A Stock, Series B
Stock, Series C Stock, Series D Stock and Series E Stock shall be automatically
converted into fully paid and nonassessable shares of Common Stock at the
Conversion Rate immediately upon the consummation of the Corporation's sale of
Common Stock in a bona fide firm commitment underwriting pursuant to a
registration statement filed with, and declared effective by, the Securities
and Exchange Commission pursuant to the Securities Act of 1933, as amended, at
a public offering price of not less than $32.50 per share (subject to
proportionate adjustments to reflect stock splits or similar events) or such
lesser amount as may be agreed to in writing by holders of at least a majority
of the outstanding shares of Preferred Stock which results in aggregate gross
cash proceeds to the Corporation of at least $10,000,000.
(e) At least ten (10) days prior to the closing of
a sale of Common Stock which meets the requirements of subparagraph (d), the
Corporation shall give written notice to
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each holder of record of shares of Series A Stock, Series B Stock, Series C
Stock, Series D Stock and Series E Stock, by certified mail enclosed in a
postage paid envelope addressed to such holder at such holder's address as the
same shall appear on the books of the Corporation. Such notice shall (i) state
that the shares are being automatically converted pursuant to subparagraph (d)
hereof, (ii) state the expected date of conversion and (iii) call upon such
holder to exchange on or after such date at the principal place of business of
the Corporation a certificate or certificates representing the number of shares
of Series A Stock, Series B Stock, Series C Stock, Series D Stock or Series E
Stock to be converted in accordance with such notice. On or after such date, the
holder of Series A Stock, Series B Stock, Series C Stock, Series D Stock or
Series E Stock shall present and surrender the certificate or certificates for
the shares of Series A Stock, Series B Stock, Series C Stock, Series D Stock or
Series E Stock to the Corporation at the place designated in such notice, and
thereupon the Corporation shall deliver to such holder, or to such holder's
nominee or nominees, a certificate or certificates for the number of shares of
Common Stock to which such holder shall be entitled as aforesaid. Shares of
Series A Stock, Series B Stock, Series C Stock, Series D Stock and Series E
Stock shall be deemed to have been converted and canceled on such conversion
date and the person or persons entitled to receive the shares of Common Stock
issuable upon such automatic conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on the conversion date.
In the case of automatic conversion pursuant to subparagraph 4(d) hereof, the
Corporation shall not be obligated to issue certificates for shares of Common
Stock unless certificates evidencing the converted shares of Series A Stock,
Series B Stock, Series C Stock, Series D Stock or Series E Stock, as the case
may be, are delivered to the Corporation.
(f) The issuance of certificates for shares of
Common Stock upon the conversion of shares of Series A Stock, Series B Stock,
Series C Stock, Series D Stock and Series E Stock shall be made without charge
to the converting stockholder for any original issue or transfer tax in respect
of the issuance of such certificates and any such tax shall be paid by the
Corporation.
(g) The Conversion Rate shall be subject to the
following adjustments:
(i) If the Corporation shall declare and pay to the
holders of Common Stock a dividend or other distribution payable in shares of
Common Stock, the Conversion Rate in effect immediately prior thereto shall be
adjusted so that the holders of Series A Stock, Series B Stock, Series C Stock,
Series D Stock and Series E Stock thereafter surrendered for conversion shall
be entitled to receive the number of shares of Common Stock which such holder
would have owned or been entitled to receive after the declaration and payment
of such dividend or other distribution if such shares of Series A Stock, Series
B Stock, Series C Stock, Series D Stock or Series E Stock had been converted
immediately prior to the record date for the determination of shareholders
entitled to receive such dividend or other distribution.
(ii) If the Corporation shall subdivide the
outstanding shares of Common Stock into a greater number of shares of Common
Stock, or combine the outstanding shares of Common Stock into a lesser number of
shares, or issue by reclassification of its shares of Common Stock any shares of
the Corporation, the Conversion Rate in effect immediately prior thereto shall
be adjusted so that the holders of Series A Stock, Series B Stock, Series C
Stock, Series D Stock
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and Series E Stock thereafter surrendered for conversion shall be entitled to
receive the number of shares of Common Stock which such holder would have owned
or been entitled to receive after the happening of any of the events described
above if such shares of Series A Stock, Series B Stock, Series C Stock, Series D
Stock and Series E Stock had been converted immediately prior to the happening
of such event on the day upon which such subdivision, combination or
reclassification, as the case may be, becomes effective.
(iii) If, after the date of issuance of the Series A
Stock, Series B Stock, Series C Stock, Series D Stock or Series E Stock, as the
case may be, the Corporation shall issue or sell any Additional Shares of
Common Stock (as defined in paragraph 7 below) for a consideration per share
less than the Conversion Amount for the Series A Stock, Series B Stock, Series
C Stock, Series D Stock or Series E Stock, respectively, then the Conversion
Rate with respect to such Series A Stock, Series B Stock, Series C Stock,
Series D Stock or Series E Stock, as the case may be, shall be adjusted to the
number determined by multiplying the Conversion Rate in effect immediately
prior to such issuance or sale by a fraction, the numerator of which shall be
the number of shares of Common Stock outstanding immediately prior to the
issuance or sale of such Additional Shares of Common Stock plus (a) the number
of such Additional Shares of Common Stock so issued or sold and (b) the number
of shares of Common Stock then issuable upon conversion of all outstanding
options to the extent that the conversion or exercise prices thereof are less
than or equal to the price at which the Series A Stock, Series B Stock, Series
C Stock, Series D Stock or Series E Stock, as the case may be, is convertible
and the denominator of which shall be the number of shares of Common Stock
outstanding immediately prior to the issuance or sale of such Additional Shares
of Common Stock plus (a) the number of shares of Common Stock which the
aggregate consideration for such Additional Shares of Common Stock so issued or
sold would purchase at a consideration per share equal to the Conversion Amount
and (b) the number of shares of Common Stock then issuable upon conversion of
all outstanding shares of convertible securities and the exercise of all then
outstanding options to the extent that the conversion or exercise prices thereof
are less than or equal to the price at which the Series A Stock, Series B Stock,
Series C Stock, Series D Stock or Series E Stock, as the case may be, is
convertible. For the purposes of this subparagraph (iii), the date as of which
the Conversion Amount shall be computed shall be earlier of (a) the date on
which the Corporation shall enter into a firm contract for the issuance or sale
of such Additional Shares of Common Stock or (b) the date of the actual issuance
or sale of such Additional Shares.
(iv) If the Corporation shall issue or sell any
warrants, options or other rights entitling the holders thereof to subscribe for
or purchase either any Additional Shares of Common Stock or evidence of
indebtedness, shares of stock or other securities which are convertible into or
exchangeable, with or without payment of additional consideration in cash or
property, for Additional Shares of Common Stock (such convertible or
exchangeable evidences of indebtedness, shares of stock or other securities
hereinafter being called "Convertible Securities"), and the consideration per
share for which Additional Shares of Common Stock may at any time thereafter be
issuable pursuant to such warrants, options or other rights or pursuant to the
terms of such Convertible Securities (when added to the consideration per share
of Common Stock, if any, received for such warrants, options or other rights),
shall be less than the Conversion Amount of the Series A Stock, Series B Stock,
Series C Stock,
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Series D Stock or Series E Stock, respectively, then the Conversion Rate with
respect to the Series A Stock, Series B Stock, Series C Stock, Series D Stock or
Series E Stock, as the case may be, shall be adjusted as provided in
subparagraph 4(g)(iii) on the basis that (a) the maximum number of Additional
Shares of Common Stock issuable pursuant to all such warrants, options or other
rights or necessary to effect the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued and (b) the aggregate
consideration (plus the consideration, if any, received for such warrants,
options or other rights) for such maximum number of Additional Shares of Common
Stock shall be deemed to be the consideration received and receivable by the
Corporation for the issuance of such Additional Shares of Common Stock pursuant
to such warrants, options or other rights or pursuant to the terms of such
Convertible Securities.
(v) If the Corporation shall issue or sell
Convertible Securities and the consideration per share for which Additional
Shares of Common Stock may at any time thereafter be issuable pursuant to the
terms of such Convertible Securities shall be less than the Conversion Amount of
the Series A Stock, Series B Stock, Series C Stock, Series D Stock or Series E
Stock, respectively, then the Conversion Rate with respect to the Series A
Stock, Series B Stock, Series C Stock, Series D Stock or Series E Stock, as the
case may be, shall be adjusted as provided in subparagraph 4(g)(iii) on the
basis that (a) the maximum number of Additional Shares of Common Stock
necessary to effect the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued and (b) the aggregate
consideration for such maximum number of Additional Shares of Common Stock
shall be deemed to be the consideration received and receivable by the
Corporation for the issuance of such Additional Shares of Common Stock pursuant
to the terms of such Convertible Securities. No adjustment of the Conversion
Rate shall be made under this subparagraph 4(g)(v) upon the issuance of any
Convertible Securities which are issued pursuant to the exercise of any
warrants, options or other rights, if such adjustment shall previously have
been made upon the issuance of such warrants, options or other rights pursuant
to subparagraph 4(g)(iv).
(vi) For the purposes of subparagraphs 4(g)(iv) and
(v), the date as of which the Conversion Amount shall be computed shall be the
earliest of (a) the date on which the Corporation shall take a record of the
holders of its Common Stock for the purpose of entitling them to receive any
warrants, options or other rights referred to in subparagraph 4(g)(iv) or to
receive any Convertible Securities, (b) the date on which the Corporation shall
enter into a firm contract for the issuance of such warrants, options or other
rights or Convertible Securities or (c) the date of the actual issuance of such
warrants, options or other rights or Convertible Securities.
(vii) No adjustment of the Conversion Rate shall be
made under subparagraph 4(g)(iii) upon the issuance of any Additional Shares of
Common Stock which are issued pursuant to the exercise of any warrants, options
or other rights or pursuant to the exercise of any conversion or exchange
rights in any Convertible Securities, if such adjustment shall previously have
been made upon the issuance of such Convertible Securities (or upon the
issuance of any warrants, options or other rights therefor), pursuant to
subparagraphs 4(g)(iv) or (v).
(viii) If any warrants, options or other rights (or
any portions thereof) which shall have given rise to an adjustment pursuant to
subparagraph 4(g)(iv) or conversion rights pursuant to Convertible Securities
which shall have given rise to an adjustment pursuant to subparagraph 4(g)(v)
shall have expired or terminated without the exercise thereof and/or if by
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<PAGE>
reason of the terms of such warrants, options or other rights or Convertible
Securities there shall have been an increase or increases, with the passage of
time or otherwise, in the price payable upon the exercise or conversion
thereof, then the Conversion Rate with respect to the Series A Stock, Series B
Stock, Series C Stock, Series D Stock or Series E Stock, as the case may be,
hereunder shall be readjusted (but to no greater extent than originally
adjusted) on the basis of (a) eliminating from the computation any Additional
Shares of Common Stock corresponding to such warrants, options or other rights
or conversion rights as shall have expired or terminated, (b) treating the
Additional Shares of Common Stock, if any, actually issued or issuable pursuant
to the previous exercise of such warrants, options or other rights or of
conversion rights pursuant to any Convertible Securities as having been issued
for the consideration actually received and receivable therefor, and (c)
treating any of such warrants, options or other rights or of conversion rights
pursuant to any Convertible Securities which remain outstanding as being
subject to exercise or conversion on the basis of such exercise or conversion
price as shall be in effect at the time; provided, however, that any
consideration which was actually received by the Corporation in connection with
the issuance or sale of such warrants, options, or other rights shall form part
of the readjustment computation even though such warrants, options or other
rights shall have expired without the exercise thereof. The Conversion Rate
with respect to the Series A Stock, Series B Stock, Series C Stock, Series D
Stock or Series E Stock, as the case may be, shall be adjusted as provided in
subparagraph 4(g)(iii) as a result of any increase in the number of Additional
Shares of Common Stock issuable, or any decrease in the consideration payable
upon any issuance of Additional Shares of Common Stock, pursuant to any
antidilution provisions contained in any warrants, options or other rights or
in any Convertible Securities.
(ix) (A) In case any Additional Shares of Common
Stock, Convertible Securities or warrants, options or other rights to purchase
any such Additional Shares of Common Stock or Convertible Securities shall be
issued or sold for cash, the consideration received therefor shall be deemed to
be the amount received by the Corporation therefor.
(B) In case any Additional Shares of Common
Stock, Convertible Securities or warrants, options or other rights to purchase
any such Additional Shares of Common Stock or Convertible Securities shall be
offered by the Corporation for subscription, the consideration received
therefor shall be deemed to be the subscription price.
(C) In case any Additional Shares of Common
Stock, Convertible Securities or warrants, options or other rights to purchase
any such Additional Shares of Common Stock or Convertible Securities are sold to
underwriters or dealers for public offering without a subscription offering, the
consideration received therefor shall be deemed to be the initial public
offering price.
(D) In any such case covered by
subparagraphs (A), (B), or (C) herein, in determining the amount of
consideration received by the Corporation, if the consideration is in whole or
in part consideration other than cash, the amount of the consideration shall be
deemed to be the fair value of such consideration as determined in good faith by
the Board of Directors of the Corporation. If Additional Shares of Common Stock
shall be issued as part of a unit with warrants, options, or other rights, then
the amount of consideration for the warrants, option or other right shall be
deemed to be the amount determined at the time of issuance by the
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Board of Directors of the Corporation. If the Board of Directors of the
Corporation shall not make any such determination, the consideration for the
warrant, option or other right shall be deemed to be zero.
(E) In any such case covered by
subparagraphs (A), (B), (C), or (D) herein, in determining the amount of
consideration received by the Corporation (I) any amounts paid or receivable for
accrued interest or accrued dividends shall be excluded, and (II) any
compensation, discounts, expenses paid or incurred or underwriting commissions
or concessions paid in connection therewith shall not be deducted.
(F) In any case covered by subparagraphs
(A), (B) or (C) herein, there shall be added to the consideration received by
the Corporation at the time of issuance or sale, the minimum aggregate amount of
additional consideration payable to the Corporation upon the exercise of such
warrants, options or other rights which relate to Convertible Securities, the
minimum aggregate amount of consideration, if any, payable upon the conversion
or exchange thereof.
(G) In case any Additional Shares of
Common Stock, Convertible Securities or any options, warrants or other rights
to purchase such Additional Shares of Common Stock or Convertible Securities
shall be issued in connection with any merger or consolidation in which the
Corporation is the surviving corporation, the amount of consideration therefor
shall be deemed to be the fair value, as determined by the Board of Directors of
the Corporation, of such portion of the assets and business of the
non-surviving corporation or corporations as such Board shall determine to be
attributable to such Additional Shares of Common Stock, Convertible Securities
or warrants, options or other rights to purchase such Additional Shares of
Common Stock or Convertible Securities.
(x) In case the Corporation shall effect a
reorganization, shall merge with or consolidate into another corporation, or
shall sell, transfer or otherwise dispose of all or substantially all of its
property, assets or business and, pursuant to the terms of such reorganization,
merger, consolidation or disposition of assets, shares of stock or other
securities, property or assets of the Corporation, successor or transferee or
an affiliate thereof or cash are to be received by or distributed to the
holders of Common Stock, then each holder of Series A Stock, Series B Stock,
Series C Stock, Series D Stock and Series E Stock shall be given a written
notice from the Corporation informing each holder of the terms of such
reorganization, merger, consolidation, or disposition of assets and of the
record date thereof for any distribution pursuant thereto, at least ten days in
advance of such record date, and each holder of Series A Stock, Series B Stock,
Series C Stock, Series D Stock and Series E Stock shall have the right
thereafter to receive, upon conversion of such Series A Stock, Series B Stock,
Series C Stock, Series D Stock and Series E Stock, the number of shares of stock
or other securities, property or assets of the Corporation, successor or
transferee or affiliate thereof or cash receivable upon or as a result of such
reorganization, merger, consolidation or disposition of assets by a holder of
the number of shares of Common Stock equal to the Conversion Rate immediately
prior to such event, multiplied by the number of shares of Series A Stock,
Series B Stock, Series C Stock, Series D Stock and Series E Stock as may be
converted. The provisions of this subparagraph (x) shall similarly apply to
successive reorganizations, mergers, consolidations or dispositions of assets.
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(xi) If a purchase, tender or exchange offer is made
to and accepted by the holders of more than 50% of the outstanding shares of
Common Stock, the Corporation shall not effect any consolidation, merger or sale
with the person having made such offer or with any affiliate of such person,
unless prior to the consummation thereof each holder of shares of Series A
Stock, Series B Stock, Series C Stock, Series D Stock and Series E Stock shall
have been given a reasonable opportunity to elect to receive, upon conversion of
the shares of Series A Stock, Series B Stock, Series C Stock, Series D Stock and
Series E Stock then held by such holder, either the stock, securities, cash or
assets then issuable with respect to the Common Stock or the stock, securities,
cash or assets issued to previous holders of the Common Stock in accordance with
such offer, or the equivalent thereof.
(xii) The number of shares of Common Stock outstanding
at any given time shall not include shares owned or held by or for the account
of the Corporation, and the disposition of such shares shall be considered an
issue or sale of Common Stock, for the purposes of this subparagraph 4(g).
(xiii) The Corporation will not pay or declare a
dividend (other than in Common Stock) upon the Common Stock payable otherwise
than out of earnings or earned surplus (determined in accordance with generally
accepted accounting principles).
(xiv) If a state of facts shall occur which, without
being specifically controlled by the provisions of this subparagraph 4(g), would
not fairly protect the conversion rights of the Series A Stock, Series B Stock,
Series C Stock, Series D Stock and Series E Stock in accordance with the
essential intent and principles of such provisions, then the Board of Directors
of the Corporation shall make an adjustment in the application of such
provisions, in accordance with such essential intent and principles, so as to
protect such conversion rights.
(xv) Anything herein to the contrary notwithstanding,
no adjustment in the Conversion Rate shall be required unless such adjustment,
either by itself or with other adjustments not previously made, would require a
change of a least 1% in such rate; provided, however, that any adjustment which
by reason of this subparagraph (xv) is not required to be made shall be carried
forward and taken into account in any subsequent adjustment.
(xvi) All calculations under this subparagraph 4(g)
shall be made to the nearest one-thousandth of a share.
(xvii) Whenever the Conversion Rate shall be
adjusted pursuant to this subparagraph 4(g), the Corporation shall forthwith
obtain, and cause to be delivered to each holder of Series A Stock, Series B
Stock, Series C Stock, Series D Stock, or Series E Stock as the case may be, a
certificate signed by the principal financial or accounting officer of the
Corporation, setting forth in reasonable detail the event requiring the
adjustment and the method by which such adjustment was calculated (including a
description of the basis on which the Board of Directors of the Corporation
determined the fair value of any consideration other than cash pursuant to
subparagraph 4(g)(ix)) and specifying the new Conversion Rate. In the case
referred to in subparagraph 4(g)(x), such a certificate shall be issued
describing the amount and kind of stock, securities, property or assets or cash
which shall be receivable upon conversion of the Series A
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Stock, Series B Stock, Series C Stock, Series D Stock, or Series E Stock as the
case may be, after giving effect to the provisions of such subparagraph 4(g)(x).
(h) The Corporation shall at all times reserve and
keep available out of its authorized but unissued shares of Common Stock, solely
for the purpose of effecting the conversion of Series A Stock, Series B Stock,
Series C Stock, Series D Stock and Series E Stock, the full number of shares of
Common Stock then deliverable upon the conversion or exchange of all shares of
Series A Stock, Series B Stock, Series C Stock, Series D Stock and Series E
Stock at the time outstanding. The Corporation shall at all times, take such
corporate action as shall be necessary in order that the Corporation may validly
and legally issue fully paid and nonassessable shares of Common Stock upon the
conversion of Series A Stock, Series B Stock, Series C Stock, Series D Stock
and Series E Stock in accordance with the provisions hereof.
(i) No fractional shares of Common Stock or scrip
representing fractional shares of Common Stock shall be issued upon any
conversion of Series A Stock, Series B Stock, Series C Stock, Series D Stock or
Series E Stock, but, in lieu thereof, there shall be paid an amount in cash
equal to the same fraction of the Conversion Amount of a whole share of Common
Stock on the business day preceding the day of conversion.
5. Events of Default. (a) The occurrence of any of
-----------------
the following shall constitute an Event of Default:
(i) Default by the Corporation in failing to convert
the Series A Stock, Series B Stock, Series C Stock, Series D Stock or Series E
Stock, as the case may be, in accordance with the provisions hereof or to pay
more than one (1) declared dividend out of funds legally available as specified
herein or the failure to make any payment in accordance with paragraph 2 hereof,
in each case where the failure to perform continues uncured for at least ninety
(90) days;
(ii) Any material default by the Corporation in the
performance or observance of any of the covenants contained in Section 5 of that
certain Preferred Stock Purchase Agreement, dated as of June 1, 1989, among the
Corporation and certain Investors, (as such term is defined therein), as the
same may be amended or the provisions thereof waived from time to time (the
"Agreement"), (which Agreement is on file at the offices of the Corporation),
which shall default continue uncured for at least ninety (90) days after notice
is given to the Corporation of such default;
(iii) Any material breach by the Corporation of any of
the representations and warranties made by it in the Agreement which shall
occur and be discovered and notice to the Corporation be given within six (6)
months following the Closing Date under the Agreement and shall continue
substantially uncured for at least ninety (90) days following the date of
discovery and notice;
(iv) The Corporation shall petition or apply to any
tribunal for the appointment of a trustee or receiver of the Corporation or of
any substantial part of its assets, or commence any proceedings relating to the
Corporation under any bankruptcy, reorganization,
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arrangement, insolvency, readjustment of debt, dissolution or liquidation law of
any jurisdiction, whether now or hereafter in effect; or any such petition or
application shall be filed, or any such proceeding commenced, against the
Corporation and the Corporation shall by any act indicate its approval thereof,
consent thereto or acquiescence therein; or an order shall be entered appointing
any such trustee or receiver, or adjudicating the Corporation bankrupt or
insolvent, or approving the petition in any such proceeding and such order shall
remain in effect for more than ninety (90) days; or an order shall be entered in
any proceeding against the Corporation decreeing the dissolution or split-up of
the Corporation, and such order shall remain in effect for more than ninety (90)
days.
(b) If an Event of Default shall have occurred,
then the holders of the Series A Stock, Series B Stock, Series C Stock and
Series D Stock shall have the right, voting together as a single class, to
elect such number of directors of the Corporation as following such election
shall constitute a majority of the entire Board of Directors (which majority
shall include any directors already serving solely as representatives of the
Series A Stock, Series B Stock, Series C Stock or Series D Stock pursuant to
the Agreement), the remaining directors to be elected by the classes or series
of stock (including the Series A Stock, Series B Stock, Series C Stock and
Series D Stock) entitled to vote therefor. The directors elected pursuant to
this subparagraph 5(b) shall not be part of any class of directors, other than
the class created by this subparagraph 5(b). Each such director shall have a
vote equal to the vote of any other director of the Corporation. Such directors
shall serve until the next annual meeting of shareholders or until such earlier
time as (i) they may be removed by a majority vote of the holders of Series A
Stock, Series B Stock, Series C Stock and Series D Stock voting together as a
single class or (ii) the holders of Series A Stock, Series B Stock, Series C
Stock, Series D Stock no longer have the right to elect such directors. If and
when such right of the holders of the Series A Stock, Series B Stock, Series C
Stock and Series D Stock becomes operative, the maximum authorized number of
members of the Board of Directors of the Corporation shall automatically be
increased to the extent necessary to create any vacancy to be filled only by
vote of the holders of the Series A Stock, Series B Stock, Series C Stock and
Series D Stock then outstanding as hereinafter set forth. Whenever such right
of the holders of the Series A Stock, Series B Stock, Series C Stock and Series
D Stock shall become operative, such right shall be exercised initially either
at a special meeting of the holders of the Series A Stock, Series B Stock,
Series C Stock and Series D Stock called as provided below or at any annual
meeting of shareholders held for the purpose of electing directors, and
thereafter at such annual meetings. The directors elected pursuant to this
subparagraph 5(b) shall be elected by a plurality of the votes cast. The right
of the holders of the Series A Stock, Series B Stock, Series C Stock and Series
D Stock voting together as a single class and separately from all other classes
and series, to elect a majority of the members of the Board of Directors of the
Corporation as aforesaid shall continue until such time as the Event of Default
has been cured, at which time the right of the holders of the Series A Stock,
Series B Stock, Series C Stock and Series D Stock with respect to which such
Event of Default has been cured to elect such directors under this subparagraph
5(b) shall terminate (subject to becoming operative again in the event of any
subsequent Event of Default) and the maximum authorized number of members of
the Board of Directors of the Corporation shall automatically be reduced if
such number was increased at the time when the terminated voting right of the
holders of the Series A Stock, Series B Stock, Series C and Series D Stock
became operative.
15
<PAGE>
At any time when the voting right of the holders of the Series A Stock,
Series B Stock, Series C Stock and Series D Stock provided in this subparagraph
5(b) shall have become operative and not have been exercised, a proper officer
of the Corporation shall, upon the written request of the holders of record of
at least fifteen percent (15%) of the shares of Series A Stock, Series B Stock,
Series C Stock and Series D Stock, counted together as a single class, then
outstanding addressed to the Secretary of the Corporation, call a special
meeting of the holders of the Series A Stock, Series B Stock, Series C Stock and
Series D Stock for the purpose of electing the directors to be elected by the
holders of the Series A Stock, Series B Stock, Series C Stock, and Series D
Stock. Such meeting shall be held at the earliest practicable date upon the
notice required for meetings of shareholders at such place in the continental
United States as may be specified in such written request. If such meeting
shall not be called by the proper officer of the Corporation within seven (7)
days after the personal service of such written request upon the Secretary of
the Corporation, or within seven (7) days after mailing the same within the
United States by registered or certified mail enclosed in a postage paid
envelope addressed to the Secretary of the Corporation at its principal office,
then the holders of record of at least fifteen percent (15%) of the Series A
Stock, Series B Stock, Series C Stock and Series D Stock, counted together as a
single class, then outstanding may designate in writing one of their number to
call such meeting at the expense of the Corporation, and such meeting may be
called by the person so designated upon the notice required for meetings of
shareholders and shall be held at such place in the continental United States
as may be specified in such notice.
Upon any termination of the right of the holders of the Series A Stock,
Series B Stock, Series C Stock and Series D Stock to vote for directors as
herein above provided, the term of office of any director then in office elected
by the holders of the Series A Stock, Series B Stock, Series C Stock and Series
D Stock shall terminate immediately. If the office of any director elected by
the holders of the Series A Stock, Series B Stock, Series C Stock and Series D
Stock becomes vacant by reason of death, resignation, retirement,
disqualification, removal from office or otherwise, then the procedure provided
for in this subparagraph 5(b) shall be used to fill the vacancy.
The Bylaws of the Corporation shall automatically be deemed amended
from time to time to provide for the increase or reduction in the maximum
authorized number of members of the Board of Directors and for the election
procedure as herein above provided in this subparagraph 5(b). Whenever holders
of Series A Stock, Series B Stock, Series C Stock or Series D Stock, as the
case may be, are required or permitted to take any action by vote, such action
may be taken without a meeting on written consent, setting forth the action so
taken and signed by the holders of the outstanding Series A Stock, Series B
Stock, Series C Stock or Series D Stock, as the case may be, having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all such shares entitled to vote thereon were
present and voted.
6. Voting Rights. (a) Except as otherwise provided herein
-------------
for the election of directors or as required by the Delaware General Corporation
Law, the holders of shares of Series A Stock, Series B Stock, Series C Stock,
Series D Stock and Series E Stock shall have the right to vote, together with
the holders of all the outstanding shares of Series A Stock, Series B Stock,
Series C Stock, Series D Stock, Series E Stock, and Common Stock and not by
classes, on all matters on which holders of Series A Stock, Series B Stock,
Series C Stock, Series
16
<PAGE>
D Stock, Series E Stock and/or Common Stock shall have the right to vote. The
holders of shares of Series A Stock, Series B Stock, Series C Stock, Series D
Stock and Series E Stock shall have the right to cast one vote for each share of
Common Stock into which each share of Series A Stock, Series B Stock, Series C
Stock, Series D Stock or Series E Stock held by them is convertible, with any
fractions rounded to the next full vote.
(b) Without the prior approval of the holders of a majority
of the shares of Series A Stock, Series B Stock and Series C Stock outstanding,
voting together as a single class, the Corporation will not (i) authorize,
create or issue any series or shares of capital stock senior or pari passu to
---- -----
the Series A Stock, Series B Stock or Series C Stock, or adopt or otherwise
issue any stock options or stock purchase plan for, or otherwise issue any stock
options to, employees, consultants or directors of the Corporation, except that
the Corporation may authorize options for employees, directors or consultants to
purchase up to 519,477 shares of Common Stock; provided, however, that nothing
-------- -------
contained herein will limit the Corporation's ability to resell any shares from
time to time contained in the treasury of the Corporation, or (ii) take any
action which would materially alter or adversely affect the rights of the
holders of the Series A Stock, Series B Stock or Series C Stock set forth
herein.
(c) Without the prior approval of the holders of a majority
of the shares of Series D Stock outstanding, the corporation will not authorize,
create or issue any series or shares of capital stock senior or pari passu to
the Series D Stock or take any action which would materially alter or adversely
affect the rights of the holders of the Series D Stock if such action would give
the Series D Stock the right to a vote on such action as a separate series under
Section 242(b)(2) of the Delaware General Corporation Law.
7. Definitions.
-----------
(a) "Additional Shares of Common Stock" shall mean
all shares of Common Stock of the Corporation issued by the Corporation after
June 10, 1992, except (i) shares of Common Stock issuable pursuant to the
conversion of the Series A Stock, Series B Stock, Series C Stock, Series D
Stock and Series E Stock and (ii) shares of Common Stock issued pursuant to the
exercise by employees, consultants and directors of the Corporation of options
issued pursuant to stock option plans or agreements adopted by the Board of
Directors of the Corporation.
(b) "Common Stock" shall mean the common stock, par
value $.01 per share, of the Corporation.
(c) "Conversion Amount" shall mean at any
applicable date the amount equal to the quotient resulting from dividing $13.39
by the Conversion Rate in effect on such date for the Series A Stock and Series
B Stock, $6.00 by the Conversion Rate in effect on such date for the Series C
Stock and Series D Stock and $20.00 by the Conversion Rate in effect on such
date for the Series E Stock.
(d) "Junior Stock" shall mean any class or series of
capital stock of the Corporation which may be issued which, at the time of
issuance, is not declared to be on a parity
17
<PAGE>
with or senior to the Series E Stock as to all of the following: dividends,
rights upon liquidation or redemption or voting rights.
ARTICLE V
The Board of Directors is authorized, subject to any limitations
prescribed by the law of the State of Delaware, to provide for the issuance of
the shares of Preferred Stock in one or more series, and, by filing a
certificate of designation pursuant to the applicable law of the State of
Delaware, to establish from time to time the number of shares to be included in
each such series, to fix the designation, powers, preferences and rights of the
shares of each such series and any qualifications, limitations or restrictions
thereof, and to increase or decrease the number of shares of any such series
(but not below the number of shares of such series then outstanding). The
number of authorized shares of Preferred Stock may be increased or decreased
(but not below the number of shares thereof then outstanding) by the affirmative
vote of the holders of a majority of the stock of the corporation entitled to
vote, unless a vote of any other holders is required pursuant to a certificate
or certificates establishing a series of Preferred Stock.
ARTICLE VI
The Board of Directors of the corporation shall have the power to adopt,
amend or repeal Bylaws of the corporation.
ARTICLE VII
Election of directors need not be by written ballot unless the Bylaws of
the corporation shall so provide.
ARTICLE VIII
To the fullest extent permitted by law, no director of the corporation
shall be personally liable for monetary damages for breach of fiduciary duty as
a director. Without limiting the effect of the preceding sentence, if the
Delaware General Corporation Law is hereafter amended to authorize the further
elimination or limitation of the liability of a director, then the liability of
a director of the corporation shall be eliminated or limited to the fullest
extent permitted by the Delaware General Corporation Law, as so amended.
Neither any amendment nor repeal of this Article VIII, nor the adoption
of any provision of this Certificate of Incorporation inconsistent with this
Article VIII, shall eliminate, reduce or otherwise adversely affect any
limitation on the personal liability of a director of the corporation existing
at the time of such amendment, repeal or adoption of such an inconsistent
provision.
18
<PAGE>
IN WITNESS WHEREOF, this Amended and Restated Certificate of
Incorporation has been executed on behalf of the Corporation by Constance
Galley, its President, and Ira Gerard, its Secretary, this 14th day of May,
1997.
TSI International Software Ltd.
By: /s/ Constance Galley
---------------------
Name: Constance Galley
Title: President
By: /s/ Ira Gerard
---------------------
Name: Ira Gerard
Title: Secretary
19
<PAGE>
EXHIBIT 3.03
-----------------------------------------------------
BYLAWS
OF
TSI International Software Ltd.
-------------------------------
(a Delaware Corporation)
As Adopted September 10, 1993
-----------------------------------------------------
<PAGE>
BYLAWS
OF
TSI INTERNATIONAL SOFTWARE LTD.
A Delaware Corporation
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I - STOCKHOLDERS......................................................... 1
Section 1.1: Annual Meetings........................................ 1
Section 1.2: Special Meetings....................................... 1
Section 1.3: Notice of Meetings..................................... 1
Section 1.4: Waiver of Notice....................................... 1
Section 1.5: Adjournments........................................... 1
Section 1.6: Quorum................................................. 2
Section 1.7: Organization........................................... 2
Section 1.8: Voting; Proxies........................................ 2
Section 1.9: Fixing Date for Determination of Stockholders of Record 3
Section 1.10 List of Stockholders Entitled to Vote.................. 3
Section 1.11 Action by Written Consent of Stockholders.............. 3
Section 1.12: Inspectors of Elections................................ 4
ARTICLE II - BOARD OF DIRECTORS.................................................. 6
Section 2.1: Number; Qualifications................................. 6
Section 2.2: Election; Resignation; Removal; Vacancies.............. 6
</TABLE>
-i-
<PAGE>
TABLE OF CONTENTS (CONT'D)
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 2.3: Regular Meetings...................................... 6
Section 2.4: Special Meetings...................................... 6
Section 2.5: Telephonic Meetings Permitted......................... 7
Section 2.6: Quorum; Vote Required for Action...................... 7
Section 2.7: Organization.......................................... 7
Section 2.8: Written Action by Directors........................... 7
Section 2.9: Powers................................................ 7
Section 2.10: Compensation of Directors............................. 7
ARTICLE III - COMMITTEES......................................................... 7
Section 3.1: Committees............................................ 7
Section 3.2: Committee Rules....................................... 8
ARTICLE IV - OFFICERS
Section 4.1: Generally............................................. 8
Section 4.2: Chairman of the Board................................. 9
Section 4.3: President............................................. 9
Section 4.4: Vice President........................................ 9
Section 4.5: Chief Financial Officer............................... 9
Section 4.6: Treasurer............................................. 9
Section 4.7: Secretary............................................. 10
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Section 4.8: Delegation of Authority................................ 10
Section 4.9: Removal................................................ 10
ARTICLE V - STOCK................................................................. 10
Section 5.l: Certificates........................................... 10
Section 5.2: Lost, Stolen or Destroyed Stock Certificates; Issuance
of New Certificate..................................... 10
Section 5.3: Other Regulations...................................... 10
ARTICLE VI - INDEMNIFICATION...................................................... 11
Section 6.1: Indemnification of Officers and Directors.............. 11
Section 6.2: Advance of Expenses.................................... 11
Section 6.3: Non-Exclusivity of Rights.............................. 12
Section 6.4: Indemnification Contracts.............................. 15
Section 6.5: Effect of Amendment.................................... 12
ARTICLE VII - NOTICES............................................................. 12
Section 7.l: Notice................................................. 12
Section 7.2: Waiver of Notice....................................... 13
ARTICLE VIII - INTERESTED DIRECTORS............................................... 13
Section 8.1: Interested Directors; Quorum............................ 13
</TABLE>
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<PAGE>
TABLE OF CONTENTS (CONT'D)
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE IX - MISCELLANEOUS................................................................. 13
Section 9.1: Fiscal Year...................................................... 13
Section 9.2: Seal............................................................. 14
Section 9.3: Form of Records.................................................. 14
Section 9.4: Reliance Upon Books and Records.................................. 14
Section 9.5: Certificate of Incorporation Governs............................. 14
Section 9.6: Severability..................................................... 14
ARTICLE X - AMENDMENT...................................................................... 15
Section 10.1: Amendments....................................................... 15
</TABLE>
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<PAGE>
BYLAWS
OF
TSI INTERNATIONAL SOFTWARE LTD.
(a Delaware Corporation)
As Adopted September 10, 1993
ARTICLE I
STOCKHOLDERS
Section 1.1: Annual Meetings. An annual meeting of stockholders for
----------- ---------------
the election of directors shall be held each year on such date in the first six
months of the Corporation's fiscal year as shall be designated by the President,
or in the absence of such designation, on the first Tuesday of the seventh month
of the fiscal year, if not a legal holiday, and if a legal holiday, then on the
next succeeding business day, or on such other date as shall be fixed by the
Board of Directors Any other proper business may be transacted at the annual
meeting.
Section 1.2: Special Meetings. Special meetings of stockholders for
----------- ----------------
any purpose or purposes may be called at any time by the President or the
Secretary of the Corporation or by a majority of the members of the Board of
Directors. Special meetings may not be called by any other person or persons.
Section 1.3: Notice of Meetings. Written notice of all meetings of
----------- ------------------
stockholders shall be given stating the place, date and time of the meeting and,
in the case of a special meeting, the purpose or purposes for which the meeting
is called. Unless otherwise required by applicable law or the Certificate of
Incorporation of the Corporation, such notice shall be given not less than ten
(10) nor more than sixty (60) days before the date of the meeting to each
stockholder entitled to vote at such meeting.
Section 1.4: Waiver of Notice. Notice of any shareholders meeting
----------- ----------------
may be waived, in writing, by any shareholder, either before or after the time
stated therein and, if any shareholder entitled to vote is present at a
shareholders meeting and does not protest, prior to or at the commencement of
the meeting, the lack of receipt of proper notice, such shareholder shall be
deemed to have waived notice of such meeting.
Section 1.5: Adjournments. Any meeting of stockholders may adjourn
----------- ------------
from time to time to reconvene at the same or another place, and notice need not
be given of any such adjourned meeting if the time, date and place thereof are
announced at the meeting at which the adjournment is taken; provided, however,
-------- -------
that if the adjournment is for more than thirty (30)
<PAGE>
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, then a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting. At the adjourned meeting
the Corporation may transact any business that might have been transacted at the
original meeting
Section 1.6: Quorum. At each meeting of stockholders the holders of
----------- ------
a majority of the shares of stock entitled to vote at the meeting, present in
person or represented by proxy, shall constitute a quorum for the transaction of
business, except if otherwise required by applicable law. If a quorum shall
fail to attend any meeting, the chairman of the meeting or the holders of a
majority of the shares entitled to vote who are present, in person or by proxy,
at the meeting may adjourn the meeting. Shares of the Corporation's stock
belonging to the Corporation (or to another corporation, if a majority of the
shares entitled to vote in the election of directors of such other corporation
are held, directly or indirectly, by the Corporation), shall neither be entitled
to vote nor be counted for quorum purposes; provided, however, that the
foregoing shall not limit the right of the Corporation or any other corporation
to vote any shares of the Corporation's stock held by it in a fiduciary
capacity.
Section 1.7: Organization. Meetings of stockholders shall be
----------- ------------
presided over by such person as the Board of Directors may designate, or, in the
absence of such a person, the Chairman of the Board, or, in the absence of such
person, the President of the Corporation, or, in the absence of such person,
such person as may be chosen by the holders of a majority of the shares entitled
to vote who are present, in person or by proxy, at the meeting. Such person
shall be chairman of the meeting and, subject to Section 1.11 hereof, shall
determine the order of business and the procedure at the meeting, including such
regulation of the manner of voting and the conduct of discussion as seems to him
or her to be in order. The Secretary of the Corporation shall act as secretary
of the meeting, but in his or her absence the chairman of the meeting may
appoint any person to act as secretary of the meeting.
Section 1.8: Voting; Proxies. Unless otherwise provided by law or
----------- ---------------
the Certificate of Incorporation, and subject to the provisions of Section 1.9
of these Bylaws, each stockholder shall be entitled to one (1) vote for each
share of stock held by such stockholder. Each stockholder entitled to vote at a
meeting of stockholders, or to express consent or dissent to corporate action in
writing without a meeting, may authorize another person or persons to act for
such stockholder by proxy. Such a proxy may be prepared, transmitted and
delivered in any manner permitted by applicable law. If a vote is to be taken
by written ballot, then each such ballot shall state the name of the stockholder
or proxy voting and such other information as the chairman of the meeting deems
appropriate. Directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the election of directors. Unless otherwise provided by applicable law,
the Certificate of Incorporation or these Bylaws, every matter other than the
election of directors shall be decided by the affirmative vote of the holders of
a majority of the shares of stock entitled to vote thereon that are present in
person or represented by proxy at the meeting and are voted for or against the
matter.
-2-
<PAGE>
Section 1.9: Fixing Date for Determination of Stockholders of Record.
----------- -------------------------------------------------------
In order that the Corporation may determine the stockholders entitled to notice
of or to vote at any meeting of stockholders or any adjournment thereof, or to
express consent to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of stock or for the purpose of any other lawful action, the Board of
Directors may fix, in advance, a record date, which shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors and which shall not be more than sixty (60) nor less than ten (10)
days before the date of such meeting, nor more than sixty (60) days prior to any
other action. If no record date is fixed by the Board of Directors, then the
record date shall be as provided by applicable law. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
Section 1.10: List of Stockholders Entitled to Vote. A complete list
------------ -------------------------------------
of stockholders entitled to vote at any meeting of stockholders, arranged in
alphabetical order and showing the address of each stockholder and the number of
shares registered in the name of each stockholder, shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof and may be inspected by any stockholder who is present at the meeting.
Section 1.11: Action by Written Consent of Stockholders.
------------ ------------------------------------------
(a) Procedure. Unless otherwise provided by the Certificate of
---------
Incorporation, any action required or permitted to be taken at any annual or
special meeting of the stockholders may be taken without a meeting, without
prior notice and without a vote, if a consent or consents in writing, setting
forth the action so taken, shall be signed by the holders of outstanding stock
having not less than the number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon were
present and voted. Written stockholder consents shall bear the date of
signature of each stockholder who signs the consent and shall be delivered to
the Corporation by delivery to its registered office in the State of Delaware,
to its principal place of business or to any officer or agent of the Corporation
having custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. No written
consent shall be effective to take the action set forth therein unless, within
sixty (60) days of the earliest dated consent delivered to the Corporation in
the manner provided above, written consents signed by a sufficient number of
stockholders to take the action set forth therein are delivered to the
Corporation in the manner provided above.
(b) Notice of Consent. Prompt notice of the taking of corporate
-----------------
action by stockholders without a meeting by less than unanimous written consent
of the stockholders
-3-
<PAGE>
shall be given to those stockholders who have not consented thereto in writing
and, in the case of a Certificate Action (as defined below), if the Delaware
General Corporation Law so requires, such notice shall be given prior to filing
of the certificate in question. If the action which is consented to requires the
filing of a certificate under the Delaware General Corporation Law (a
"Certificate Action"), then if the Delaware General Corporation Law so requires,
------------------
the certificate so filed shall state that written stockholder consent has been
given in accordance with Section 228 of the Delaware General Corporation Law and
that written notice of the taking of corporate action by stockholders without a
meeting as described herein has been given as provided in such section.
Section 1.12: Inspectors of Elections.
------------ -----------------------
(a) Applicability. Unless otherwise provided in the Corporation's
-------------
Certificate of Incorporation or required by the Delaware General Corporation
Law, the following provisions of this Section 1.11 shall apply only if and when
the Corporation has a class of voting stock that is: (i) listed on a national
securities exchange; (ii) authorized for quotation on an interdealer quotation
system of a registered national securities association; or (iii) held of record
by more than 2,000 stockholders; in all other cases, observance of the
provisions of this Section 1.11 shall be optional, and at the discretion of the
Corporation.
(b) Appointment. The Corporation shall, in advance of any meeting
-----------
of stockholders, appoint one or more inspectors of election to act at the
meeting and make a written report thereof. The Corporation may designate one or
more persons as alternate inspectors to replace any inspector who fails to act.
If no inspector or alternate is able to act at a meeting of stockholders, the
person presiding at the meeting shall appoint one or more inspectors to act at
the meeting.
(c) Inspector's Oath. Each inspector of election, before entering
----------------
upon the discharge of his duties, shall take and sign an oath faithfully to
execute the duties of inspector with strict impartiality and according to the
best of his ability.
(d) Duties of Inspectors. At a meeting of stockholders, the
--------------------
inspectors of election shall (i) ascertain the number of shares outstanding and
the voting power of each share, (ii) determine the shares represented at a
meeting and the validity of proxies and ballots, (iii) count all votes and
ballots, (iv) determine and retain for a reasonable period of time a record of
the disposition of any challenges made to any determination by the inspectors,
and (v) certify their determination of the number of shares represented at the
meeting, and their count of all votes and ballots. The inspectors may appoint
or retain other persons or entities to assist the inspectors in the performance
of the duties of the inspectors.
(e) Opening and Closing of Polls. The date and time of the opening
----------------------------
and the closing of the polls for each matter upon which the stockholders will
vote at a meeting shall be announced by the inspectors at the meeting. No
ballot, proxies or votes, nor any revocations thereof or changes thereto, shall
be accepted by the inspectors after the closing of the polls unless the Court of
Chancery upon application by a stockholder shall determine otherwise.
-4-
<PAGE>
(f) Determinations. In determining the validity and counting of
--------------
proxies and ballots, the inspectors shall be limited to an examination of the
proxies, any envelopes submitted with those proxies, any information provided in
connection with proxies in accordance with Section 212(c)(2) of the Delaware
General Corporation Law, ballots and the regular books and records of the
Corporation, except that the inspectors may consider other reliable information
for the limited purpose of reconciling proxies and ballots submitted by or on
behalf of banks, brokers, their nominees or similar persons which represent more
votes than the holder of a proxy is authorized by the record owner to cast or
more votes than the stockholder holds of record. If the inspectors consider
other reliable information for the limited purpose permitted herein, the
inspectors at the time they make their certification of their determinations
pursuant to this Section 1.11 shall specify the precise information considered
by them, including the person or persons from whom they obtained the
information, when the information was obtained, the means by which the
information was obtained and the basis for the inspectors' belief that such
information is accurate and reliable.
ARTICLE II
BOARD OF DIRECTORS
Section 2.1: Number; Qualifications. The Board of Directors shall
----------- ----------------------
consist of at least one and no more than nine members. The initial number of
directors shall be six (6), and thereafter shall be fixed from time to time by
resolution of the Board of Directors. No decrease in the authorized number of
directors constituting the Board of Directors shall shorten the term of any
incumbent director. Directors need not be stockholders of the Corporation.
Section 2.2: Election; Resignation; Removal; Vacancies. The Board of
----------- -----------------------------------------
Directors shall initially consist of the person or persons elected by the
incorporator or named in the Corporation's initial Certificate of Incorporation.
Each director shall hold office until the next annual meeting of stockholders
and until his or her successor is elected and qualified, or until his or her
earlier death, resignation or removal. Any director may resign at any time upon
written notice to the Corporation. Subject to the rights of any holders of
Preferred Stock then outstanding: (i) any director or the entire Board of
Directors may be removed, with or without cause, by the holders of a majority of
the shares then entitled to vote at an election of directors and (ii) any
vacancy occurring in the Board of Directors for any cause, and any newly created
directorship resulting from any increase in the authorized number of directors
to be elected by all stockholders having the right to vote as a single class,
may be filled by the stockholders, by a majority of the directors then in
office, although less than a quorum, or by a sole remaining director.
Section 2.3: Regular Meetings. Regular meetings of the Board of
----------- ----------------
Directors may be held at such places, within or without the State of Delaware,
and at such times as the Board of Directors may from time to time determine.
Notice of regular meetings need not be given if the date, times and places
thereof are fixed by resolution of the Board of Directors.
-5-
<PAGE>
Section 2.4: Special Meetings. Special meetings of the Board of
----------- ----------------
Directors may be called by the Chairman of the Board, the President or a
majority of the members of the Board of Directors then in office and may be held
at any time, date or place, within or without the State of Delaware, as the
person or persons calling the meeting shall fix. Notice of the time, date and
place of such meeting shall be given, orally or in writing, by the person or
persons calling the meeting to all directors at least four (4) days before the
meeting if the notice is mailed, or at least twenty-four (24) hours before the
meeting if such notice is given by telephone, hand delivery, telegram, telex,
mailgram, facsimile or similar communication method. Unless otherwise indicated
in the notice, any and all business may be transacted at a special meeting.
Section 2.5: Telephonic Meetings Permitted. Members of the Board of
----------- -----------------------------
Directors, or any committee of the Board, may participate in a meeting of the
Board or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to
conference telephone or similar communications equipment shall constitute
presence in person at such meeting.
Section 2.6: Quorum; Vote Required for Action. At all meetings of
----------- --------------------------------
the Board of Directors a majority of the total number of authorized directors
shall constitute a quorum for the transaction of business. Except as otherwise
provided herein or in the Certificate of Incorporation, or required by law, the
vote of a majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors.
Section 2.7: Organization. Meetings of the Board of Directors shall
----------- ------------
be presided over by the Chairman of the Board, or in his or her absence by the
President, or in his or her absence by a chairman chosen at the meeting. The
Secretary shall act as secretary of the meeting, but in his or her absence the
chairman of the meeting may appoint any person to act as secretary of the
meeting.
Section 2.8: Written Action by Directors. Any action required or
----------- ---------------------------
permitted to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting if all members of the Board or
such committee, as the case may be, consent thereto in writing, and the writing
or writings are filed with the minutes of proceedings of the Board or committee,
respectively.
Section 2.9: Powers. The Board of Directors may, except as otherwise
----------- ------
required by law or the Certificate of Incorporation, exercise all such powers
and do all such acts and things as may be exercised or done by the Corporation.
Section 2.10: Compensation of Directors. Directors, as such, may
------------ -------------------------
receive, pursuant to a resolution of the Board of Directors, fees and other
compensation for their services as directors, including without limitation their
services as members of committees of the Board of Directors.
-6-
<PAGE>
ARTICLE III
COMMITTEES
Section 3.1: Committees. The Board of Directors may, by resolution
----------- ----------
passed by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of a member of the committee, the
member or members thereof present at any meeting of such committee who are not
disqualified from voting, whether or not he, she or they constitute a quorum,
may unanimously appoint another member of the Board of Directors to act at the
meeting in place of any such absent or disqualified member. Any such committee,
to the extent provided in a resolution of the Board of Directors, shall have and
may exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation and may authorize the
seal of the Corporation to be affixed to all papers that may require it; but no
such committee shall have the power or authority in reference to amending the
Certificate of Incorporation (except that a committee may, to the extent
authorized in the resolution or resolutions providing for the issuance of shares
of stock adopted by the Board of Directors as provided in subsection (a) of
Section 151 of the Delaware General Corporation Law, fix the designations and
any of the preferences or rights of such shares relating to dividends,
redemption, dissolution, any distribution of assets of the Corporation, or the
conversion into, or the exchange of such shares for, shares of any other class
or classes or any other series of the same or any other class or classes of
stock of the Corporation, or fix the number of shares of any series of stock or
authorize the increase or decrease of the shares of any series), adopting an
agreement of merger or consolidation under Sections 251 or 252 of the Delaware
General Corporation Law, recommending to the stockholders the sale, lease or
exchange of all or substantially all of the Corporation's property and assets,
recommending to the stockholders a dissolution of the Corporation or a
revocation of a dissolution, or amending the Bylaws of the Corporation; and
unless the resolution of the Board of Directors expressly so provides, no such
committee shall have the power or authority to declare a dividend, authorize the
issuance of stock or adopt a certificate of ownership and merger pursuant to
section 253 of the Delaware General Corporation Law.
Section 3.2: Committee Rules. Unless the Board of Directors
----------- ---------------
otherwise provides, each committee designated by the Board may make, alter and
repeal rules for the conduct of its business. In the absence of such rules each
committee shall conduct its business in the same manner as the Board of
Directors conducts its business pursuant to Article II of these Bylaws.
-7-
<PAGE>
ARTICLE IV
OFFICERS
Section 4.1: Generally. The officers of the Corporation shall
----------- ---------
consist of a Chief Executive Officer and/or a President, one or more Vice
Presidents, a Secretary, a Treasurer and such other officers, including a
Chairman of the Board of Directors and/or Chief Financial Officer, as may from
time to time be appointed by the Board of Directors. All officers shall be
elected by the Board of Directors; provided, however, that the Board of
Directors may empower the Chief Executive Officer of the Corporation to appoint
officers other than the Chairman of the Board, the Chief Executive Officer, the
President, the Chief Financial Officer or the Treasurer. Each officer shall hold
office until his or her successor is elected and qualified or until his or her
earlier resignation or removal. Any number of offices may be held by the same
person. Any officer may resign at any time upon written notice to the
Corporation. Any vacancy occurring in any office of the Corporation by death,
resignation, removal or otherwise may be filled by the Board of Directors.
Section 4.2: Chief Executive Officer. Subject to the control of the
----------- -----------------------
Board of Directors and such supervisory powers, if any, as may be given by the
Board of Directors, the powers and duties of the Chief Executive Officer of the
Corporation are:
(a) To act as the general manager and, subject to the control of the
Board of Directors, to have general supervision, direction and control of the
business and affairs of the Corporation;
(b) To preside at all meetings of the stockholders;
(c) To call meetings of the stockholders to be held at such times and,
subject to the limitations prescribed by law or by these Bylaws, at such places
as he or she shall deem proper; and
(d) To affix the signature of the Corporation to all deeds,
conveyances, mortgages, guarantees, leases, obligations, bonds, certificates and
other papers and instruments in writing which have been authorized by the Board
of Directors or which, in the judgment of the Chief Executive Officer, should be
executed on behalf of the Corporation; to sign certificates for shares of stock
of the Corporation; and, subject to the direction of the Board of Directors, to
have general charge of the property of the Corporation and to supervise and
control all officers, agents and employees of the Corporation.
The President shall be the Chief Executive Officer of the Corporation unless the
Board of Directors shall designate another officer to be the Chief Executive
Officer. If there is no President, and the Board of Directors has not
designated any other officer to be the Chief Executive Officer, then the
Chairman of the Board shall be the Chief Executive Officer.
-8-
<PAGE>
Section 4.3: Chairman of the Board. The Chairman of the Board shall
----------- ---------------------
have the power to preside at all meetings of the Board of Directors and shall
have such other powers and duties as provided in these bylaws and as the Board
of Directors may from time to time prescribe.
Section 4.4: President. The President shall be the Chief Executive
----------- ---------
Officer of the Corporation unless the Board of Directors shall have designated
another officer as the Chief Executive Officer of the Corporation. Subject to
the provisions of these Bylaws and to the direction of the Board of Directors,
and subject to the supervisory powers of the Chief Executive Officer (if the
Chief Executive Officer is an officer other than the President), and subject to
such supervisory powers and authority as may be given by the Board of Directors
to the Chairman of the Board and/or to any other officer, the President shall
have the responsibility for the general management the control of the business
and affairs of the Corporation and the general supervision and direction of all
of the officers, employees and agents of the Corporation (other than the Chief
Executive Officer, if the Chief Executive Officer is an officer other than the
President) and shall perform all duties and have all powers that are commonly
incident to the office of President or that are delegated to the President by
the Board of Directors.
Section 4.5: Vice President. Each Vice President shall have all such
----------- --------------
powers and duties as are commonly incident to the office of Vice President, or
that are delegated to him or her by the Board of Directors or the Chief
Executive Officer. A Vice President may be designated by the Board to perform
the duties and exercise the powers of the Chief Executive Officer in the event
of the Chief Executive Officer's absence or disability.
Section 4.6: Chief Financial Officer. Subject to the direction of the
----------- -----------------------
Board of Directors and the President, the Chief Financial Officer shall perform
all duties and have all powers that are commonly incident to the office of chief
financial officer.
Section 4.7: Treasurer. The Treasurer shall have custody of all
----------- ---------
monies and securities of the Corporation. The Treasurer shall make such
disbursements of the funds of the Corporation as are authorized and shall render
from time to time an account of all such transactions. The Treasurer shall also
perform such other duties and have such other powers as are commonly incident to
the office of Treasurer, or as the Board of Directors or the President may from
time to time prescribe.
Section 4.8: Secretary. The Secretary shall issue or cause to be
----------- ---------
issued all authorized notices for, and shall keep, or cause to be kept, minutes
of all meetings of the stockholders and the Board of Directors. The Secretary
shall have charge of the corporate minute books and similar records and shall
perform such other duties and have such other powers as are commonly incident to
the office of Secretary, or as the Board of Directors or the President may from
time to time prescribe.
Section 4.9: Delegation of Authority. The Board of Directors may from
----------- -----------------------
time to time delegate the powers or duties of any officer to any other officers
or agents, notwithstanding any provision hereof.
-9-
<PAGE>
Section 4.10: Removal. Any officer of the Corporation shall serve at
------------ -------
the pleasure of the Board of Directors and may be removed at any time, with or
without cause, by the Board of Directors. Such removal shall be without
prejudice to the contractual rights of such officer, if any, with the
Corporation.
ARTICLE V
STOCK
Section 5.1: Certificates. Every holder of stock shall be entitled to
----------- ------------
have a certificate signed by or in the name of the Corporation by the Chairman
or Vice-Chairman of the Board of Directors, or the President or a Vice
President, and by the Treasurer or an Assistant Treasurer, or the Secretary or
an Assistant Secretary, of the Corporation, certifying the number of shares
owned by such stockholder in the Corporation. Any or all of the signatures on
the certificate may be a facsimile.
Section 5.2: Lost, Stolen or Destroyed Stock Certificates; Issuance of
----------- ---------------------------------------------------------
New Certificates. The Corporation may issue a new certificate of stock in the
- ----------------
place of any certificate previously issued by it, alleged to have been lost,
stolen or destroyed, and the Corporation may require the owner of the lost,
stolen or destroyed certificate, or such owner's legal representative, to agree
to indemnify the Corporation and/or to give the Corporation a bond sufficient to
indemnify it, against any claim that may be made against it on account of the
alleged loss, theft or destruction of any such certificate or the issuance of
such new certificate.
Section 5.3: Other Regulations. The issue, transfer, conversion and
----------- -----------------
registration of stock certificates shall be governed by such other regulations
as the Board of Directors may establish.
ARTICLE VI
INDEMNIFICATION
Section 6.1: Indemnification of Officers and Directors. Each person
----------- -----------------------------------------
who was or is made a party to, or is threatened to be made a party to, or is
involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (a "proceeding"), by reason of the fact that he
----------
or she (or a person of whom he or she is the legal representative), is or was a
director or officer of the Corporation or a Reincorporated Predecessor (as
defined below) or is or was serving at the request of the Corporation or a
Reincorporated Predecessor (as defined below) as a director or officer of
another corporation, or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, shall be
indemnified and held harmless by the Corporation to the fullest extent permitted
by the Delaware General Corporation Law, against all expenses, liability and
loss (including attorneys' fees, judgments, fines, ERISA excise taxes and
penalties and amounts paid or to be paid in settlement) reasonably incurred or
suffered by such person in connection therewith, and such indemnification shall
continue as to a person who has ceased to be a director or officer and shall
inure to the benefit of
-10-
<PAGE>
his or her heirs, executors and administrators; provided, however, that the
-------- -------
Corporation shall indemnify any such person seeking indemnity in connection with
a proceeding (or part thereof) initiated by such person only if such proceeding
(or part thereof) was authorized by the Board of Directors of the Corporation.
As used herein, the term "Reincorporated Predecessor" means a corporation that
--------------------------
is merged with and into the Corporation in a statutory merger where (a) the
Corporation is the surviving corporation of such merger; (b) the primary purpose
of such merger is to change the corporate domicile of the Reincorporated
Predecessor to Delaware.
Section 6.2: Advance of Expenses. The Corporation shall pay all
----------- -------------------
expenses (including attorneys' fees) incurred by such a director or officer in
defending any such proceeding as they are incurred in advance of its final
disposition; provided, however, that if the Delaware General Corporation Law
then so requires, the payment of such expenses incurred by such a director or
officer in advance of the final disposition of such proceeding shall be made
only upon delivery to the Corporation of an undertaking, by or on behalf of such
director or officer, to repay all amounts so advanced if it should be determined
ultimately that such director or officer is not entitled to be indemnified under
this Article VI or otherwise; and provided, further, that the Corporation shall
-------- -------
not be required to advance any expenses to a person against whom the Corporation
directly brings a claim, in a proceeding, alleging that such person has breached
his or her duty of loyalty to the Corporation, committed an act or omission not
in good faith or that involves intentional misconduct or a knowing violation of
law, or derived an improper personal benefit from a transaction.
Section 6.3: Non-Exclusivity of Rights. The rights conferred on any
----------- -------------------------
person in this Article VI shall not be exclusive of any other right that such
person may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, Bylaw, agreement, vote or consent of stockholders
or disinterested directors, or otherwise. Additionally, nothing in this Article
VI shall limit the ability of the Corporation, in its discretion, to indemnify
or advance expenses to persons whom the Corporation is not obligated to
indemnify or advance expenses pursuant to this Article VI.
Section 6.4: Indemnification Contracts. The Board of Directors is
----------- -------------------------
authorized to cause the Corporation to enter into indemnification contracts with
any director, officer, employee or agent of the Corporation, or any person
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, including employee benefit plans, providing indemnification rights
to such person. Such rights may be greater than those provided in this Article
VI.
Section 6.5: Effect of Amendment. Any amendment, repeal or
----------- -------------------
modification of any provision of this Article VI shall be prospective only, and
shall not adversely affect any right or protection conferred on a person
pursuant to this Article VI and existing at the time of such amendment, repeal
or modification.
-11-
<PAGE>
ARTICLE VII
NOTICES
Section 7.1: Notice. Except as otherwise specifically provided herein
----------- ------
or required by law, all notices required to be given pursuant to these Bylaws
shall be in writing and may in every instance be effectively given by hand
delivery (including use of a delivery service), by depositing such notice in the
mail, postage prepaid, or by sending such notice by prepaid telegram, telex,
overnight express courier, mailgram or facsimile. Any such notice shall be
addressed to the person to whom notice is to be given at such person's address
as it appears on the records of the Corporation. The notice shall be deemed
given (i) in the case of hand delivery, when received by the person to whom
notice is to be given or by any person accepting such notice on behalf of such
person, (ii) in the case of delivery by mail, upon deposit in the mail, (iii) in
the case of delivery by overnight express courier, on the first business day
after such notice is dispatched, and (iv) in the case of delivery via telegram,
telex, mailgram, or facsimile, when dispatched.
Section 7.2: Waiver of Notice. Whenever notice is required to be
----------- ----------------
given under any provision of these bylaws, a written waiver of notice, signed by
the person entitled to notice, whether before or after the time stated therein,
shall be deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting at the beginning of the meeting to
the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders, directors or members of a
committee of directors need be specified in any written waiver of notice.
ARTICLE VIII
INTERESTED DIRECTORS
Section 8.1: Interested Directors; Quorum. No contract or transaction
----------- ----------------------------
between the Corporation and one or more of its directors or officers, or between
the Corporation and any other corporation, partnership, association or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board or committee thereof that authorizes
the contract or transaction, or solely because his, her or their votes are
counted for such purpose, if: (i) the material facts as to his, her or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board or committee
in good faith authorizes the contract or transaction by the affirmative votes of
a majority of the disinterested directors, even though the disinterested
directors be less than a quorum; (ii) the material facts as to his, her or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in
-12-
<PAGE>
good faith by vote of the stockholders; or (iii) the contract or transaction is
fair as to the Corporation as of the time it is authorized, approved or ratified
by the Board of Directors, a committee thereof, or the stockholders. Common or
interested directors may be counted in determining the presence of a quorum at a
meeting of the Board of Directors or of a committee which authorizes the
contract or transaction.
ARTICLE IX
MISCELLANEOUS
Section 9.1: Fiscal Year. The fiscal year of the Corporation shall be
----------- -----------
determined by resolution of the Board of Directors.
Section 9.2: Seal. The Board of Directors may provide for a corporate
----------- ----
seal, which shall have the name of the Corporation inscribed thereon and shall
otherwise be in such form as may be approved from time to time by the Board of
Directors.
Section 9.3: Form of Records. Any records maintained by the
----------- ---------------
Corporation in the regular course of its business, including its stock ledger,
books of account and minute books, may be kept on, or be in the form of,
magnetic tape, diskettes, photographs, microphotographs or any other information
storage device, provided that the records so kept can be converted into clearly
legible form within a reasonable time. The Corporation shall so convert any
records so kept upon the request of any person entitled to inspect the same.
Section 9.4: Reliance Upon Books and Records. A member of the Board
----------- -------------------------------
of Directors, or a member of any committee designated by the Board of Directors
shall, in the performance of his or her duties, be fully protected in relying in
good faith upon records of the Corporation and upon such information, opinions,
reports or statements presented to the Corporation by any of the Corporation's
officers or employees, or committees of the Board of Directors, or by any other
person as to matters the member reasonably believes are within such other
person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Corporation.
Section 9.5: Certificate of Incorporation Governs. In the event of
----------- ------------------------------------
any conflict between the provisions of the Corporation's Certificate of
Incorporation and Bylaws, the provisions of the Certificate of Incorporation
shall govern.
Section 9.6: Severability. If any provision of these Bylaws shall be
----------- ------------
held to be invalid, illegal, unenforceable or in conflict with the provisions of
the Corporation's Certificate of Incorporation, then such provision shall
nonetheless be enforced to the maximum extent possible consistent with such
holding and the remaining provisions of these Bylaws (including without
limitation, all portions of any section of these Bylaws containing any such
provision held to be invalid, illegal, unenforceable or in conflict with the
Certificate of Incorporation, that are not themselves invalid, illegal,
unenforceable or in conflict with the Certificate of Incorporation) shall remain
in full force and effect.
-13-
<PAGE>
ARTICLE X
AMENDMENT
Section 10.1: Amendments. Stockholders of the Corporation holding a
------------ ----------
majority of the Corporation's outstanding voting stock shall have the power to
adopt, amend or repeal Bylaws. To the extent provided in the Corporation's
Certificate of Incorporation, the Board of Directors of the Corporation shall
also have the power to adopt, amend or repeal Bylaws of the Corporation, except
insofar as Bylaws adopted by the stockholders shall otherwise provide.
-14-
<PAGE>
EXHIBIT 4.02
STOCKHOLDERS' AGREEMENT
THIS AGREEMENT, made as of this 1st day of June, 1989, by and among TSI
International Ltd., a Connecticut corporation with its principal office at 295
Westport Avenue, Norwalk, Connecticut ("Company"), and the persons listed on
Annex A attached hereto (such persons being hereinafter referred to collectively
as "Shareholders" and each individually as a "Shareholder"
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, each Shareholder is presently the owner of the outstanding
securities of the Company ("Securities") listed opposite such Shareholder's name
on Annex A attached hereto; and
WHEREAS, each Shareholder would like to grant to the Company, and then to
certain persons, a right of first refusal with respect to any securities of the
Company which the Shareholder proposes to sell or otherwise dispose of, and make
certain other agreements contained herein.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants, terms and conditions set forth herein, the parties hereby agree as
follows:
1. Restrictions on Sale. During the term of this Agreement, each
--------------------
Shareholder shall not sell, assign, dispose of, transfer, pledge, or hypothecate
any Securities, whether by operation of law or otherwise, except as expressly
permitted by this Agreement.
2. Right of First Refusal. If a Shareholder (the "Selling Shareholder")
----------------------
proposes to sell, assign, dispose of or otherwise transfer any Securities (the
"Offered Securities"), then the Selling Shareholder shall notify the Company,
and the Company shall notify each holder of 10% or more of the Company's
outstanding shares of stock on a fully diluted basis, assuming conversion of all
outstanding convertible securities and the exercise of all outstanding options
(each, a "Qualified Shareholder" and collectively, the "Qualified
Shareholders"), in writing (the "Notice"), setting forth in reasonable detail
the terms and conditions of the proposed disposition of such Securities (which
must be for cash or other consideration with readily ascertainable cash
<PAGE>
value) and the identity of the intended transferee (who must be a bona fide
independent third party offeree) and shall offer the Securities to the Company,
and then to the Qualified Shareholders, as provided hereinafter on the same
terms and conditions.
(a) Within thirty (30) days after receipt of the Notice, the Company
may elect to purchase all or part of the Offered Securities, at the price
and on the terms specified in the Notice. Such right to purchase shall be
exercised by written notice ("Company Exercise Notice") delivered or mailed
to the Selling Shareholder and to each Qualified Shareholder as provided in
Section 12 below, which notice shall specify the number of Offered
Securities elected to be purchased and the time, place and date for closing
of such purchase (which closing shall not be later than 30 days after the
date of the Company Exercise Notice) or that the Company has declined to
purchase all or a portion of the Offered Securities.
(b) If any of the Offered Securities are not to be purchased by the
Company pursuant to subsection (a) above (the "Unsold Securities"), the
Qualified Shareholders shall have the right to purchase all or a portion of
the Unsold Securities pro rata based on the number of shares of common
--- ----
stock of the Company ("Common Stock") held by each Qualified Shareholder
(assuming conversion of all outstanding convertible securities and the
exercise of all outstanding options) to the total number of shares of
Common Stock held by all Qualified Shareholders (assuming conversion of all
outstanding convertible securities and the exercise of all outstanding
options). Such right shall be exercised within the later of (i) ten (10)
business days after the receipt of the Company Exercise Notice delivered
pursuant to subsection (a) above, or (ii) if no Company Exercise Notice is
given, ten (10) business days after the expiration of the thirty (30)-day
period specified in subsection (a) above by written notice ("Shareholder
Exercise Notice") delivered or mailed to the Selling Shareholder as
provided in Section 12 below. The closing of such purchase shall take
place at the offices of the Company on the fifth (5th) business day
following the expiration of the ten (10) business day period specified
above. A Qualified
2
<PAGE>
Shareholder may also indicate in such notice a number of Unsold Securities
in excess of its pro rata share, determined as hereinabove provided, if
--------
any, that it would be willing to purchase if such remain unsold after
completion of the offering of Unsold Securities as hereinabove provided.
Any such remaining Unsold Securities shall be sold to those Qualified
Shareholders who requested to purchase them on a proportionate basis.
(c) On the date fixed for closing pursuant to subsection (a) or (b)
above, the Selling Shareholder shall deliver to the purchaser(s) the
certificates representing the Offered Securities sold to such purchaser(s),
free and clear of all liens and encumbrances (other than legends on share
certificates in respect of applicable securities laws and contractual
restrictions such as those set forth in this agreement) and properly
endorsed for transfer and each purchaser shall pay the purchase price for
the Offered Securities purchased by it by delivery of a check payable to
the Selling Shareholder.
(d) If all Offered Securities referred to in the Notice are not
elected to be purchased pursuant to subsections (a) and (b) above, the
Selling Shareholder may, luring the ninety (90)-day period following the
expiration of the ten (10)-day period provided for in subsection (b) above,
sell any remaining Offered Securities not so purchased to the proposed
transferee on the same terms as specified in the Notice. If the Selling
Shareholder shall not have sold such Offered Securities within such period
or the terms of sale shall have changed, the right provided hereunder shall
be deemed to be revived, and such Securities shall not be sold unless first
reoffered to the Company, and then to the Qualified Shareholders, in
accordance herewith.
3. Effectiveness of Agreement. (a) This Agreement shall be effective upon
--------------------------
the consummation of the sale and issuance by the Company of shares of its
preferred stock pursuant to the provisions of the Preferred Stock Purchase
Agreement (the "Preferred Stock Purchase Agreement"), dated as of June 1, 1989,
by and among the Company, Warburg, Pincus Capital Company, L.P. ("Warburg") and
Vanguard Atlantic Ltd. ("Vanguard") and shall remain in effect until the
consummation of the Initial Public Offering (as defined in Section 6 below);
provided,
3
<PAGE>
however, that the provisions of Section 6 hereof shall survive such Initial
Public Offering for the period specified therein. If the transactions
contemplated by the Preferred Stock Purchase Agreement are not consummated on or
prior to June 30, 1989, then this Agreement shall be terminated and be of no
force or effect.
(b) Notwithstanding the foregoing, the provisions of Sections 1 and 2
of this Agreement:
(i) shall terminate and be of no further force and effect as to any
Shareholder at such time as such Shareholder shall no longer own any
Securities;
(ii) shall not apply to a transfer of any Securities by a Shareholder
to its affiliate or, in the case of an individual Shareholder, either
during his or her lifetime or following his or her death by will or
intestacy, to such Shareholder's heirs, descendants or spouse, or any
custodian or trustee for the account of such Shareholder or such
Shareholder's heirs, descendants or spouse, or to such Shareholder by a
trustee or custodian for the account of such Shareholder or such
Shareholder's heirs, descendants or spouse; provided, however, that in each
such case all transferees shall receive and agree to hold such Securities
subject to the provisions of this Agreement, and there shall be no further
transfer of such Securities except in accordance herewith; and
(iii) shall not apply to any transfer of Securities by XIST LTD.
pursuant to exercise of an option to purchase such Securities under that
certain Stock Option Agreement, dated as of June 1, 1989, by and between
XIST LTD. and Warburg Pincus Capital Company, L.P. or to any transfer of
Securities between Warburg, Pincus Capital Company, L.P., XIST LTD. and
Vanguard Atlantic Ltd.
4. Legend. All certificates representing the Securities ;hall have
------
endorsed thereon the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
TERMS AND CONDITIONS OF A CERTAIN STOCKHOLDERS' AGREEMENT DATED AS OF
JUNE 1, 1989 AMONG TSI INTERNATIONAL LTD. AND ITS
4
<PAGE>
STOCKHOLDERS WHICH PROVIDES FOR, AMONG OTHER MATTERS, A RIGHT OF FIRST
REFUSAL ON THE SALE OF SUCH SECURITIES AND A LIMITATION ON RESALE OF
SUCH SECURITIES FOLLOWING A PUBLIC OFFERING OF THE COMPANY'S
SECURITIES. COPIES OF THE AGREEMENT MAY BE OBTAINED UPON WRITTEN
REQUEST TO THE SECRETARY OF TSI INTERNATIONAL LTD."
5. Dividends. If, during the term of this Agreement, there is a dividend
---------
of any security, stock split or other change in the character or amount of any
of the Company's outstanding securities, then in such event any and all new,
substituted or additional securities to which a Shareholder is entitled by
reason of his or her ownership of Securities shall, upon issuance, be
immediately subject to the provisions of this Agreement and shall be deemed
included in the term "Securities" for all purposes of this Agreement with the
same force and effect as the Securities presently subject to this Agreement and
with respect to which such new, substituted or additional securities where
distributed.
6. Public Offering Restrictions. Each Shareholder hereby agrees that, if
----------------------------
the underwriting agreement entered into by the Company and the underwriters of
such offering contains restrictions upon the sale of securities of the Company
other than those which are to be included in such offering, then for a period
commencing on the effective date of a distribution of shares of the Company's
common stock, or any security which is convertible into or exchangeable for
common stock, or any right, option or warrant to acquire common stock of the
Company in an underwritten public offering to the general public pursuant to a
registration statement filed with and declared effective by the Securities and
Exchange Commission pursuant to the Securities Act of 1933 (the "Initial Public
Offering") and ending one hundred fifty (150) days after such Initial Public
Offering, such Shareholder will not, directly or indirectly, sell, offer to sell
or otherwise dispose of any Securities other than any of such Shareholder's
Securities included in the Initial Public Offering. If in connection with the
Initial Public Offering the underwriters state in writing that they are
unwilling to include all of a Shareholder's Securities entitled to be included
therein because such inclusion will materially interfere with the orderly
5
<PAGE>
sale and distribution of the securities being offered by the Company, then the
number of Securities of the Shareholders entitled to be included will be reduced
pro rata on the basis of the number of shares owned by the Shareholders, or
- --- ----
there shall be no inclusion of such Securities in the registration statement and
proposed distribution, in accordance with the requirements of the underwriters.
7. Agreement of Shareholders. The Shareholders hereby agree to vote, when
-------------------------
properly submitted to them at a meeting properly convened, all Securities owned
by them entitled to vote thereat in favor of an amendment to the Certificate of
Incorporation of the Company: (a) increasing the number of authorized shares of
common stock of the Company to three million (3,000,000); (b) reclassifying all
outstanding shares of Class A Common Stock, par value $.01 per share, of the
Company, Class B Common Stock, par value $.01 per share, of the Company ("Class
B Stock") and Class C Common Stock, par value $.01 per share, of the Company
("Class C Stock") as Common Stock, par value $.01 per share, of the Company
("Common Stock"); (c) eliminating any and all preemptive rights which would
otherwise attach to such shares by reason of Section 33-343 of the Connecticut
Stock Corporation Act; and (d) authorizing the creation of the preferred stock
to be issued pursuant to the provisions of the Preferred Stock Purchase
Agreement. The Shareholders also hereby agree to waive any preemptive rights
under Section 33-343 of the Connecticut Stock Corporation Act with respect to
any Securities owned by them which would otherwise be triggered upon issuance by
the company of shares of its preferred stock pursuant to the provisions of the
Preferred Stock Purchase Agreement.
8. Exchange of Certificate. On or promptly after the date of approval of
-----------------------
the amendment to the Company's certificate of incorporation as provided in
Section 7 hereof, each Shareholder owning shares of Class A Stock, Class B Stock
or Class C Stock shall deliver to the Company all certificates representing such
shares of Class A Stock, Class B Stock and/or Class C Stock in exchange for
certificates representing the shares of Common Stock issuable upon
reclassification of such shares of Class A Stock, Class B Stock and/or Class C
Stock as provided in Section 7 above.
6
<PAGE>
9. Board of Directors. During the term of this Agreement, the Company and
------------------
each Shareholder agree that the number of persons constituting the Company's
Board of Directors shall not exceed seven (7) (subject to increase upon the
occurrence of an Event of Default, as defined in the Certificate of Designations
(as defined in the Preferred Stock Purchase Agreement)) and to use their best
efforts to cause two (2) persons to be designated by Warburg, two (2) persons to
be designated by Vanguard, one (1) person to be designated by XIST LTD. or an
affiliate of XIST LTD. to which XIST LTD. has transferred its shares, the Chief
Executive Officer of the Company and one (1) person to be designated by mutual
agreement of the Qualified Shareholders and management of the Company (the
"Qualified Shareholder Designee") to be elected to the Board of Directors of the
Company. Subject to the provisions of the Preferred Stock Purchase Agreement,
each shareholder agrees to vote all Securities entitled to vote for the election
of directors owned by such Shareholder in favor of the election of such
designees.
The Qualified Shareholders hereby appoint Bruce Coleman the initial
Qualified Shareholder Designee.
10. Further Assurances. The parties agree to execute such further
------------------
instruments and to take such further action as may reasonably be necessary to
carry out the purposes and intent of this Agreement.
11. Qualified Shareholders. The Company hereby agrees that each Qualified
----------------------
Shareholder shall be entitled to all of the rights granted to the Qualified
Investors (as defined in the Preferred Stock Purchase Agreement) under Sections
4, 5, 8 and 10 of the Preferred Stock Purchase Agreement so long as such
Shareholder remains a Qualified Shareholder.
12. Notices. All notices, requests, demands and other communications
-------
under this Agreement shall be in writing and shall be delivered personally,
telegraphed, telexed, sent by facsimile transmission against confirmed receipt,
by overnight delivery service or sent by certified, registered or express mail,
postage prepaid. Any such notice shall be deemed given when delivered
personally against a signed receipt, when telegraphed, telexed or sent by
7
<PAGE>
facsimile transmission or when received by overnight delivery service or, if
mailed, five days after the date of deposit in the United States mails, to the
Shareholder to be notified at such Shareholder's address of record set forth in
the books of the Company and to the Company at 295 Westport Avenue, Norwalk,
Connecticut 06856 or at such other address as the party to be notified may
specify by written notice to all other parties hereto.
13. Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of Connecticut as applied to agreements among
Connecticut residents entered into and to be performed entirely within the State
of Connecticut, and shall inure to the benefit of the successors and assigns of
the parties hereto and be binding upon their heirs, executors, administrators,
guardians, successors and assigns.
14. Entire Agreement: Amendment. This Agreement represents the entire
----------------------------
understanding of the parties with respect to the subject matter hereof and
supersedes all previous understandings, written or oral. This Agreement may
only be amended with the written consents of (a) the holders of a majority of
the outstanding shares of preferred stock issued pursuant to the Preferred Stock
Purchase Agreement and (b) the holders of at least sixty percent (60%) of the
outstanding shares of Common Stock, and no oral waiver or amendment shall be
effective under any circumstances whatsoever.
15. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
16. Fees. If any action at law or in equity is necessary to enforce or
----
interpret the terms of this Agreement, the prevailing party or parties shall be
entitled to reasonable attorney's fees, costs and necessary disbursements in
addition to any other relief to which such party or parties may be entitled.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.
TSI INTERNATIONAL LTD.
8
<PAGE>
By:/s/ Constance Galley
----------------------------------
Constance Galley,
President
Vanguard Atlantic Ltd.
By:/s/ Catherine Phillips
----------------------------------
Vice President
Warburg, Pincus Capital Company, L.P.
By: Warburg, Pincus & Co.,
General Partner
By:/s/ Jeff Horing
--------------------------------
, Partner
XIST LTD.
By:/s/ James Alberg
----------------------------------
/s/ Constance Galley
-------------------------------------
CONSTANCE GALLEY
/s/ John Klein
-------------------------------------
JOHN KLEIN
/s/ Bruce Martin
-------------------------------------
BRUCE MARTIN
/s/ Victor Sample
-------------------------------------
VICTOR SAMPLE
9
<PAGE>
/s/ Dennis Bonagura
--------------------------------------
DENNIS BONAGURA
/s/ Joan Chase
--------------------------------------
JOAN CHASE
/s/ Kristin Garrison
--------------------------------------
KRISTIN GARRISON
/s/ James Monks
--------------------------------------
JAMES MONKS
Steven Rosen
--------------------------------------
STEVEN ROSEN
/s/ Marie Sadler
--------------------------------------
MARIE SADLER
/s/ David Stefano
--------------------------------------
DAVID STEFANO
/s/ Karen Zmijewski
--------------------------------------
KAREN ZMIJEWSKI
/s/ Lori Bonitata
--------------------------------------
LORI BONITATA
/s/ Mindy Difllippo
--------------------------------------
MINDY DIFILLIPPO
/s/ George Greenburg
--------------------------------------
GEORGE GREENBERG
/s/ Melvin Lipetz
--------------------------------------
MELVIN LIPETZ
10
<PAGE>
/s/ Jo Myall
--------------------------------------
JO MYALL
/s/ Jeffrey Picerno
--------------------------------------
JEFFREY PICERNO
/s/ Janet Hardy
--------------------------------------
JANET HARDY
/s/ Robert Magnano
--------------------------------------
ROBERT MAGNANO
/s/ Charles Rose
--------------------------------------
CHARLES ROSE
/s/ Agela Seeman
--------------------------------------
ANGELA SEEMAN
--------------------------------------
NORMAN SELLERS
/s/ Deborah Strilowich
--------------------------------------
DEBORAH STRILOWICH
/s/ Felice Werwin
--------------------------------------
FELICE WERWIN
/s/ John Barilla
--------------------------------------
JOHN BARILLA
/s/ Richard Glazer
--------------------------------------
RICHARD GLAZER
--------------------------------------
JAMES GOSHORN
11
<PAGE>
1991 PREFERRED STOCK PURCHASE AGREEMENT
---------------------------------------
This 1991 Preferred Stock Purchase Agreement (the "Agreement"), dated as of
the 30th day of April, 1991, by and among TSI International Ltd., a Connecticut
corporation (the "Company"), and the investors listed on Schedule A hereto
(collectively, the "Investors").
W I T N E S S E T H :
- - - - - - - - - - -
WHEREAS, the Company desires to issue and sell to the Investors shares of
Series A Preferred Stock of the Company (the "Preferred Shares");
WHEREAS, the Investors desire to purchase the Preferred Shares from the
Company; and
WHEREAS, the Company and certain of the Investors are parties to a
Preferred Stock Purchase Agreement dated as of the 1st day of June, 1989 (the
"1989 Agreement");
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, the parties hereby agree as follows:
1. Purchase and Sale of Preferred Shares.
-------------------------------------
1.1. Sale of Preferred Shares. Upon receipt by the Company of the
------------------------
purchase price, the Company hereby issues and sells to each Investor, and each
Investor hereby purchases from the Company, the number of Preferred Shares set
forth opposite such Investor's name on Schedule A hereto.
1.2 Purchase Price. The purchase price being paid by the Investors
--------------
for the Preferred Shares is $13.39 per share. The purchase price will be paid by
noon, New York time, on May 7, 1991, by wire transfer of same-day funds or
delivery to the Company of a cashier's check in the amount set opposite each
Investor's name on Schedule A.
<PAGE>
2. Representations and Warranties of the Company.
---------------------------------------------
The Company hereby represents and warrants to the Investors as follows:
2.1. Organization. The Company is a corporation duly organized,
------------
validly existing and in good standing under the laws of the State of
Connecticut. The Company has all requisite corporate power and authority and
holds all licenses, permits and other required authorizations from governmental
authorities necessary to conduct its business as it is now being conducted or as
proposed to be conducted and to own or lease the properties and assets it now
owns or holds under lease.
2.2. Charter Documents. The Company has heretofore delivered to
-----------------
counsel for the Investors true, correct and complete copies of the Company's
Certificate of Incorporation and By-Laws, each as in full force and effect on
June 5, 1989. There have not been any changes made to such Certificate of
Incorporation or By-Laws since June 5, 1989.
2.3. Capitalization. As of the date hereof, the Company's authorized
--------------
capitalization consists of 3,000,000 shares of Common Stock, par value $.01 per
share, and 750,000 shares of Preferred Stock, par value $.01 per share, of which
934,000 and 297,405 shares, respectively, are outstanding. The issuance of the
Preferred Shares and of the shares of Common Stock issuable upon conversion of
the Preferred Shares (the "Conversion Shares") pursuant to the provisions of
this Agreement have been duly and validly authorized. No further approval or
authorization of the shareholders or the directors of the Company or of any
governmental authority or agency will be required for the issuance and sale of
the Preferred Shares as contemplated by this Agreement. A true and complete
list of the holders of all issued and outstanding equity securities of the
Company on the date hereof, including the number of securities owned by each
such holder, is set forth on Schedule 2.3 attached hereto. Except pursuant to
the 1989 Agreement, no shareholder of the Company or any other person is
entitled to any preemptive rights with respect to the purchase or sale of any
securities by the Company.
2
<PAGE>
When issued and sold to the Investors, the Preferred Shares will be duly and
validly issued, fully paid and non-assessable, will be free and clear of any
liens, pledges or encumbrances and will have the designations, preferences and
relative, participating, optional and other special rights as set forth in the
Company's Certificate of Incorporation. The Conversion Shares, when issued and
delivered upon conversion of the Preferred Shares, will be duly and validly
issued, fully paid and non-assessable. Except as set forth on Schedule 2.3
attached hereto, there are not outstanding options, warrants or other rights,
commitments or arrangements, written or oral, to which the Company is a party or
by which it is bound, to purchase or otherwise acquire any authorized but
unissued shares of capital stock of the Company or any security directly or
indirectly convertible into or exchangeable or exercisable for any capital stock
of the Company.
2.4. Compliance with Other Instruments. The Company is not in
---------------------------------
violation of this Certificate of Incorporation or By-Laws. Neither the sale of
the Preferred Shares (or the issuance and delivery of the Conversion Shares),
the execution and delivery of this Agreement, nor the fulfillment of the terms
set forth in this Agreement and the consummation of the transactions
contemplated by this Agreement, will: (i) conflict with or constitute a breach
of, or constitute a default under or an event which, with or without notice or
lapse of time or each, would be a breach of or default under or violation of the
Certificate of Incorporation or By-Laws of the Company or would be a breach of
or default under or violation of any material agreement, document, indenture,
mortgage or other instrument or undertaking by which the Company is bound or to
which any of its properties are subject, or would be a material violation of any
law, administrative regulation, judgment, order or decree applicable to the
Company; (ii) result in the creation or imposition of any material lien, charge
or encumbrance upon any property or assets of the Company; (iii) result in the
loss of any material license, certificate, legal privilege or legal right
enjoyed or possessed by the Company; (iv) give any party to any material
agreement to which the Company is a party a right of termination; or (v) except
as
3
<PAGE>
provided for in this Agreement, require the consent of any other person or
entity under any agreement, indenture, mortgage, document or other instrument or
undertaking by which the Company is bound or to which any of its properties are
subject.
2.5. Authorization. The Company has the full corporate power and
-------------
authority to enter into this Agreement and to perform all of its obligations
hereunder. The execution, delivery and performance of the terms of this
Agreement by the Company have been duly authorized by all necessary corporate
action. This Agreement constitutes a legal, valid and binding obligation of the
Company enforceable in accordance with its terms. The Company, in light of its
business or proposed business, does not require any consent, approval,
authorization or order of, or declaration, filing or registration with, any
court or governmental or regulatory agency or board in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby.
2.6. Compliance with the Securities Act. Based upon the
----------------------------------
representations of the Investors set forth herein, and assuming the truth of
such representations, the offer, sale and issuance of the Preferred Shares (and
the issuance and delivery of the Conversion Shares) are exempt from the
registration requirements of the Securities Act of 1933.
2.7. Reservation of Common Stock. The Company shall reserve and keep
---------------------------
available out of its authorized but unissued Common Stock the number of shares
of Common Stock required for issuance upon the conversion of all of the
Preferred Shares (including any additional shares of Common Stock which may
become so issuable by reason of the operation of anti-dilution provisions of the
Preferred Shares).
3. Representations, Warranties and Covenants of the Investors. Each
----------------------------------------------------------
Investor hereby severally represents and warrants to, and agrees with, the
Company as follows:
4
<PAGE>
3.1. Investment Intent. Each Investor is acquiring the Preferred
-----------------
Shares (and any Conversion Shares) for its own account and not with a present
view to, or for sale in connection with, any distribution thereof in violation
of the Securities Act of 1933. Each Investor consents to the placement of the
following legend on each certificate representing the Preferred Shares and on
each certificate representing the Conversion Shares:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE
TRANSFERRED OR SOLD UNLESS (i) A REGISTRATION STATEMENT
UNDER SUCH ACT IS THEN IN EFFECT WITH RESPECT THERETO, (ii)
A WRITTEN OPINION FROM COUNSEL FOR THE ISSUER OF MESSRS.
STROOCK & STROOCK & LAVAN OR OTHER COUNSEL FOR THE HOLDER
REASONABLY ACCEPTABLE TO THE ISSUER HAS BEEN OBTAINED TO THE
EFFECT THAT NO SUCH REGISTRATION IS REQUIRED OR (iii) A 'NO
ACTION' LETTER OR ITS THEN EQUIVALENT HAS BEEN ISSUED BY THE
STAFF OF THE SECURITIES AND EXCHANGE COMMISSION WITH RESPECT
TO SUCH TRANSFER OR SALE."
3.2. Restricted Securities. Each Investor understands that the
---------------------
Preferred Shares (and any Conversion Shares) have not been registered under the
Securities Act of 1933 for the reason that the sale provided for in this
Agreement is exempt pursuant to Section 4 of the Securities Act of 1933 and that
the reliance of the Company on such exemption is predicated in part on such
Investor's representations set forth herein. Each Investor represents that it is
experienced in evaluating companies such as the Company, is able to fend for
itself, has such knowledge and experience in financial and business matters as
to be capable of evaluating the merits and risks of its investment, and has the
ability to suffer the total loss of its investment. Such Investor was not formed
solely for the purpose of investing in the Company. Each Investor further
represents that it has had access during the course of the transaction and prior
to its purchase of the Preferred Shares to such information relating to the
Company as it has desired and that it has had
5
<PAGE>
the opportunity to ask questions of and receive answers from the Company
concerning the terms and conditions of the offering and to obtain additional
information (to the extent the Company possessed such information or could
acquire it without unreasonable effort or expense) necessary to verify the
accuracy of any information furnished to it or to which it had access.
Each Investor understands that the Preferred Shares (and any Conversion
Shares) may not be sold, transferred or otherwise disposed of without
registration under the Securities Act of 1933 or an exemption therefrom and that
in the absence of an effective registration statement covering the Preferred
Shares (or the Conversion Shares) or an available exemption from registration
under the Securities Act of 1933, the Preferred Shares (and any Conversion
Shares) must be held indefinitely. The benefits of Rule 144 promulgated under
the Securities Act of 1933 are not presently available, the Company has not
covenanted to make the benefits of such Rule available, and the Company has no
present plans to make the benefits of such Rule available.
4. Deliveries of the Company. On May 7, 1991, as a condition to the
-------------------------
Investors' obligation to pay the purchase price, the Company will deliver to the
Investors the following:
(a.) an opinion of counsel to the Company, Fenwick & West,
addressed to the Investors, in form and substance satisfactory to the Investors
and to counsel to the Investors, Stroock & Stroock & Lavan;
(b.) copies of the resolutions adopted by the Company's Board of
Directors authorizing the execution, delivery and performance of this Agreement
and the transactions contemplated hereby;
(c.) a certificate, dated as of a recent date, of the Secretary
of State of Connecticut attesting as to the good standing of the Company in such
State;
(d.) a stock certificate registered in the name of such Investor
representing the Preferred Shares purchased by such Investor; and
6
<PAGE>
(e.) a certificate signed by the President of the Company that
the representations and warranties in Section 2 are true and correct as of May
7, 1991.
5. 1989 Agreement.
--------------
(a) All references in the 1989 Agreement to Preferred Shares
shall be deemed to refer also to the Preferred Shares issued to the Investors
hereunder, and such Preferred Shares and the holders thereof shall be entitled
to all the rights and benefits of holders of Preferred Shares under the 1989
Agreement, including, but not limited to, the benefits of Sections 4, 5, 8 and
10 of the 1989 Agreement. Section 14.8 of the 1989 Agreement is hereby amended
to include as Registrable Securities all Preferred Shares and Conversion Shares
issued pursuant to this Agreement. The Investors hereby waive the provisions of
Sections 5.6 and 10 of the 1989 Agreement, and consent pursuant to Section 6(b)
of the Certificate of Incorporation, to the extent necessary to permit the
issuance of the Preferred Shares hereunder and the issuance of Options (as
defined in said Section 10) for employees, directors or consultants to purchase
up to 28,940 additional shares of Common Stock in addition to those provided for
in said Section 5.6.
(b) Each Investor hereunder which is not a party to the
Stockholders' Agreement dated as of June 1, 1989 by and among the Company and
its shareholders, as amended (the "Stockholders Agreement"), hereby agrees to
become a party to, and to be bound by all the provisions of, such agreement as
if such Investor was a Shareholder as defined in such agreement.
(c) Pursuant to Section 14 of the Stockholders Agreement, the
Investors, constituting the holders of a majority of the Company's outstanding
Preferred Stock and the holders of at least 60% of the Company's outstanding
Common Stock, amend the Stockholders Agreement to add the following to the last
sentence of Section 7 thereof: "and of that certain 1991 Preferred Stock
Purchase Agreement among the Company and certain investors."
7
<PAGE>
6. Expenses.
--------
The Company agrees to pay and save the Investors harmless against
liability for the payment of, the reasonable fees and expenses of Stroock &
Stroock & Lavan, counsel for the Investors, arising in connection with the
negotiation, execution and consummation of this Agreement and the transactions
contemplated hereby.
7. No Brokers.
----------
Each of the Company, on the one hand, and the Investors, on the other
hand, represents and warrants to the other that there was no broker or finder
connected with this Agreement or the transactions contemplated hereby. In the
event of a claim by any broker or finder based upon his representing or being
retained by the Investors, the Investors agree to indemnify and save harmless
the Company in respect of such claim. In the event of a claim by any broker or
finder based upon his representing or being retained by the Company the Company
agrees to indemnify and save harmless the Investors in respect of such claim.
8. Survival of Representations.
---------------------------
All representations, warranties, covenants and agreements contained in
this Agreement or in any document, exhibit, schedule or certificate delivered in
connection herewith shall survive the execution and delivery of this Agreement
and any investigation at any time made by the Investors or on their behalf for a
period of six months from the date hereof.
9. Miscellaneous Provisions.
------------------------
9.1. Constructions and Enforcement. This Agreement shall be
-----------------------------
governed by, and construed and enforced in accordance with, the internal laws of
the State of New York without giving any effect to principles of conflicts of
laws. The Company agrees that it will not assert against any limited partner of
any Investor, in such person's role as a limited partner, any claim it may have
under this Agreement by reason of any failure or alleged failure by any Investor
to meet its obligations hereunder.
8
<PAGE>
9.2. Notices. All notices hereunder shall be in writing and shall be
-------
deemed to have been given at the time when mailed by certified mail, addressed
to the address below stated of the party to which notice is given, or to such
changed address as such party may have fixed by notice:
To the Company:
TSI International Ltd.
45 Danbury Road
Wilton, Connecticut 06897
Attn: Constance Galley, President
- with a copy to -
Fenwick & West
Two Palo Alto Square
Palo Alto, California 94306
Attn: Mark C. Stevens
To the Investors:
To the addresses set forth on Schedule A
- with a copy to -
Stroock & Stroock & Lavan
7 Hanover Square
New York, New York 10004
Attn: Martin H. Neidell
provided, however, that any notice of change of address shall be effective only
upon receipt.
9.3. Assignment. This Agreement shall be binding upon and inure to
----------
the benefit of the Company, the Investors and the respective successors and
permitted assigns of the Investors. The Company may not assign any of its
rights or obligations under this Agreement without the prior written consent of
the Investors. The Investors may assign all or any part of their respective
rights and obligations hereunder. A person to whom all or a part of the
Investor's rights are assigned shall become a party to this Agreement, entitled
to all the rights and benefits hereunder. The rights and powers of the
Investors
9
<PAGE>
hereunder are granted to the Investors as owners of the Preferred Shares and the
Conversion Shares, if any. Any subsequent owner of any Preferred Shares or
Conversion Shares, whether becoming such by transfer, assignment, operation of
law or otherwise, shall be deemed to be an Investor hereunder, shall have the
same rights and powers which an Investor owning the same number of shares has
hereunder, and shall be entitled to exercise them in full and no transfer or
assignment shall divest such Investor or any subsequent owner of such rights and
powers until such Investor or subsequent owner no longer owns any Preferred
Shares or any Conversion Shares; provided, that no such transferee shall be
entitled to the benefits of Sections 4, 5, 8 or 10 of the 1989 Agreement unless
such transferee is also a Qualified Investor as defined therein.
9.4. Amendments and Waivers. This Agreement and all exhibits and
----------------------
schedules hereto set forth the entire understanding of the parties with respect
to the transactions contemplated hereby. This Agreement may be amended, the
Company may take any action herein prohibited or omit to take action herein
required to be performed by it, and any breach of or compliance with any
covenant, agreement, warranty or representation may be waived, only if the
Company has obtained the written consent or waiver of the holders of not less
than 50% of the issued and outstanding Preferred Shares and Conversion Shares.
9.5. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
9.6 Headings. The headings in this Agreement are for reference purposes
--------
only and shall not constitute a part hereof.
9.7 Additional Investors. The persons or entities listed on Schedule B
--------------------
(the "Additional Investors") shall have the right for a period of 60 days from
the date hereof, to acquire up to an additional number of Preferred Shares set
forth opposite their names on the same terms as contained herein. If such right
is exercised, the Additional
10
<PAGE>
Investors shall execute this Agreement in counterparts and shall be deemed for
all purposes to be, and shall become and be considered as, an Investor as
defined in this Agreement. To the extent that the Additional Investors purchase
the additional shares after 45 days from the date hereof but on or before the
expiration of the 60-day period, the Additional Investors agree to pay to TSI,
in addition to the purchase price for the additional shares, an amount specified
by TSI for late closing costs not to exceed $5,625. If the Additional Investors
do not purchase all of such shares by the expiration of such 60-day period, then
Warburg, Pincus Capital Company, L.P. and Vanguard Atlantic Ltd. or affiliates
thereof shall have the right, but not the obligation, to purchase on a pro-rata
basis (based upon their relative as-converted share ownership in the Company)
any such shares not so purchased by the Additional Investors for a period of up
to ten days after the expiration of such 60-day period. Warburg, Pincus Capital
Company. L.P. and Vanguard Atlantic Ltd. or affiliates thereof may also indicate
when they exercise the foregoing rights a number of additional Preferred Shares
in excess of their pro-rata share, if any, that they would be willing to
purchase if such remain unsold and any unsold shares shall be sold to them on a
pro-rata basis. In the event any such Preferred Shares are purchased under this
Section 9.7, the Company will deliver a stock certificate registered in the name
of such Investor representing the Preferred Shares purchased by such Investor on
the date thereof.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first above written.
[THE REMAINDER OF THIS PAGE LEFT BLANK INTENTIONALLY.]
11
<PAGE>
TSI INTERNATIONAL LTD.
By: /s/Constance F. Galley
-------------------------------
Constance F. Galley, President
INVESTORS:
WARBURG, PINCUS CAPITAL COMPANY, L.P.
By: Warburg, Pincus & Co.,
General Partner
By: /s/William Janeway
-------------------------------
Partner
VANGUARD ATLANTIC LTD.
By: /s/Ernest Keet
-------------------------------
[NO EXHIBITS OR SCHEDULES ARE ATTACHED]
12
<PAGE>
SUPPLEMENT TO 1991 PREFERRED STOCK PURCHASE AGREEMENT
Supplement dated as of July 16, 1991 to 1991 Preferred Stock Purchase
Agreement, dated as of April 30, 1991 (the "1991 Agreement"), by and among TSI
International Ltd., a Connecticut Corporation, and the investors listed on
Schedule A to the 1991 Agreement (the "Investors").
WI T N E S S E T H :
--------------------
WHEREAS, the Company and the Investors desire to supplement the provisions
of the 1991 Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, the parties hereby agree as follows:
1. Definitions. Terms defined in the 1991 Agreement shall have the same
-----------
meaning when used herein.
2. Additional Purchase. In accordance with the provisions of Section 9.7
-------------------
of the 1991 Agreement, Information Partners Capital Fund, L.P. ("IP") hereby
purchases from the Company 37,342 Preferred Shares and by this Supplement is
deemed to have executed the 1991 Agreement and for all purposes is, and shall be
considered as, an Investor under the 1991 Agreement.
3. Qualified Investor. So long as IP owns any Preferred Shares of the
------------------
Company, IP shall be deemed a Qualified Investor and a Qualified Shareholder (as
defined in the Stockholders Agreement).
4. Priority. The Company and the Investors agree that (a) the Preferred
--------
Shares purchased pursuant to the 1991 Agreement (including those purchased by IP
pursuant to this Supplement) (the "Senior Preferred Shares") will be identical
in all respects with the Preferred Shares purchased pursuant to the 1989
Agreement (the "Junior Preferred Shares") except that the Senior Preferred
Shares shall be senior to the Junior Preferred Shares in the event of the
voluntary
<PAGE>
of involuntary liquidation, dissolution or winding up of the Company or the
sale, lease, conveyance or other disposition of all or substantially all of the
Company's property and business and (b) when the Company consummates the sale of
more than 5% of its equity securities or securities convertible into, or
exercisable or exchangeable for, more than 5% of its equity securities, the
Company and the Investors will use their best efforts to amend the Company's
certificate of incorporation to provide for the creation of Senior Preferred
Shares and Junior Preferred Shares in accordance with the provisions of
subparagraph (a) above.
5. Miscellaneous. Except as supplemented hereby, the 1991 Agreement
-------------
remains unmodified and in full force and effect.
6. Counterparts. This Supplement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
[THE REMAINDER OF THIS PAGE LEFT BLANK INTENTIONALLY.]
2
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Supplement as of the
day and year first above written.
TSI INTERNATIONAL LTD.
By:/s/ Constance Galley
--------------------------------
Constance F. Galley, President
WARBURG, PINCUS CAPITAL COMPANY, L.P.
By: Warburg, Pincus & Co.,
General Partner
By:/s/ William Janeway
-------------------------------
Partner
VANGUARD ATLANTIC LTD.
By:/s/ Ernest Keet
-------------------------------
INFORMATION PARTNERS CAPITAL FUND, L.P.
By:/s/ Stephen Pagliuro
-------------------------------
By:/s/ Constance Galley
-------------------------------
CONSTANCE F. GALLEY
3
<PAGE>
1992 PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
AND
AMENDMENT TO 1989 PREFERRED STOCK PURCHASE AGREEMENT
AND
STOCKHOLDERS' AGREEMENT
This 1992 Preferred Stock and Warrant Purchase Agreement and Amendment
to 1989 Preferred Stock Purchase Agreement and Stockholders' Agreement (the
"Agreement"), dated as of the 10th day of June, 1992 (the "Closing Date"), is
entered into by and among TSI International Ltd., a Connecticut corporation (the
"Company"), and the investors listed on Schedule A hereto who execute this
Agreement (collectively, the "Investors").
W I T N E S S E T H:
-------------------
WHEREAS, the Company has amended its Certificate of Incorporation, as
provided in the Certificate Amending Certificate of Incorporation filed with the
Connecticut Secretary of State on June 5, 1992 attached hereto as Exhibit 1
("Certificate of Amendment"), to provide for the conversion of 115,761 shares of
its Series A Convertible Preferred Stock (the "Series A Stock) into 115,761
shares of Series B Convertible Preferred Stock (the "Series B Stock"), to
authorize the issuance of 725,000 shares of Series C Convertible Preferred Stock
(the "Series C Stock") and to authorize 500,000 shares of undesignated Preferred
Stock;
WHEREAS, the Company has further amended its Certificate of
Incorporation, as provided in the Certificate of Amendment Adopted by Resolution
of the Board of Directors filed with the Connecticut Secretary of State on June
9, 1992, attached hereto as Exhibit 2 ("Series D Certificate"), to designate and
authorize the issuance of 344,469 shares of Preferred Stock as Series D
Convertible Preferred Stock (the "Series D Stock");
WHEREAS, the Company desires to issue and sell to the Investors shares
of Series C Stock of the Company (the "Preferred Shares") and warrants in the
form attached hereto as Exhibit
<PAGE>
3 (the "Warrants") to purchase shares of Series D Stock (the Preferred Shares
and the Warrants are collectively referred to herein as the "Securities");
WHEREAS, the Investors desire to purchase the Securities from the
Company; and
WHEREAS, the Company and certain of the Investors are parties to a
Preferred Stock Purchase Agreement dated as of the 1st day of June, 1989, as
amended (the "1989 Agreement"), which agreement will be amended by this
Agreement, and a 1991 Preferred Stock Purchase Agreement dated as of April 30,
1991 and supplemented by a Supplement to 1991 Preferred Stock Purchase Agreement
dated as of July 16, 1991 (collectively, the "1991 Agreement");
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the parties hereby agree as follows:
1. Purchase and Sale of Units.
---------------------------
1.1. Sale of Units. Upon receipt by the Company of the
--------------
purchase price therefor, the Company hereby issues and sells to each Investor,
and each Investor hereby purchases from the Company, in one or more closings as
provided herein, the number of Units set forth opposite such Investor's name on
Schedule A hereto, where a "Unit" is one Preferred Share and a Warrant to
purchase one Exercise Share, as defined below.
1.2. Purchase Price. The purchase price being paid by the
---------------
Investors for the Securities together is $6.00 per Unit. Except as provided in
Section 1.3 below, the Investors listed on Schedule A will pay by noon Eastern
Time, on the Closing Date, by wire transfer of same-day funds or delivery to the
Company of a cashier's check, the amount set forth opposite each Investor's name
on Schedule A (the "Purchase Price").
1.3. Supplemental Closing. If XIST Ltd. or another Dun &
---------------------
Bradstreet affiliate ("Dun & Bradstreet Affiliate") does not purchase the
Securities listed on Schedule A opposite the name "Dun & Bradstreet Affiliate"
(the "Supplemental Securities") by noon Eastern Time on the Closing Date, then
Vanguard Atlantic Ltd. and Warburg, Pincus Capital Company,
-2-
<PAGE>
L.P. (the "Supplemental Investors") will have the right to purchase, at the
Purchase Price specified above, pro rata according to their Common Stock
equivalent interest in the Company prior to
-3-
<PAGE>
the Closing Date, such Supplemental Securities. In the event that either
Supplemental Investor does not purchase its pro rata share of the Supplemental
Securities, the other Supplemental Investor may purchase the remaining shares of
Supplemental Securities not subscribed for by such Supplemental Investor. The
purchase and sale of the Supplemental Securities must occur no later than noon
Eastern Time on June 17, 1992 (the "Supplemental Closing") and any Supplemental
Securities purchased at the Supplemental Closing will be Securities for all
purposes under this Agreement. It shall not be a condition precedent to the
Investors' obligations hereunder to purchase their respective Securities on the
Closing Date that a Dun & Bradstreet Affiliate purchase the Supplemental
Securities.
2. Representations and Warranties of the Company. The Company hereby
----------------------------------------------
represents and warrants to the Investors as follows effective as of the Closing
Date.
2.1. Organization. The Company is a corporation duly
-------------
organized, validly existing and in good standing under the laws of the State of
Connecticut. Except as set forth in Schedule 2.1, the Company has all requisite
corporate power and authority and holds all licenses, permits and other required
authorizations from governmental authorities necessary to conduct its business
as it is now being conducted or as proposed to be conducted and to own or lease
the properties and assets it now owns or holds under lease.
2.2. Charter Documents. The Company has heretofore delivered
------------------
to counsel for the Investors true, correct and complete copies of the Company's
Certificate of Incorporation and By-Laws, each as in full force and effect on
the Closing Date.
2.3. Capitalization. As of the date hereof, the Company's
---------------
authorized capitalization consists of 3,888,166 shares of Common Stock, par
value $.01 per share, of which 938,229 shares are outstanding; and 1,638,166
shares of Preferred Stock, par value $.01 per share, of which 297,405 shares
have been designated Series A Convertible Preferred Stock, all of which are
outstanding, 115,761 shares have been designated Series B Convertible Preferred
Stock, all of which are outstanding, 725,000 shares have been designated Series
C Preferred Stock, none of which are outstanding, 344,469 shares have been
designated as Series D Convertible Preferred
-4-
<PAGE>
Stock, none of which are outstanding, and 155,531 shares remain undesignated and
unissued. The issuance of the Securities and of the shares of Series D Stock
issuable upon exercise of the Warrants (the "Exercise Shares") and the Common
Stock issuable upon conversion of the Preferred Shares and Exercise Shares
(collectively, the "Conversion Shares") pursuant to the provisions of this
Agreement have been duly and validly authorized. No further approval or
authorization of the shareholders or the directors of the Company or of any
governmental authority or agency will be required for the issuance and sale of
the Securities as contemplated by this Agreement. Schedule 2.3 attached hereto
is a list of the aggregate number of outstanding securities of the Company.
Except pursuant to the 1989 Agreement and the 1991 Agreement, no shareholder of
the Company or any other person is entitled to any preemptive rights with
respect to the purchase or sale of any securities by the Company. When issued
and sold to the Investors, the Preferred Shares and Exercise Shares will be duly
and validly issued, fully paid and non-assessable, will be free and clear of any
liens, pledges or encumbrances and will have the designations, preferences and
relative, participating, optional and other special rights as set forth in the
Company's Certificate of Incorporation. The Conversion Shares, when issued and
delivered upon conversion of the Preferred Shares and Exercise Shares, will be
duly and validly issued, fully paid and non-assessable. Except as set forth on
Schedule 2.3 attached hereto, there are no outstanding options, warrants or
other rights, commitments or arrangements, written or oral, to which the Company
is a party or by which it is bound, to purchase or otherwise acquire any
authorized but unissued shares of capital stock of the Company or any security
directly or indirectly convertible into or exchangeable or exercisable for any
capital stock of the Company.
2.4. Compliance with Other Instruments. Except as set forth in
----------------------------------
Schedule 2.4, to the Company's best knowledge, the Company is not in material
default in the performance of any material obligation, agreement, instrument or
undertaking to which it is a party or by which it is bound. The Company is not
in violation of its Certificate of Incorporation or By-Laws. Neither the sale
of the Preferred Shares or Exercise Shares (or the issuance and delivery of the
Conversion Shares), the execution and delivery of this Agreement, nor the
fulfillment of the terms set forth in
-5-
<PAGE>
this Agreement and the consummation of the transactions contemplated by this
Agreement, will: (i) conflict with or constitute a breach of, or constitute a
default under or an event which, with or without notice or lapse of time or
each, would be a breach of or default under or violation of the Certificate of
Incorporation or By-Laws of the Company or would be a breach of or default under
or violation of any material agreement, document, indenture, mortgage or other
instrument or undertaking by which the Company is bound or to which any of its
properties are subject, or would be a material violation of any law,
administrative regulation, judgment, order or decree applicable to the Company;
(ii) result in the creation or imposition of any material lien, charge or
encumbrance upon any property or assets of the Company; (iii) result in the loss
of any material license, certificate, legal privilege or legal right enjoyed or
possessed by the Company; (iv) give any party to any material agreement to which
the Company is a party a right of termination; or (v) except as provided for in
this Agreement, require the consent of any other person or entity under any
agreement, indenture, mortgage, document or other instrument or undertaking by
which the Company is bound or to which any of its properties are subject.
2.5. Authorization. The Company has the full corporate power
--------------
and authority to enter into this Agreement and to perform all of its obligations
hereunder. The execution, delivery and performance of the terms of this
Agreement by the Company have been duly authorized by all necessary corporate
action. This Agreement constitutes a legal, valid and binding obligation of the
Company enforceable in accordance with its terms. The Company, in light of its
business or proposed business, does not require any consent, approval,
authorization or order of, or declaration, filing or registration with, any
court or governmental or regulatory agency or board in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby.
2.6. Compliance with the Securities Act. Based upon the
-----------------------------------
representations of the Investors set forth herein, and assuming the truth of
such representations, the offer, sale and issuance of the Securities and
Exercise Shares (and the issuance and delivery of the Conversion Shares) are
exempt from the registration requirements of the Securities Act of 1933.
-6-
<PAGE>
2.7. Reservation of Common Stock. The Company shall reserve
----------------------------
and keep available out of its authorized but unissued Common Stock the number of
shares of Common Stock required for issuance upon the conversion of all of the
Preferred Shares and Exercise Shares (including any additional shares of Common
Stock which may become so issuable by reason of the operation of anti-dilution
provisions of the Preferred Shares and the Exercise Shares).
2.8. Litigation. Except as set forth on Schedule 2.8 attached
----------
hereto, there is not now pending, and to the best knowledge of the Company there
is not threatened in writing, any litigation, action, suit or proceeding: (i)
to which the Company is or will be a party in or before or by any court or
governmental or regulatory agency or body; or (ii) to which any of the officers
or employees of the Company is or will be a party in or before or by any court
or governmental or regulatory agency or body, concerning termination by such
person of his or her employment with any of such person's former employers. In
addition to the foregoing, there is no judgment, decree, injunction, rule or
order of any court, governmental department, commission, agency, instrumentality
or arbitrator outstanding against the Company having any material adverse effect
on the business or proposed business or operations, properties, assets or
condition, financial or otherwise, of the Company.
2.9. Compliance with Law. The Company is in compliance in all
-------------------
material respects with all applicable statutes and regulations of the United
States and of all states, municipalities and agencies in respect of the conduct
of its business.
2.10. Financial Statements. Attached hereto as Schedule 2.10
--------------------
are the audited balance sheets of the Company at April 30, 1991, and the related
statements of income and retained earnings and changes in financial position,
including the notes thereto, of the Company for the periods then ended, and the
unaudited balance sheet of the Company at March 31, 1992 and the related
statements of income for the period then ended. The financial statements
referred to above have been prepared in conformity with generally accepted
accounting principles consistently applied subject in the case of the interim
statements to normal year-end audit adjustments, and each balance
-7-
<PAGE>
sheet fairly presents the financial condition of the Company as of its date and
each statement of income fairly presents the results of operations of the
Company for the period covered thereby.
3. Representations, Warranties and Covenants of the Investors. Each
-----------------------------------------------------------
Investor hereby severally represents and warrants to, and agrees with, the
Company as follows effective as of the delivery of the Purchase Price and the
exercise of the Warrants:
3.1. Investment Intent. Each Investor is acquiring the
------------------
Securities and Exercise Shares (and any Conversion Shares) for its own account
and not with a present view to, or for sale in connection with, any distribution
thereof in violation of the Securities Act of 1933. Each Investor consents to
the placement of the following legend on each certificate representing the
Preferred Shares, on each certificate representing the Exercise Shares, on each
certificate representing the Conversion Shares and/or each Warrant:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED
OR SOLD UNLESS (i) A REGISTRATION STATEMENT UNDER SUCH ACT IS
THEN IN EFFECT WITH RESPECT THERETO, (ii) A WRITTEN OPINION
FROM COUNSEL FOR THE ISSUER OR MESSRS. STROOCK & STROOCK &
LAVAN OR OTHER COUNSEL FOR THE HOLDER REASONABLY ACCEPTABLE
TO THE ISSUER HAS BEEN OBTAINED TO THE EFFECT THAT NO SUCH
REGISTRATION IS REQUIRED OR (iii) A 'NO ACTION' LETTER OR ITS
THEN EQUIVALENT HAS BEEN ISSUED BY THE STAFF OF THE
SECURITIES AND EXCHANGE COMMISSION WITH RESPECT TO SUCH
TRANSFER OR SALE."
3.2. Restricted Securities. Each Investor understands that the
----------------------
Securities and Exercise Shares (and any Conversion Shares) have not been
registered under the Securities Act of 1933 for the reason that the sale
provided for in this Agreement is exempt pursuant to Section 4 of the Securities
Act of 1933 and that the reliance of the Company on such exemption is predicated
in part on such Investor's representations set forth herein. Each Investor
represents that it is experienced in evaluating companies such as the Company,
is able to fend for itself, has such knowledge and experience in financial and
business matters as to be capable of evaluating the
-8-
<PAGE>
merits and risks of its investment, and has the ability to suffer the total loss
of its investment. Such Investor was not formed solely for the purpose of
investing in the Company. Each Investor further represents that it has had
access during the course of the transaction and prior to its purchase of the
Securities and Exercise Shares to such information relating to the Company as it
has desired and that it has had the opportunity to ask questions of and receive
answers from the Company concerning the terms and conditions of the offering and
to obtain additional information (to the extent the Company possessed such
information or could acquire it without unreasonable effort or expense)
necessary to verify the accuracy of any information furnished to it or to which
it had access.
Each Investor understands that the Securities and Exercise Shares (and
any Conversion Shares) may not be sold, transferred or otherwise disposed of
without registration under the Securities Act of 1933 or an exemption therefrom
and that in the absence of an effective registration statement covering the
Securities and Exercise Shares (or the Conversion Shares) or an available
exemption from registration under the 1933 Act, the Securities and the Exercise
Shares (and any Conversion Shares) must be held indefinitely. The benefits of
Rule 144 promulgated under the Securities Act of 1933 are not presently
available, the Company has not covenanted to make the benefits of such Rule
available, and the Company has no present plans to make the benefits of such
Rule available.
4. Deliveries of the Company. On the Closing Date, as a condition
-------------------------
to the Investors' obligation to pay the Purchase Price provided under Section
1.2 hereof, the Company will deliver to the Investors executing this Agreement
the following:
(a) an opinion of counsel to the Company, Fenwick & West,
addressed to the Investors, in form and substance satisfactory to the Investors
and to counsel to the Investors, Stroock & Stroock & Lavan;
(b) copies of the resolutions adopted by the Company's Board
of Directors authorizing the execution, delivery and performance of this
Agreement and the transactions contemplated hereby;
-9-
<PAGE>
(c) a certificate, dated as of a recent date, of the Secretary
of State of Connecticut attesting as to the good standing of the Company in such
State;
(d) a stock certificate registered in the name of such
Investor representing the Preferred Shares purchased by such Investor in
consideration of the Purchase Prise therefor;
(e) a Warrant in the Investor's name to purchase the number of
Exercise Shares set forth opposite each Investor's name on Schedule A;
(f) a certificate signed by the President or Vice President of
the Company that the representations and warranties in Section 2 are true and
correct as of the Closing Date; and
(g) a copy of the Certificate of Amendment and the Series D
Certificate.
5. Deliveries of the Company Upon Supplemental Closing. As a
------------------------------------------- -------
condition to the obligations of the Supplemental Investors participating in the
Supplemental Closing to pay the Purchase Price for the Supplemental Securities
purchased in the Supplemental Closing, the Company will deliver to the
Supplemental Investors a stock certificate registered in the name of each such
Supplemental Investor representing the Preferred Shares purchased by such
Supplemental Investor in the Supplemental Closing and a Warrant in the
Supplemental Investor's name to purchase the number of Exercise Shares equal to
the number of Preferred Shares purchased by the Supplemental Investor in the
Supplemental Closing.
6. 1989 Agreement and Stockholders Agreement.
------------------------------------------
(a) The 1989 Agreement is hereby amended so that all
references to Preferred Shares and Conversion Shares in Sections 4, 5, 8, 10 and
14 of the 1989 Agreement shall be deemed to refer also to the Series B Stock
issued in connection with the conversion of 115,761 shares of Series A Stock
purchased in 1991, into 115,761 shares of Series B Stock.
(b) The holders of Preferred Shares purchased hereunder, the
Exercise Shares, the Conversion Share and the Series B Stock shall be entitled
to all the rights and benefits of holders of Preferred Shares under Sections 4,
5, 8 and 10 of the 1989 Agreement, provided that
-10-
<PAGE>
with respect to the provisions of Sections 5.6, 8 and 10 of the 1989 Agreement
and any consents under the 1989 Agreement requiring the consent of the holders
of a majority of the Series A Stock, the Preferred Shares sold hereunder and the
Exercise Shares issuable upon exercise of the Warrants will participate pari
passu as a single class with the shares of the Series A Stock sold under the
1989 Agreement and the shares of the Series B Stock sold under the 1991
Agreement on an as-converted to Common Stock basis. Section 14.8 of the 1989
Agreement is hereby amended to include as Registrable Securities all Series B
Stock, Preferred Shares, Exercise Shares and Conversion Shares issued pursuant
to this Agreement or upon exercise of the Warrants. The Investors that are
holders of Series A Stock and Series B Stock, on behalf of themselves as holders
of a majority of the outstanding Series A Stock and Series B Stock, hereby waive
the provisions of Sections 5.6 and 10 of the 1989 Agreement, and consent,
pursuant to Section III(6)(b) of the Certificate of Amendment, to the extent
necessary to permit the issuance of the Securities hereunder and the Exercise
Shares upon issuance of the Warrants.
(c) Each Investor hereunder which is not a party to the
Stockholders' Agreement dated as of June 1, 1989 by and among the Company and
its shareholders, as amended (the "Stockholders' Agreement"), hereby agrees to
become a party to, and to be bound by all the provisions of, such agreement as
if such Investor was a Shareholder as defined in the Stockholders' Agreement.
(d) Pursuant to Section 14 of the Stockholders' Agreement, the
Investors, constituting the holders of a majority of the Company's outstanding
Preferred Stock and the holders of at least 60% of the Company's outstanding
Common Stock, amend the Stockholders' Agreement to: (i) add the following to
the last sentence of Section 7 thereof: "and of that certain 1992 Preferred
Stock and Warrant Purchase Agreement and Amendment to 1989 Stock Purchase
Agreement and Stockholders' Agreement among the Company and certain investors
and the exercise of the warrants purchased thereunder"; (ii) add each Investor
who is not a party to the Stockholders' Agreement and the Preferred Shares,
Warrants and Exercise Shares to Annex A
-11-
<PAGE>
thereto; and (iii) provide that the definition of "Securities" includes all
securities received in exchange for or upon conversion, exercise or in
replacement of the Securities listed on Schedule A.
(e) The Investors, on behalf of themselves as holders of Series A
Stock and Series B Stock, hereby waive their right to receive any additional
shares of Common Stock upon any conversion of their Series A Stock or Series B
Stock as a result of the application of Section 4(g) of the Certificate of
Amendment to the issuance of the Securities hereunder or the Exercise Shares
upon exercise of the Warrants.
7. Expenses.
---------
The Company agrees to pay and save the Investors harmless against
liability for the payment of, the reasonable fees and expenses of Stroock &
Stroock & Lavan, counsel for the Investors, arising in connection with the
negotiation, execution and consummation of this Agreement and the transactions
contemplated hereby.
8. No Brokers.
-----------
Each of the Company, on the one hand, and the Investors, on the other
hand, represents and warrants to the other that there was no broker or finder
connected with this Agreement or the transactions contemplated hereby. In the
event of a claim by any broker or finder based upon his representing or being
retained by the Investors, the Investors agree to indemnify and save harmless
the Company in respect of such claim. In the event of a claim by any broker or
finder based upon his representing or being retained by the Company the Company
agrees to indemnify and save harmless the Investors in respect of such claim.
9. Survival of Representations.
----------------------------
All representations, warranties, covenants and agreements contained in
this Agreement or in any document, exhibit, schedule or certificate delivered in
connection herewith shall survive the execution and delivery of this Agreement
and any investigation at any time made by the Investors or on their behalf for a
period of six months from the date hereof.
10. Miscellaneous Provisions.
-------------------------
-12-
<PAGE>
10.1. Construction and Enforcement. This Agreement shall be
-----------------------------
governed by, and construed and enforced in accordance with, the internal laws of
the State of New York without giving any effect to principles of conflicts of
laws. The Company agrees that it will not assert against any limited partner of
any Investor, in such person's role as a limited partner, any claim it may have
under this Agreement by reason of any failure or alleged failure by any Investor
to meet its obligations hereunder.
10.2. Notices. All notices hereunder shall be in writing and
--------
shall be deemed to have been given at the time when mailed by certified mail,
addressed to the address below stated of the party to which notice is given, or
to such changed address as such party may have fixed by notice:
TO THE COMPANY:
TSI International Ltd.
45 Danbury Road
Wilton, Connecticut 06897
Attn: Constance Galley, President
-WITH A COPY TO
Fenwick & West
Two Palo Alto Square
Palo Alto, California 94306
Attn: Mark C. Stevens
TO THE INVESTORS:
To the addresses set forth on Schedule A
-WITH A COPY TO
Stroock & Stroock & Lavan
7 Hanover Square
New York, New York 10004
Attn: Martin H. Neidell
provided, however, that any notice of change of address shall be effective only
upon receipt.
-13-
<PAGE>
10.3. Assignment. This Agreement shall be binding upon and inure
----------
to the benefit of the Company, the Investors and the respective successors and
permitted assigns of the Investors. The Company may not assign any of its rights
or obligations under this Agreement without the prior written consent of the
Investors. The Investors may assign all or any part of their respective rights
and obligations hereunder. A person to whom all or a part of the Investor's
rights are assigned shall become a party to this Agreement, entitled to all the
rights and benefits hereunder. The rights and powers of the Investors hereunder
are granted to the Investors as owners of the Securities, the Exercise Shares
and the Conversion Shares, if any. Any subsequent owner of any Securities,
Exercise Shares or Conversion Shares, whether becoming such by transfer,
assignment, operation of law or otherwise, shall be deemed to be an Investor
hereunder, shall have the same rights and powers which an Investor owning the
same number of shares has hereunder, and shall be entitled to exercise them in
full and no transfer or assignment shall divest such Investor or any subsequent
owner of such rights and powers until such Investor or subsequent owner no
longer owns any Securities, Exercise Shares or any Conversion Shares; provided,
that no such transferee shall be entitled to the benefits of Sections 4, 5, 8 or
10 of the 1989 Agreement unless such transferee is also a Qualified Investor as
defined therein.
10.4. Amendments and Waivers. This Agreement and all exhibits
-----------------------
and schedules hereto set forth the entire understanding of the parties with
respect to the transactions contemplated hereby. This Agreement may be amended,
the Company may take any action herein prohibited or omit to take action herein
required to be performed by it, and any breach of or compliance with any
covenant, agreement, warranty or representation may be waived, only if the
Company has obtained the written consent or waiver of the holders of not less
than 50% of the issued and outstanding Preferred Shares, Exercise Shares and
Conversion Shares.
10.5. Counterparts. This Agreement may be executed in one or
-------------
more counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
-14-
<PAGE>
10.6. Headings. The headings in this Agreement are for reference
---------
purposes only and shall not constitute a part hereof.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.
TSI INTERNATIONAL LTD.
By: /s/ Constance Galley
---------------------------------
INVESTORS:
WARBURG, PINCUS CAPITAL COMPANY, L.P.
By: Warburg, Pincus & Co.,
General Partner
By: /s/ William Janeway
---------------------------------
Partner
VANGUARD ATLANTIC LTD.
By: /s/ Ernest Keet
---------------------------------
DUN & BRADSTREET AFFILIATE:
XIST LTD.
-------------------------------------
By: /s/ James Alberg
---------------------------------
CONSTANCE F. GALLEY
/s/ Constance Galley
-------------------------------------
RICHARD BANKOSKY
/s/ Richard Bankosky
-------------------------------------
-15-
<PAGE>
TED WATSON
/s/ Ted Watson
-------------------------------------
JAMES WATTS
/s/ James Watts
-------------------------------------
PAUL LEMME
/s/ Paul Lemme
-------------------------------------
-16-
No exhibits or schedules attached
<PAGE>
FIRST AMENDMENT TO
1992 PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
AND AMENDMENT TO 1989 PREFERRED STOCK
PURCHASE AGREEMENT AND STOCKHOLDERS' AGREEMENT
This Amendment is entered into as of August 10, 1992 among TSI
International Ltd., a Connecticut corporation (the "Company") and the parties
listed on the signature page hereto.
WITNESSETH:
WHEREAS, the parties listed on the signature page hereto under the heading
"Shareholders" (the "Shareholders") are parties to that certain 1992 Preferred
Stock and Warrant Purchase Agreement and Amendment to 1989 Preferred Stock
Purchase Agreement and Stockholders' Agreement dated as of June 10, 1992 (the
"Purchase Agreement"), which amended the Preferred Stock Purchase Agreement
dated as of June 1, 1989, as amended (the "1989 Agreement");
WHEREAS, the Company desires to sell, and FSC Corp. (the "Bank") desires to
purchase, 20,000 shares (the "Preferred Shares") of the Company's Series C
Convertible Preferred Stock (the "Series C Stock") and warrants (the "Warrants")
to purchase 20,000 shares (the "Exercise Shares") of the Company's Series D
Convertible Preferred Stock (the "Series D Stock") pursuant to the terms and
conditions of the Purchase Agrement, as amended by this Amendment (the Preferred
Shares and Warrants being collectively referred to herein as the "Securities");
WHEREAS, the Company's Board of Directors has amended the Company's
Certificate of Incorporation to increase the number of authorized shares of
Series D Stock to 364,469, as set forth in the Amendment to Certificate of
Incorporation Adopted by the Board of Directors of TSI International Ltd.
attached hereto as Exhibit 1 (the "Amendment to Certificate"); and
WHEREAS, the Company and the Shareholders, which constitute holders of more
than 50% of the issued and outstanding shares of Series C Stock for the purposes
of Section 10.4 of the Purchase Agreement, desire to add the Bank as a party to
the Purchase Agreement and to the Stockholders' Agreement dated as of June 1,
1989 (the "Stockholders' Agreement").
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, the parties hereby agree as follows:
1. Amendments.
----------
1.1 Purchase Agreement. the Comapny and the Shareholders hereby
------------------
amend the Purchase Agreement, and consent to the corresponding amendment of the
Stockholders' Agreement and 1989 Agreement, as provided in the Purchase
Agreement, to provide as follows: (a) the Bank is added as, and shall be
deemedn, an "Investor" under the Purchase Agreement and, as set forth in the
Purchase Agreement, and the sale of the Securities hereunder shall be deemed to
have been sales of such Securities under the Purchase Agreement; (c) the
Preferred Shares shall be deemed to be "Preferred Shares" under the Purchase
Agreement; (d) the Warrants shall be deemed to be "Warrants" under the Purchase
Agreement; and (e) the Bank will be deemed a "Qualifed Investor" for the
purposes of Sections 4 (other than the first sentence of Section 4.10), 5 and 8
of the 1989 Agreement.
1.2 Stockholders' Agreement. Pursuant to Section 14 of the
-----------------------
St5ockholders' Agreement, the Shareholders, constituting the holders of a
majority of the Company's outstanding Preferred Stock and the holders of at
least 60% of the Company's outstanding Common Stock, amend the Stockholders'
Agreement to add the following to the last sentence of Section 7 thereof: ", as
amended by the First Amendment to 1992 Preferred Stock Purchase Agreement and
Amendment to 1989 Preferred Stock Purchase Agreement and Stockholders'
Agreement, dated as of Ausgust 10, 1992".
2. Purchase and Sale of Securities.
-------------------------------
2.1 Sale of Securities. Upon receipt by the Company of the purchase
------------------
price therefor, the Company hereby issues and sells to the Bank, and the Bank
hereby purchases from the Company, the Securities. The closing (the "Closing")
of the transactions contemplated hereby will occur at 10:00 a.m. local time on
August 10, 1992 (the "Closing Date") at the offices of the Company or at such
other time and place as the Bank and the Company shall agree.
2.2 Purchse Price. The purchase price being paid by the Bank for the
-------------
Securities together is $6.00 per Unit, where a "Unit" is one Preferred Share and
a Warrant to purchase one share of Series D Stock. The Bank will pay by noon
Eastern Time, on the Closing Date, by wire transfer of same-day funds or
delivery to the Company of a cashier's check, $120,000 (the "Purchase Price") as
payment for the Securities.
2.3 Delivery. As a condition to the obligations of the Bank to pay
--------
the Purchase Price for the Securities:
(i) The Amendment to Certificate shall have been filed with the
Connecticut Secretary of State;
(ii) the Company will deliver to the Bank a stock certificate
registered in the name of the Bank representing the
Preferred Shares;
(iii) the Company will deliver to the Bank a Warrant in the
Bank's name to purchase the Exercise Shares;
(iv) the Company will deliver to the Bank a certificate signed
by the President or Vice President of the Company that the
representations and warranties in Section 3.1 hereof are
true and correct as of the Closing Date; and
(v) Fenwick & West, counsel to the Company, will deliver to the
Bank an opinion in the form attached hereto as Exhibit 3.
3. Representations and Warranties.
------------------------------
3.1 Company Representations and Warranties. The Company hereby
--------------------------------------
represents and warrants to the Bank that the representations and warranties of
the Company set forth in Section 2 of the Purchase Agreement, except as set
forth on Exhibit 2 hereto, are true and correct as of the date hereof and will
be true and correct as of the Closing.
3.2 Bank Representations and Warranties. The Bank hereby represents
-----------------------------------
and warrants to the Company that the representations and warranties of the Bank
set forth in Section 3 of the Purchase Agreement, are true and correct as of the
date hereof and will be true and correct as of the Closing.
4. Agreement to Be Bound.
---------------------
The Bank hereby agrees to become a party to, and to be bound by all
the provisions of, the Purchase Agreement, as an "Invesetor," as defined in such
agreement, and the Stockholders' Agreement, as a "Shareholder," as defined in
such agreement.
5. Waiver of Preemptive Rights.
---------------------------
The Shareholders, as holders of more than 50% of the company's Series
A convertible Preferred Stock, the Company's Series B Convertible Preferred
Stock, and the Series C Stock, on behalf of themselves and all other holders of
such securities, hereby agree to waive the right of first refusla of Section 10
of the 1989 Agreement with respect to the Securities sold hereunder.
6. Limitation of Amendment.
-----------------------
Except as expresssly provided herein, the Purchase Agreement and the
Stockholders' Agreement shall remain in full force and effect in accordance with
their terms.
7. Counterparts.
------------
This Amendment may be executed in one or more counterparts, each of
which shall be deemed an original, and all of which together shall be deemed to
constitute but one instrument.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the
day and year first above written.
TSI INTERNATIONAL LTD. SHAREHOLDERS:
By: /s/ Richard Bankosky Warburg, Pincus Capital Company, L.P.
FSC Corp. By: Warburg, Pincus & Co.,
General Partner
By: /s/ Jay Massimo
By: /s/ William Janeway
-------------------
Partner
Vanguard Atlantic Ltd.
By: /s/ Ernest Keet
----------------
Information Partners
By: /s/ Stephen Pagliuca
--------------------
/s/ Constance Galley
--------------------
/s/ Richard Bankosky
--------------------
/s/ Ted Watson
--------------
/s/ Paul Lemme
--------------
<PAGE>
1993 PREFERRED STOCK PURCHASE AGREEMENT
AND
AMENDMENT TO 1989 PREFERRED STOCK PURCHASE AGREEMENT
AND
STOCKHOLDERS' AGREEMENT
This 1993 Preferred Stock Purchase Agreement and Amendment to 1989
Preferred Stock Purchase Agreement and Stockholders' Agreement (the
"Agreement"), dated as of the 2nd day of September, 1993 (the "Closing Date"),
is entered into by and among TSI International Ltd., a Connecticut corporation
(the "Company"), and the investors listed on Schedule A hereto who execute this
Agreement (collectively, the "Investors").
W I T N E S S E T H:
-------------------
WHEREAS, the Company desires to issue and sell to the Investors shares of
its Series C Convertible Preferred Stock (the "Preferred Shares"); and
WHEREAS, the Investors desire to purchase the Preferred Shares from the
Company; and
WHEREAS, the Company and certain of the Investors are parties to a
Preferred Stock Purchase Agreement dated as of the 1st day of June, 1989 (the
"1989 Agreement"), which agreement was amended by that certain 1992 Preferred
Stock and Warrant Purchase Agreement, as amended (the "1992 Agreement"), and
will be further amended by this Agreement, and a 1991 Preferred Stock Purchase
Agreement dated as of April 30, 1991 and supplemented by a Supplement to 1991
Preferred Stock Purchase Agreement dated as of July 16, 1991 (collectively, the
"1991 Agreement");
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, the parties hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
-------------------------------------
1.1. SALE OF PREFERRED SHARES. Upon receipt by the Company of the
------------------------
purchase price therefor, the Company hereby issues and sells to each Investor,
and each Investor hereby purchases from the Company, in one or more closings as
provided herein, the number of Preferred Shares set forth opposite such
Investor's name on Schedule A hereto.
1.2. PURCHASE PRICE. The purchase price being paid by the Investors
--------------
for the Preferred Shares is $6.00 per share. Except as provided in Section 1.3
below, the Investors listed on Schedule A will pay by noon Eastern Time, on the
Closing Date, by wire transfer of same-day funds or delivery to the Company of a
cashier's check, the amount set forth opposite each Investor's name on Schedule
A (the "Purchase Price").
<PAGE>
1.3. SUPPLEMENTAL CLOSING. If Dun & Bradstreet Divestiture, Inc.
--------------------
("DBDI") does not purchase the Preferred Shares listed on Schedule A hereto
opposite its name by noon Eastern Time on the Closing Date, then DBDI may
purchase, at the Purchase Price specified on Schedule A, such Preferred Shares
no later than noon Eastern Time on September 7, 1993 (the "Supplemental
Closing"), and any such shares purchased at the Supplemental Closing will be
Preferred Shares for all purposes under this Agreement.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
---------------------------------------------
represents and warrants to the Investors as follows effective as of the Closing
Date.
2.1. ORGANIZATION. The Company is a corporation duly organized,
------------
validly existing and in good standing under the laws of the State of
Connecticut. Except as set forth in Schedule 2.1, the Company has all requisite
corporate power and authority and holds all licenses, permits and other required
authorizations from governmental authorities necessary to conduct its business
as it is now being conducted or as proposed to be conducted and to own or lease
the properties and assets it now owns or holds under lease.
2.2. CHARTER DOCUMENTS. The Company has heretofore made available to
-----------------
the Investors true, correct and complete copies of the Company's Certificate of
Incorporation, as amended (the "Certificate of Incorporation") and By-Laws, each
as in full force and effect on the Closing Date.
2.3. CAPITALIZATION. As of the date hereof, the Company's authorized
--------------
capitalization consists of 3,888,166 shares of Common Stock, par value $.01 per
share, of which 938,229 shares are outstanding; and 1,638,166 shares of
Preferred Stock, par value $.01 per share, of which 297,405 shares have been
designated Series A Convertible Preferred Stock (the "Series A Stock"), all of
which are outstanding, 115,761 shares have been designated Series B Convertible
Preferred Stock (the "Series B Stock"), all of which are outstanding, 725,000
shares have been designated Series C Convertible Preferred Stock (the "Series C
Stock"), 364,369 shares of which are outstanding, 364,469 shares have been
designated as Series D Convertible Preferred Stock (the "Series D Stock"), none
of which are outstanding (but all of which are subject to exercisable warrants
held by certain of the Investors), and 135,531 shares remain undesignated and
unissued. The issuance of the Preferred shares and the Common Stock issuable
upon conversion of the Preferred Shares (the "Conversion Shares") pursuant to
the provisions of this Agreement have been duly and validly authorized. No
further approval or authorization of the shareholders or the directors of the
Company or of any governmental authority or agency will be required for the
issuance and sale of the Preferred Shares as contemplated by this Agreement.
Schedule 2.3 attached hereto is a list of the aggregate number of outstanding
securities of the Company. Except pursuant to the 1989 Agreement, the 1991
Agreement and the 1992 Agreement, no shareholder of the Company or any other
person is entitled to any preemptive rights with respect to the purchase or sale
of any securities by the Company. When issued and sold to the Investors, the
Preferred Shares will be duly and validly issued, fully paid and non-assessable,
will be free and clear of any liens, pledges or encumbrances and will have the
designations, preferences and relative, participating, optional and other
special rights as set forth in the Company's Certificate of Incorporation. The
Conversion Shares, when issued and delivered
2
<PAGE>
upon conversion of the Preferred Shares, will be duly and validly issued, fully
paid and non-assessable. Except as set forth on Schedule 2.3 attached hereto,
there are no outstanding options, warrants or other rights, commitments or
arrangements, written or oral, to which the Company is a party or by which it is
bound, to purchase or otherwise acquire any authorized but unissued shares of
capital stock of the Company or any security directly or indirectly convertible
into or exchangeable or exercisable for any capital stock of the Company.
2.4. COMPLIANCE WITH OTHER INSTRUMENTS. Except as set forth in
---------------------------------
Schedule 2.4, to the Company's best knowledge, the Company is not in material
default in the performance of any material obligation, agreement, instrument or
undertaking to which it is a party or by which it is bound. The Company is not
in violation of its Certificate of Incorporation or By-Laws. Neither the sale of
the Preferred Shares (or the issuance and delivery of the Conversion Shares),
the execution and delivery of this Agreement, nor the fulfillment of the terms
set forth in this Agreement and the consummation of the transactions
contemplated by this Agreement, will: (i) conflict with or constitute a breach
of, or constitute a default under or an event which, with or without notice or
lapse of time or each, would be a breach of or default under or violation of the
Certificate of Incorporation or By-Laws of the Company or would be a breach of
or default under or violation of any material agreement, document, indenture,
mortgage or other instrument or undertaking by which the Company is bound or to
which any of its properties are subject, or would be a material violation of any
law, administrative regulation, judgment, order or decree applicable to the
Company; (ii) result in the creation or imposition of any material lien, charge
or encumbrance upon any property or assets of the Company; (iii) result in the
loss of any material license, certificate, legal privilege or legal right
enjoyed or possessed by the Company; (iv) give any party to any material
agreement to which the Company is a party a right of termination; or (v) except
as provided for in this Agreement, require the consent of any other person or
entity under any agreement, indenture, mortgage, document or other instrument or
undertaking by which the Company is bound or to which any of its properties are
subject.
2.5. AUTHORIZATION. The Company has the full corporate power and
-------------
authority to enter into this Agreement and to perform all of its obligations
hereunder. The execution, delivery and performance of the terms of this
Agreement by the Company have been duly authorized by all necessary corporate
action. This Agreement constitutes a legal, valid and binding obligation of the
Company enforceable in accordance with its terms. The Company, in light of its
business or proposed business, does not require any consent, approval,
authorization or order of, or declaration, filing or registration with, any
court or governmental or regulatory agency or board in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby.
2.6. COMPLIANCE WITH THE SECURITIES ACT. Based upon the
----------------------------------
representations of the Investors set forth herein, and assuming the truth of
such representations, the offer, sale and issuance of the Preferred Shares (and
the issuance and delivery of the Conversion Shares) are exempt from the
registration requirements of the Securities Act of 1933.
2.7. RESERVATION OF COMMON STOCK. The Company shall reserve and keep
---------------------------
available out of its authorized but unissued Common Stock the number of shares
of Common
3
<PAGE>
Stock required for issuance upon the conversion of all of the Preferred Shares
(including any additional shares of Common Stock which may become so issuable by
reason of the operation of anti-dilution provisions of the Preferred Shares).
2.8. LITIGATION. Except as set forth on Schedule 2.8 attached hereto,
----------
there is not now pending, and to the best knowledge of the Company there is not
threatened in writing, any litigation, action, suit or proceeding: (i) to which
the Company is or will be a party in or before or by any court or governmental
or regulatory agency or body; or (ii) to which any of the officers or employees
of the Company is or will be a party in or before or by any court or
governmental or regulatory agency or body, concerning termination by such person
of his or her employment with any of such person's former employers. In
addition to the foregoing, there is no judgment, decree, injunction, rule or
order of any court, governmental department, commission, agency, instrumentality
or arbitrator outstanding against the Company having any material adverse effect
on the business or proposed business or operations, properties, assets or
condition, financial or otherwise, of the Company.
2.9. COMPLIANCE WITH LAW. To its knowledge, the Company is in
-------------------
compliance in all material respects with all applicable statutes and regulations
of the United States and of all states, municipalities and agencies in respect
of the conduct of its business.
2.10. FINANCIAL STATEMENTS. Attached hereto as Schedule 2.10 are the
--------------------
audited balance sheets of the Company at April 30, 1992, and the related
statements of income and retained earnings and changes in financial position,
including the notes thereto, of the Company for the periods then ended, and the
unaudited balance sheet of the Company at April 30, 1993 and the related
statements of income for the period then ended. The financial statements
referred to above have been prepared in conformity with generally accepted
accounting principles consistently applied subject in the case of the interim
statements to normal year-end audit adjustments, and each balance sheet fairly
presents the financial condition of the Company as of its date and each
statement of income fairly presents the results of operations of the Company for
the period covered thereby.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTORS. Each
----------------------------------------------------------
Investor hereby severally represents and warrants to, and agrees with, the
Company as follows effective as of the delivery of the Purchase Price:
3.1. INVESTMENT INTENT. Each Investor is acquiring the Preferred
-----------------
Shares (and any Conversion Shares) for its own account and not with a present
view to, or for sale in connection with, any distribution thereof in violation
of the Securities Act of 1933. Each Investor consents to the placement of the
following legend on each certificate representing the Preferred Shares and on
each certificate representing the Conversion Shares:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED OR SOLD UNLESS (i) A
REGISTRATION STATEMENT UNDER SUCH ACT IS THEN IN EFFECT WITH RESPECT
THERETO, (ii) A
4
<PAGE>
WRITTEN OPINION FROM COUNSEL FOR THE ISSUER OR COUNSEL FOR THE HOLDER
REASONABLY ACCEPTABLE TO THE ISSUER HAS BEEN OBTAINED TO THE EFFECT
THAT NO SUCH REGISTRATION IS REQUIRED OR (iii) A 'NO ACTION' LETTER OR
ITS THEN EQUIVALENT HAS BEEN ISSUED BY THE STAFF OF THE SECURITIES AND
EXCHANGE COMMISSION WITH RESPECT TO SUCH TRANSFER OR SALE."
3.2. RESTRICTED SECURITIES. Each Investor understands that the
---------------------
Preferred Shares (and any Conversion Shares) have not been registered under the
Securities Act of 1933 for the reason that the sale provided for in this
Agreement is exempt pursuant to Section 4 of the Securities Act of 1933 and that
the reliance of the Company on such exemption is predicated in part on such
Investor's representations set forth herein. Each Investor represents that it
is experienced in evaluating companies such as the Company, is able to fend for
itself, has such knowledge and experience in financial and business matters as
to be capable of evaluating the merits and risks of its investment, and has the
ability to suffer the total loss of its investment. Such Investor was not
formed solely for the purpose of investing in the Company. Each Investor
further represents that it has had access during the course of the transaction
and prior to its purchase of the Preferred Shares to such information relating
to the Company as it has desired and that it has had the opportunity to ask
questions of and receive answers from the Company concerning the terms and
conditions of the offering and to obtain additional information (to the extent
the Company possessed such information or could acquire it without unreasonable
effort or expense) necessary to verify the accuracy of any information furnished
to it or to which it had access.
Each Investor understands that the Preferred Shares (and any Conversion
Shares) may not be sold, transferred or otherwise disposed of without
registration under the Securities Act of 1933 or an exemption therefrom and that
in the absence of an effective registration statement covering the Preferred
Shares (or the Conversion Shares) or an available exemption from registration
under the 1933 Act, the Preferred Shares (and any Conversion Shares) must be
held indefinitely. The benefits of Rule 144 promulgated under the Securities
Act of 1933 are not presently available, the Company has not covenanted to make
the benefits of such Rule available, and the Company has no present plans to
make the benefits of such Rule available.
4. DELIVERIES OF THE COMPANY. On the Closing Date, as a condition to the
-------------------------
Investors' obligation to pay the Purchase Price provided under Section 1.2
hereof, the Company will deliver to the Investors executing this Agreement the
following:
(A) an opinion of counsel to the Company, Fenwick & West, addressed
to the Investors, in form and substance satisfactory to the Investors;
(B) copies of certified resolutions adopted by the Company's Board of
Directors authorizing the execution, delivery and performance of this Agreement
and the transactions contemplated hereby;
5
<PAGE>
(C) a stock certificate registered in the name of such Investor
representing the Preferred Shares purchased by such Investor in consideration of
the Purchase Price therefor; and
(D) a certificate signed by the President or Vice President of the
Company that the representations and warranties in Section 2 are true and
correct as of the Closing Date.
5. DELIVERIES OF THE COMPANY UPON SUPPLEMENTAL CLOSING. As a condition
---------------------------------------------------
to the obligations of DBDI to pay the Purchase Price for the Preferred Shares
purchased in the Supplemental Closing, if any, the Company will deliver to DBDI
all documents required to be delivered to the Investors on the Closing Date
pursuant to Section 4 hereof.
6. 1989 AGREEMENT AND STOCKHOLDERS AGREEMENT.
-----------------------------------------
(A) The holders of Preferred Shares purchased hereunder and the
Conversion Shares shall be entitled to all the rights and benefits of holders of
Preferred Shares under Sections 4, 5, 8 and 10 of the 1989 Agreement, provided
that with respect to the provisions of Sections 5.6, 8 and 10 of the 1989
Agreement and any consents under the 1989 Agreement requiring the consent of the
holders of a majority of the Series A Stock, Series B and Series C Stock, the
Preferred Shares sold hereunder will participate pari passu as a single class
with the shares of the Series A Stock sold under the 1989 Agreement, the shares
of the Series A Stock sold under the 1991 Agreement (and converted to Series B
Stock upon the effectiveness of the filing of the Company's Amended Certificate
of Incorporation on June 5, 1992), and the shares of Series C Stock sold under
the 1992 Agreement on an as-converted to Common Stock basis. Section 14.8 of the
1989 Agreement is hereby amended to include as Registrable Securities all
Preferred Shares and Conversion Shares issued pursuant to this Agreement. The
Investors that are holders of Series A Stock, Series B Stock and Series C Stock,
on behalf of themselves as holders of a majority of the outstanding Series A
Stock, Series B Stock and Series C Stock, hereby waive the provisions of
Sections 5.6 and 10 of the 1989 Agreement, and consent, pursuant to Section
III(6)(b) of the Certificate of Incorporation, to the extent necessary to permit
the issuance of the Preferred Shares hereunder.
(B) Each Investor hereunder which is not a party to the Stockholders'
Agreement dated as of June 1, 1989 by and among the Company and its
shareholders, as amended (the "Stockholders' Agreement"), hereby agrees to
become a party to, and to be bound by all the provisions of, such agreement as
if such Investor was a Shareholder as defined in the Stockholders' Agreement.
(C) Pursuant to Section 14 of the Stockholders' Agreement, the
Investors, constituting the holders of a majority of the Company's outstanding
Preferred Stock and the holders of at least 60% of the Company's outstanding
Common Stock, amend the Stockholders' Agreement to: (i) add the following to
the last sentence of Section 7 thereof: "and of that certain 1993 Preferred
Stock Purchase Agreement and Amendment to 1989 Stock Purchase Agreement and
Stockholders' Agreement among the Company and certain investors;" (ii) add each
Investor who is not a party to the Stockholders' Agreement and the Preferred
Shares to Annex A thereto;
6
<PAGE>
and (iii) provide that the definition of "Securities" includes all securities
received in exchange for or upon conversion, exercise or in replacement of the
Preferred Shares listed on Schedule A.
(D) The Investors, on behalf of themselves as holders of Series A
Stock, Series B Stock and Series C Stock, hereby waive their right to receive
any additional shares of Common Stock upon any conversion of their Series A
Stock, Series B Stock and Series C Stock as a result of the application of
Section III(4)(g) of the Certificate of Incorporation to the issuance of the
Preferred Shares hereunder.
7. NO BROKERS.
----------
Each of the Company, on the one hand, and the Investors, on the other
hand, represents and warrants to the other that there was no broker or finder
connected with this Agreement or the transactions contemplated hereby. In the
event of a claim by any broker or finder based upon his representing or being
retained by the Investors, the Investors agree to indemnify and save harmless
the Company in respect of such claim. In the event of a claim by any broker or
finder based upon his representing or being retained by the Company, the Company
agrees to indemnify and save harmless the Investors in respect of such claim.
8. SURVIVAL OF REPRESENTATIONS.
---------------------------
All representations, warranties, covenants and agreements contained in
this Agreement or in any document, exhibit, schedule or certificate delivered in
connection herewith shall survive the execution and delivery of this Agreement
and any investigation at any time made by the Investors or on their behalf for a
period of six months from the date hereof.
9. MISCELLANEOUS PROVISIONS.
------------------------
9.1. CONSTRUCTION AND ENFORCEMENT. This Agreement shall be governed
----------------------------
by, and construed and enforced in accordance with, the internal laws of the
State of New York without giving any effect to principles of conflicts of laws.
The Company agrees that it will not assert against any limited partner of any
Investor, in such person's role as a limited partner, any claim it may have
under this Agreement by reason of any failure or alleged failure by any Investor
to meet its obligations hereunder.
9.2. NOTICES. All notices hereunder shall be in writing and shall be
-------
deemed to have been given at the time when mailed by certified mail, addressed
to the address below stated of the party to which notice is given, or to such
changed address as such party may have fixed by notice:
7
<PAGE>
TO THE COMPANY:
TSI International Ltd.
45 Danbury Road
Wilton, Connecticut 06897
Attn: Constance Galley, President
-WITH A COPY TO
Fenwick & West
Two Palo Alto Square
Palo Alto, California 94306
Attn: Mark C. Stevens, Esquire
TO THE INVESTORS:
To the addresses set forth on Schedule A
; provided, however, that any notice of change of address shall be effective
only upon receipt.
9.3. ASSIGNMENT. This Agreement shall be binding upon and inure to
----------
the benefit of the Company, the Investors and the respective successors and
permitted assigns of the Investors. The Company may not assign any of its rights
or obligations under this Agreement without the prior written consent of the
Investors. The Investors may assign all or any part of their respective rights
and obligations hereunder. A person to whom all or a part of the Investor's
rights are assigned shall become a party to this Agreement, entitled to all the
rights and benefits hereunder. The rights and powers of the Investors hereunder
are granted to the Investors as owners of the Preferred Shares and the
Conversion Shares, if any. Any subsequent owner of any Preferred Shares or
Conversion Shares, whether becoming such by transfer, assignment, operation of
law or otherwise, shall be deemed to be an Investor hereunder, shall have the
same rights and powers which an Investor owning the same number of shares has
hereunder, and shall be entitled to exercise them in full and no transfer or
assignment shall divest such Investor or any subsequent owner of such rights and
powers until such Investor or subsequent owner no longer owns any Preferred
Shares or any Conversion Shares; provided, that no such transferee shall be
entitled to the benefits of Sections 4, 5, 8 or 10 of the 1989 Agreement unless
such transferee is also a Qualified Investor as defined therein.
9.4. AMENDMENTS AND WAIVERS. This Agreement and all exhibits and
----------------------
schedules hereto set forth the entire understanding of the parties with respect
to the transactions contemplated hereby. This Agreement may be amended, the
Company may take any action herein prohibited or omit to take action herein
required to be performed by it, and any breach of or compliance with any
covenant, agreement, warranty or representation may be waived, only if the
Company has obtained the written consent or waiver of the holders of not less
than 50% of the issued and outstanding Preferred Shares and Conversion Shares.
8
<PAGE>
9.5. COUNTERPARTS. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
9.6. HEADINGS. The headings in this Agreement are for reference
--------
purposes only and shall not constitute a part hereof.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first above written.
TSI INTERNATIONAL LTD.
By: /s/ Constance Galley
---------------------------------
Title:
------------------------------
INVESTORS:
WARBURG, PINCUS CAPITAL COMPANY, L.P.
By: Warburg, Pincus & Co.,
General Partner
By: /s/ Stewart Gross
---------------------------------
Partner
VANGUARD ATLANTIC LTD.
By: /s/ Ernest Keet
---------------------------------
Title:
------------------------------
D & B DIVESTITURE, INC.
By: /s/ Dennis Sisco
---------------------------------
Title:
------------------------------
9
<PAGE>
FSC CORP.
By: /s/ Jay Massimo
---------------------------------
Title:
------------------------------
JOHN J. PENDRAY
/s/ John Pendray
------------------------------------
CONSTANCE F. GALLEY
/s/ Constance Galley
------------------------------------
ROBERT H. BOUTON
/s/ Bob Bouton
------------------------------------
DAVID M. RAYE
/s/ David Raye
------------------------------------
PAUL A. LEMME
/s/ Paul Lemme
------------------------------------
No exhibits or schedules are attached
10
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EXHIBIT 4.03
PREFERRED STOCK PURCHASE AGREEMENT
BY
AND
AMONG
TSI INTERNATIONAL LTD.,
WARBURG, PINCUS CAPITAL COMPANY, L.P.
AND
VANGUARD ATLANTIC LTD.
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PREFERRED STOCK PURCHASE AGREEMENT
This Preferred Stock Purchase Agreement (the Agreement"), dated as of
the 1st day of June, 1989, by and among TSI International Ltd., a Connecticut
corporation (the "Company"), Vanguard Atlantic Ltd., a Connecticut corporation
("Vanguard") and Warburg, Pincus Capital Company, L.P., a Delaware limited
partnership ("Warburg") (Vanguard and Warburg being sometimes hereinafter
referred to singly as an "Investor" and together as the "Investors").
W I T N E S S E T H :
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WHEREAS, the Company desires to issue and sell to the Investors shares
of Series A Preferred Stock of the Company (the "Preferred Shares"); and
WHEREAS, the Investors desire to purchase the Preferred Shares from
the Company.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the parties hereby agree as follows:
1. Definitions; Purchase and Sale of Preferred Shares.
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1.1. Definitions. Certain terms as used in this Agreement are
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defined in Section 14 hereof and reference is hereby made to such Section.
1.2. Authorization and Designation of Preferred Shares. On or
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before the Closing Date (as hereinafter defined), the Company shall (a) cause to
be approved by the holders of at least two-thirds (2/3) of the presently
outstanding shares of each class of its capital stock and filed with the
Secretary of State of Connecticut a certificate of amendment (the "Certificate
of Amendment") to the Certificate of Incorporation of the Company, in the form
attached hereto as Exhibit B, which will increase the number of authorized
shares of Common Stock, reclassify and convert the Class A Common Stock, Class B
Common Stock and Class C Common Stock as Common Stock, without preemptive rights
as provided in Section 33-343 of the Connecticut Stock Corporation Act, and
authorize the creation of the Preferred Shares and
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(b) cause to be approved by its Board of Directors and filed with the Secretary
of State of Connecticut a certificate of amendment to the Certificate of
Incorporation of the Company (the "Certificate of Designations"), in the form
attached hereto as Exhibit C, pursuant to which the Company will be authorized
to issue the Preferred Shares having the designations, preferences, and
relative, participating, optional and other special rights set forth in the
Certificate of Designations.
1.3. Sale of Preferred Shares. Subject to the terms and
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conditions hereof, on the Closing Date the Company hereby agrees to issue and
sell to each Investor, and each Investor agrees to purchase from the Company,
the number of Preferred Shares set forth opposite such Investor's name on
Exhibit A hereto.
1.4. Purchase Price. The purchase price to be paid by the
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Investors for the Preferred Shares is $13.39 per share. The purchase price will
be payable on the Closing Date: (a) by Warburg, by wire transfer of funds or
delivery to the Company of a cashier's check in the amount of $3,682,250 and (b)
by Vanguard, by delivery to the Company of the Company's Promissory Note, dated
April 30, 1986, issued to Vanguard in the original principal amount of $800,000,
which has accrued interest as of the close of business on May 31, 1989 equal to
$5,312.33, $300,002.95 of which principal and accrued interest is being used to
purchase Preferred Shares.
1.5. Closing Date. The closing of the transactions
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contemplated by this Agreement (the "Closing") shall take place at the offices
of Stroock & Stroock & Lavan, 7 Hanover Square, New York, New York, at 10:00
A.M. local time on June 2, 1989, or on such other date or time as shall be
mutually agreed to by the parties to this Agreement (the "Closing Date").
2. Representations and Warranties of the Company. The Company
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hereby represents and warrants to the Investors as follows:
2.1. Organization. The Company is a corporation duly
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organized, validly existing and in good standing under the laws of the State of
Connecticut. The Company
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has all requisite corporate power and authority and holds all licenses, permits
and other required authorizations from governmental authorities necessary to
conduct its business as it is now being conducted or as proposed to be conducted
and to own or lease the properties and assets it now owns or holds under lease.
Except as set forth on Schedule 2.1 attached hereto, the Company is duly
qualified or licensed and in good standing as a foreign corporation in each
jurisdiction wherein the character of its properties or the nature of the
activities conducted by it makes such qualification or licensing necessary and
where failure to so qualify would have a material, adverse effect on the
business or operations of the Company, which jurisdictions are set forth on
Schedule 2.1 attached hereto.
2.2. Charter Documents. The Company has heretofore delivered
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to counsel for the Investors true, correct and complete copies of the Company's
Certificate of Incorporation and By-Laws, each as in full force and effect on
the date hereof. Except as set forth on Schedule 2.2, there will be no changes
made to such Certificate of Incorporation or By-Laws between the date hereof and
the Closing Date, except as contemplated by Exhibits B and C hereto.
2.3. Capitalization. As of the Closing Date, the Company's
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authorized capitalization will consist of: 3,000,000 shares of Common Stock, par
value $.01 per share (the "Common Stock"), 939,250 of which will be outstanding
and 60,650 of which will be subject to outstanding options; and 750,000 shares
of Preferred Stock, par value $.01 per share, 550,000 of which have been
designated Series A Convertible Preferred Stock and none of which will be
outstanding until issuance pursuant hereto. All outstanding shares of stock of
the Company are validly issued, fully paid and non-assessable. The issuance of
the Preferred Shares and of the shares of Common Stock issuable upon conversion
of the Preferred Shares (the "Conversion Shares") pursuant to the provisions of
this Agreement have been duly and validly authorized. No further approval or
authorization of the shareholders or the directors of the Company or of any
governmental authority or agency will be required for the issuance and sale of
the Preferred Shares as contemplated by this Agreement with the exception of
certain post-issuance filing
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requirements with Federal and state securities commissions, including without
limitation filing of a Form D with the Securities and Exchange Commission. A
true and complete list of the holders of all issued and outstanding equity
securities (including options, warrants or other rights to purchase equity
securities), of the Company on the date hereof, including the number of
securities owned by or issuable to each such holder, is set forth on Schedule
2.3 attached hereto. No shareholder of the Company or any other person is
entitled to any preemptive rights with respect to the purchase or sale of any
securities by the Company. When issued and sold to the Investors, the Preferred
Shares will be duly and validly issued, fully paid and non-assessable, will be
free and clear of any liens, pledges or encumbrances and will have the
designations, preferences and relative, participating, optional and other
special rights as set forth in the Certificate of Designations. The Conversion
Shares, when issued and delivered upon conversion of the Preferred Shares, will
be duly and validly issued, fully paid and non-assessable. Except as set forth
on Schedule 2.3 attached hereto, there are no outstanding options, warrants or
other rights, commitments or arrangements, written or oral, to which the Company
is a party or by which it is bound, to purchase or otherwise acquire any
authorized but unissued shares of capital stock of the Company or any security
directly or indirectly convertible into or exchangeable or exercisable for any
capital stock of the Company.
2.4. Ordinary Course of Business. Except as set forth on
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Schedule 2.4 attached hereto, since March 31, 1989, the Company has not and,
from the date hereof to the Closing Date, it will not have:
(a) borrowed any amount or incurred or become subject to
any liabilities (absolute or contingent) in excess of $10,000 individually,
except expenses incurred in the ordinary course of business;
(b) paid any obligations or liabilities in excess of
$10,000 individually, other than current liabilities paid in the ordinary course
of business;
(c) declared or made any payment or distribution in cash,
securities or property to its shareholders or purchased or redeemed any shares
of its capital stock;
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(d) mortgaged, pledged or subjected to any lien, charge
or any other encumbrance, any material portion of its properties or assets;
(e) sold, assigned or transferred any material portion of
its assets except software and technology licenses in the ordinary course of
business;
(f) suffered any extraordinary losses in excess of
$10,000 individually or waived any rights of material value;
(g) made any capital expenditures or commitments therefor
in excess of $10,000 individually except in the ordinary course of business; or
(h) entered into any material agreement or other
transaction other than in the ordinary course of business.
2.5. Compliance with Other Instruments. To the Company's best
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knowledge, the Company is not in material default in the performance of any
material obligation, agreement, instrument or undertaking to which it is a party
or by which it is bound. The Company is not in violation of its Certificate of
Incorporation or By-Laws. Neither the sale of the Preferred Shares (or the
issuance and delivery of the Conversion Shares), the execution and delivery of
this Agreement, nor the fulfillment of the terms set forth in this Agreement and
the consummation of the transactions contemplated by this Agreement, will: (i)
conflict with or constitute a breach of, or constitute a default under or an
event which, with or without notice or lapse of time or each, would be a breach
of or default under or violation of the Certificate of Incorporation or By-Laws
of the Company or would be a material breach of or material default under or
violation of any material agreement, document, indenture, mortgage or other
instrument or undertaking by which the Company is bound or to which any of its
properties are subject, or would be a material violation of any law,
administrative regulation, judgment, order or decree applicable to the Company;
(ii) result in the creation or imposition of any material lien, charge or
encumbrance upon any property or assets of the Company; (iii) result in the loss
of any material license, certificate, legal privilege or legal right enjoyed or
possessed by the Company; (iv) give any party to any material agreement to which
the Company is a party a right of termination;
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(v) require the consent of any other person or entity under any agreement,
indenture, mortgage, document or other instrument or undertaking by which the
Company is bound or to which any of its properties are subject other than the
consents of People's Bank ("People's") pursuant to Section 5.02 of the Loan and
Security Agreement, dated as of February 18, 1987, by and between People's and
the Company and Section 5.02 of the Loan and Security Agreement, dated as of
August 4, 1987, by and between People's and the Company.
2.6. Authorization. The Company has the full corporate power
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and authority to enter into this Agreement and to perform all of its obligations
hereunder. The execution, delivery and performance of the terms of this
Agreement by the Company have been duly authorized by all necessary corporate
action. This Agreement constitutes a legal, valid and binding obligation of the
Company enforceable in accordance with its terms; except as such enforceability
may be limited by: (a) the effect of applicable bankruptcy and other similar
laws affecting the rights of creditors generally; (b) the effect of rules of law
governing specific performance, injunctive relief and other equitable remedies;
or (c) the enforceability of the indemnification provisions of Section 8.4. The
Company, in light of its business or proposed business, does not require any
consent, approval, authorization or order of, or declaration, filing or
registration with, any court or governmental or regulatory agency or board in
connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.
2.7. Taxes. Except as set forth on Schedule 2.7 attached
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hereto, the Company has filed all necessary federal, state, local and foreign
tax returns and reports and all taxes, fees, assessments and governmental
charges of any nature shown by such returns to be due and payable have been
paid, except for those amounts being contested in good faith and for which
appropriate amounts have been reserved in accordance with generally accepted
accounting principles. There is no tax deficiency which has been asserted
against the Company which would materially adversely affect the business or
operations, or proposed business or operations, of the Company. The Company has
not been, and is not now being, audited by any federal, state, local
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or foreign tax authorities. The Company has made all required deposits for taxes
applicable to the current tax year. To the best of the Company's knowledge, all
tax returns and reports of the Company were prepared in accordance with the
relevant rules and regulations of each taxing authority having jurisdiction over
the Company.
2.8. Litigation. Except as set forth on Schedule 2.8 attached
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hereto, there is not now pending, and to the best knowledge of the Company there
is not threatened in writing, any litigation, action, suit or proceeding: (i) to
which the Company is or will be a party in or before or by any court or
governmental or regulatory agency or body; or (ii) to which any of the officers
or employees of the Company is or will be a party in or before or by any court
or governmental or regulatory agency or body, concerning termination by such
person of his employment with any of such person's former employers. In
addition to the foregoing, there is no judgment, decree, injunction, rule or
order of any court, governmental department, commission, agency, instrumentality
or arbitrator outstanding against the Company having any material adverse effect
on the business or proposed business or operations, properties, assets or
condition, financial or otherwise, of the Company.
2.9. Properties. Except as set forth on Schedule 2.9 attached
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hereto, the Company has good and marketable title to all of the properties and
assets it purports to own, and a good and valid leasehold interest in all
property it has leased, whether such property is real or personal, free and
clear of all material liens, charges, encumbrances or restrictions of any nature
whatsoever. The Company owns or leases all such properties as are necessary in
any material respect to its operations as now conducted and such properties are
in good operating condition and repair in all material respects.
2.10. Compliance with Law. The Company is in compliance in all
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material respects with all applicable statutes and regulations of the United
States and of all states, municipalities and agencies in respect of the conduct
of its business.
2.11. Trademarks. The Company owns or possesses sufficient
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rights to all patents, trademarks, service marks, trade names or copyrights
necessary for its business as
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now conducted and as proposed to be conducted. The business of the Company does
not, and will not cause the Company to, violate any patent, trademark, service
mark, trade name, trade secret, copyright, license or proprietary interest of
any other person. The Company possesses sufficient rights to all proprietary
technology necessary for the conduct of its business, both as proposed to be and
as presently conducted.
2.12. Subsidiaries. Except as set forth on Schedule 2.12
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attached hereto, the Company does not have any investment or other ownership
interest in any other corporation, joint venture, general partnership, limited
partnership or other business entity.
2.13. Registration Rights. Except as to the rights granted to
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the Investors in this Agreement, there are no rights outstanding which permit or
allow the holder thereof to cause the Company to file a registration statement
or which permit or allow the holder thereof to include securities of the Company
in a registration statement filed by the Company.
2.14. Contracts and Commitments. Except as set forth on Schedule
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2.14 attached hereto, the Company is not a party to or bound by any agreements
which obligate any person, including, without limitation, the Company, to make
payments in the case of each agreement in an amount exceeding $50,000 in the
current year, in any future year or in the immediately preceding fiscal year or
which are otherwise material to the conduct and operation of its business or
proposed business and its properties and assets, including, without limitation,
all loan agreements, leases, purchase commitments, royalty agreements,
distribution agreements, license agreements, employment and consulting
agreements and employee benefit plans and arrangements to which the Company is a
party or by which it is bound. Schedule 2.14 also lists all material agreements,
written or oral, or formal, written proposals therefor, between the Company and
any of its officers, directors, employees or shareholders, except for standard
agreements regarding cash or stock compensation. All of the foregoing agreements
are legal, valid and binding obligations of the Company and, to the best of the
Company's knowledge, of each of the other parties thereto, enforceable in
accordance with their respective terms; except as such enforceability may be
limited by: (a) the effect of applicable bankruptcy and other similar
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laws affecting the rights of creditors generally; or (b) the effect of rules of
law governing specific performance, injunctive relief and other equitable
remedies. To the best of the Company's knowledge, all such agreements are in
full force and effect in all material respects and there is no material default
under any of such agreements.
2.15. Outstanding Indebtedness. Except as reflected in the
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financial statements referred to in Section 2.22 hereof or as set forth on
Schedules 2.4, 2.8 and 2.14 attached hereto, the Company does not have (a) any
liability or obligation of any nature in excess of $10,000, whether accrued,
absolute, contingent or otherwise, and whether direct, indirect, due or to
become due which would be required to be described in financial statements
prepared in accordance with generally accepted accounting principles,
consistently applied; (b) any power of attorney outstanding, nor any other
agreement of agency, whether as principal or agent, nor has it any obligation or
liability, either actual, accrued, accruing or contingent, as guarantor, surety,
cosigner, endorser, comaker or otherwise in respect of the obligation of any
person; or (c) any liability to any officer, director, shareholder or employee
of the Company for money borrowed by the Company.
2.16. Conflicting Aqreements. To the best knowledge of the
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Company, no officer or other employee of the Company is a party to or bound by
any agreement, contract or commitment, or subject to any restrictions in
connection with any previous or current employment of any such person, which
adversely affects, or in the future may adversely affect, the business, or the
proposed business, of the Company.
2.17. Disclosure. To the best of the Company's knowledge,
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neither this Agreement nor any of the schedules or exhibits hereto, nor the
Business Plan dated January 1989 (the "Business Plan") copies of which have been
delivered to the Investors, read together, contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
contained herein or therein not misleading. There exists no fact or circumstance
which, to the knowledge of the Company, materially adversely affects or will
materially adversely affect the business, properties or assets, or condition,
financial or otherwise,
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of the Company, both at the present and as proposed, except as set forth herein,
in the schedules or exhibits hereto or in the Business Plan.
2.18. Representations and Warranties True on Closing Date. The
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representations and warranties of the Company contained in this Agreement and
all information contained in any exhibit, schedule or attachment hereto will be
true and correct in all material respects at the Closing Date as though then
made and as though the Closing Date were substituted for the date of this
Agreement throughout this Agreement except as affected by the transactions
expressly contemplated by this Agreement.
2.19. Compliance with the Securities Act. All securities of the
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Company heretofore sold and issued by it were sold and issued in compliance with
all applicable Federal and state securities laws. Based upon the representations
of the Investors set forth herein, and assuming the truth of such
representations, the offer, sale and issuance of the Preferred Shares (and the
issuance and delivery of the Conversion Shares) are exempt from the registration
requirements of the Securities Act.
2.20. Pension Plans. Except as set forth on Schedule 2.20
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attached hereto, the Company does not have any pension, health, retirement,
profit sharing, bonus, stock purchase, stock option, severance or similar
employee benefit plans or obligations subject to the Employee Retirement Income
Security Act of 1974, and does not have any other stock purchase or stock option
plans.
2.21. Insurance. The Company maintains valid policies of
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workers' compensation insurance and such insurance with respect to its
properties and business of the kinds and in the amounts as set forth on Schedule
2.21 attached hereto. The activities and operations of the Company have been
conducted in a manner so as to conform in all material respects to all
applicable provisions of such insurance policies. Such policies are valid and
enforceable in accordance with their terms and are in full force and effect. The
Company is not in material default with respect to any provision contained in
any such policy and has not materially failed to give any notice or present any
claim under any such policy in due and timely fashion.
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There are no outstanding unpaid claims under any such policy. The Company has
not received notice of, nor has it knowledge of, any inaccuracy in any
application for such policies, any failure to pay premiums when due or any
similar state of facts that might form the basis for termination of any such
insurance. The Company has not canceled or terminated any insurance policy
listed on Schedule 2.21, nor has any insurance company canceled or terminated
any such insurance policy of the Company.
2.22. Financial Statements. Attached hereto as Exhibit E are the
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audited balance sheets of the Company at April 30, 1987, and April 30, 1988, and
the related statements of income and retained earnings and changes in financial
position, including the notes thereto, of the Company for the periods then
ended, and the unaudited balance sheet of the Company at March 31, 1989 and the
related statements of income for the period then ended. The financial statements
referred to above have been prepared in conformity with generally accepted
accounting principles consistently applied subject in the case of the interim
statements to normal year-end audit adjustments, and each balance sheet fairly
presents the financial condition of the Company as of its date and each
statement of income fairly presents the results of operations of the Company for
the period covered thereby.
3. Representations, Warranties and Covenants of the Investors. Each
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Investor hereby severally represents and warrants to, and agrees with, the
Company as follows:
3.1. Investment Intent. Each Investor is acquiring the Preferred
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Shares (and any Conversion Shares) for its own account and not with a present
view to, or for sale in connection with, any distribution thereof in violation
of the Securities Act. Each Investor consents to the placement of the following
legend on each certificate representing the Preferred Shares and on each
certificate representing the Conversion Shares:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE
TRANSFERRED OR SOLD UNLESS (i) A REGISTRATION STATEMENT
UNDER SUCH ACT IS THEN IN EFFECT WITH RESPECT THERETO, (ii)
A WRITTEN OPINION FROM COUNSEL FOR THE ISSUER OR MESSRS.
STROOCK & STROOCK & LAVAN OR OTHER
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COUNSEL FOR THE HOLDER REASONABLY ACCEPTABLE TO THE ISSUER
HAS BEEN OBTAINED TO THE EFFECT THAT NO SUCH REGISTRATION IS
REQUIRED OR (iii) A 'NO ACTION' LETTER OR ITS THEN
EQUIVALENT HAS BEEN ISSUED BY THE STAFF OF THE SECURITIES
AND EXCHANGE COMMISSION WITH RESPECT TO SUCH TRANSFER OR
SALE."
3.2. Restricted Securities. Each Investor understands that the
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Preferred Shares (and any Conversion Shares) will not be registered at the
Closing under the Securities Act for the reason that the sale provided for in
this Agreement is exempt pursuant to Section 4 of the Securities Act and that
the reliance of the Company on such exemption is predicated in part on such
Investor's representations set forth herein. Each Investor represents that it is
experienced in evaluating companies such as the Company, is able to fend for
itself, has such knowledge and experience in financial and business matters as
to be capable of evaluating the merits and risks of its investment, and has the
ability to suffer the total loss of its investment. Each Investor is an
accredited investor within the meaning of Rule 501 of Regulation D promulgated
under the Securities Act. Such Investor was not formed solely for the purpose of
investing in the Company. Each Investor further represents that it has had
access during the course of the transaction and prior to its purchase of the
Preferred Shares to such information relating to the Company as it has desired
and that it has had the opportunity to ask questions of and receive answers from
the Company concerning the terms and conditions of the offering and to obtain
additional information (to the extent the Company possessed such information or
could acquire it without unreasonable effort or expense) necessary to verify the
accuracy of any information furnished to it or to which it had access.
Each Investor understands that the Preferred Shares (and any
Conversion Shares) may not be sold, transferred or otherwise disposed of without
registration under the Securities Act or an exemption therefrom and that in the
absence of an effective registration statement covering the Preferred Shares (or
the Conversion Shares) or an available exemption from registration under the
Securities Act, the Preferred Shares (and any Conversion Shares) must be held
indefinitely. The benefits of Rule 144 promulgated under the Securities Act are
not presently available, the Company has not covenanted to make the benefits of
such Rule available, and the Company has no present plans to make the benefits
of such Rule available.
4. Affirmative Covenants of the Company. The Company covenants and
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agrees with each Qualified Investor that as long as any Preferred Shares are
issued and outstanding:
4.1. Accounting System. It will maintain a system of accounting
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established and administered in accordance with generally accepted accounting
principles consistently applied.
4.2. Periodic Reports; Budgets.
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(a) It will furnish to each Qualified Investor as soon as
practicable, and in any event within 90 days after the end of each fiscal year
of the Company, audited financial statements of the Company, including an
audited balance sheet as at the end of such fiscal year and audited statements
of income and retained earnings and cash flow for such fiscal year, setting
forth in each case in comparative form corresponding figures for the preceding
fiscal year and for the budget for the fiscal year just completed (provided,
however, that information as to the budgeted figures will not be audited), all
of which will fairly present the financial condition of the Company at the date
shown and the results of its operations for the
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period then ended. Such financial statements shall be accompanied by the report
thereon of nationally recognized independent public accountants to the effect
that such financial statements have been prepared in accordance with generally
accepted accounting principles applied on a basis consistent with prior years
(except as otherwise specified in such report). The Company will use its best
efforts to conduct its business so that such report of the independent public
accountants will not contain any qualifications as to the scope of the audit,
the continuance of the Company, or with respect to the Company's compliance with
generally accepted accounting principles consistently applied, except for
changes in methods of accounting in which such accountants concur.
(b) It will furnish to each Qualified Investor, as soon
as practicable and in any event within 30 days after the end of each calendar
month, a monthly report of the Company consisting of an unaudited balance sheet
as at the end of such month and an unaudited statement of income and statement
of cash flows for such month and for the fiscal year to date, setting forth in
each case in comparative form the corresponding figures for the preceding year
and for the budget. All such reports shall be certified to by the chief
financial officer of the Company to fairly present the financial condition of
the Company at the date shown and the results of its operations for the period
then ended and to have been prepared in accordance with generally accepted
accounting principles for interim financial information consistently applied
except for normal year end adjustments. The reports for each calendar month
shall include a narrative discussion prepared by the Company describing the
business and operations of the Company during the preceding calendar month.
(c) It will furnish to its Board of Directors as early as
practicable prior to the end of each fiscal year of the Company for its
approval, and promptly after obtaining such approval will furnish to each
Qualified Investor, an annual Business Plan for the Company as approved by the
Company's Board of Directors for (i) the succeeding fiscal year, containing
projections of profit and loss and cash flow for each month of such fiscal year
and ending balance sheets for each quarter of such fiscal year, and (ii) the
succeeding two fiscal years,
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containing projections of profit and loss, cash flow and ending balance sheets
for each of such years. Promptly upon preparation thereof, the Company will
furnish to each such holder any other budgets that the Company may prepare and
provide to the Board of Directors generally and any revisions of such previously
furnished budgets.
(d) It will furnish to each Qualified Investor, promptly
after receipt, each audit response letter, accountant's management letter and
other reports submitted to the Company by its independent public accountants in
connection with an annual or interim audit of the books of the Company.
4.3. Certificates of Compliance. Concurrently with the
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furnishing of the reports pursuant to Sections 4.2(a) and 4.2(b) hereof, it will
furnish to each recipient a certificate of an officer stating that the Company
is not in material default under, and has not materially breached, this
Agreement, or if any such default or breach exists, specifying the nature
thereof and what actions the Company has taken and proposes to take with respect
thereto. Concurrently with the furnishing of the reports pursuant to Section
4.2(a) hereof, the Company will cause to be furnished to each Qualified Investor
a statement of the independent public accountants of the Company to the effect
that they have caused the provisions of this Agreement to be reviewed and that
in the course of their audit of the Company nothing has come to their attention
to lead them to believe that any default hereunder exists or, if such is not the
case, specifying such default or possible default and the nature thereof. The
Company covenants that promptly after the occurrence of any material default
hereunder or any material default under or breach of any material agreement, it
will deliver to its Board of Directors a certificate of an officer specifying in
detail the nature and period of existence thereof, and what actions the Company
has taken and proposes to take with respect thereto.
4.4. Other Reports and Inspection. It will furnish to each
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Qualified Investor, as soon as practicable after issuance, copies of any
financial statements or reports prepared by the Company for and furnished to its
stockholders or the Commission. It will furnish promptly to each Qualified
Investor such other documents, reports and financial data as such
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holder may reasonably request to the extent such data is readily available. It
will, upon reasonable prior notice, make available to each such holder or such
holder's representatives or designees during normal business hours (a) all
assets, properties and business records of the Company for inspection and
copying and (b) the directors, officers and employees of the Company for
interviews concerning the business, affairs and finances of the Company.
4.5. Insurance. It will maintain valid policies of worker's
---------
compensation insurance and such other insurance with financially sound insurers
with respect to its properties and business of the kinds and in amounts similar
to those listed on Schedule 2.21 attached hereto. The activities and operations
of the Company will be conducted in a manner so as to conform in all material
respects to all applicable provisions of such insurance policies.
4.6. Licenses. It will obtain and keep in full force and effect
--------
all licenses, permits and other authorizations from governmental authorities
which shall be necessary to the conduct of its business.
4.7. Material Changes. It will promptly advise each Qualified
----------------
Investor of any litigation or governmental proceeding pending or, to the best
knowledge of the Company, threatened in writing against the Company or against
any officer or key employee of the Company.
4.8. Compliance with Law. It will comply in all material
-------------------
respects with all applicable statutes, rules and regulations of the United
States, of the states thereof and their counties, municipalities and other
subdivisions and of any other jurisdiction applicable to the Company, and will
do all things necessary to preserve, renew and keep in full force and effect and
in good standing its corporate existence and authority necessary to continue its
business in all material respects.
4.9. Agreements with Employees. The Company will cause all key
-------------------------
employees of the Company to enter into the Company's standard form of
confidentiality agreement, the form of which has been furnished to counsel to
the Investors.
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<PAGE>
4.10. Board of Directors. Commencing on the Closing Date, the
------------------
Company shall use its best efforts to have its Board of Directors consist of
seven persons, two of whom shall be designees of Warburg (or its Affiliates and
Associates), two of whom shall be designees of Vanguard, one of whom shall be
the chief executive officer of the Company, one of whom shall be a designee of
XIST LTD. (or its Affiliates or Associates) and one of whom shall be a person
not employed by the Company mutually agreeable to the Qualified Investors and
management of the Company. Each of the Investors (so long as no Event of
Default, as defined in the Certificate of Designations, has occurred and is
continuing) and Vanguard and XIST LTD. agree to vote their shares of Common
Stock of the Company to effectuate the election of the persons nominated as
directors in accordance with the foregoing provisions. Unless otherwise agreed
to by the Investors, the Company covenants that at all times its By-Laws will
contain provisions authorizing no more than seven directors (subject to increase
upon the occurrence of an Event of Default, as defined in the Certificate of
Designations) and indemnifying its directors to the fullest extent permitted
under applicable law. The Board of Directors shall hold regular meetings at
least once every three months.
4.11. Reservation of Common Stock. The Company shall reserve and
---------------------------
keep available out of its authorized but unissued Common Stock the number of
shares of Common Stock required for issuance upon the conversion of all of the
Preferred Shares (including any additional shares of Common Stock which may
become so issuable by reason of the operation of anti-dilution provisions of the
Preferred Shares).
4.12. Compensation and Audit Committees. The Company will promptly
---------------------------------
after the Closing Date establish and thereafter at all times maintain a
Compensation Committee and an Audit Committee of the Board of Directors of the
Company. At least a majority of the members of each such committee shall
consist of directors who are not members of management of the Company. The
Compensation Committee shall make recommendations t the Board of Directors
regarding all matters of compensation for the officers of the Company and stock
options for employees of the Company.
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<PAGE>
4.13. Agreements with Shareholders. Until the Company shall have
----------------------------
completed its initial Public Offering, all persons who are or who become
shareholders of the Company shall enter into an agreement, substantially in the
form of Exhibit D hereto, pursuant to which such shareholders shall agree: (a)
that for a period beginning with the effective date of the Company's initial
Public Offering and ending at least 150 days after such effective date such
shareholders will not, directly or indirectly, sell, offer to sell or otherwise
dispose of securities of the Company other than securities which are included
and sold in such initial Public Offering without permission from a
representative of the underwriters; and (b) to grant to the Company and then to
the holders of 10% or more of the Company's outstanding shares of Common Stock
on a fully diluted basis (assuming conversion of Preferred Shares and exercise
of all outstanding options) a right of first refusal with respect to any
securities of the Company which such shareholders propose to sell or otherwise
dispose of.
4.14. Conflicting Agreements. The Company will not enter into any
----------------------
agreement which, by its terms, would restrict the performance of the Company's
obligations under this Agreement, the Certificate of Designations or any of the
other agreements attached as exhibits hereto, including, but not limited to,
registration rights or the payment of dividends on, or the redemption, voting or
conversion of, the Preferred Shares.
4.15. Key Person Insurance. The Company shall obtain, as soon as
--------------------
practicable following the Closing, a key person life and disability insurance
policy with respect to Constance Galley, which life insurance policy shall be in
the amount of $1,000,000 and which disability insurance policy shall be in such
amount as shall be reasonably acceptable to the Investors. Such policy shall
name the Company as beneficiary. The Company shall take such action as shall be
necessary in order to obtain and to maintain, at its sole cost and expense, such
policy.
5. Negative Covenants of the Company. The Company covenants and agrees
---------------------------------
with the Qualified Investors that, without the prior approval of at least a
majority of the Company's Board of Directors:
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<PAGE>
5.1. Merger; Sale of Assets. The Company will not become a party
----------------------
to any merger or consolidation, or sell, lease or otherwise dispose of any
material portion of its assets, other than sales and leases of assets and
licenses of software and technology in the ordinary course of business and other
than the replacement of outmoded or damaged equipment with new equipment. The
Company will not voluntarily dissolve, liquidate or wind up the Company or carry
out any partial liquidation of the Company.
5.2. Business. The Company will not engage in any business other
--------
than as set forth in the Business Plan.
5.3. Stock Repurchases. Except as provided in this Agreement or in
-----------------
the Certificate of Designations, the Company will not purchase or redeem any
shares of its capital stock other than pursuant to agreements with officers or
employees of the Company relating to repurchase of stock after termination of
employment.
5.4. Dividends. Except for payment of dividends or the Preferred
---------
Shares, the Company will not declare or pay any dividend or make any
distribution in cash or property to the shareholders of the Company.
5.5. Indebtedness. The Company will not create, incur or assume or
------------
otherwise become or remain liable with respect to Indebtedness to be incurred in
any one year or make or commit to make capital expenditures in any one year in
excess of $100,000.
5.6. Amendments. The Company will not amend its Certificate of
----------
Incorporation or By-Laws. In addition to the negative covenants contained in
Sections 5.1 through 5.5 above, the Company and the Investors agree that,
without the prior approval of the holders of a majority of the Preferred Shares
then outstanding, the Company will not (a) authorize, create or issue any series
or shares of capital stock senior or pari passu to the Preferred Shares, or
adopt or otherwise institute any stock option or stock purchase plan for, or
otherwise issue any stock options to, employees, consultants or directors of the
Company except that the Company may authorize and issue options, stock
purchases, stock bonuses or similar arrangements (collectively, the "Options")
for employees, directors or consultants to purchase up
-18-
<PAGE>
to 68,750 shares of Common Stock; provided, however, that nothing contained
-------- -------
herein will limit the Company's ability to resell any shares from time to time
contained in the treasury of the Company or (b) take any action which would
materially alter or adversely affect the rights of the holders of Preferred
Shares.
5.7. Affiliate Transactions. The Company will not engage in any
----------------------
transaction with, nor enter into any contract, agreement or other arrangement
providing for, the rental of real or personal property from, or otherwise
requiring payments to, any officer, director or shareholder of the Company or
any Affiliate or Associate of such persons or entities, except for employment
arrangements travel advances and similar arrangements entered into in the
ordinary course of business.
6. Conditions to Obligations of the Company. The obligations of the
----------------------------------------
Company under this Agreement are subject to the satisfaction of the following
conditions on or prior to the Closing Date, any of which may be waived in whole
or in part by the Company:
6.1. Representations and Warranties. All of the representations and
------------------------------
warranties of the Investors contained in this Agreement shall be true and
correct in all material respects on the Closing Date with the same force and
effect as if made on the Closing Date.
6.2. Consideration. The purchase price set forth in Section 1.4
-------------
hereof to be paid on the Closing Date shall be paid by the Investors to the
Company.
6.3. Articles Amended. The Certificate of Amendment, substantially
----------------
in the form attached hereto as Exhibit B, and the Certificate of Designations,
substantially in the form attached hereto as Exhibit C, will have been filed
with the Secretary of State of the State of Connecticut.
7. Conditions to Obligations of the Investors. The obligations of the
------------------------------------------
Investors to fulfill their obligations under this Agreement are subject to the
satisfaction of the following conditions on or prior to the Closing Date, any of
which may be waived in whole or in part by the Investors:
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<PAGE>
7.1. Representations and Warranties. All of the representations and
------------------------------
warranties of the Company contained in this Agreement shall be true and correct
on the Closing Date with the same effect as if made on the Closing Date, except
as affected by the transactions specifically contemplated by this Agreement.
7.2. Performance of Covenants. All of the covenants and agreements
------------------------
of the Company contained in this Agreement and required to be performed on or
before the Closing Date shall have been performed in all respects to the
satisfaction of the Investors.
7.3. Opinion of Counsel to the Company. On the Closing Date, the
---------------------------------
Investors shall have received an opinion of counsel to the Company, Fenwick,
Davis & West, addressed to the Investors, substantially in the form attached
hereto as Exhibit F.
7.4. Officer's and Other Certificates. The Company shall have
--------------------------------
delivered to each Investor the following:
(a) an officer's certificate, dated the Closing Date, stating
that the conditions specified in Sections 7.1, 7.2, 7.5, 7.7, 7.10 and 7.11 have
been satisfied;
(b) incumbency certificates for the officers of the Company
executing this Agreement or any documents delivered in connection with this
Agreement;
(c) copies of the resolutions adopted by the Company's Board
of Directors and the shareholders of the Company authorizing the execution,
delivery and performance of this Agreement and the transactions contemplated
hereby, including the Certificate of Amendment and Certificate of Designations,
certified to by the Secretary of the Company as being in full force and effect
on the Closing Date;
(d) a certified copy of the Certificate of Incorporation of
the Company as filed with the Secretary of State of Connecticut;
(e) a certificate, dated as of a recent date, of the Secretary
of State of Connecticut attesting as to the good standing of and the payment of
taxes by the Company in such State;
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<PAGE>
(f) a stock certificate registered in the name of such
Investor representing the Preferred Shares purchased by such Investor on the
Closing Date;
(g) a certified copy of the Certificate of Designations, as
filed with the Secretary of State of Connecticut;
(h) a copy of the Company's By-laws, certified to by the
Secretary of the Company as being in full force and effect on the Closing Date;
(i) a certified copy of the Certificate of Amendment, as filed
with the Secretary of State of Connecticut; and
(j) such other certificates or documents as such Investor or
its counsel may reasonably request relating to the transactions contemplated
hereby.
7.5. Legal Action. There shall not have been instituted or
------------
threatened any legal proceeding seeking to prohibit or threaten the consummation
of the transactions contemplated by this Agreement. None of the parties hereto
shall be prohibited by any order, writ, injunction or decree of any governmental
body of competent jurisdiction from consummating the transactions contemplated
by this Agreement.
7.6. Review. Prior to the Closing Date, each Investor shall have
------
completed its due diligence and business review of the Company and the results
of such review shall be satisfactory to such Investor in its sole discretion.
7.7. Agreement. The agreement referred to in Section 4.13 shall
---------
have been entered into and shall be satisfactory to the Investors.
7.8. Adverse Change. There shall have been no material adverse
--------------
change in the business, property or condition, financial or otherwise, of the
Company.
7.9. Warburg Purchase. Warburg shall have acquired, pursuant to
----------------
agreements substantially in the forms attached hereto as Exhibit G (a) 150,000
shares of Common Stock owned by XIST LTD. for a purchase price of $13.39 per
share and (b) an option to acquire an additional 50,000 shares of Common Stock
owned by XIST LTD. at an exercise price of $15.39 per share.
-21-
<PAGE>
7.10. Vanguard Debt. Any indebtedness of the Company to Vanguard
-------------
which shall not have been converted into Preferred Shares shall have been paid
in full and Vanguard shall have delivered to the Company executed Forms UCC-2 to
release all security interests currently filed with respect to such
indebtedness.
7.11. Conversion of Common Stock. All outstanding shares of Class A
--------------------------
Common Stock, Class B Common Stock and Class C Common Stock shall have been
converted into an equal number of shares of Common Stock, without class
designation.
7.12. Termination of Covenants. Sections 7.1, 7.3, 7.4.1, 7.5, 7.6
------------------------
and 7.7 of that certain Asset Purchase Agreement dated as of April 11, 1985, as
amended, among Vanguard Atlantic Financial Corp., TSI International Ltd. (then
known as Vanguard Atlantic Operations Ltd.), Vanguard Atlantic Properties, Inc.,
XIST Ltd. (then known as TSI International Ltd.) and TSI Software International,
B.V. shall have been waived in their entirety insofar as such sections relate to
the Company or its stock.
8. Registration Rights.
-------------------
8.1. Required Registration. If at any time following the third
---------------------
anniversary of the Closing Date the holders of at least 50% of the Registrable
Securities shall decide to sell or otherwise dispose of Registrable Securities
of the Company then owned by such holders, such holders may give written notice
to the Company of the proposed disposition, specifying the number of Registrable
Securities so to be sold or disposed of (which must include at least 50% of the
Registrable Securities) and requesting that the Company prepare and file a
registration statement under the Securities Act covering such Registrable
Securities. The Company shall, within 10 days thereafter, give written notice
to the other holders of Registrable Securities of such request and each of the
other holders shall have the option, for a period of 10 days after receipt by it
of such notice from the Company, to include its Registrable Securities in such
registration statement. The Company shall use its best efforts to cause an
appropriate registration statement (the "Registration Statement") covering such
Registrable Securities to be filed with the Commission and to become effective
as soon as reasonably practicable and to
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<PAGE>
remain effective until the completion of the distribution of the Registrable
Securities to be offered or sold but not longer than 90 days after effectiveness
of the Registration Statement. (The holders whose Registrable Securities are
included in a Registration Statement are hereinafter referred to as the "Selling
Investors"). The Company shall not be obligated to file more than two
Registration Statements pursuant to the foregoing provisions of this Section
8.1. The Company shall bear all of the Costs and Expenses of the two
Registration Statements. In addition to the foregoing and without regard to
there first having been filed either of the two Registration Statements provided
for in the foregoing provisions of this Section 8.1, the holders of Registrable
Securities will be entitled to demand an unlimited number of Registration
Statements on Form S-3 or any successor form allowing substantial incorporation
by reference to Securities Exchange Act reports filed by the Company, but only
if the Company is eligible to use Form S-3 or such successor Form, at such
holders' Cost and Expense, provided however, that at least $500,000 in aggregate
sales price less underwriters discounts and commissions of Registrable
Securities are proposed to be sold pursuant thereto and no more than one such
Registration Statement is demanded in any twelve month period of time. A demand
for registration under this Section 8.1 will not count as such until it has
become effective and unless the holders of Registrable Securities are able to
register and sell at least 80% of the Registrable Securities included in such
Registration Statement; provided, however, that if the initiating holders
withdraw a request for registration before the Registration Statement becomes
effective, then the initiating holders at their option either shall (i) bear the
Costs and Expenses thereof pro rata on the basis of the number of shares
requested to be included therein or (ii) have such Registration Statement
applied to and counted as one of the two Registration Statements for which the
Company has agreed to bear the Costs and Expenses.
8.2. Procedure for Registration. In connection with the filing of a
--------------------------
Registration Statement pursuant to Section 8.1 hereof, and in supplementation
and not in limitation of the provisions hereof, the Company shall:
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<PAGE>
(a) Notify the Selling Investors as to the filing of the
Registration Statement and of all amendments or supplements thereto filed prior
to the effective date of said Registration Statement;
(b) Notify the Selling Investors, promptly after the Company
shall receive notice thereof, of the time when said Registration Statement
became effective or when any amendment or supplement to any prospectus forming a
part of said Registration Statement has been filed;
(c) Notify the Selling Investors promptly of any request by
the Commission for the amending or supplementing of such Registration Statement
or prospectus or for additional information;
(d) Prepare and promptly file with the Commission and promptly
notify the Selling Investors of the filing of any amendments or supplements to
such Registration Statement or prospectus as may be necessary to correct any
statements or omissions if, at any time when a prospectus relating to the
Registrable Securities is required to be delivered under the Securities Act, any
event with respect to the Company shall have occurred as a result of which any
such prospectus or any other prospectus as then in effect would include an
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein not misleading; and, in addition, prepare and
file with the Commission, promptly upon the Selling Investors' written request,
any amendments or supplements to such Registration Statement or prospectus which
may be reasonably necessary or advisable in connection with the distribution of
the Registrable Securities;
(e) Prepare, promptly upon request of the Selling Investors or
any underwriters for the Selling Investors, such amendment or amendments to such
Registration Statement and such prospectus or prospectuses as may be reasonably
necessary to permit compliance with the requirements of Section 10(a)(3) of the
Securities Act;
(f) Advise the Selling Investors promptly after the Company
shall receive notice or obtain knowledge of the issuance of any stop order by
the Commission
-24-
<PAGE>
suspending the effectiveness of any such Registration Statement or amendment
thereto or of the initiation or threatening of any proceeding for that purpose,
and promptly use its best efforts to prevent the issuance of any stop order or
obtain its withdrawal promptly if such stop order should be issued;
(g) Use its best efforts to qualify, as soon as reasonably
practicable, the Registrable Securities for sale under the securities or blue-
sky laws of such states and jurisdictions within the United States as shall be
reasonably requested by the Selling Investors; provided, that the Company shall
not be required in connection therewith or as a condition thereto to qualify to
do business, to become subject to taxation or to file a consent to service of
process generally in any of the aforesaid states or jurisdictions;
(h) Furnish the Selling Investors, as soon as available,
copies of any Registration Statement and each preliminary or final prospectus,
or supplement or amendment required to be prepared pursuant hereto, all in such
quantities as the Selling Investors may, from time to time, reasonably request;
and
(i) If requested by the Selling Investors, enter into an
agreement with the underwriters of the Registrable Securities being registered
containing customary provisions and reflecting the foregoing.
8.3. Incidental Registration. If at any time the Company shall
-----------------------
propose the filing of a Registration Statement on an appropriate form under the
Securities Act of any securities of the Company, otherwise than pursuant to
Section 8.1 hereof and other than a registration statement on Forms S-8 or S-4
or any equivalent form then in effect, then the Company shall give the holders
of Registrable Securities, XIST LTD. and Vanguard notice of such proposed
registration and shall include in any Registration Statement relating to such
securities all or a portion of the Registrable Securities and Common Stock then
owned by such holders, which such holders shall request (such holders to be
considered Selling Investors), by notice given by such holders to the Company
within 30 days after the giving of such notice by the Company, to be so
included. In the event of the inclusion of Registrable Securities and Common
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<PAGE>
Stock pursuant to this Section 8.3, the Company shall bear all of the Costs and
Expenses of such registration; provided, however, that the Selling Investors
shall pay, pro rata based upon the number of Registrable Securities and Common
Stock included therein, the underwriters discounts and compensation. In the
event the distribution of securities of the Company covered by a Registration
Statement referred to in this Section 8.3 is to be underwritten, then the
Company's obligation to include Registrable Securities and Common Stock in such
Registration Statement shall be subject, at the option of the Company, to the
following further conditions:
(a) The distribution for the account of the Selling Investors shall
be underwritten by the same underwriters who are underwriting the distribution
of the securities for the account of the Company and/or any other persons whose
securities are covered by such Registration Statement, and the Selling Investors
will enter into an agreement with such underwriters containing customary
provisions;
(b) If the underwriting agreement entered into with the aforesaid
underwriters contains restrictions upon the sale of securities of the Company,
other than the securities which are to be included in the proposed distribution,
for a period not exceeding 150 days from the effective date of the Registration
Statement, then such restrictions will be binding upon the Selling Investors
and, if requested by the Company, the Selling Investors will enter into a
written agreement to that effect; and
(c) If the underwriters state in writing that they are unwilling to
include any or all of the Selling Investors' securities in the proposed
underwriting because such inclusion will materially interfere with the orderly
sale and distribution of the securities being offered by the Company, then the
number of Selling Investors' securities to be included will be reduced pro rata
on the basis of the number of shares owned by such holders, or there will be no
inclusion of Selling Investors' securities in the registration statement and
proposed distribution, in accordance with such statement by the underwriters.
8.4. Indemnification by the Company. The Company will indemnify and
------------------------------
hold harmless each Selling Investor, any underwriter (as defined in the
Securities Act) for
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<PAGE>
such Selling Investor, each partner, officer and director of such Selling
Investor, and each person, if any, who controls such Selling Investor or such
underwriter within the meaning of the Securities Act (but, in the case of an
underwriter or a controlling person, only if such underwriter or controlling
person indemnifies the persons mentioned in subdivision (b) of Section 8.5
hereof in the manner set forth therein), against any losses, claims, damages or
liabilities, joint or several, to which such Selling Investor or any such
underwriter, partner, officer, director or controlling person becomes subject,
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) are caused by any untrue
statement or alleged untrue statement of any material fact contained in any
preliminary prospectus (if used prior to the effective date of the Registration
Statement and not corrected or supplied in the final prospectus for such
Registration Statement), or contained, on the effective date thereof, in any
Registration Statement under which Registrable Securities were registered under
the Securities Act, the prospectus contained therein, or any amendment or
supplement thereto, or arising out of or based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; and the Company will
reimburse such Selling Investor and any such underwriter, partner, officer,
director or controlling person for any legal or other expenses reasonably
incurred by such Selling Investor, or any such partner, officer, director,
underwriter or controlling person in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that the
Company will not be liable to any such persons in any such case to the extent
that any such loss, claim, damage, liability or action arises out of or is based
upon any untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with information furnished to
the Company in writing by such person expressly for inclusion in any of the
foregoing documents.
8.5. Indemnification by Selling Investors. Each Selling Investor shall:
------------------------------------
(a) Furnish in writing all information to the Company concerning
itself and its holdings of securities of the Company as shall be required in
connection
-27-
<PAGE>
with the preparation and filing of any Registration Statement covering any
Registrable Securities; and
(b) Indemnify and hold harmless the Company, each of its directors,
each of its officers who has signed a Registration Statement, each person, if
any, who controls the Company within the meaning of the Securities Act and any
underwriter (as defined in the Securities Act) for the Company, against any
losses, claims, damages or liabilities to which the Company or any such
director, officer, controlling person or underwriter may become subject under
the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) are caused by any untrue or alleged
untrue statement of any material fact contained in any preliminary prospectus
(if used prior to the effective date of the Registration Statement) or contained
on the effective date thereof, in any Registration Statement under which
Registrable Securities were registered under the Securities Act, the prospectus
contained therein, or any amendment or supplement thereto, or arising out of or
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading; in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with information furnished to the Company by
such Selling Investor expressly for inclusion in any of the foregoing documents,
and such Selling Investor shall reimburse the Company and any such underwriter,
officer, director or controlling person for any legal or other expenses
reasonably incurred by the Company or any such director, officer or controlling
person in connection with investigating or defending any such loss, claim,
damage, liability or action. Notwithstanding the foregoing provisions of this
Section 8.5, no Selling Investor shall be required to indemnify the Company or
any such underwriter, officer, director or controlling persons for any amount in
excess of the amount of the proceeds received by such Selling Investor.
8.6. Notification by Selling Investors. Each Selling Investor and
---------------------------------
each other person indemnified pursuant to Section 8.4 hereof will, in the event
it receives notice of the
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<PAGE>
commencement of any action against it which is based upon an alleged act or
omission which, if proven, would result in the Company's having to indemnify it
pursuant to Section 8.4 hereof, promptly notify the Company, in writing, of the
commencement of such action and permit the Company, if the Company so notifies
such Selling Investor within 10 days after receipt by the Company of notice of
the commencement of the action, to participate in and to assume the defense of
such action with counsel reasonably satisfactory to such Selling Investor or
such other indemnified person, as the case may be; provided, however, that such
Selling Investor shall be entitled to retain its own counsel at the Company's
expense if they have defenses available to them which are not available to the
Company or if there exists a potential for conflict of interest between the
Company and such Selling Investor which would render such dual representation
impractical. The omission to notify the Company promptly of the commencement of
any such action shall not relieve the Company of any liability to indemnify such
Selling Investor or such other indemnified person, as the case may be, under
Section 8.4 hereof, except to the extent the Company shall suffer any loss by
reason of such failure to give notice and shall not relieve the Company of any
other liabilities which it may have under this or any other agreement.
8.7. Notification by Company. The Company agrees that, in the event
-----------------------
it receives notice of the commencement of any action against it which is based
upon an alleged act or omission which, if proven, would result in any Selling
Investor having to indemnify the Company pursuant to subdivision (b) of Section
8.5 hereof, the Company will promptly notify such Selling Investor in writing of
the commencement of such action and permit such Selling Investor, if such
Selling Investor so notifies the Company within 10 days after receipt by it of
notice of the commencement of the action, to participate in and to assume the
defense of such action with counsel reasonably satisfactory to the Company. The
omission to notify such Selling Investor promptly of the commencement of any
such action will not relieve such Selling Investor of liability to indemnify the
Company under subdivision (b) of Section 8.5 hereof, except to the extent that
such Selling Investor suffers any loss by reason of such failure to give notice
and shall
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<PAGE>
not relieve such Selling Investor of any other liabilities which it may have
under this or any other agreement.
8.8. Costs and Expenses. As used in this Agreement, "Costs and
------------------
Expenses" shall include all of the costs and expenses relating to the
Registration Statement involved, including but not limited to registration,
filing and qualification fees, blue-sky expenses, printing expenses, reasonable
fees and disbursements of counsel to the Company and counsel for the Selling
Investors as the Selling Investors may designate, provided, however, that no
more than one such counsel for the Selling Investors will be so designated on
any occasion, and accounting fees; provided however, that underwriting discounts
and commissions and reimbursable underwriters' expenses will be borne pro rata
by the holders of the securities included in the Registration Statement.
8.9. Rule 144 Reporting. After the Company becomes subject to the
------------------
reporting requirements of Sections 13 or l5(d) of the Securities Exchange Act,
and with a view to making available the benefits of certain rules and
regulations of the Commission which may permit the sale of the Preferred Shares
or the Conversion Shares without registration, the Company agrees to:
(a) Cause public information with respect to the Company to be
available, as set forth in Rule 144 or any comparable rule or regulation under
the Securities Act, at all times;
(b) Use its best efforts to tile with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Securities Exchange Act; and
(c) To furnish to each holder of Registrable Securities forthwith
upon request a written statement by the Company as to its compliance with the
reporting requirements of said Rule 144 and of the Securities Act and the
Securities Exchange Act.
9. Expenses.
--------
-30-
<PAGE>
The Company and XIST LTD. agree, in the event the transactions
contemplated hereby are consummated, to pay on a pro rata basis based on the
proceeds received by each of them from the consummation of this Agreement and
the agreements attached as Exhibit G hereto, and save the Investors harmless
against liability for the payment of, the reasonable fees and expenses of
Stroock & Stroock & Lavan, counsel for the Investors, arising in connection with
the negotiation, execution and consummation of this Agreement and the
transactions contemplated hereby, which fees and expenses will be paid promptly
after presentation of such counsel's statement, reasonably itemized as to hours
and dates worked, attorneys and other professionals performing services and
nature of the work on each such date. The Company also agrees to pay, and save
the Investors harmless against liability for the payment of, (a) fees and
expenses (including without limitation, reasonable attorneys' fees) incurred
with respect to any amendments or waivers requested by the Company (whether or
not the same become effective) under or in respect of this Agreement and the
transactions contemplated hereby, (b) stamp and other transfer taxes which may
be payable in respect of the execution and delivery of this Agreement or the
issuance of the Preferred Shares or the Conversion Shares and (c) fees and
expenses (including, without limitation, reasonable attorneys' fees) incurred in
respect of the enforcement by the Investors of the rights granted to the
Investors under this Agreement and the transactions contemplated hereby.
10. Right of First Refusal.
----------------------
(a) The Company agrees that until there is a Public Offering of its
securities if it sells any New Securities it will offer to the Qualified
Investors the right to purchase additional shares of such New Securities of the
Company in accordance with, and subject to, the provisions of this Section
10(a). The Company shall immediately notify the Qualified Investors of the
terms for the sale of such New Securities by the Company (the "Company's
Notice"). Each of the Qualified Investor wishing to purchase such New
Securities pursuant to the Company's Notice (hereinafter referred to as a
"Purchasing Party") shall notify the Company by written notice within 15 days
after receipt of the Company's Notice how many of such shares it
-31-
<PAGE>
desires to purchase. Each Purchasing Party shall be entitled to purchase up to
that number of shares of New Securities specified in its notice which is equal
to a number of shares of New Securities which, when added to the Conversion
Shares then held by such Investor (assuming conversion of all Preferred Shares),
is in the same proportion to the total number of shares of securities of the
Company then outstanding (assuming conversion of all convertible securities and
exercise of all outstanding options and including the New Securities to the
extent outstanding), as the number of Conversion Shares held by such Investor
(assuming conversion of all Preferred Shares) bears to the total number of
shares of securities of the Company outstanding immediately prior to the
issuance of any New Securities (assuming conversion of all convertible
securities and exercise of all outstanding options). If the Company later
changes the terms of the sale in any material respect, the Company shall first
reoffer such New Securities to the Investors pursuant to the procedure set forth
above. Any New Securities which are sold (or issued) by the Company otherwise
than for cash shall be offered to the Investors for an equivalent cash value as
determined by the Board of Directors of the Company in good faith.
(b) Whether or not the terms and conditions of a sale of New
Securities provide for the purchaser to have any registration rights, the
Company agrees with the Investors that in the event any Investor acquires any
New Securities pursuant to paragraph (a) above, such Investor may elect either
to (i) have such New Securities be deemed Registrable Securities for the
purposes of Section 8 hereof or (ii) have the registration rights provided in
such sale.
(c) The closing of the purchase of shares pursuant to this Section 10
shall occur at the principal office of the Company not later than 45 days after
the closing of the sale of New Securities, or at such other time as the
Purchasing Parties and the Company may mutually determine. At the closing, the
Company shall deliver to each Purchasing Party, the certificate or certificates
representing such shares, free and clear of all liens and encumbrances
whatsoever (other than those imposed by this Agreement), and such Purchasing
Party shall pay to the Company, in cash or by delivery of a cashier's check, or
by wire transfer, the amount of the
-32-
<PAGE>
purchase price for the shares of New Securities purchased by such Purchasing
Party pursuant to this Section 10.
11. Conduct Prior to the Closing Date.
---------------------------------
The Investors, their counsel, accountants, employees or other
representatives may, prior to the Closing Date, make such investigations of the
properties, plants and operations of the Company and such audit of the financial
condition of the Company for such purposes as it deems necessary or advisable in
connection with the transactions contemplated hereby; such investigation shall
not, however, affect the representations and warranties of the Company
hereunder. Prior to the Closing Date, the Company agrees to permit the
Investors and their counsel, accountants, employees or other representatives to
have, after the date hereof and upon reasonable advance notice, full access
during normal business hours to the premises and to all books and records of the
Company and the Investors shall have the right to make copies thereof and
excerpts therefrom, and the Company will furnish the Investors with such
financial and operating data and other information with respect to the business
and properties of the Company as is otherwise readily available and as the
Investors may, from time to time, reasonably request. Prior to the Closing
Date, the Company agrees to permit the Investors and their counsel, accountants,
employees or other representatives to communicate with and visit suppliers,
customers and others having business relations with the Company. The Company
acknowledges that the rights set forth in this Section 11 are essential to the
Investors as a means of evaluating the assets and business of the Company and
agree that in no event will they make any claim of any kind as a result of the
exercise by the Investors of such rights and hereby waive any and all rights
they may have to make such claims.
12. No Brokers.
----------
Each of the Company, on the one hand, and the Investors, on the other
hand, represents and warrants to the other that there was no broker or finder
connected with this Agreement or the transactions contemplated hereby. In the
event of a claim by any broker or finder based upon his or her representing or
being retained by the Investors, the Investors agree
-33-
<PAGE>
to indemnify and save harmless the Company in respect of such claim. In the
event of a claim by any broker or finder based upon his or her representing or
being retained by the Company the Company agrees to indemnify and save harmless
the Investors in respect of such claim.
13. Survival of Representations. All representations, warranties,
---------------------------
covenants and agreements contained in this Agreement or in any document,
exhibit, schedule or certificate delivered in connection herewith shall survive
the execution and delivery of this Agreement and the Closing Date and any
investigation at any time made by the Investors or on their behalf for a period
of six months from the Closing Date. If the Company shall be required to file a
report with the Commission pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act by reason of the Company having registered any of its securities
pursuant to Section 12 of the Securities Exchange Act or Section 5 of the
Securities Act (a "Reporting Event") then the Company shall be under no further
obligation to perform the covenants contained in Sections 4 and 5 hereof, except
for the covenants contained in Sections 4.1, 4.8, 4.11 and 5.6 (second sentence)
hereof which shall survive the Reporting Event.
14. Definitions.
-----------
For purposes of this Agreement, the following terms have the
respective meanings set forth below:
14.1. "Affiliate" has the meaning such term is given in Rule 405
promulgated under the Securities Act.
14.2. "Associate" has the meaning such term is given in Rule 405
promulgated under the Securities Act.
14.3. "Commission" means the Securities and Exchange Commission.
14.4. "Indebtedness" means all obligations, contingent or otherwise,
which in accordance with generally accepted accounting principles should be
classified on the obligor's balance sheet as liabilities, but in any event
including liabilities secured by any mortgage, pledge, lien or other security
interest existing on property owned or acquired by the obligor,
-34-
<PAGE>
whether or not the liability secured thereby shall have been assumed, all
guarantees of such Indebtedness and other contingent obligations in respect of
the Indebtedness of others.
14.5. "New Securities" means shares of Common Stock of the Company,
or any security which is convertible into or exchangeable for Common Stock, or
any right, option or warrant to acquire any Common Stock of the Company, except
for Conversion Shares, Preferred Shares or Options.
14.6. "Public Offering" means a distribution of securities in an
underwritten public offering to the general public pursuant to a Registration
Statement filed with and declared effective by the Commission pursuant to the
Securities Act.
14.7. "Qualified Investor"' means each holder of Preferred Shares or
Conversion Shares, or shares of Common Stock or other securities convertible
into or exercisable for shares of Common Stock, which, assuming conversion or
exercise of the Preferred Shares and such other securities, constitutes 10% or
more of the outstanding Common Stock of the Company on a fully diluted basis
(assuming conversion of all convertible securities and exercise of all
outstanding options).
14.8. "Registrable Securities" means (a) the Preferred Shares issued
hereunder; (b) any Conversion Shares issued or to be issued pursuant to
conversion of the Preferred Shares issued hereunder; (c) any other securities
issued as a dividend or other distribution with respect to, or in exchange for
or in replacement of, the Preferred Shares issued hereunder or the Conversion
Shares; provided, however, that if any of the foregoing securities are sold
pursuant to a Registration Statement such securities shall no longer constitute
Registrable Securities.
14.9. "Securities Act" means the Securities Act of 1933, as amended,
or any similar Federal law then in force.
14.10. "Securities Exchange Act" means the Securities Exchange Act
of 1934, as amended, or any similar Federal law then in force.
15. Miscellaneous Provisions.
------------------------
-35-
<PAGE>
15.1. Construction and Enforcement. This Agreement shall be
----------------------------
governed by, and construed and enforced in accordance with, the internal laws of
the State of New York without giving any effect to principles of conflicts of
laws. The Company agrees that it will not assert against any limited partner of
any Investor, in such person's role as a limited partner, any claim it may have
under this Agreement by reason of any failure or alleged failure by any Investor
to meet its obligations hereunder.
15.2. Notices. All notices hereunder shall be in writing and shall
-------
be deemed to have been given at the time when mailed by certified mail,
addressed to the address below stated of the party to which notice is given, or
to such changed address as such party may have fixed by notice:
To the Company:
TSI International Ltd.
295 Westport Avenue
Norwalk, Connecticut 06856
Attn: Constance Galley, President
-with a copy to-
Fenwick, Davis & West
Two Palo Alto Square
Palo Alto, California 94306
Attn: Mark C. Stevens, Esq.
-36-
<PAGE>
To the Investors:
Warburg, Pincus Capital Company, L.P.
466 Lexington Avenue
New York, New York 10017
Attn: Jeffrey A. Harris
and
Vanguard Atlantic Ltd.
405 Danbury Road
Wilton, Connecticut 06897
Attn: E. Lee Keet
-with a copy to-
Stroock & Stroock & Lavan
7 Hanover Square
New York, New York 10004
Attn: Martin H. Neidell, Esq.
To XIST LTD:
c/o The Dun & Bradstreet Corporation
299 Park Avenue
New York, New York 10171
Attn: Mr. Peter Lessler
-with a copy to-
The Dun & Bradstreet Corporation
1225 Worcester
Natick, Massachusetts 01760
Attn: James Alberg, Esq.
provided, however, that any notice of change of address shall be effective only
upon receipt.
15.3. Assignment. This Agreement shall be binding upon and inure to
----------
the benefit of the Company, the Investors and the respective successors and
permitted assigns of the Investors. The Company may not assign any of its
rights or obligations under this Agreement without the prior written consent of
the Investors. The Investors may assign all or any part of their respective
rights and obligations hereunder. A person to whom all or a part of either
Investor's rights are assigned shall become a party to this Agreement, entitled
to all the rights and benefits hereunder. The rights and powers of the
Investors hereunder are granted to the
-37-
<PAGE>
Investors as owners of the Preferred Shares and the Conversion Shares, if any.
Any subsequent owner of any Preferred Shares or Conversion Shares, whether
becoming such by transfer, assignment, operation of law or otherwise, shall be
deemed to be an Investor hereunder, shall have the same rights and powers which
an Investor owning the same number of shares has hereunder, and shall be
entitled to exercise them in full and no transfer or assignment shall divest
such Investor or any subsequent owner of such rights and powers until such
Investor or subsequent owner no longer owns any Preferred Shares or any
Conversion Shares; provided that no such transferee will be entitled to the
benefits of Sections 4, 5, 8 or 10 hereof unless such transferee is also a
Qualified Investor.
15.4. Amendments and Waivers. This Agreement and all exhibits and
----------------------
schedules hereto set forth the entire understanding of the parties with respect
to the transactions contemplated hereby. This Agreement may be amended, the
Company may take any action herein prohibited or omit to take action herein
required to be performed by it, and any breach of or compliance with any
covenant, agreement, warranty or representation may be waived, only if the
Company has obtained the written consent or waiver of the holders of not less
than 50% of the issued and outstanding Preferred Shares and Conversion Shares
or, in the case of any amendment to Sections 8 or 10 of this Agreement which
adversely affects the rights of the Qualified Investors, by the written consent
or waiver of all persons or entities who at such time are Qualified Investors.
15.5. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
15.6. Headings. The headings in this Agreement are for reference
--------
purposes only and shall not constitute a part hereof.
15.7. Confidentiality. The Investors acknowledge that much of the
---------------
financial and other information provided to them hereunder is of a sensitive and
confidential
-38-
<PAGE>
nature and, accordingly, the Investors will keep such information confidential
and will protect such information as it protects its own information of similar
importance.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.
TSI INTERNATIONAL LTD.
By: /s/ Constance Galley
---------------------------------------
Constance Galley, President
INVESTORS:
WARBURG, PINCUS CAPITAL COMPANY, L.P.
By: Warburg, Pincus & Co.,
General Partner
By: /s/ Jeff Horing
-----------------------------------------
Partner
VANGUARD ATLANTIC LTD.
By: /s/ Catherine J. Phillips
-------------------------
Sections 4.10 and 9
Accepted and Agreed to:
XIST LTD.
By: /s/ James L. Alberg, Vice President
-----------------------------------
[NO SCHEDULES OR EXHIBITS ATTACHED]
-39-
<PAGE>
1991 PREFERRED STOCK PURCHASE AGREEMENT
---------------------------------------
This 1991 Preferred Stock Purchase Agreement (the "Agreement"), dated as of
the 30th day of April, 1991, by and among TSI International Ltd., a Connecticut
corporation (the "Company"), and the investors listed on Schedule A hereto
(collectively, the "Investors").
W I T N E S S E T H :
- - - - - - - - - - -
WHEREAS, the Company desires to issue and sell to the Investors shares of
Series A Preferred Stock of the Company (the "Preferred Shares");
WHEREAS, the Investors desire to purchase the Preferred Shares from the
Company; and
WHEREAS, the Company and certain of the Investors are parties to a
Preferred Stock Purchase Agreement dated as of the 1st day of June, 1989 (the
"1989 Agreement");
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, the parties hereby agree as follows:
1. Purchase and Sale of Preferred Shares.
-------------------------------------
1.1. Sale of Preferred Shares. Upon receipt by the Company of the
------------------------
purchase price, the Company hereby issues and sells to each Investor, and each
Investor hereby purchases from the Company, the number of Preferred Shares set
forth opposite such Investor's name on Schedule A hereto.
1.2 Purchase Price. The purchase price being paid by the Investors
--------------
for the Preferred Shares is $13.39 per share. The purchase price will be paid by
noon, New York time, on May 7, 1991, by wire transfer of same-day funds or
delivery to the Company of a cashier's check in the amount set opposite each
Investor's name on Schedule A.
<PAGE>
2. Representations and Warranties of the Company.
---------------------------------------------
The Company hereby represents and warrants to the Investors as follows:
2.1. Organization. The Company is a corporation duly organized,
------------
validly existing and in good standing under the laws of the State of
Connecticut. The Company has all requisite corporate power and authority and
holds all licenses, permits and other required authorizations from governmental
authorities necessary to conduct its business as it is now being conducted or as
proposed to be conducted and to own or lease the properties and assets it now
owns or holds under lease.
2.2. Charter Documents. The Company has heretofore delivered to
-----------------
counsel for the Investors true, correct and complete copies of the Company's
Certificate of Incorporation and By-Laws, each as in full force and effect on
June 5, 1989. There have not been any changes made to such Certificate of
Incorporation or By-Laws since June 5, 1989.
2.3. Capitalization. As of the date hereof, the Company's authorized
--------------
capitalization consists of 3,000,000 shares of Common Stock, par value $.01 per
share, and 750,000 shares of Preferred Stock, par value $.01 per share, of which
934,000 and 297,405 shares, respectively, are outstanding. The issuance of the
Preferred Shares and of the shares of Common Stock issuable upon conversion of
the Preferred Shares (the "Conversion Shares") pursuant to the provisions of
this Agreement have been duly and validly authorized. No further approval or
authorization of the shareholders or the directors of the Company or of any
governmental authority or agency will be required for the issuance and sale of
the Preferred Shares as contemplated by this Agreement. A true and complete
list of the holders of all issued and outstanding equity securities of the
Company on the date hereof, including the number of securities owned by each
such holder, is set forth on Schedule 2.3 attached hereto. Except pursuant to
the 1989 Agreement, no shareholder of the Company or any other person is
entitled to any preemptive rights with respect to the purchase or sale of any
securities by the Company.
2
<PAGE>
When issued and sold to the Investors, the Preferred Shares will be duly and
validly issued, fully paid and non-assessable, will be free and clear of any
liens, pledges or encumbrances and will have the designations, preferences and
relative, participating, optional and other special rights as set forth in the
Company's Certificate of Incorporation. The Conversion Shares, when issued and
delivered upon conversion of the Preferred Shares, will be duly and validly
issued, fully paid and non-assessable. Except as set forth on Schedule 2.3
attached hereto, there are not outstanding options, warrants or other rights,
commitments or arrangements, written or oral, to which the Company is a party or
by which it is bound, to purchase or otherwise acquire any authorized but
unissued shares of capital stock of the Company or any security directly or
indirectly convertible into or exchangeable or exercisable for any capital stock
of the Company.
2.4. Compliance with Other Instruments. The Company is not in
---------------------------------
violation of this Certificate of Incorporation or By-Laws. Neither the sale of
the Preferred Shares (or the issuance and delivery of the Conversion Shares),
the execution and delivery of this Agreement, nor the fulfillment of the terms
set forth in this Agreement and the consummation of the transactions
contemplated by this Agreement, will: (i) conflict with or constitute a breach
of, or constitute a default under or an event which, with or without notice or
lapse of time or each, would be a breach of or default under or violation of the
Certificate of Incorporation or By-Laws of the Company or would be a breach of
or default under or violation of any material agreement, document, indenture,
mortgage or other instrument or undertaking by which the Company is bound or to
which any of its properties are subject, or would be a material violation of any
law, administrative regulation, judgment, order or decree applicable to the
Company; (ii) result in the creation or imposition of any material lien, charge
or encumbrance upon any property or assets of the Company; (iii) result in the
loss of any material license, certificate, legal privilege or legal right
enjoyed or possessed by the Company; (iv) give any party to any material
agreement to which the Company is a party a right of termination; or (v) except
as
3
<PAGE>
provided for in this Agreement, require the consent of any other person or
entity under any agreement, indenture, mortgage, document or other instrument or
undertaking by which the Company is bound or to which any of its properties are
subject.
2.5. Authorization. The Company has the full corporate power and
-------------
authority to enter into this Agreement and to perform all of its obligations
hereunder. The execution, delivery and performance of the terms of this
Agreement by the Company have been duly authorized by all necessary corporate
action. This Agreement constitutes a legal, valid and binding obligation of the
Company enforceable in accordance with its terms. The Company, in light of its
business or proposed business, does not require any consent, approval,
authorization or order of, or declaration, filing or registration with, any
court or governmental or regulatory agency or board in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby.
2.6. Compliance with the Securities Act. Based upon the
----------------------------------
representations of the Investors set forth herein, and assuming the truth of
such representations, the offer, sale and issuance of the Preferred Shares (and
the issuance and delivery of the Conversion Shares) are exempt from the
registration requirements of the Securities Act of 1933.
2.7. Reservation of Common Stock. The Company shall reserve and keep
---------------------------
available out of its authorized but unissued Common Stock the number of shares
of Common Stock required for issuance upon the conversion of all of the
Preferred Shares (including any additional shares of Common Stock which may
become so issuable by reason of the operation of anti-dilution provisions of the
Preferred Shares).
3. Representations, Warranties and Covenants of the Investors. Each
----------------------------------------------------------
Investor hereby severally represents and warrants to, and agrees with, the
Company as follows:
4
<PAGE>
3.1. Investment Intent. Each Investor is acquiring the Preferred
-----------------
Shares (and any Conversion Shares) for its own account and not with a present
view to, or for sale in connection with, any distribution thereof in violation
of the Securities Act of 1933. Each Investor consents to the placement of the
following legend on each certificate representing the Preferred Shares and on
each certificate representing the Conversion Shares:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE
TRANSFERRED OR SOLD UNLESS (i) A REGISTRATION STATEMENT
UNDER SUCH ACT IS THEN IN EFFECT WITH RESPECT THERETO, (ii)
A WRITTEN OPINION FROM COUNSEL FOR THE ISSUER OF MESSRS.
STROOCK & STROOCK & LAVAN OR OTHER COUNSEL FOR THE HOLDER
REASONABLY ACCEPTABLE TO THE ISSUER HAS BEEN OBTAINED TO THE
EFFECT THAT NO SUCH REGISTRATION IS REQUIRED OR (iii) A 'NO
ACTION' LETTER OR ITS THEN EQUIVALENT HAS BEEN ISSUED BY THE
STAFF OF THE SECURITIES AND EXCHANGE COMMISSION WITH RESPECT
TO SUCH TRANSFER OR SALE."
3.2. Restricted Securities. Each Investor understands that the
---------------------
Preferred Shares (and any Conversion Shares) have not been registered under the
Securities Act of 1933 for the reason that the sale provided for in this
Agreement is exempt pursuant to Section 4 of the Securities Act of 1933 and that
the reliance of the Company on such exemption is predicated in part on such
Investor's representations set forth herein. Each Investor represents that it is
experienced in evaluating companies such as the Company, is able to fend for
itself, has such knowledge and experience in financial and business matters as
to be capable of evaluating the merits and risks of its investment, and has the
ability to suffer the total loss of its investment. Such Investor was not formed
solely for the purpose of investing in the Company. Each Investor further
represents that it has had access during the course of the transaction and prior
to its purchase of the Preferred Shares to such information relating to the
Company as it has desired and that it has had
5
<PAGE>
the opportunity to ask questions of and receive answers from the Company
concerning the terms and conditions of the offering and to obtain additional
information (to the extent the Company possessed such information or could
acquire it without unreasonable effort or expense) necessary to verify the
accuracy of any information furnished to it or to which it had access.
Each Investor understands that the Preferred Shares (and any Conversion
Shares) may not be sold, transferred or otherwise disposed of without
registration under the Securities Act of 1933 or an exemption therefrom and that
in the absence of an effective registration statement covering the Preferred
Shares (or the Conversion Shares) or an available exemption from registration
under the Securities Act of 1933, the Preferred Shares (and any Conversion
Shares) must be held indefinitely. The benefits of Rule 144 promulgated under
the Securities Act of 1933 are not presently available, the Company has not
covenanted to make the benefits of such Rule available, and the Company has no
present plans to make the benefits of such Rule available.
4. Deliveries of the Company. On May 7, 1991, as a condition to the
-------------------------
Investors' obligation to pay the purchase price, the Company will deliver to the
Investors the following:
(a.) an opinion of counsel to the Company, Fenwick & West,
addressed to the Investors, in form and substance satisfactory to the Investors
and to counsel to the Investors, Stroock & Stroock & Lavan;
(b.) copies of the resolutions adopted by the Company's Board of
Directors authorizing the execution, delivery and performance of this Agreement
and the transactions contemplated hereby;
(c.) a certificate, dated as of a recent date, of the Secretary
of State of Connecticut attesting as to the good standing of the Company in such
State;
(d.) a stock certificate registered in the name of such Investor
representing the Preferred Shares purchased by such Investor; and
6
<PAGE>
(e.) a certificate signed by the President of the Company that
the representations and warranties in Section 2 are true and correct as of May
7, 1991.
5. 1989 Agreement.
--------------
(a) All references in the 1989 Agreement to Preferred Shares
shall be deemed to refer also to the Preferred Shares issued to the Investors
hereunder, and such Preferred Shares and the holders thereof shall be entitled
to all the rights and benefits of holders of Preferred Shares under the 1989
Agreement, including, but not limited to, the benefits of Sections 4, 5, 8 and
10 of the 1989 Agreement. Section 14.8 of the 1989 Agreement is hereby amended
to include as Registrable Securities all Preferred Shares and Conversion Shares
issued pursuant to this Agreement. The Investors hereby waive the provisions of
Sections 5.6 and 10 of the 1989 Agreement, and consent pursuant to Section 6(b)
of the Certificate of Incorporation, to the extent necessary to permit the
issuance of the Preferred Shares hereunder and the issuance of Options (as
defined in said Section 10) for employees, directors or consultants to purchase
up to 28,940 additional shares of Common Stock in addition to those provided for
in said Section 5.6.
(b) Each Investor hereunder which is not a party to the
Stockholders' Agreement dated as of June 1, 1989 by and among the Company and
its shareholders, as amended (the "Stockholders Agreement"), hereby agrees to
become a party to, and to be bound by all the provisions of, such agreement as
if such Investor was a Shareholder as defined in such agreement.
(c) Pursuant to Section 14 of the Stockholders Agreement, the
Investors, constituting the holders of a majority of the Company's outstanding
Preferred Stock and the holders of at least 60% of the Company's outstanding
Common Stock, amend the Stockholders Agreement to add the following to the last
sentence of Section 7 thereof: "and of that certain 1991 Preferred Stock
Purchase Agreement among the Company and certain investors."
7
<PAGE>
6. Expenses.
--------
The Company agrees to pay and save the Investors harmless against
liability for the payment of, the reasonable fees and expenses of Stroock &
Stroock & Lavan, counsel for the Investors, arising in connection with the
negotiation, execution and consummation of this Agreement and the transactions
contemplated hereby.
7. No Brokers.
----------
Each of the Company, on the one hand, and the Investors, on the other
hand, represents and warrants to the other that there was no broker or finder
connected with this Agreement or the transactions contemplated hereby. In the
event of a claim by any broker or finder based upon his representing or being
retained by the Investors, the Investors agree to indemnify and save harmless
the Company in respect of such claim. In the event of a claim by any broker or
finder based upon his representing or being retained by the Company the Company
agrees to indemnify and save harmless the Investors in respect of such claim.
8. Survival of Representations.
---------------------------
All representations, warranties, covenants and agreements contained in
this Agreement or in any document, exhibit, schedule or certificate delivered in
connection herewith shall survive the execution and delivery of this Agreement
and any investigation at any time made by the Investors or on their behalf for a
period of six months from the date hereof.
9. Miscellaneous Provisions.
------------------------
9.1. Constructions and Enforcement. This Agreement shall be
-----------------------------
governed by, and construed and enforced in accordance with, the internal laws of
the State of New York without giving any effect to principles of conflicts of
laws. The Company agrees that it will not assert against any limited partner of
any Investor, in such person's role as a limited partner, any claim it may have
under this Agreement by reason of any failure or alleged failure by any Investor
to meet its obligations hereunder.
8
<PAGE>
9.2. Notices. All notices hereunder shall be in writing and shall be
-------
deemed to have been given at the time when mailed by certified mail, addressed
to the address below stated of the party to which notice is given, or to such
changed address as such party may have fixed by notice:
To the Company:
TSI International Ltd.
45 Danbury Road
Wilton, Connecticut 06897
Attn: Constance Galley, President
- with a copy to -
Fenwick & West
Two Palo Alto Square
Palo Alto, California 94306
Attn: Mark C. Stevens
To the Investors:
To the addresses set forth on Schedule A
- with a copy to -
Stroock & Stroock & Lavan
7 Hanover Square
New York, New York 10004
Attn: Martin H. Neidell
provided, however, that any notice of change of address shall be effective only
upon receipt.
9.3. Assignment. This Agreement shall be binding upon and inure to
----------
the benefit of the Company, the Investors and the respective successors and
permitted assigns of the Investors. The Company may not assign any of its
rights or obligations under this Agreement without the prior written consent of
the Investors. The Investors may assign all or any part of their respective
rights and obligations hereunder. A person to whom all or a part of the
Investor's rights are assigned shall become a party to this Agreement, entitled
to all the rights and benefits hereunder. The rights and powers of the
Investors
9
<PAGE>
hereunder are granted to the Investors as owners of the Preferred Shares and the
Conversion Shares, if any. Any subsequent owner of any Preferred Shares or
Conversion Shares, whether becoming such by transfer, assignment, operation of
law or otherwise, shall be deemed to be an Investor hereunder, shall have the
same rights and powers which an Investor owning the same number of shares has
hereunder, and shall be entitled to exercise them in full and no transfer or
assignment shall divest such Investor or any subsequent owner of such rights and
powers until such Investor or subsequent owner no longer owns any Preferred
Shares or any Conversion Shares; provided, that no such transferee shall be
entitled to the benefits of Sections 4, 5, 8 or 10 of the 1989 Agreement unless
such transferee is also a Qualified Investor as defined therein.
9.4. Amendments and Waivers. This Agreement and all exhibits and
----------------------
schedules hereto set forth the entire understanding of the parties with respect
to the transactions contemplated hereby. This Agreement may be amended, the
Company may take any action herein prohibited or omit to take action herein
required to be performed by it, and any breach of or compliance with any
covenant, agreement, warranty or representation may be waived, only if the
Company has obtained the written consent or waiver of the holders of not less
than 50% of the issued and outstanding Preferred Shares and Conversion Shares.
9.5. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
9.6 Headings. The headings in this Agreement are for reference purposes
--------
only and shall not constitute a part hereof.
9.7 Additional Investors. The persons or entities listed on Schedule B
--------------------
(the "Additional Investors") shall have the right for a period of 60 days from
the date hereof, to acquire up to an additional number of Preferred Shares set
forth opposite their names on the same terms as contained herein. If such right
is exercised, the Additional
10
<PAGE>
Investors shall execute this Agreement in counterparts and shall be deemed for
all purposes to be, and shall become and be considered as, an Investor as
defined in this Agreement. To the extent that the Additional Investors purchase
the additional shares after 45 days from the date hereof but on or before the
expiration of the 60-day period, the Additional Investors agree to pay to TSI,
in addition to the purchase price for the additional shares, an amount specified
by TSI for late closing costs not to exceed $5,625. If the Additional Investors
do not purchase all of such shares by the expiration of such 60-day period, then
Warburg, Pincus Capital Company, L.P. and Vanguard Atlantic Ltd. or affiliates
thereof shall have the right, but not the obligation, to purchase on a pro-rata
basis (based upon their relative as-converted share ownership in the Company)
any such shares not so purchased by the Additional Investors for a period of up
to ten days after the expiration of such 60-day period. Warburg, Pincus Capital
Company. L.P. and Vanguard Atlantic Ltd. or affiliates thereof may also indicate
when they exercise the foregoing rights a number of additional Preferred Shares
in excess of their pro-rata share, if any, that they would be willing to
purchase if such remain unsold and any unsold shares shall be sold to them on a
pro-rata basis. In the event any such Preferred Shares are purchased under this
Section 9.7, the Company will deliver a stock certificate registered in the name
of such Investor representing the Preferred Shares purchased by such Investor on
the date thereof.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first above written.
[THE REMAINDER OF THIS PAGE LEFT BLANK INTENTIONALLY.]
11
<PAGE>
TSI INTERNATIONAL LTD.
By: /s/Constance F. Galley
-------------------------------
Constance F. Galley, President
INVESTORS:
WARBURG, PINCUS CAPITAL COMPANY, L.P.
By: Warburg, Pincus & Co.,
General Partner
By: /s/William Janeway
-------------------------------
Partner
VANGUARD ATLANTIC LTD.
By: /s/Ernest Keet
-------------------------------
[NO EXHIBITS OR SCHEDULES ARE ATTACHED]
12
<PAGE>
SUPPLEMENT TO 1991 PREFERRED STOCK PURCHASE AGREEMENT
Supplement dated as of July 16, 1991 to 1991 Preferred Stock Purchase
Agreement, dated as of April 30, 1991 (the "1991 Agreement"), by and among TSI
International Ltd., a Connecticut Corporation, and the investors listed on
Schedule A to the 1991 Agreement (the "Investors").
WI T N E S S E T H :
--------------------
WHEREAS, the Company and the Investors desire to supplement the provisions
of the 1991 Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, the parties hereby agree as follows:
1. Definitions. Terms defined in the 1991 Agreement shall have the same
-----------
meaning when used herein.
2. Additional Purchase. In accordance with the provisions of Section 9.7
-------------------
of the 1991 Agreement, Information Partners Capital Fund, L.P. ("IP") hereby
purchases from the Company 37,342 Preferred Shares and by this Supplement is
deemed to have executed the 1991 Agreement and for all purposes is, and shall be
considered as, an Investor under the 1991 Agreement.
3. Qualified Investor. So long as IP owns any Preferred Shares of the
------------------
Company, IP shall be deemed a Qualified Investor and a Qualified Shareholder (as
defined in the Stockholders Agreement).
4. Priority. The Company and the Investors agree that (a) the Preferred
--------
Shares purchased pursuant to the 1991 Agreement (including those purchased by IP
pursuant to this Supplement) (the "Senior Preferred Shares") will be identical
in all respects with the Preferred Shares purchased pursuant to the 1989
Agreement (the "Junior Preferred Shares") except that the Senior Preferred
Shares shall be senior to the Junior Preferred Shares in the event of the
voluntary
<PAGE>
of involuntary liquidation, dissolution or winding up of the Company or the
sale, lease, conveyance or other disposition of all or substantially all of the
Company's property and business and (b) when the Company consummates the sale of
more than 5% of its equity securities or securities convertible into, or
exercisable or exchangeable for, more than 5% of its equity securities, the
Company and the Investors will use their best efforts to amend the Company's
certificate of incorporation to provide for the creation of Senior Preferred
Shares and Junior Preferred Shares in accordance with the provisions of
subparagraph (a) above.
5. Miscellaneous. Except as supplemented hereby, the 1991 Agreement
-------------
remains unmodified and in full force and effect.
6. Counterparts. This Supplement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
[THE REMAINDER OF THIS PAGE LEFT BLANK INTENTIONALLY.]
2
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Supplement as of the
day and year first above written.
TSI INTERNATIONAL LTD.
By:/s/ Constance Galley
--------------------------------
Constance F. Galley, President
WARBURG, PINCUS CAPITAL COMPANY, L.P.
By: Warburg, Pincus & Co.,
General Partner
By:/s/ William Janeway
-------------------------------
Partner
VANGUARD ATLANTIC LTD.
By:/s/ Ernest Keet
-------------------------------
INFORMATION PARTNERS CAPITAL FUND, L.P.
By:/s/ Stephen Pagliuro
-------------------------------
By:/s/ Constance Galley
-------------------------------
CONSTANCE F. GALLEY
3
<PAGE>
1992 PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
AND
AMENDMENT TO 1989 PREFERRED STOCK PURCHASE AGREEMENT
AND
STOCKHOLDERS' AGREEMENT
This 1992 Preferred Stock and Warrant Purchase Agreement and Amendment
to 1989 Preferred Stock Purchase Agreement and Stockholders' Agreement (the
"Agreement"), dated as of the 10th day of June, 1992 (the "Closing Date"), is
entered into by and among TSI International Ltd., a Connecticut corporation (the
"Company"), and the investors listed on Schedule A hereto who execute this
Agreement (collectively, the "Investors").
W I T N E S S E T H:
-------------------
WHEREAS, the Company has amended its Certificate of Incorporation, as
provided in the Certificate Amending Certificate of Incorporation filed with the
Connecticut Secretary of State on June 5, 1992 attached hereto as Exhibit 1
("Certificate of Amendment"), to provide for the conversion of 115,761 shares of
its Series A Convertible Preferred Stock (the "Series A Stock) into 115,761
shares of Series B Convertible Preferred Stock (the "Series B Stock"), to
authorize the issuance of 725,000 shares of Series C Convertible Preferred Stock
(the "Series C Stock") and to authorize 500,000 shares of undesignated Preferred
Stock;
WHEREAS, the Company has further amended its Certificate of
Incorporation, as provided in the Certificate of Amendment Adopted by Resolution
of the Board of Directors filed with the Connecticut Secretary of State on June
9, 1992, attached hereto as Exhibit 2 ("Series D Certificate"), to designate and
authorize the issuance of 344,469 shares of Preferred Stock as Series D
Convertible Preferred Stock (the "Series D Stock");
WHEREAS, the Company desires to issue and sell to the Investors shares
of Series C Stock of the Company (the "Preferred Shares") and warrants in the
form attached hereto as Exhibit
<PAGE>
3 (the "Warrants") to purchase shares of Series D Stock (the Preferred Shares
and the Warrants are collectively referred to herein as the "Securities");
WHEREAS, the Investors desire to purchase the Securities from the
Company; and
WHEREAS, the Company and certain of the Investors are parties to a
Preferred Stock Purchase Agreement dated as of the 1st day of June, 1989, as
amended (the "1989 Agreement"), which agreement will be amended by this
Agreement, and a 1991 Preferred Stock Purchase Agreement dated as of April 30,
1991 and supplemented by a Supplement to 1991 Preferred Stock Purchase Agreement
dated as of July 16, 1991 (collectively, the "1991 Agreement");
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the parties hereby agree as follows:
1. Purchase and Sale of Units.
---------------------------
1.1. Sale of Units. Upon receipt by the Company of the
--------------
purchase price therefor, the Company hereby issues and sells to each Investor,
and each Investor hereby purchases from the Company, in one or more closings as
provided herein, the number of Units set forth opposite such Investor's name on
Schedule A hereto, where a "Unit" is one Preferred Share and a Warrant to
purchase one Exercise Share, as defined below.
1.2. Purchase Price. The purchase price being paid by the
---------------
Investors for the Securities together is $6.00 per Unit. Except as provided in
Section 1.3 below, the Investors listed on Schedule A will pay by noon Eastern
Time, on the Closing Date, by wire transfer of same-day funds or delivery to the
Company of a cashier's check, the amount set forth opposite each Investor's name
on Schedule A (the "Purchase Price").
1.3. Supplemental Closing. If XIST Ltd. or another Dun &
---------------------
Bradstreet affiliate ("Dun & Bradstreet Affiliate") does not purchase the
Securities listed on Schedule A opposite the name "Dun & Bradstreet Affiliate"
(the "Supplemental Securities") by noon Eastern Time on the Closing Date, then
Vanguard Atlantic Ltd. and Warburg, Pincus Capital Company,
-2-
<PAGE>
L.P. (the "Supplemental Investors") will have the right to purchase, at the
Purchase Price specified above, pro rata according to their Common Stock
equivalent interest in the Company prior to
-3-
<PAGE>
the Closing Date, such Supplemental Securities. In the event that either
Supplemental Investor does not purchase its pro rata share of the Supplemental
Securities, the other Supplemental Investor may purchase the remaining shares of
Supplemental Securities not subscribed for by such Supplemental Investor. The
purchase and sale of the Supplemental Securities must occur no later than noon
Eastern Time on June 17, 1992 (the "Supplemental Closing") and any Supplemental
Securities purchased at the Supplemental Closing will be Securities for all
purposes under this Agreement. It shall not be a condition precedent to the
Investors' obligations hereunder to purchase their respective Securities on the
Closing Date that a Dun & Bradstreet Affiliate purchase the Supplemental
Securities.
2. Representations and Warranties of the Company. The Company hereby
----------------------------------------------
represents and warrants to the Investors as follows effective as of the Closing
Date.
2.1. Organization. The Company is a corporation duly
-------------
organized, validly existing and in good standing under the laws of the State of
Connecticut. Except as set forth in Schedule 2.1, the Company has all requisite
corporate power and authority and holds all licenses, permits and other required
authorizations from governmental authorities necessary to conduct its business
as it is now being conducted or as proposed to be conducted and to own or lease
the properties and assets it now owns or holds under lease.
2.2. Charter Documents. The Company has heretofore delivered
------------------
to counsel for the Investors true, correct and complete copies of the Company's
Certificate of Incorporation and By-Laws, each as in full force and effect on
the Closing Date.
2.3. Capitalization. As of the date hereof, the Company's
---------------
authorized capitalization consists of 3,888,166 shares of Common Stock, par
value $.01 per share, of which 938,229 shares are outstanding; and 1,638,166
shares of Preferred Stock, par value $.01 per share, of which 297,405 shares
have been designated Series A Convertible Preferred Stock, all of which are
outstanding, 115,761 shares have been designated Series B Convertible Preferred
Stock, all of which are outstanding, 725,000 shares have been designated Series
C Preferred Stock, none of which are outstanding, 344,469 shares have been
designated as Series D Convertible Preferred
-4-
<PAGE>
Stock, none of which are outstanding, and 155,531 shares remain undesignated and
unissued. The issuance of the Securities and of the shares of Series D Stock
issuable upon exercise of the Warrants (the "Exercise Shares") and the Common
Stock issuable upon conversion of the Preferred Shares and Exercise Shares
(collectively, the "Conversion Shares") pursuant to the provisions of this
Agreement have been duly and validly authorized. No further approval or
authorization of the shareholders or the directors of the Company or of any
governmental authority or agency will be required for the issuance and sale of
the Securities as contemplated by this Agreement. Schedule 2.3 attached hereto
is a list of the aggregate number of outstanding securities of the Company.
Except pursuant to the 1989 Agreement and the 1991 Agreement, no shareholder of
the Company or any other person is entitled to any preemptive rights with
respect to the purchase or sale of any securities by the Company. When issued
and sold to the Investors, the Preferred Shares and Exercise Shares will be duly
and validly issued, fully paid and non-assessable, will be free and clear of any
liens, pledges or encumbrances and will have the designations, preferences and
relative, participating, optional and other special rights as set forth in the
Company's Certificate of Incorporation. The Conversion Shares, when issued and
delivered upon conversion of the Preferred Shares and Exercise Shares, will be
duly and validly issued, fully paid and non-assessable. Except as set forth on
Schedule 2.3 attached hereto, there are no outstanding options, warrants or
other rights, commitments or arrangements, written or oral, to which the Company
is a party or by which it is bound, to purchase or otherwise acquire any
authorized but unissued shares of capital stock of the Company or any security
directly or indirectly convertible into or exchangeable or exercisable for any
capital stock of the Company.
2.4. Compliance with Other Instruments. Except as set forth in
----------------------------------
Schedule 2.4, to the Company's best knowledge, the Company is not in material
default in the performance of any material obligation, agreement, instrument or
undertaking to which it is a party or by which it is bound. The Company is not
in violation of its Certificate of Incorporation or By-Laws. Neither the sale
of the Preferred Shares or Exercise Shares (or the issuance and delivery of the
Conversion Shares), the execution and delivery of this Agreement, nor the
fulfillment of the terms set forth in
-5-
<PAGE>
this Agreement and the consummation of the transactions contemplated by this
Agreement, will: (i) conflict with or constitute a breach of, or constitute a
default under or an event which, with or without notice or lapse of time or
each, would be a breach of or default under or violation of the Certificate of
Incorporation or By-Laws of the Company or would be a breach of or default under
or violation of any material agreement, document, indenture, mortgage or other
instrument or undertaking by which the Company is bound or to which any of its
properties are subject, or would be a material violation of any law,
administrative regulation, judgment, order or decree applicable to the Company;
(ii) result in the creation or imposition of any material lien, charge or
encumbrance upon any property or assets of the Company; (iii) result in the loss
of any material license, certificate, legal privilege or legal right enjoyed or
possessed by the Company; (iv) give any party to any material agreement to which
the Company is a party a right of termination; or (v) except as provided for in
this Agreement, require the consent of any other person or entity under any
agreement, indenture, mortgage, document or other instrument or undertaking by
which the Company is bound or to which any of its properties are subject.
2.5. Authorization. The Company has the full corporate power
--------------
and authority to enter into this Agreement and to perform all of its obligations
hereunder. The execution, delivery and performance of the terms of this
Agreement by the Company have been duly authorized by all necessary corporate
action. This Agreement constitutes a legal, valid and binding obligation of the
Company enforceable in accordance with its terms. The Company, in light of its
business or proposed business, does not require any consent, approval,
authorization or order of, or declaration, filing or registration with, any
court or governmental or regulatory agency or board in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby.
2.6. Compliance with the Securities Act. Based upon the
-----------------------------------
representations of the Investors set forth herein, and assuming the truth of
such representations, the offer, sale and issuance of the Securities and
Exercise Shares (and the issuance and delivery of the Conversion Shares) are
exempt from the registration requirements of the Securities Act of 1933.
-6-
<PAGE>
2.7. Reservation of Common Stock. The Company shall reserve
----------------------------
and keep available out of its authorized but unissued Common Stock the number of
shares of Common Stock required for issuance upon the conversion of all of the
Preferred Shares and Exercise Shares (including any additional shares of Common
Stock which may become so issuable by reason of the operation of anti-dilution
provisions of the Preferred Shares and the Exercise Shares).
2.8. Litigation. Except as set forth on Schedule 2.8 attached
----------
hereto, there is not now pending, and to the best knowledge of the Company there
is not threatened in writing, any litigation, action, suit or proceeding: (i)
to which the Company is or will be a party in or before or by any court or
governmental or regulatory agency or body; or (ii) to which any of the officers
or employees of the Company is or will be a party in or before or by any court
or governmental or regulatory agency or body, concerning termination by such
person of his or her employment with any of such person's former employers. In
addition to the foregoing, there is no judgment, decree, injunction, rule or
order of any court, governmental department, commission, agency, instrumentality
or arbitrator outstanding against the Company having any material adverse effect
on the business or proposed business or operations, properties, assets or
condition, financial or otherwise, of the Company.
2.9. Compliance with Law. The Company is in compliance in all
-------------------
material respects with all applicable statutes and regulations of the United
States and of all states, municipalities and agencies in respect of the conduct
of its business.
2.10. Financial Statements. Attached hereto as Schedule 2.10
--------------------
are the audited balance sheets of the Company at April 30, 1991, and the related
statements of income and retained earnings and changes in financial position,
including the notes thereto, of the Company for the periods then ended, and the
unaudited balance sheet of the Company at March 31, 1992 and the related
statements of income for the period then ended. The financial statements
referred to above have been prepared in conformity with generally accepted
accounting principles consistently applied subject in the case of the interim
statements to normal year-end audit adjustments, and each balance
-7-
<PAGE>
sheet fairly presents the financial condition of the Company as of its date and
each statement of income fairly presents the results of operations of the
Company for the period covered thereby.
3. Representations, Warranties and Covenants of the Investors. Each
-----------------------------------------------------------
Investor hereby severally represents and warrants to, and agrees with, the
Company as follows effective as of the delivery of the Purchase Price and the
exercise of the Warrants:
3.1. Investment Intent. Each Investor is acquiring the
------------------
Securities and Exercise Shares (and any Conversion Shares) for its own account
and not with a present view to, or for sale in connection with, any distribution
thereof in violation of the Securities Act of 1933. Each Investor consents to
the placement of the following legend on each certificate representing the
Preferred Shares, on each certificate representing the Exercise Shares, on each
certificate representing the Conversion Shares and/or each Warrant:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED
OR SOLD UNLESS (i) A REGISTRATION STATEMENT UNDER SUCH ACT IS
THEN IN EFFECT WITH RESPECT THERETO, (ii) A WRITTEN OPINION
FROM COUNSEL FOR THE ISSUER OR MESSRS. STROOCK & STROOCK &
LAVAN OR OTHER COUNSEL FOR THE HOLDER REASONABLY ACCEPTABLE
TO THE ISSUER HAS BEEN OBTAINED TO THE EFFECT THAT NO SUCH
REGISTRATION IS REQUIRED OR (iii) A 'NO ACTION' LETTER OR ITS
THEN EQUIVALENT HAS BEEN ISSUED BY THE STAFF OF THE
SECURITIES AND EXCHANGE COMMISSION WITH RESPECT TO SUCH
TRANSFER OR SALE."
3.2. Restricted Securities. Each Investor understands that the
----------------------
Securities and Exercise Shares (and any Conversion Shares) have not been
registered under the Securities Act of 1933 for the reason that the sale
provided for in this Agreement is exempt pursuant to Section 4 of the Securities
Act of 1933 and that the reliance of the Company on such exemption is predicated
in part on such Investor's representations set forth herein. Each Investor
represents that it is experienced in evaluating companies such as the Company,
is able to fend for itself, has such knowledge and experience in financial and
business matters as to be capable of evaluating the
-8-
<PAGE>
merits and risks of its investment, and has the ability to suffer the total loss
of its investment. Such Investor was not formed solely for the purpose of
investing in the Company. Each Investor further represents that it has had
access during the course of the transaction and prior to its purchase of the
Securities and Exercise Shares to such information relating to the Company as it
has desired and that it has had the opportunity to ask questions of and receive
answers from the Company concerning the terms and conditions of the offering and
to obtain additional information (to the extent the Company possessed such
information or could acquire it without unreasonable effort or expense)
necessary to verify the accuracy of any information furnished to it or to which
it had access.
Each Investor understands that the Securities and Exercise Shares (and
any Conversion Shares) may not be sold, transferred or otherwise disposed of
without registration under the Securities Act of 1933 or an exemption therefrom
and that in the absence of an effective registration statement covering the
Securities and Exercise Shares (or the Conversion Shares) or an available
exemption from registration under the 1933 Act, the Securities and the Exercise
Shares (and any Conversion Shares) must be held indefinitely. The benefits of
Rule 144 promulgated under the Securities Act of 1933 are not presently
available, the Company has not covenanted to make the benefits of such Rule
available, and the Company has no present plans to make the benefits of such
Rule available.
4. Deliveries of the Company. On the Closing Date, as a condition
-------------------------
to the Investors' obligation to pay the Purchase Price provided under Section
1.2 hereof, the Company will deliver to the Investors executing this Agreement
the following:
(a) an opinion of counsel to the Company, Fenwick & West,
addressed to the Investors, in form and substance satisfactory to the Investors
and to counsel to the Investors, Stroock & Stroock & Lavan;
(b) copies of the resolutions adopted by the Company's Board
of Directors authorizing the execution, delivery and performance of this
Agreement and the transactions contemplated hereby;
-9-
<PAGE>
(c) a certificate, dated as of a recent date, of the Secretary
of State of Connecticut attesting as to the good standing of the Company in such
State;
(d) a stock certificate registered in the name of such
Investor representing the Preferred Shares purchased by such Investor in
consideration of the Purchase Prise therefor;
(e) a Warrant in the Investor's name to purchase the number of
Exercise Shares set forth opposite each Investor's name on Schedule A;
(f) a certificate signed by the President or Vice President of
the Company that the representations and warranties in Section 2 are true and
correct as of the Closing Date; and
(g) a copy of the Certificate of Amendment and the Series D
Certificate.
5. Deliveries of the Company Upon Supplemental Closing. As a
------------------------------------------- -------
condition to the obligations of the Supplemental Investors participating in the
Supplemental Closing to pay the Purchase Price for the Supplemental Securities
purchased in the Supplemental Closing, the Company will deliver to the
Supplemental Investors a stock certificate registered in the name of each such
Supplemental Investor representing the Preferred Shares purchased by such
Supplemental Investor in the Supplemental Closing and a Warrant in the
Supplemental Investor's name to purchase the number of Exercise Shares equal to
the number of Preferred Shares purchased by the Supplemental Investor in the
Supplemental Closing.
6. 1989 Agreement and Stockholders Agreement.
------------------------------------------
(a) The 1989 Agreement is hereby amended so that all
references to Preferred Shares and Conversion Shares in Sections 4, 5, 8, 10 and
14 of the 1989 Agreement shall be deemed to refer also to the Series B Stock
issued in connection with the conversion of 115,761 shares of Series A Stock
purchased in 1991, into 115,761 shares of Series B Stock.
(b) The holders of Preferred Shares purchased hereunder, the
Exercise Shares, the Conversion Share and the Series B Stock shall be entitled
to all the rights and benefits of holders of Preferred Shares under Sections 4,
5, 8 and 10 of the 1989 Agreement, provided that
-10-
<PAGE>
with respect to the provisions of Sections 5.6, 8 and 10 of the 1989 Agreement
and any consents under the 1989 Agreement requiring the consent of the holders
of a majority of the Series A Stock, the Preferred Shares sold hereunder and the
Exercise Shares issuable upon exercise of the Warrants will participate pari
passu as a single class with the shares of the Series A Stock sold under the
1989 Agreement and the shares of the Series B Stock sold under the 1991
Agreement on an as-converted to Common Stock basis. Section 14.8 of the 1989
Agreement is hereby amended to include as Registrable Securities all Series B
Stock, Preferred Shares, Exercise Shares and Conversion Shares issued pursuant
to this Agreement or upon exercise of the Warrants. The Investors that are
holders of Series A Stock and Series B Stock, on behalf of themselves as holders
of a majority of the outstanding Series A Stock and Series B Stock, hereby waive
the provisions of Sections 5.6 and 10 of the 1989 Agreement, and consent,
pursuant to Section III(6)(b) of the Certificate of Amendment, to the extent
necessary to permit the issuance of the Securities hereunder and the Exercise
Shares upon issuance of the Warrants.
(c) Each Investor hereunder which is not a party to the
Stockholders' Agreement dated as of June 1, 1989 by and among the Company and
its shareholders, as amended (the "Stockholders' Agreement"), hereby agrees to
become a party to, and to be bound by all the provisions of, such agreement as
if such Investor was a Shareholder as defined in the Stockholders' Agreement.
(d) Pursuant to Section 14 of the Stockholders' Agreement, the
Investors, constituting the holders of a majority of the Company's outstanding
Preferred Stock and the holders of at least 60% of the Company's outstanding
Common Stock, amend the Stockholders' Agreement to: (i) add the following to
the last sentence of Section 7 thereof: "and of that certain 1992 Preferred
Stock and Warrant Purchase Agreement and Amendment to 1989 Stock Purchase
Agreement and Stockholders' Agreement among the Company and certain investors
and the exercise of the warrants purchased thereunder"; (ii) add each Investor
who is not a party to the Stockholders' Agreement and the Preferred Shares,
Warrants and Exercise Shares to Annex A
-11-
<PAGE>
thereto; and (iii) provide that the definition of "Securities" includes all
securities received in exchange for or upon conversion, exercise or in
replacement of the Securities listed on Schedule A.
(e) The Investors, on behalf of themselves as holders of Series A
Stock and Series B Stock, hereby waive their right to receive any additional
shares of Common Stock upon any conversion of their Series A Stock or Series B
Stock as a result of the application of Section 4(g) of the Certificate of
Amendment to the issuance of the Securities hereunder or the Exercise Shares
upon exercise of the Warrants.
7. Expenses.
---------
The Company agrees to pay and save the Investors harmless against
liability for the payment of, the reasonable fees and expenses of Stroock &
Stroock & Lavan, counsel for the Investors, arising in connection with the
negotiation, execution and consummation of this Agreement and the transactions
contemplated hereby.
8. No Brokers.
-----------
Each of the Company, on the one hand, and the Investors, on the other
hand, represents and warrants to the other that there was no broker or finder
connected with this Agreement or the transactions contemplated hereby. In the
event of a claim by any broker or finder based upon his representing or being
retained by the Investors, the Investors agree to indemnify and save harmless
the Company in respect of such claim. In the event of a claim by any broker or
finder based upon his representing or being retained by the Company the Company
agrees to indemnify and save harmless the Investors in respect of such claim.
9. Survival of Representations.
----------------------------
All representations, warranties, covenants and agreements contained in
this Agreement or in any document, exhibit, schedule or certificate delivered in
connection herewith shall survive the execution and delivery of this Agreement
and any investigation at any time made by the Investors or on their behalf for a
period of six months from the date hereof.
10. Miscellaneous Provisions.
-------------------------
-12-
<PAGE>
10.1. Construction and Enforcement. This Agreement shall be
-----------------------------
governed by, and construed and enforced in accordance with, the internal laws of
the State of New York without giving any effect to principles of conflicts of
laws. The Company agrees that it will not assert against any limited partner of
any Investor, in such person's role as a limited partner, any claim it may have
under this Agreement by reason of any failure or alleged failure by any Investor
to meet its obligations hereunder.
10.2. Notices. All notices hereunder shall be in writing and
--------
shall be deemed to have been given at the time when mailed by certified mail,
addressed to the address below stated of the party to which notice is given, or
to such changed address as such party may have fixed by notice:
TO THE COMPANY:
TSI International Ltd.
45 Danbury Road
Wilton, Connecticut 06897
Attn: Constance Galley, President
-WITH A COPY TO
Fenwick & West
Two Palo Alto Square
Palo Alto, California 94306
Attn: Mark C. Stevens
TO THE INVESTORS:
To the addresses set forth on Schedule A
-WITH A COPY TO
Stroock & Stroock & Lavan
7 Hanover Square
New York, New York 10004
Attn: Martin H. Neidell
provided, however, that any notice of change of address shall be effective only
upon receipt.
-13-
<PAGE>
10.3. Assignment. This Agreement shall be binding upon and inure
----------
to the benefit of the Company, the Investors and the respective successors and
permitted assigns of the Investors. The Company may not assign any of its rights
or obligations under this Agreement without the prior written consent of the
Investors. The Investors may assign all or any part of their respective rights
and obligations hereunder. A person to whom all or a part of the Investor's
rights are assigned shall become a party to this Agreement, entitled to all the
rights and benefits hereunder. The rights and powers of the Investors hereunder
are granted to the Investors as owners of the Securities, the Exercise Shares
and the Conversion Shares, if any. Any subsequent owner of any Securities,
Exercise Shares or Conversion Shares, whether becoming such by transfer,
assignment, operation of law or otherwise, shall be deemed to be an Investor
hereunder, shall have the same rights and powers which an Investor owning the
same number of shares has hereunder, and shall be entitled to exercise them in
full and no transfer or assignment shall divest such Investor or any subsequent
owner of such rights and powers until such Investor or subsequent owner no
longer owns any Securities, Exercise Shares or any Conversion Shares; provided,
that no such transferee shall be entitled to the benefits of Sections 4, 5, 8 or
10 of the 1989 Agreement unless such transferee is also a Qualified Investor as
defined therein.
10.4. Amendments and Waivers. This Agreement and all exhibits
-----------------------
and schedules hereto set forth the entire understanding of the parties with
respect to the transactions contemplated hereby. This Agreement may be amended,
the Company may take any action herein prohibited or omit to take action herein
required to be performed by it, and any breach of or compliance with any
covenant, agreement, warranty or representation may be waived, only if the
Company has obtained the written consent or waiver of the holders of not less
than 50% of the issued and outstanding Preferred Shares, Exercise Shares and
Conversion Shares.
10.5. Counterparts. This Agreement may be executed in one or
-------------
more counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
-14-
<PAGE>
10.6. Headings. The headings in this Agreement are for reference
---------
purposes only and shall not constitute a part hereof.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.
TSI INTERNATIONAL LTD.
By: /s/ Constance Galley
---------------------------------
INVESTORS:
WARBURG, PINCUS CAPITAL COMPANY, L.P.
By: Warburg, Pincus & Co.,
General Partner
By: /s/ William Janeway
---------------------------------
Partner
VANGUARD ATLANTIC LTD.
By: /s/ Ernest Keet
---------------------------------
DUN & BRADSTREET AFFILIATE:
XIST LTD.
-------------------------------------
By: /s/ James Alberg
---------------------------------
CONSTANCE F. GALLEY
/s/ Constance Galley
-------------------------------------
RICHARD BANKOSKY
/s/ Richard Bankosky
-------------------------------------
-15-
<PAGE>
TED WATSON
/s/ Ted Watson
-------------------------------------
JAMES WATTS
/s/ James Watts
-------------------------------------
PAUL LEMME
/s/ Paul Lemme
-------------------------------------
-16-
No exhibits or schedules attached
<PAGE>
FIRST AMENDMENT TO
1992 PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
AND AMENDMENT TO 1989 PREFERRED STOCK
PURCHASE AGREEMENT AND STOCKHOLDERS' AGREEMENT
This Amendment is entered into as of August 10, 1992 among TSI
International Ltd., a Connecticut corporation (the "Company") and the parties
listed on the signature page hereto.
WITNESSETH:
WHEREAS, the parties listed on the signature page hereto under the heading
"Shareholders" (the "Shareholders") are parties to that certain 1992 Preferred
Stock and Warrant Purchase Agreement and Amendment to 1989 Preferred Stock
Purchase Agreement and Stockholders' Agreement dated as of June 10, 1992 (the
"Purchase Agreement"), which amended the Preferred Stock Purchase Agreement
dated as of June 1, 1989, as amended (the "1989 Agreement");
WHEREAS, the Company desires to sell, and FSC Corp. (the "Bank") desires to
purchase, 20,000 shares (the "Preferred Shares") of the Company's Series C
Convertible Preferred Stock (the "Series C Stock") and warrants (the "Warrants")
to purchase 20,000 shares (the "Exercise Shares") of the Company's Series D
Convertible Preferred Stock (the "Series D Stock") pursuant to the terms and
conditions of the Purchase Agrement, as amended by this Amendment (the Preferred
Shares and Warrants being collectively referred to herein as the "Securities");
WHEREAS, the Company's Board of Directors has amended the Company's
Certificate of Incorporation to increase the number of authorized shares of
Series D Stock to 364,469, as set forth in the Amendment to Certificate of
Incorporation Adopted by the Board of Directors of TSI International Ltd.
attached hereto as Exhibit 1 (the "Amendment to Certificate"); and
WHEREAS, the Company and the Shareholders, which constitute holders of more
than 50% of the issued and outstanding shares of Series C Stock for the purposes
of Section 10.4 of the Purchase Agreement, desire to add the Bank as a party to
the Purchase Agreement and to the Stockholders' Agreement dated as of June 1,
1989 (the "Stockholders' Agreement").
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, the parties hereby agree as follows:
1. Amendments.
----------
1.1 Purchase Agreement. the Comapny and the Shareholders hereby
------------------
amend the Purchase Agreement, and consent to the corresponding amendment of the
Stockholders' Agreement and 1989 Agreement, as provided in the Purchase
Agreement, to provide as follows: (a) the Bank is added as, and shall be
deemedn, an "Investor" under the Purchase Agreement and, as set forth in the
Purchase Agreement, and the sale of the Securities hereunder shall be deemed to
have been sales of such Securities under the Purchase Agreement; (c) the
Preferred Shares shall be deemed to be "Preferred Shares" under the Purchase
Agreement; (d) the Warrants shall be deemed to be "Warrants" under the Purchase
Agreement; and (e) the Bank will be deemed a "Qualifed Investor" for the
purposes of Sections 4 (other than the first sentence of Section 4.10), 5 and 8
of the 1989 Agreement.
1.2 Stockholders' Agreement. Pursuant to Section 14 of the
-----------------------
St5ockholders' Agreement, the Shareholders, constituting the holders of a
majority of the Company's outstanding Preferred Stock and the holders of at
least 60% of the Company's outstanding Common Stock, amend the Stockholders'
Agreement to add the following to the last sentence of Section 7 thereof: ", as
amended by the First Amendment to 1992 Preferred Stock Purchase Agreement and
Amendment to 1989 Preferred Stock Purchase Agreement and Stockholders'
Agreement, dated as of Ausgust 10, 1992".
2. Purchase and Sale of Securities.
-------------------------------
2.1 Sale of Securities. Upon receipt by the Company of the purchase
------------------
price therefor, the Company hereby issues and sells to the Bank, and the Bank
hereby purchases from the Company, the Securities. The closing (the "Closing")
of the transactions contemplated hereby will occur at 10:00 a.m. local time on
August 10, 1992 (the "Closing Date") at the offices of the Company or at such
other time and place as the Bank and the Company shall agree.
2.2 Purchse Price. The purchase price being paid by the Bank for the
-------------
Securities together is $6.00 per Unit, where a "Unit" is one Preferred Share and
a Warrant to purchase one share of Series D Stock. The Bank will pay by noon
Eastern Time, on the Closing Date, by wire transfer of same-day funds or
delivery to the Company of a cashier's check, $120,000 (the "Purchase Price") as
payment for the Securities.
2.3 Delivery. As a condition to the obligations of the Bank to pay
--------
the Purchase Price for the Securities:
(i) The Amendment to Certificate shall have been filed with the
Connecticut Secretary of State;
(ii) the Company will deliver to the Bank a stock certificate
registered in the name of the Bank representing the
Preferred Shares;
(iii) the Company will deliver to the Bank a Warrant in the
Bank's name to purchase the Exercise Shares;
(iv) the Company will deliver to the Bank a certificate signed
by the President or Vice President of the Company that the
representations and warranties in Section 3.1 hereof are
true and correct as of the Closing Date; and
(v) Fenwick & West, counsel to the Company, will deliver to the
Bank an opinion in the form attached hereto as Exhibit 3.
3. Representations and Warranties.
------------------------------
3.1 Company Representations and Warranties. The Company hereby
--------------------------------------
represents and warrants to the Bank that the representations and warranties of
the Company set forth in Section 2 of the Purchase Agreement, except as set
forth on Exhibit 2 hereto, are true and correct as of the date hereof and will
be true and correct as of the Closing.
3.2 Bank Representations and Warranties. The Bank hereby represents
-----------------------------------
and warrants to the Company that the representations and warranties of the Bank
set forth in Section 3 of the Purchase Agreement, are true and correct as of the
date hereof and will be true and correct as of the Closing.
4. Agreement to Be Bound.
---------------------
The Bank hereby agrees to become a party to, and to be bound by all
the provisions of, the Purchase Agreement, as an "Invesetor," as defined in such
agreement, and the Stockholders' Agreement, as a "Shareholder," as defined in
such agreement.
5. Waiver of Preemptive Rights.
---------------------------
The Shareholders, as holders of more than 50% of the company's Series
A convertible Preferred Stock, the Company's Series B Convertible Preferred
Stock, and the Series C Stock, on behalf of themselves and all other holders of
such securities, hereby agree to waive the right of first refusla of Section 10
of the 1989 Agreement with respect to the Securities sold hereunder.
6. Limitation of Amendment.
-----------------------
Except as expresssly provided herein, the Purchase Agreement and the
Stockholders' Agreement shall remain in full force and effect in accordance with
their terms.
7. Counterparts.
------------
This Amendment may be executed in one or more counterparts, each of
which shall be deemed an original, and all of which together shall be deemed to
constitute but one instrument.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the
day and year first above written.
TSI INTERNATIONAL LTD. SHAREHOLDERS:
By: /s/ Richard Bankosky Warburg, Pincus Capital Company, L.P.
FSC Corp. By: Warburg, Pincus & Co.,
General Partner
By: /s/ Jay Massimo
By: /s/ William Janeway
-------------------
Partner
Vanguard Atlantic Ltd.
By: /s/ Ernest Keet
----------------
Information Partners
By: /s/ Stephen Pagliuca
--------------------
/s/ Constance Galley
--------------------
/s/ Richard Bankosky
--------------------
/s/ Ted Watson
--------------
/s/ Paul Lemme
--------------
<PAGE>
1993 PREFERRED STOCK PURCHASE AGREEMENT
AND
AMENDMENT TO 1989 PREFERRED STOCK PURCHASE AGREEMENT
AND
STOCKHOLDERS' AGREEMENT
This 1993 Preferred Stock Purchase Agreement and Amendment to 1989
Preferred Stock Purchase Agreement and Stockholders' Agreement (the
"Agreement"), dated as of the 2nd day of September, 1993 (the "Closing Date"),
is entered into by and among TSI International Ltd., a Connecticut corporation
(the "Company"), and the investors listed on Schedule A hereto who execute this
Agreement (collectively, the "Investors").
W I T N E S S E T H:
-------------------
WHEREAS, the Company desires to issue and sell to the Investors shares of
its Series C Convertible Preferred Stock (the "Preferred Shares"); and
WHEREAS, the Investors desire to purchase the Preferred Shares from the
Company; and
WHEREAS, the Company and certain of the Investors are parties to a
Preferred Stock Purchase Agreement dated as of the 1st day of June, 1989 (the
"1989 Agreement"), which agreement was amended by that certain 1992 Preferred
Stock and Warrant Purchase Agreement, as amended (the "1992 Agreement"), and
will be further amended by this Agreement, and a 1991 Preferred Stock Purchase
Agreement dated as of April 30, 1991 and supplemented by a Supplement to 1991
Preferred Stock Purchase Agreement dated as of July 16, 1991 (collectively, the
"1991 Agreement");
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, the parties hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
-------------------------------------
1.1. SALE OF PREFERRED SHARES. Upon receipt by the Company of the
------------------------
purchase price therefor, the Company hereby issues and sells to each Investor,
and each Investor hereby purchases from the Company, in one or more closings as
provided herein, the number of Preferred Shares set forth opposite such
Investor's name on Schedule A hereto.
1.2. PURCHASE PRICE. The purchase price being paid by the Investors
--------------
for the Preferred Shares is $6.00 per share. Except as provided in Section 1.3
below, the Investors listed on Schedule A will pay by noon Eastern Time, on the
Closing Date, by wire transfer of same-day funds or delivery to the Company of a
cashier's check, the amount set forth opposite each Investor's name on Schedule
A (the "Purchase Price").
<PAGE>
1.3. SUPPLEMENTAL CLOSING. If Dun & Bradstreet Divestiture, Inc.
--------------------
("DBDI") does not purchase the Preferred Shares listed on Schedule A hereto
opposite its name by noon Eastern Time on the Closing Date, then DBDI may
purchase, at the Purchase Price specified on Schedule A, such Preferred Shares
no later than noon Eastern Time on September 7, 1993 (the "Supplemental
Closing"), and any such shares purchased at the Supplemental Closing will be
Preferred Shares for all purposes under this Agreement.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
---------------------------------------------
represents and warrants to the Investors as follows effective as of the Closing
Date.
2.1. ORGANIZATION. The Company is a corporation duly organized,
------------
validly existing and in good standing under the laws of the State of
Connecticut. Except as set forth in Schedule 2.1, the Company has all requisite
corporate power and authority and holds all licenses, permits and other required
authorizations from governmental authorities necessary to conduct its business
as it is now being conducted or as proposed to be conducted and to own or lease
the properties and assets it now owns or holds under lease.
2.2. CHARTER DOCUMENTS. The Company has heretofore made available to
-----------------
the Investors true, correct and complete copies of the Company's Certificate of
Incorporation, as amended (the "Certificate of Incorporation") and By-Laws, each
as in full force and effect on the Closing Date.
2.3. CAPITALIZATION. As of the date hereof, the Company's authorized
--------------
capitalization consists of 3,888,166 shares of Common Stock, par value $.01 per
share, of which 938,229 shares are outstanding; and 1,638,166 shares of
Preferred Stock, par value $.01 per share, of which 297,405 shares have been
designated Series A Convertible Preferred Stock (the "Series A Stock"), all of
which are outstanding, 115,761 shares have been designated Series B Convertible
Preferred Stock (the "Series B Stock"), all of which are outstanding, 725,000
shares have been designated Series C Convertible Preferred Stock (the "Series C
Stock"), 364,369 shares of which are outstanding, 364,469 shares have been
designated as Series D Convertible Preferred Stock (the "Series D Stock"), none
of which are outstanding (but all of which are subject to exercisable warrants
held by certain of the Investors), and 135,531 shares remain undesignated and
unissued. The issuance of the Preferred shares and the Common Stock issuable
upon conversion of the Preferred Shares (the "Conversion Shares") pursuant to
the provisions of this Agreement have been duly and validly authorized. No
further approval or authorization of the shareholders or the directors of the
Company or of any governmental authority or agency will be required for the
issuance and sale of the Preferred Shares as contemplated by this Agreement.
Schedule 2.3 attached hereto is a list of the aggregate number of outstanding
securities of the Company. Except pursuant to the 1989 Agreement, the 1991
Agreement and the 1992 Agreement, no shareholder of the Company or any other
person is entitled to any preemptive rights with respect to the purchase or sale
of any securities by the Company. When issued and sold to the Investors, the
Preferred Shares will be duly and validly issued, fully paid and non-assessable,
will be free and clear of any liens, pledges or encumbrances and will have the
designations, preferences and relative, participating, optional and other
special rights as set forth in the Company's Certificate of Incorporation. The
Conversion Shares, when issued and delivered
2
<PAGE>
upon conversion of the Preferred Shares, will be duly and validly issued, fully
paid and non-assessable. Except as set forth on Schedule 2.3 attached hereto,
there are no outstanding options, warrants or other rights, commitments or
arrangements, written or oral, to which the Company is a party or by which it is
bound, to purchase or otherwise acquire any authorized but unissued shares of
capital stock of the Company or any security directly or indirectly convertible
into or exchangeable or exercisable for any capital stock of the Company.
2.4. COMPLIANCE WITH OTHER INSTRUMENTS. Except as set forth in
---------------------------------
Schedule 2.4, to the Company's best knowledge, the Company is not in material
default in the performance of any material obligation, agreement, instrument or
undertaking to which it is a party or by which it is bound. The Company is not
in violation of its Certificate of Incorporation or By-Laws. Neither the sale of
the Preferred Shares (or the issuance and delivery of the Conversion Shares),
the execution and delivery of this Agreement, nor the fulfillment of the terms
set forth in this Agreement and the consummation of the transactions
contemplated by this Agreement, will: (i) conflict with or constitute a breach
of, or constitute a default under or an event which, with or without notice or
lapse of time or each, would be a breach of or default under or violation of the
Certificate of Incorporation or By-Laws of the Company or would be a breach of
or default under or violation of any material agreement, document, indenture,
mortgage or other instrument or undertaking by which the Company is bound or to
which any of its properties are subject, or would be a material violation of any
law, administrative regulation, judgment, order or decree applicable to the
Company; (ii) result in the creation or imposition of any material lien, charge
or encumbrance upon any property or assets of the Company; (iii) result in the
loss of any material license, certificate, legal privilege or legal right
enjoyed or possessed by the Company; (iv) give any party to any material
agreement to which the Company is a party a right of termination; or (v) except
as provided for in this Agreement, require the consent of any other person or
entity under any agreement, indenture, mortgage, document or other instrument or
undertaking by which the Company is bound or to which any of its properties are
subject.
2.5. AUTHORIZATION. The Company has the full corporate power and
-------------
authority to enter into this Agreement and to perform all of its obligations
hereunder. The execution, delivery and performance of the terms of this
Agreement by the Company have been duly authorized by all necessary corporate
action. This Agreement constitutes a legal, valid and binding obligation of the
Company enforceable in accordance with its terms. The Company, in light of its
business or proposed business, does not require any consent, approval,
authorization or order of, or declaration, filing or registration with, any
court or governmental or regulatory agency or board in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby.
2.6. COMPLIANCE WITH THE SECURITIES ACT. Based upon the
----------------------------------
representations of the Investors set forth herein, and assuming the truth of
such representations, the offer, sale and issuance of the Preferred Shares (and
the issuance and delivery of the Conversion Shares) are exempt from the
registration requirements of the Securities Act of 1933.
2.7. RESERVATION OF COMMON STOCK. The Company shall reserve and keep
---------------------------
available out of its authorized but unissued Common Stock the number of shares
of Common
3
<PAGE>
Stock required for issuance upon the conversion of all of the Preferred Shares
(including any additional shares of Common Stock which may become so issuable by
reason of the operation of anti-dilution provisions of the Preferred Shares).
2.8. LITIGATION. Except as set forth on Schedule 2.8 attached hereto,
----------
there is not now pending, and to the best knowledge of the Company there is not
threatened in writing, any litigation, action, suit or proceeding: (i) to which
the Company is or will be a party in or before or by any court or governmental
or regulatory agency or body; or (ii) to which any of the officers or employees
of the Company is or will be a party in or before or by any court or
governmental or regulatory agency or body, concerning termination by such person
of his or her employment with any of such person's former employers. In
addition to the foregoing, there is no judgment, decree, injunction, rule or
order of any court, governmental department, commission, agency, instrumentality
or arbitrator outstanding against the Company having any material adverse effect
on the business or proposed business or operations, properties, assets or
condition, financial or otherwise, of the Company.
2.9. COMPLIANCE WITH LAW. To its knowledge, the Company is in
-------------------
compliance in all material respects with all applicable statutes and regulations
of the United States and of all states, municipalities and agencies in respect
of the conduct of its business.
2.10. FINANCIAL STATEMENTS. Attached hereto as Schedule 2.10 are the
--------------------
audited balance sheets of the Company at April 30, 1992, and the related
statements of income and retained earnings and changes in financial position,
including the notes thereto, of the Company for the periods then ended, and the
unaudited balance sheet of the Company at April 30, 1993 and the related
statements of income for the period then ended. The financial statements
referred to above have been prepared in conformity with generally accepted
accounting principles consistently applied subject in the case of the interim
statements to normal year-end audit adjustments, and each balance sheet fairly
presents the financial condition of the Company as of its date and each
statement of income fairly presents the results of operations of the Company for
the period covered thereby.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTORS. Each
----------------------------------------------------------
Investor hereby severally represents and warrants to, and agrees with, the
Company as follows effective as of the delivery of the Purchase Price:
3.1. INVESTMENT INTENT. Each Investor is acquiring the Preferred
-----------------
Shares (and any Conversion Shares) for its own account and not with a present
view to, or for sale in connection with, any distribution thereof in violation
of the Securities Act of 1933. Each Investor consents to the placement of the
following legend on each certificate representing the Preferred Shares and on
each certificate representing the Conversion Shares:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED OR SOLD UNLESS (i) A
REGISTRATION STATEMENT UNDER SUCH ACT IS THEN IN EFFECT WITH RESPECT
THERETO, (ii) A
4
<PAGE>
WRITTEN OPINION FROM COUNSEL FOR THE ISSUER OR COUNSEL FOR THE HOLDER
REASONABLY ACCEPTABLE TO THE ISSUER HAS BEEN OBTAINED TO THE EFFECT
THAT NO SUCH REGISTRATION IS REQUIRED OR (iii) A 'NO ACTION' LETTER OR
ITS THEN EQUIVALENT HAS BEEN ISSUED BY THE STAFF OF THE SECURITIES AND
EXCHANGE COMMISSION WITH RESPECT TO SUCH TRANSFER OR SALE."
3.2. RESTRICTED SECURITIES. Each Investor understands that the
---------------------
Preferred Shares (and any Conversion Shares) have not been registered under the
Securities Act of 1933 for the reason that the sale provided for in this
Agreement is exempt pursuant to Section 4 of the Securities Act of 1933 and that
the reliance of the Company on such exemption is predicated in part on such
Investor's representations set forth herein. Each Investor represents that it
is experienced in evaluating companies such as the Company, is able to fend for
itself, has such knowledge and experience in financial and business matters as
to be capable of evaluating the merits and risks of its investment, and has the
ability to suffer the total loss of its investment. Such Investor was not
formed solely for the purpose of investing in the Company. Each Investor
further represents that it has had access during the course of the transaction
and prior to its purchase of the Preferred Shares to such information relating
to the Company as it has desired and that it has had the opportunity to ask
questions of and receive answers from the Company concerning the terms and
conditions of the offering and to obtain additional information (to the extent
the Company possessed such information or could acquire it without unreasonable
effort or expense) necessary to verify the accuracy of any information furnished
to it or to which it had access.
Each Investor understands that the Preferred Shares (and any Conversion
Shares) may not be sold, transferred or otherwise disposed of without
registration under the Securities Act of 1933 or an exemption therefrom and that
in the absence of an effective registration statement covering the Preferred
Shares (or the Conversion Shares) or an available exemption from registration
under the 1933 Act, the Preferred Shares (and any Conversion Shares) must be
held indefinitely. The benefits of Rule 144 promulgated under the Securities
Act of 1933 are not presently available, the Company has not covenanted to make
the benefits of such Rule available, and the Company has no present plans to
make the benefits of such Rule available.
4. DELIVERIES OF THE COMPANY. On the Closing Date, as a condition to the
-------------------------
Investors' obligation to pay the Purchase Price provided under Section 1.2
hereof, the Company will deliver to the Investors executing this Agreement the
following:
(A) an opinion of counsel to the Company, Fenwick & West, addressed
to the Investors, in form and substance satisfactory to the Investors;
(B) copies of certified resolutions adopted by the Company's Board of
Directors authorizing the execution, delivery and performance of this Agreement
and the transactions contemplated hereby;
5
<PAGE>
(C) a stock certificate registered in the name of such Investor
representing the Preferred Shares purchased by such Investor in consideration of
the Purchase Price therefor; and
(D) a certificate signed by the President or Vice President of the
Company that the representations and warranties in Section 2 are true and
correct as of the Closing Date.
5. DELIVERIES OF THE COMPANY UPON SUPPLEMENTAL CLOSING. As a condition
---------------------------------------------------
to the obligations of DBDI to pay the Purchase Price for the Preferred Shares
purchased in the Supplemental Closing, if any, the Company will deliver to DBDI
all documents required to be delivered to the Investors on the Closing Date
pursuant to Section 4 hereof.
6. 1989 AGREEMENT AND STOCKHOLDERS AGREEMENT.
-----------------------------------------
(A) The holders of Preferred Shares purchased hereunder and the
Conversion Shares shall be entitled to all the rights and benefits of holders of
Preferred Shares under Sections 4, 5, 8 and 10 of the 1989 Agreement, provided
that with respect to the provisions of Sections 5.6, 8 and 10 of the 1989
Agreement and any consents under the 1989 Agreement requiring the consent of the
holders of a majority of the Series A Stock, Series B and Series C Stock, the
Preferred Shares sold hereunder will participate pari passu as a single class
with the shares of the Series A Stock sold under the 1989 Agreement, the shares
of the Series A Stock sold under the 1991 Agreement (and converted to Series B
Stock upon the effectiveness of the filing of the Company's Amended Certificate
of Incorporation on June 5, 1992), and the shares of Series C Stock sold under
the 1992 Agreement on an as-converted to Common Stock basis. Section 14.8 of the
1989 Agreement is hereby amended to include as Registrable Securities all
Preferred Shares and Conversion Shares issued pursuant to this Agreement. The
Investors that are holders of Series A Stock, Series B Stock and Series C Stock,
on behalf of themselves as holders of a majority of the outstanding Series A
Stock, Series B Stock and Series C Stock, hereby waive the provisions of
Sections 5.6 and 10 of the 1989 Agreement, and consent, pursuant to Section
III(6)(b) of the Certificate of Incorporation, to the extent necessary to permit
the issuance of the Preferred Shares hereunder.
(B) Each Investor hereunder which is not a party to the Stockholders'
Agreement dated as of June 1, 1989 by and among the Company and its
shareholders, as amended (the "Stockholders' Agreement"), hereby agrees to
become a party to, and to be bound by all the provisions of, such agreement as
if such Investor was a Shareholder as defined in the Stockholders' Agreement.
(C) Pursuant to Section 14 of the Stockholders' Agreement, the
Investors, constituting the holders of a majority of the Company's outstanding
Preferred Stock and the holders of at least 60% of the Company's outstanding
Common Stock, amend the Stockholders' Agreement to: (i) add the following to
the last sentence of Section 7 thereof: "and of that certain 1993 Preferred
Stock Purchase Agreement and Amendment to 1989 Stock Purchase Agreement and
Stockholders' Agreement among the Company and certain investors;" (ii) add each
Investor who is not a party to the Stockholders' Agreement and the Preferred
Shares to Annex A thereto;
6
<PAGE>
and (iii) provide that the definition of "Securities" includes all securities
received in exchange for or upon conversion, exercise or in replacement of the
Preferred Shares listed on Schedule A.
(D) The Investors, on behalf of themselves as holders of Series A
Stock, Series B Stock and Series C Stock, hereby waive their right to receive
any additional shares of Common Stock upon any conversion of their Series A
Stock, Series B Stock and Series C Stock as a result of the application of
Section III(4)(g) of the Certificate of Incorporation to the issuance of the
Preferred Shares hereunder.
7. NO BROKERS.
----------
Each of the Company, on the one hand, and the Investors, on the other
hand, represents and warrants to the other that there was no broker or finder
connected with this Agreement or the transactions contemplated hereby. In the
event of a claim by any broker or finder based upon his representing or being
retained by the Investors, the Investors agree to indemnify and save harmless
the Company in respect of such claim. In the event of a claim by any broker or
finder based upon his representing or being retained by the Company, the Company
agrees to indemnify and save harmless the Investors in respect of such claim.
8. SURVIVAL OF REPRESENTATIONS.
---------------------------
All representations, warranties, covenants and agreements contained in
this Agreement or in any document, exhibit, schedule or certificate delivered in
connection herewith shall survive the execution and delivery of this Agreement
and any investigation at any time made by the Investors or on their behalf for a
period of six months from the date hereof.
9. MISCELLANEOUS PROVISIONS.
------------------------
9.1. CONSTRUCTION AND ENFORCEMENT. This Agreement shall be governed
----------------------------
by, and construed and enforced in accordance with, the internal laws of the
State of New York without giving any effect to principles of conflicts of laws.
The Company agrees that it will not assert against any limited partner of any
Investor, in such person's role as a limited partner, any claim it may have
under this Agreement by reason of any failure or alleged failure by any Investor
to meet its obligations hereunder.
9.2. NOTICES. All notices hereunder shall be in writing and shall be
-------
deemed to have been given at the time when mailed by certified mail, addressed
to the address below stated of the party to which notice is given, or to such
changed address as such party may have fixed by notice:
7
<PAGE>
TO THE COMPANY:
TSI International Ltd.
45 Danbury Road
Wilton, Connecticut 06897
Attn: Constance Galley, President
-WITH A COPY TO
Fenwick & West
Two Palo Alto Square
Palo Alto, California 94306
Attn: Mark C. Stevens, Esquire
TO THE INVESTORS:
To the addresses set forth on Schedule A
; provided, however, that any notice of change of address shall be effective
only upon receipt.
9.3. ASSIGNMENT. This Agreement shall be binding upon and inure to
----------
the benefit of the Company, the Investors and the respective successors and
permitted assigns of the Investors. The Company may not assign any of its rights
or obligations under this Agreement without the prior written consent of the
Investors. The Investors may assign all or any part of their respective rights
and obligations hereunder. A person to whom all or a part of the Investor's
rights are assigned shall become a party to this Agreement, entitled to all the
rights and benefits hereunder. The rights and powers of the Investors hereunder
are granted to the Investors as owners of the Preferred Shares and the
Conversion Shares, if any. Any subsequent owner of any Preferred Shares or
Conversion Shares, whether becoming such by transfer, assignment, operation of
law or otherwise, shall be deemed to be an Investor hereunder, shall have the
same rights and powers which an Investor owning the same number of shares has
hereunder, and shall be entitled to exercise them in full and no transfer or
assignment shall divest such Investor or any subsequent owner of such rights and
powers until such Investor or subsequent owner no longer owns any Preferred
Shares or any Conversion Shares; provided, that no such transferee shall be
entitled to the benefits of Sections 4, 5, 8 or 10 of the 1989 Agreement unless
such transferee is also a Qualified Investor as defined therein.
9.4. AMENDMENTS AND WAIVERS. This Agreement and all exhibits and
----------------------
schedules hereto set forth the entire understanding of the parties with respect
to the transactions contemplated hereby. This Agreement may be amended, the
Company may take any action herein prohibited or omit to take action herein
required to be performed by it, and any breach of or compliance with any
covenant, agreement, warranty or representation may be waived, only if the
Company has obtained the written consent or waiver of the holders of not less
than 50% of the issued and outstanding Preferred Shares and Conversion Shares.
8
<PAGE>
9.5. COUNTERPARTS. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
9.6. HEADINGS. The headings in this Agreement are for reference
--------
purposes only and shall not constitute a part hereof.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first above written.
TSI INTERNATIONAL LTD.
By: /s/ Constance Galley
---------------------------------
Title:
------------------------------
INVESTORS:
WARBURG, PINCUS CAPITAL COMPANY, L.P.
By: Warburg, Pincus & Co.,
General Partner
By: /s/ Stewart Gross
---------------------------------
Partner
VANGUARD ATLANTIC LTD.
By: /s/ Ernest Keet
---------------------------------
Title:
------------------------------
D & B DIVESTITURE, INC.
By: /s/ Dennis Sisco
---------------------------------
Title:
------------------------------
9
<PAGE>
FSC CORP.
By: /s/ Jay Massimo
---------------------------------
Title:
------------------------------
JOHN J. PENDRAY
/s/ John Pendray
------------------------------------
CONSTANCE F. GALLEY
/s/ Constance Galley
------------------------------------
ROBERT H. BOUTON
/s/ Bob Bouton
------------------------------------
DAVID M. RAYE
/s/ David Raye
------------------------------------
PAUL A. LEMME
/s/ Paul Lemme
------------------------------------
No exhibits or schedules are attached
10
<PAGE>
EXHIBIT 10.01
TSI INTERNATIONAL SOFTWARE LTD.
-------------------------------
1993 STOCK OPTION PLAN
----------------------
(as adopted September 10, 1993)
SECTION 1: PURPOSE OF THE PLAN
This 1993 Stock Option Plan is intended to continue the established policy of
TSI International Software Ltd. ("Company") of encouraging ownership of its
Common Stock by selected persons and of providing incentives for them to
increase the productivity of the Company. By extending to those selected
persons the opportunity to acquire proprietary interests in the Company and to
participate in its success, this Plan may be expected to benefit the Company and
its shareholders by making it possible for the Company to attract and retain the
best available talent and by rewarding those selected persons for their part in
increasing the value of the Company's stock.
SECTION 2: PRIOR PLAN
Upon the effectiveness of the merger in which TSI International Ltd., a
Connecticut corporation ("TSI Connecticut") merges with and into the Company,
all options granted pursuant to the TSI Connecticut 1989 Stock Option Plan, as
amended, shall be assumed under this Plan, and shall be deemed granted under
this Plan for all purposes.
SECTION 3: DEFINITIONS
As used herein, the following definitions shall apply:
3.01 "Affiliate" shall mean any person or entity which controls, is
controlled by or is under common control with the Company, where "control" means
the ownership of more than fifty percent (50%) of the total voting power of the
outstanding stock of a corporation or of the outstanding ownership of a non-
corporate entity.
3.02 "Board" shall mean the Board of Directors of the Company.
3.03 "Code" shall mean the Internal Revenue Code of 1986, including any
amendments made thereto.
3.04 "Committee" shall mean the Stock Option Committee of the Board of
Directors, if any, and shall otherwise mean the Board.
<PAGE>
3.05 "Common Stock" shall mean the Common Stock, $.01 par value per share,
of the Company.
3.06 "Company" shall mean TSI International Software Ltd.
3.07 "Continuous Employment" with the Company or any Parent, Subsidiary or
Affiliate of the Company shall mean, in the case of an employee, continuous
regular employment by the Company or any Parent, Subsidiary or Affiliate of the
Company, or an uninterrupted chain of continuous regular employment by the
Company or any Parent, Subsidiary or Affiliate of the Company. A leave of
absence granted in accordance with the Company's usual procedure which does not
operate to interrupt Continuous Employment for other benefits granted by the
Company shall not be considered a termination of employment nor an interruption
of Continuous Employment hereunder, and an employee who is granted such a leave
of absence shall be considered to be continuously employed during the period of
such leave. In the case of an Optionee who is a director, independent
consultant, contractor or advisor, the Committee will have the discretion to
determine whether the Optionee is "continuously employed by the Company."
3.08 "Formula Value" shall mean the sum of (I) the aggregate exercise
price of all In-the-Money Options to purchase Common Stock exercisable as of the
most recent fiscal year end plus (II) the greater of:
(A) eighty percent (80%) of the annual sales of the Company for the
fiscal year of the Company most recently ended; or
(B) the product of the Matrix Factor multiplied by the Company's net
profit before taxes for the twelve-month period ended on the last date of the
most recently ended fiscal year.
3.09 "In-the-Money Options" shall mean outstanding options to purchase
Common Stock (whether granted pursuant to an employee stock option plan or
otherwise) as to which the exercise price per Share is less than the current
value of Common Stock per Share. For purposes of the identification of "In-the-
Money Options" only, the current value of Common Stock per Share shall mean the
quotient of (I) the greater of:
(A) eighty percent (80%) of the annual sales of the Company for the
Company's most recently ended fiscal year; or
(B) the product of the Matrix Factor multiplied by the Company's net
profit before taxes for the twelve-month period ended on the last day of the
Company's most recently ended fiscal year,
<PAGE>
divided by (II) the Outstanding Shares as of the most recent fiscal year end.
- ----------
3.10 "Matrix Factor" shall mean a percentage represented by the factor set
out in the matrix set forth in the addendum attached hereto. For purposes of
determining "Earnings Growth" or "Sales Growth" for purposes of such matrix,
sales and net earnings of the Company for the most recently ended fiscal year
shall be compared to sales and net earnings of the Company for the second most
recently ended fiscal year.
Net earnings, sales and net profits before taxes for each relevant
fiscal year, and annual sales of the Company for each fiscal year, shall be
determined in good faith by the Committee, on the basis of audited financial
statements of the Company prepared by the independent certified public
accountants then retained by the Company, to the extent available or expected to
be available within a reasonable time, or to the extent audited financial
statements are not and will not be so available, on unaudited financial
statements prepared according to generally accepted accounting principles
consistently applied to prior periods.
3.11 "Option" shall mean a stock option granted pursuant to this Plan.
3.12 "Optionee" shall mean a selected person who receives an Option.
3.13 "Outstanding Shares" will mean the sum of the outstanding shares of
Common Stock plus all outstanding convertible preferred stock (on an as-if-
converted to Common Stock basis) plus all In-the-Money Options (on an as-if-
exercised basis).
3.14 "Parent" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if, at the time of the
granting of the Option, each of such corporations other than the Company owns
stock possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
3.15 "Plan" shall mean this 1993 Stock Option Plan.
3.16 "Share" shall mean a share of the Common Stock of the Company as
adjusted in accordance with Section 17 of this Plan.
3.17 "Subsidiary" shall mean any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if, at the time of
granting the Option, each of the corporations other than the last corporation in
the unbroken chain owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.
<PAGE>
SECTION 4: TYPES OF OPTIONS AND SHARES
Options to purchase Shares granted under this Plan may be either (a) incentive
stock options ("ISO's") within the meaning of Section 422A of the Code or (b)
non-qualified stock options ("NQSO's"), as designated at the time of grant.
SECTION 5: STOCK RESERVED FOR THE PLAN
5.01 Number of Shares. The aggregate number of Shares, that may be issued
pursuant to Options granted under this Plan is 519,477 Shares, subject to
adjustment pursuant to the provisions of Section 16, plus any Shares that become
available through repurchases pursuant to Section 5.03, below. At all times
during the term of this Plan, the Company shall reserve out of its authorized
but unissued Shares, or its treasury shares, such number of Shares as may be
issued upon the exercise of Options granted under this Plan.
5.02 Termination or Expiration of Options. If any Options granted under
this Plan shall for any reason terminate or expire without having been exercised
in full, the Shares not purchased under such Options shall be available for
future grant and purchase under this Plan.
5.03 Repurchase of Stock. Any Shares previously issued pursuant to this
Plan, and any Shares that were previously shares of the Company's Class C Common
Stock, that are subsequently repurchased pursuant to the Company's right to
repurchase stock, shall be available for future grant and purchase under this
Plan; provided that no such repurchased Shares may be made subject to ISO's
granted under this Plan.
SECTION 6: ADMINISTRATION OF THE PLAN
6.01 Committee. The Board shall appoint a Stock Option Committee of
directors (the "Committee") to administer this Plan. The Board may from time to
time appoint members of the Committee in substitution for or in addition to
members previously appointed to fill vacancies, however caused, in the
Committee. Prior to such appointment, the entire Board shall act as the
"Committee." No member of the Committee may participate in any respect
concerning the granting of an Option to such member.
6.02 Administration by Committee. The Committee shall have plenary
authority in its discretion (subject to the express provisions of this Plan): to
determine the purchase price of the Common Stock covered by each Option, the
selected persons to whom and the time or times at which Options shall be
granted, time or times at which Options granted hereunder shall become
exercisable, and the number of Shares to be covered by each Option; to interpret
this Plan; to prescribe, amend and rescind rules and regulations relating to
this Plan; to determine the terms (which need not be identical) of option
agreements executed and delivered under this Plan, including such terms and
provisions as shall be requisite in the judgment of the Committee to conform to
any change in any law or regulation applicable thereto; to accelerate the
exercisability
<PAGE>
of any Option; to modify or amend any option agreement entered into pursuant
hereto; to execute on behalf of the Company any instrument required to
effectuate an Option grant; to ensure satisfaction of any withholding tax
obligation which may be imposed with respect to the grant or exercise of an
Option; and to make all other determinations deemed necessary or advisable for
the administration of the Plan. The Committee's determination on the foregoing
matters shall be conclusive. Upon the Committee's request, the President of the
Company shall make recommendations to the Committee as to the granting of
Options and any other determinations within the Committee's discretion.
SECTION 7: ELIGIBILITY
Options may be granted to employees, officers, directors, consultants,
independent contractors and advisors (provided such consultants, contractors and
advisors render bona fide services not in connection with the offer and sale of
securities of the Company in a capital-raising transaction) of the Company or
any Parent, Subsidiary or Affiliate of the Company. ISO's may be granted only
to employees (including officers and directors who are also employees) of the
Company or a Parent or Subsidiary of the Company. The Committee in its sole
discretion shall select the Optionees. An Optionee may be granted more than one
Option under this Plan. The Company may also, from time to time, assume
outstanding options granted by another company, whether in connection with an
acquisition of such other company or otherwise, by either (i) granting an option
under this Plan in replacement of the option assumed by the Company, or (ii)
treating the assumed option as if it had been granted under this Plan if the
terms of such assumed option could be applied to an option granted under this
Plan. Such assumption shall be permissible if the holder of the assumed option
would have been eligible to be granted an option hereunder if the other company
had applied the rules of this Plan to such grant.
SECTION 8: FACTORS TO BE CONSIDERED IN GRANTING OPTIONS
In determining the selected persons to whom Options shall be granted, the terms
of the Option and the number of Shares to be covered by each Option, the
Committee shall take into account such factors as it shall deem relevant in
connection with accomplishing the purpose of this Plan.
SECTION 9: GRANT AGREEMENT; CONSIDERATION
The Committee shall cause to be executed by any person receiving and accepting
the grant of an Option, a written option agreement in such form as the Committee
shall determine, specifying the terms and conditions of the Option (the
"Grant"). All Grants shall conform to the provisions of the Plan, but the
specific terms and conditions of each Option granted thereunder need not be the
same. The Committee shall require such consideration for the granting of the
Option as it shall deem necessary or advisable.
SECTION 10: OPTION PRICES
<PAGE>
The purchase price of Common Stock covered by each Option shall be determined by
the Committee, but shall not be less than 100% of the fair market value of the
Common Stock at the time the Option is granted unless the Committee determines,
with respect to NQSO's only, that a lower purchase price is advisable. Any
determination of the fair market value or of the method of computing fair market
value of a share made by the Committee shall be final, binding and conclusive on
all parties. In the absence of any provision by the Committee to the contrary,
the fair market value of the Share shall be (A) the Formula Value of the Company
divided by (B) the sum of (I) the Outstanding Shares plus (II) the maximum
aggregate number of shares of Common Stock which could be purchased by the
exercise of In-the-Money Options exercisable as of the most recent fiscal year
end.
SECTION 11: TERM OF OPTIONS
Options shall be exercisable within the times or upon the events determined by
the Committee as set forth in the Grant; provided, however, that no Option shall
be exercisable after the expiration of ten (10) years from the date the Option
is granted, and provided further that no ISO granted to a holder of ten percent
(10%) or more of the Outstanding Shares shall be exercisable after the
expiration of five (5) years from the date the Option is granted.
SECTION 12: EXERCISE OF OPTIONS
12.01 When exercisable, the Committee shall have the discretion to
establish the vesting schedule for any Options granted under this Plan.
In the event of a dissolution or liquidation of the Company, a merger in
which the Company is not the surviving corporation (except for a merger in which
the shareholders of the Company own or control a majority of the surviving
corporation's voting stock immediately following such merger), the acquisition
of all or substantially all of the Company's outstanding stock in which the
shareholders of the Company own or control less than a majority of the Company's
voting stock immediately following such acquisition, the sale of all or
substantially all of the assets of the Company, or any other transaction which
qualifies as a "corporate transaction" under Section 425(a) of the Code wherein
the shareholders of the Company give up all of their equity interest in the
Company, any or all outstanding Options shall, notwithstanding any contrary
terms of the Grant, accelerate and become exercisable in full at least twenty
(20) days prior to and shall expire on, (and, if the Company has reserved to
itself a right to repurchase shares issued upon exercise of Options at the
original purchase price of such shares, such right shall terminate upon), the
consummation of such dissolution, liquidation, merger, acquisition or sale of
assets at such times and on such conditions as the Committee shall determine.
The aggregate Fair Market Value (determined at the time an Option is granted) of
stock with respect to all ISOs held by an Optionee that first become exercisable
in the calendar year of such dissolution, liquidation, merger, sale of stock or
sale of assets may not exceed $100,000. If the Fair Market Value of stock with
respect to which all ISOs are first exercisable in such calendar
<PAGE>
year exceeds $100,000, the Options for the first $100,000 worth of stock to
become exercisable in that year shall be ISOs and the Options for the amount in
excess of $100,000 shall be NQSOs.
Unless otherwise provided in the option agreement, a holder of an Option
may purchase all, or from time-to-time any part of, the Shares the right to
purchase which has accrued to him or her in accordance with the terms of this
Section.
Except as provided in Sections 15 and 16, no Option may be exercised at any
time unless the holder thereof is then employed by the Company or a Parent,
Subsidiary or Affiliate of the Company. In the case of an NQSO held by a
director, consultant, independent contractor or adviser, the Committee shall
determine, in its sole discretion, whether the Optionee is "employed by the
Company." The holder of an Option shall have none of the rights of a
shareholder with respect to the Shares subject to Option until such Shares shall
have been registered on the transfer books of the Company in the name of the
person or persons exercising the Option upon the exercise of the option.
12.02 Payment of Purchase Price. Payment for the Shares may be made in
cash (by check) or, where approved by the Committee in its sole discretion at
the time of grant and where permitted by law: (i) the cancellation of
indebtedness of the Company to the Optionee; (ii) by waiver of compensation due
or accrued to Optionee for services rendered; (iii) by surrender of shares of
Common Stock of the Company that have been owned by the Optionee for more than
six (6) months (and which have been paid for within the meaning of SEC Rule 144)
or were obtained by the Optionee in the open public market having a Fair Market
Value equal to the exercise price of the Option; (iv) provided that a public
market for the Company's stock exists, through a "same day sale" commitment from
the Optionee and a broker-dealer that is a member of the National Association of
Securities Dealers (an "NASD Dealer") whereby the Optionee irrevocably elects to
exercise the Option and to sell a portion of the Shares so purchased to pay for
the exercise price and whereby the NASD Dealer irrevocably commits upon receipt
of such Shares to forward the exercise price directly to the Company; or (v) by
any combination of the foregoing.
12.03 Withholding taxes. Prior to issuance of the Shares upon exercise of
an Option, the Optionee shall pay or make adequate provision for any federal or
state withholding obligations of the Company, if applicable. Where approved by
the Committee in its sole discretion, the Optionee may provide for payment of
withholding taxes upon exercise of the Option by requesting that the Company
retain Shares with a Fair Market Value equal to the minimum amount of taxes
required to be withheld.
12.04 Notice of Election. A person electing to exercise an Option shall
give written notice to the Company, as specified by the Committee, of his or her
election to exercise an Option and of the number of Shares such person has
elected to purchase, such notice to be accompanied by the instrument evidencing
such Option and any other documents required by the Committee or the Grant, and
shall at the time of such exercise tender the purchase price of the
<PAGE>
Shares such person has elected to purchase. If the notice of election to
exercise is given by the executor or administrator of a deceased Optionee or by
the person or persons to whom the Option has been transferred under the
Optionee's will or the applicable laws of descent and distribution, the Company
will be under no obligation to deliver Shares pursuant to such exercise unless
and until the Company is satisfied that the person or persons giving such notice
is or are entitled to exercise the Option.
12.05 Restrictive Agreement. Any Common Stock purchased pursuant to an
Option granted under this Plan shall be held subject to such restrictions as the
Committee shall determine, in its sole discretion, are appropriate at the time
of grant of the Option.
SECTION 13: ASSUMED OPTIONS
In the event the Company assumes an option granted by another Company, the terms
and conditions of such option shall remain unchanged (except the exercise price
and the number and nature of shares issuable upon exercise, which will be
adjusted appropriately pursuant to Section 425(c) of the Code). In the event
the Company elects to grant a new option rather that assuming an existing option
(as specified in Section 7), such new option need not be granted at Fair Market
Value on the date of grant and may instead be granted with a similarly adjusted
exercise price.
SECTION 14: NON-TRANSFERABILITY OF OPTIONS
An Option granted under this Plan shall not be transferable otherwise than by
will or the laws of descent and distribution, and an Option may be exercised,
during the lifetime of the Optionee, only by such Optionee.
SECTION 15: TERMINATION OF EMPLOYMENT
15.01 Right to Exercise Option. If an Optionee ceases to be employed by
the Company or any Parent, Subsidiary or Affiliate of the Company for any reason
except death or disability, the Optionee may exercise such Optionee's Option to
the extent (and only to the extent) that it would have been exercisable upon the
date of termination, within three (3) months after the date of termination (or
such shorter time period as may be specified in the Grant), provided that, if
Optionee is an Insider and the Company is subject to Section 16(b) of the
Exchange Act, the Optionee's Option will be exercisable for a period of time
sufficient to allow such Optionee from having a matching purchase and sale under
Section 16(b), with any extension beyond three (3) months from termination of
employment deemed to be an NQSO, and provided further that in no event may an
Option be exercisable later than the expiration date of the Option.
<PAGE>
15.02 Employment Relationship. Options granted under this Plan shall not
be affected by change of duties or position so long as the Optionee continues to
be employed by or to have a similar relationship with the Company or any Parent,
Subsidiary or Affiliate of the Company; provided that the holder of an ISO must
remain an employee of the Company or a Parent or Subsidiary in order for such
Optionee's employment not to be deemed to have terminated as regards such ISO.
Retirement pursuant to any pension plan provided by the Company shall be deemed
to be a termination of employment for the purposes of this Section. Nothing in
this Plan or in any Option granted pursuant to this Plan shall confer upon any
person employed by the Company or any Parent, Subsidiary or Affiliate of the
Company, any right to continue in the employ of the Company or any Parent,
Subsidiary or Affiliate of the Company or interfere with the right of the
Company to terminate such Optionee's employment or other relationship at any
time.
SECTION 16: DEATH OF OPTIONEE
If an Optionee's employment or other relationship with the Company or any
Parent, Subsidiary or Affiliate of the Company is terminated because of the
death of the Optionee or disability of Optionee within the meaning of Section
22(e)(3) of the Code, such Optionee's Options may be exercised to the extent
(and only to the extent) that it would have been exercisable by the Optionee on
the date of termination, by the Optionee (or the Optionee's legal
representative) within twelve (12) months after the date of termination (or such
shorter time period as may be specified in the Grant), but in any event no later
than the expiration date of the Options.
SECTION 17: ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
In the event that the number of outstanding shares of Common Stock of the
Company is changed by the stock dividend, stock split, reverse stock split,
combination, re-classification or similar change in the capital structure of the
Company without consideration, or if a substantial portion of the assets of the
Company are distributed, without consideration in a spin-off or similar
transaction, to the shareholders of the Company, the number of Shares available
under this Plan and the number of Shares subject to outstanding Options and the
exercise price per share of such Option shall be proportionately adjusted,
subject to any required action by the Board or shareholders of the Company and
compliance with applicable securities laws; provided, however, that a fractional
share shall not be issued upon exercise of any Option and any fractions of a
Share that would have resulted shall either be cashed out at Fair Market Value
or the number of shares issuable under the Option shall be rounded up to the
nearest whole number, as determined by the Committee; and provided further that
the exercise price may not be decreased to below the par value, if any, for the
Shares.
<PAGE>
SECTION 18: TIME OF GRANTING OPTIONS
Nothing contained in this Plan or in any resolution to be adopted by the Board
or the holders of securities of the Company shall constitute the granting of any
Option hereunder. An Option granted pursuant to this Plan shall be deemed to
have been granted on the date on which the name of the recipient and price of
the Shares and the other terms of the Option are determined by the Committee.
SECTION 19: TERMINATION AND AMENDMENT OF THE PLAN
Unless this Plan shall theretofore have been terminated as hereinafter in this
Section provided, no Option shall be granted hereunder after ten (10) years from
the date of the adoption hereof. The Board may at any time prior to that date
terminate this Plan or make such modification or amendment of this Plan as it
shall deem advisable; provided, however, that no amendment may be made, without
the approval by the holders of the Company's shareholders, except as provided in
Section 16 hereof, which would (i) increase the maximum number of Shares for
which Options may be granted under this Plan, (ii) extend the period during
which an Option may be granted, or (iii) amend the requirements as to the class
of selected persons eligible to receive Options. No termination, modification,
or amendment of this Plan or any Grant may, without consent of the Optionee to
whom an Option shall theretofore have been granted, adversely affect the rights
of such Optionee under such Option.
SECTION 20: CONDITIONS UPON ISSUANCE OF SHARES
Shares of Common Stock shall not be issued with respect to an Option unless the
exercise of such Option and the issuance and delivery of such Shares pursuant
thereto shall comply with all relevant provisions of law, including, without
limitation, the Securities Act of 1933, as amended, the Securities Exchange Act
of 1934, as amended, the rules and regulations promulgated thereunder, the
requirements of any stock exchange upon which the Common Stock may then be
listed, the applicable state securities laws, and shall be further subject to
the approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require the person
exercising such Option to represent and warrant at the time of any such exercise
that the Common Stock is being purchased only for investment and without any
present intention to sell or distribute such Common Stock if, in the opinion of
counsel for the Company, such a representation is necessary or desirable under
any of the aforementioned relevant provisions of law.
<PAGE>
SECTION 21: GOVERNMENT REGULATIONS
The Plan and the granting and exercise of Options hereunder, and the obligation
of the Company to sell and deliver Shares under such Options, shall be subject
to all applicable laws, rules and regulations.
SECTION 22: EFFECTIVE DATE; SHAREHOLDER'S APPROVAL
The Plan shall be effective upon shareholder approval within twelve (12) months
of its adoption by the Board by a majority of those shareholders of the Company
who are present at a duly constituted shareholders' meeting.
SECTION 23: GOVERNING LAW
This Plan shall be governed by and construed in accordance with the laws of the
State of Connecticut.
<PAGE>
Addendum
--------
Matrix Factor
-------------
<TABLE>
<CAPTION>
Sales Growth (%) Earnings Growth (%)
- -------------------------------------------------------------------------------
Less than 10% 10-15% 15-20% Greater than 20%
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Less than 10% 4 5 6 7
10-15% 5 6 7 8
15-20% 6 7 8 9
Greater than 20% 7 8 9 10
</TABLE>
<PAGE>
[FORM OF TSI INTERNATIONAL SOFTWARE LTD.
STOCK OPTION GRANT]
------------------
Optionee: ____________________________________
Address: ____________________________________
____________________________________
Total Shares Subject to Option: ____________________________________
Exercise Price Per Share: ____________________________________
Date of Vesting Commencement: ____________________________________
Date of Grant: ____________________________________
Expiration Date: ____________________________________
Type of Stock Option: ____________ Incentive
____________ Nonqualified
1. Grant of Option. TSI International Software Ltd., a Connecticut
---------------
corporation (the "Company"), hereby grants, on the date of grant set forth above
-------
(the "Date of Grant"), to the optionee named above ("Optionee") an option (this
------------- --------
"Option") to purchase the total number of shares of Common Stock of the Company
- -------
set forth above (the "Shares") at the exercise price per share set forth above
------
(the "Exercise Price"), subject to all of the terms and conditions of this Grant
--------------
and the Company's 1993 Stock Option Plan, as amended to the date hereof (the
"Plan"). If designated as an Incentive Stock Option above, this Option is
----
intended to qualify as an "incentive stock option" ("ISO") within the meaning of
---
Section 422A of the Internal Revenue Code of 1986, as amended (the "Code").
------
Unless otherwise defined herein, capitalized terms used herein shall have the
meanings ascribed to them in the Plan.
2. Exercise Period of Option. Subject to the terms and conditions
-------------------------
of the Plan and this Grant, this Option shall become exercisable as to one-
quarter of the Shares on and after the date of vesting commencement set forth
above (the "Vesting Commencement Date"), and shall become exercisable as to an
-------------------------
additional one-quarter of the Shares on each anniversary of the Vesting
Commencement Date thereafter; provided that this Option shall expire on the
Expiration Date set forth above and must be exercised, if at all, on or before
the Expiration Date.
3. Restriction on Exercise. This Option may not be exercised unless
-----------------------
such exercise is in compliance with the Securities Act of 1933 and all
applicable state securities laws, as they are in effect on the date of exercise,
and the requirements of any stock exchange or national market system on which
the Company's Common Stock may be listed at the time of
<PAGE>
exercise. Optionee understands that the Company is under no obligation to
register, qualify or list the Shares with the Securities and Exchange
Commission, any state securities commission or any stock exchange to effect such
compliance.
4. Termination of Option. Except as provided below in this Section,
---------------------
this Option shall terminate and may not be exercised if Optionee ceases to be
employed by the Company or any Parent or Subsidiary of the Company (or, in the
case of a nonqualified stock option, an Affiliate of the Company). Optionee
shall be considered to be employed by the Company for all purposes under this
Section 4 if Optionee is an officer, director or full-time employee of the
Company or any Parent, Subsidiary or Affiliate of the Company or if the Board of
Directors determines that Optionee is rendering substantial services as a part-
time employee, consultant, contractor or adviser to the Company or any Parent,
Subsidiary or Affiliate of the Company. The Board of Directors of the Company
shall have discretion to determine whether Optionee has ceased to be employed by
the Company or any Parent, Subsidiary or Affiliate of the Company and the
effective date on which such employment terminated (the "Termination Date").
----------------
(a) Termination Generally. If Optionee ceases to be employed
---------------------
by the Company or any Parent, Subsidiary or Affiliate of the Company for any
reason except death or disability, this Option, to the extent (and only to the
extent) that it would have been exercisable by Optionee on the Termination Date,
may be exercise by Optionee within three (3) months after the Termination Date,
but in no event later than the Expiration Date.
(b) Death or Disability. If Optionee's employment with the
-------------------
Company or any Parent, Subsidiary or Affiliate of the Company is terminated
because of the death of Optionee or the disability of Optionee within the
meaning of Section 22(e)(3) of the Code, this Option, to the extent (and only to
the extent) that it would have been exercisable by Optionee on the Termination
Date, may be exercised by Optionee (or Optionee's legal representative) within
twelve (12) months after the Termination Date, but in no event later than the
Expiration Date.
(c) No Right to Employment. Nothing in the Plan or this Grant
----------------------
shall confer on Optionee any right to continue in the employ of, or other
relationship with, the Company or any Parent, Subsidiary or Affiliate of the
Company or limit in any way the right of the Company or any Parent, Subsidiary
or Affiliate of the Company to terminate Optionee's employment or other
relationship at any time, with or without cause.
5) Manner of Exercise.
-------------------
(a) Exercise Agreement. This Option shall be exercisable by
------------------
delivery to the Company of any executed written Stock Option Agreement in the
form attached hereto as Exhibit A, or in such other form as may be approved by
---------
the Company, which shall set forth Optionee's election to exercise some or all
of this Option, the number of Shares being purchased, any restrictions imposed
on the Shares and such other representations and agreements as may be required
by the Company to comply with applicable securities laws.
(b) Exercise Price. Such notice shall be accompanied by full
--------------
payment of the Exercise Price for the Shares being purchased. Payment for the
Shares may be made in
-2-
<PAGE>
cash (by check) or, where permitted by law, such other forms of consideration as
are set forth in the Plan.
(c) Withholding Taxes. Prior to the issuance of the Shares upon
-----------------
exercise of this Option, Optionee must pay or make adequate provision for any
applicable federal or state withholding obligations of the Company.
(d) Issuance of Shares. Provided that such notice and payment
------------------
are in form and substance satisfactory to counsel for the Company, the Company
shall cause the Shares to be issued in the name of Optionee or Optionee's legal
representative.
6) Notice of Disqualifying Disposition of ISO Shares. If the Option
-------------------------------------------------
granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO on or before the
later if (1) the date two years after the Date of Grant, or (2) the date one
year after exercise of the ISO with respect to the Shares to be sold or
disposed, the Optionee shall immediately notify the Company in writing of such
disposition. Optionee acknowledges and agrees that Optionee may be subject to
income tax withholding by the Company in the compensation income recognized by
the Optionee from any such early disposition by paymnet in cash or out of the
current wages or other earnings payable to the Optionee.
7) Nontransferability of Option. This Option may not be transferred
----------------------------
in any manner other than by will or by the law of descent and distribution and
may be exercised during the lifetime of the Optionee only by the Optionee. The
terms of this Option shall be binding upon the executors, administrators and
successors of the Optionee.
8) Interpretation. Any dispute regarding the interpretation of this
--------------
Stock Option Grant shall be submitted by Optionee or the Company to the
Company's Board of Directors or the committee thereof that administers the
Plan, which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Board or committee shall be final and
binding on the Company and on Optionee.
9) Entire Agreement. The Plan and the Stock Option Exercise
----------------
Agreement attached as Exhibit A are incorporated herein by this reference. This
---------
Grant, the Plan and the Stock Option Exercise Agreement constitute the entire
agreement of the parties hereto and supersede all prior undertakings and
agreements with respect to the subject matter hereof.
TSI INTERNATIONAL SOFTWARE LTD.
By: ___________________________________
Name:___________________________________
Title:__________________________________
-3-
<PAGE>
ACCEPTANCE
----------
Optionee hereby acknowledges receipt of a copy of the Plan, represents
that Optionee has read and understands the terms and provisions thereof, and
accepts this Option subject to all terms and conditions of the Plan and this
Stock Option Grant. Optionee acknowledges that there may be adverse tax
consequences upon exercise of this Option or disposition of the Shares and that
Optionee should consult a tax adviser prior to such exercise or disposition.
-----------------------
Optionee
-4-
<PAGE>
Exhibit A
---------
[FORM OF STOCK OPTION EXERCISE AGREEMENT]
---------------------------------------
This Agreement is made this ____ day of ________________, 19___
between TSI International Software Ltd. (the "Company"), and the optionee named
-------
below ("Optionee").
--------
Optionee:
-----------------------------------------------
Social Security Number:
-----------------------------------------------
Address:
-----------------------------------------------
-----------------------------------------------
Number of Shares Purchased:
-----------------------------------------------
Price per Share:
-----------------------------------------------
Aggregate Purchase Price:
-----------------------------------------------
Date of Option Grant:
-----------------------------------------------
Date of Vesting Commencement:
-----------------------------------------------
Type of Option: [ ] Incentive Stock Option
[ ] Nonqualified Stock Option
Optionee hereby delivers to the Company the Aggregate Purchase Price,
to the extent permitted in the Option Grant, as follows (check as applicable and
complete):
[ ] in cash in the amount of $__________, receipt of which is acknowledged
by the Company;
[ ] by delivery of ____________ fully-paid, nonassessable and vested
shares of the Common Stock of the Company owned by Optionee for at
least six (6) months prior to the date hereof and owned free and clear
of all liens, claims, encumbrances or security interests, valued at
the current fair market value of $_________ per share (as determined
by the Board of Directors of the Company in good faith);
[ ] by the waiver hereby of compensation due or accrued for services
rendered in the amount of $___________; or
<PAGE>
[ ] if the Company is public, through a "same-day-sale" commitment,
delivered herewith, from Optionee and the NASD broker named therein in
the amount of $____________.
The Company and Optionee hereby agree as follows:
1. Purchase of Shares. On this date and subject to the terms and
------------------
conditions of this Agreement, Optionee hereby exercises the Stock Option Grant
between the Company and Optionee dated as of the Date of Option Grant set forth
above (the "Grant"), with respect to the Number of Shares Purchased set forth
-----
above of the Company's Common Stock (the "Shares") at an aggregate purchase
------
price equal to the Aggregate Purchase Price set forth above (the "Purchase
--------
Price") and the Price per Share set forth above (the "Purchase Price Per
- ----- ------------------
Share"). The term "Shares" refers to the Shares purchased under this Agreement
- -----
and includes all securities received (a) in replacement of the Shares, and (b)
as a result of stock dividends or stock splits in respect of the Shares.
Capitalized terms used herein that are not defined herein have the definitions
ascribed to them in the Plan or the Grant.
2. Stockholders' Agreement. By executing this Agreement, Optionee is
-----------------------
also agreeing to become a party to and be bound by that certain Stockholders'
Agreement dated as of June 1, 1989, as amended to the date hereof and as it may
be further amended pursuant to its terms (the "Stockholders' Agreement"). A
-----------------------
copy of the Stockholders' Agreement as executed on June 1, 1989 is attached
hereto as Attachment 1. A copy of all amendments thereto may be obtained
without charge from the Company at its principal offices.
3. Representations of Purchaser. Optionee represents and warrants to the
----------------------------
Company that:
(a) Optionee acknowledges that Optionee has received, read and
understood the Plan and the Grant and agrees to abide by and be bound by their
terms and conditions.
(b) Optionee is purchasing the Shares for Optionee's own account for
investment purposes only and not with a view to, or for sale in connection with,
a distribution of the Shares within the meaning of the Securities Act of 1933,
as amended (the "1933 Act").
--------
(c) Optionee has no present intention of selling or otherwise
disposing of all or any portion of the Shares.
(d) Optionee is fully aware of (i) the highly speculative nature of
the investment in the Shares; (ii) the financial hazards involved; and (iii) the
lack of liquidity of the Shares and the restrictions on transferability of the
Shares (e.g., that Optionee may not be able to sell or dispose of the Shares or
----
use them as collateral for loans).
(e) Optionee is capable of evaluating the merits
and risks of this investment, has the ability to protect Optionee's own
interests in this transaction and is financially capable of bearing a total loss
of this investment.
-2-
<PAGE>
4. Compliance with Securities Laws. Optionee under- stands and
-------------------------------
acknowledges that the Shares have not been regis- tered under the 1933 Act and
that, notwithstanding any other provision of the Grant to the contrary, the
exercise of any rights to purchase any Shares is expressly conditioned upon
compliance with the 1933 Act and all applicable state securities laws. Optionee
agrees to cooperate with the Company to ensure compliance with such laws. The
Shares are being issued under the 1933 Act pursuant to (the Company will check
the applicable box):
[ ] the exemption provided by Rule 701;
[ ] the exemption provided by Rule 504;
[ ] Section 4(2) of the 1933 Act;
[ ] other: _______________________.
5. Federal Restrictions on Transfer. Optionee understands that the
--------------------------------
Shares must be held indefinitely unless they are registered under the l933 Act
or unless an exemption from such registration is available and that the
certificate(s) representing the Shares will bear a legend to that effect.
Optionee understands that the Company is under no obligation to register the
Shares and that an exemption may not be available or may not permit Optionee to
transfer Shares in the amounts or at the times proposed by Optionee.
(a) Rule 144. Optionee has been advised that Rule 144 promulgated
--------
under the 1933 Act, which permits certain resales of unregistered securities, is
not presently available with respect to the Shares and, in any event, requires
that the Shares be paid for and then held for a minimum of two years before they
may be resold under Rule 144. Prior to an initial public offering of the
Company's stock, "nonaffiliates" (i.e. persons other than officers, directors
and major shareholders of the Company) may resell only under Rule 144(k), which
requires that the Shares be paid for and held for a minimum of three years.
Rule 144(k) is not available to affiliates.
(b) Rule 701. If the exemption relied upon for exercise of the
--------
Shares is Rule 701, the Shares will become freely transferable, subject to
limited conditions regarding the method of sale, by nonaffiliates 90 days after
the first sale of common stock of the Company to the general public pursuant to
a registration statement filed with and declared effective by the SEC, subject
to any lengthier market standoff agreement contained in this Agreement or
entered into by the Optionee. Affiliates must comply with the provisions (other
than the holding period requirements) of Rule 144.
6. State Law Restrictions on Transfer. Optionee understands that
----------------------------------
transfer of the Shares may be restricted by applicable state laws and that the
certificate(s) representing the Shares may bear a legend to that effect.
-3-
<PAGE>
7. Company's Repurchase Option.
----------------------------
(a) Termination Date. Optionee shall be considered to be employed by
----------------
the Company for all purposes under this Section 7 if Optionee is an officer,
director or full-time employee of the Company or any Parent, Subsidiary or
Affiliate of the Company or if the Board of Directors determines that Optionee
is rendering substantial services as a part-time employee, consultant,
contractor or adviser to the Company or any Parent, Subsidiary or Affiliate of
the Company. The Board of Directors of the Company shall have discretion to
determine whether Optionee has ceased to be employed by the Company or any
Parent, Subsidiary or Affiliate of the Company and the effective date on which
such employment terminated (the "Termination Date").
----------------
(b) Repurchase Option. In the event of Optionee's Termination Date
-----------------
occurring, for any reason whatsoever, including, without limitation,
resignation, termination, disability or death (a "Termination of Employment"),
-------------------------
Optionee (or Optionee's personal representative) shall immediately offer the
Shares to the Company and the Company shall have a first right and option,
exercisable within thirty (30) days of such offer, to repurchase the Shares.
(c) Repurchase Price. The purchase price of each Share in such a case
----------------
shall be the "Formula Value per Share." For purposes of this Section 7(c), the
Formula Value per Share shall mean the quotient obtained by dividing the
"Formula Value" (as defined in the Plan) by the "Outstanding Shares" (as defined
in the Plan.
(d) Payment of Repurchase Price. The purchase price in the case of
---------------------------
any purchase of Shares by the Company pursuant to this Section 7 shall be paid
in cash within thirty (30) days of acceptance of the offer described above or
within thirty (30) days of such time as audited or unaudited financial
statements setting out the information necessary to calculate the purchase price
are available, whichever is later, at which time the undersigned shall deliver
to the Company the stock certificate or certificates to be duly endorsed for
transfer, with the necessary documentary and transfer stamps, if any, paid for
and affixed by the undersigned.
8. Right of Termination Unaffected. Nothing in this Agreement shall be
-------------------------------
construed to limit or otherwise affect in any manner whatsoever the right or
power of the Company to terminate Optionee's employment at any time, for any
reason or no reason, with or without cause.
9. Legends. Optionee understands and agrees that the Shares are subject
-------
to a of repurchase held by the Company (or its assignee) as set forth herein,
and certain other rights as are set forth in the Stockholders' Agreement, and
that, in addition to the legends described in the Stockholders' Agreement, the
certificate(s) representing the Shares will bear legends in substantially the
following forms:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS
-4-
<PAGE>
ON PUBLIC RESALE AND TRANSFER AND RIGHT OF FIRST REFUSAL AND REPURCHASE
OPTIONS HELD BY THE ISSUER AND/OR ITS ASSIGNEE(S) AND MAY NOT BE
TRANSFERRED EXCEPT AS SET FORTH IN AN AGREEMENT BETWEEN THE ISSUER AND
THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT
THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS AND
RIGHT OF FIRST REFUSAL AND REPURCHASE ARE BINDING ON TRANSFEREES OF
THESE SHARES."
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS
AND UNTIL REGISTERED UNDER THE SECURITIES ACT OR, IN THE OPINION OF
COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE
SECURI- TIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS
IN COMPLIANCE THEREWITH."
10. Stop-Transfer Notices. Optionee understands and agrees that, in
---------------------
order to ensure compliance with the restric- tions referred to herein, the
Company may issue appropriate "stop-transfer" instructions to its transfer
agent, if any, and that, if the Company transfers its own securities, it may
make appropriate notations to the same effect in its own records.
11. Tax Consequences. OPTIONEE UNDERSTANDS THAT OPTIONEE MAY SUFFER
----------------
ADVERSE TAX CONSEQUENCES AS A RESULT OF OPTIONEE'S PURCHASE OR DISPOSITION OF
THE SHARES. OPTIONEE REPRESENTS THAT OPTIONEE HAS CONSULTED WITH ANY TAX
CONSULTANT(s) OPTIONEE DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE OR
DISPOSITION OF THE SHARES AND THAT OPTIONEE IS NOT RELYING ON THE COMPANY FOR
ANY TAX ADVICE. IN PARTICULAR, IF OPTIONEE IS AN INSIDER SUBJECT TO SECTION
16(b) OF THE SECURITIES EXCHANGE ACT OF 1934, OPTIONEE REPRESENTS THAT OPTIONEE
HAS CONSULTED WITH OPTIONEE'S TAX ADVISERS CONCERNING THE ADVISABILITY OF FILING
AN 83(b) ELECTION WITH THE INTERNAL REVENUE SERVICE.
12. Entire Agreement. The Plan, Grant and Stockholders' Agreement are
----------------
incorporated herein by reference. This Agreement, the Plan and the Grant
constitute the entire agreement of the parties and supersede in their entirety
all prior undertakings and agreements of the Company and Optionee with respect
to the subject matter hereof, and is governed by Connecticut law except for that
body of law pertaining to conflict of laws.
-5-
<PAGE>
Submitted by: Accepted by:
OPTIONEE: TSI INTERNATIONAL SOFTWARE LTD.
-------------------
(print name)
By:
- ---------------------------- ----------------------------
(signature)
Its:
---------------------------
Dated: Dated:
---------------------- -------------------------
-6-
<PAGE>
EXHIBIT 10.02
TSI INTERNATIONAL SOFTWARE, LTD.
1997 EQUITY INCENTIVE PLAN
As Adopted May 8, 1997
1. PURPOSE. The purpose of this Plan is to provide incentives to
-------
attract, retain and motivate eligible persons whose present and potential
contributions are important to the success of the Company, its Parent and
Subsidiaries, by offering them an opportunity to participate in the Company's
future performance through awards of Options, Restricted Stock and Stock
Bonuses. Capitalized terms not defined in the text are defined in Section 23.
2. SHARES SUBJECT TO THE PLAN.
--------------------------
2.1 Number of Shares Available. Subject to Sections 2.2 and
--------------------------
18, the total number of Shares reserved and available for grant and issuance
pursuant to this Plan will be 750,000 Shares. Subject to Sections 2.2 and 18,
Shares that: (a) are subject to issuance upon exercise of an Option but cease to
be subject to such Option for any reason other than exercise of such Option; (b)
are subject to an Award granted hereunder but are forfeited or are repurchased
by the Company at the original issue price; or (c) are subject to an Award that
otherwise terminates without Shares being issued will again be available for
grant and issuance in connection with future Awards under this Plan. Any
authorized shares not issued or subject to outstanding grants under the
Company's 1993 Stock Option Plan (the "Prior Plan") on the Effective Date (as
defined below) and any shares that: (a) are issuable upon exercise of options
granted pursuant to the Prior Plan that expire or become unexercisable for any
reason without having been exercised in full or (b) are subject to an option
granted pursuant to the Prior Plan but are forfeited or are repurchased by the
Company at the original issue price; will no longer be available for grant and
issuance under the Prior Plan, but will be available for grant and issuance
under this Plan. At all times the Company shall reserve and keep available a
sufficient number of Shares as shall be required to satisfy the requirements of
all outstanding Options granted under this Plan and all other outstanding but
unvested Awards granted under this Plan. No Participant may receive (a)
Restricted Stock Awards, (b) Stock Bonus Awards, or (c) Options with an Exercise
Price below Fair Market Value for more than 100,000 Shares over the term of the
Plan, and the sum of such awards issued under this Plan may not exceed 200,000
Shares in the aggregate over the term of the Plan.
2.2 Adjustment of Shares. In the event that the number of outstanding
--------------------
Shares is changed by a stock dividend, recapitalization, stock split, reverse
stock split, subdivision, combination, reclassification or similar change in the
capital structure of the Company without consideration, then (a) the number of
Shares reserved for issuance under this Plan, (b) the Exercise Prices of and
number of Shares subject to outstanding Options, and (c) the number of Shares
subject to other outstanding Awards will be proportionately adjusted, subject to
any required action by the Board or the stockholders of the Company and
compliance with applicable securities laws; provided, however, that fractions of
-------- -------
a Share will not be issued but will either be replaced by a cash payment equal
to the Fair Market Value of such fraction of a Share or will be rounded up to
the nearest whole Share, as determined by the Committee.
3. ELIGIBILITY. ISO (as defined in Section 5 below) may be granted
-----------
only to employees (including officers and directors who are also employees) of
the Company or of a Parent or Subsidiary of the Company. All other Awards may
be granted to employees, officers, directors, consultants, independent
contractors and advisors of the Company or any Parent or Subsidiary of the
Company; provided such consultants, contractors and advisors render bona fide
--------
services not in connection with the offer and sale of securities in a capital-
raising transaction. No person will be eligible to receive more than 200,000
Shares in any calendar year under this Plan pursuant to the grant of Awards
hereunder, other than new employees of the Company or of a Parent or Subsidiary
of the Company (including new employees who are also officers and directors of
the Company or any Parent or Subsidiary of the Company) who are eligible to
receive up to a maximum of 300,000 Shares in the calendar year in which they
commence their employment. A person may be granted more than one Award under
this Plan.
<PAGE>
4. ADMINISTRATION.
--------------
4.1 Committee Authority. This Plan will be administered by
-------------------
the Committee or by the Board acting as the Committee. Subject to the general
purposes, terms and conditions of this Plan, and to the direction of the Board,
the Committee will have full power to implement and carry out this Plan.
Without limitation, the Committee will have the authority to:
(a) construe and interpret this Plan, any Award Agreement and any
other agreement or document executed pursuant to this Plan;
(b) prescribe, amend and rescind rules and regulations relating to
this Plan;
(c) select persons to receive Awards;
(d) determine the form and terms of Awards;
(e) determine the number of Shares or other consideration subject to
Awards;
(f) determine whether Awards will be granted singly, in combination
with, in tandem with, in replacement of, or as alternatives to,
other Awards under this Plan or any other incentive or
compensation plan of the Company or any Parent or Subsidiary of
the Company;
(g) grant waivers of Plan or Award conditions;
(h) determine the vesting, exercisability and payment of Awards;
(i) correct any defect, supply any omission or reconcile any
inconsistency in this Plan, any Award or any Award Agreement;
(j) determine whether an Award has been earned; and
(k) make all other determinations necessary or advisable for the
administration of this Plan.
4.2 Committee Discretion. Any determination made by the
--------------------
Committee with respect to any Award will be made in its sole discretion at the
time of grant of the Award or, unless in contravention of any express term of
this Plan or Award, at any later time, and such determination will be final and
binding on the Company and on all persons having an interest in any Award under
this Plan. The Committee may delegate to one or more officers of the Company
the authority to grant an Award under this Plan to Participants who are not
Insiders of the Company.
5. OPTIONS. The Committee may grant Options to eligible persons and
-------
will determine whether such Options will be Incentive Stock Options within the
meaning of the Code ("ISO") or Nonqualified Stock Options ("NQSO"), the number
of Shares subject to the Option, the Exercise Price of the Option, the period
during which the Option may be exercised, and all other terms and conditions of
the Option, subject to the following:
5.1 Form of Option Grant. Each Option granted under this
--------------------
Plan will be evidenced by an Award Agreement which will expressly identify the
Option as an ISO or an NQSO ("Stock Option Agreement"), and will be in such form
and contain such provisions (which need not be the same for each Participant) as
the Committee may from time to time approve, and which will comply with and be
subject to the terms and conditions of this Plan.
5.2 Date of Grant. The date of grant of an Option will be
-------------
the date on which the Committee makes the determination to grant such Option,
unless otherwise specified by the Committee. The Stock Option Agreement and a
copy of this Plan will be delivered to the Participant within a reasonable time
after the granting of the Option.
-2-
<PAGE>
5.3 Exercise Period. Options may be exercisable within the
---------------
times or upon the events determined by the Committee as set forth in the Stock
Option Agreement governing such Option; provided, however, that no Option will
-------- -------
be exercisable after the expiration of ten (10) years from the date the Option
is granted; and provided further that no ISO granted to a person who directly or
----------------
by attribution owns more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or of any Parent or Subsidiary of
the Company ("Ten Percent Stockholder") will be exercisable after the expiration
of five (5) years from the date the ISO is granted. The Committee also may
provide for Options to become exercisable at one time or from time to time,
periodically or otherwise, in such number of Shares or percentage of Shares as
the Committee determines.
5.4 Exercise Price. The Exercise Price of an Option will be
--------------
determined by the Committee when the Option is granted and may not be less than
85% of the Fair Market Value of the Shares on the date of grant; provided that:
(i) the Exercise Price of an ISO will not be less than 100% of the Fair Market
Value of the Shares on the date of grant; and (ii) the Exercise Price of any ISO
granted to a Ten Percent Stockholder will not be less than 110% of the Fair
Market Value of the Shares on the date of grant. Payment for the Shares
purchased must be made in accordance with Section 8 of this Plan.
5.5 Method of Exercise. Options may be exercised only by
------------------
delivery to the Company of a written stock option exercise agreement (the
"Exercise Agreement") in a form approved by the Committee (which need not be the
same for each Participant), stating the number of Shares being purchased, the
restrictions imposed on the Shares purchased under such Exercise Agreement, if
any, and such representations and agreements regarding Participant's investment
intent and access to information and other matters, if any, as may be required
or desirable by the Company to comply with applicable securities laws, together
with payment in full of the Exercise Price for the number of Shares being
purchased.
5.6 Termination. Notwithstanding the exercise periods set
-----------
forth in the Stock Option Agreement, exercise of an Option will always be
subject to the following:
(a) If the Participant is Terminated for any reason except death or
Disability, then the Participant may exercise such Participant's
Options only to the extent that such Options would have been
exercisable upon the Termination Date no later than three (3)
months after the Termination Date (or such shorter or longer time
period not exceeding five (5) years as may be determined by the
Committee, with any exercise beyond three (3) months after the
Termination Date deemed to be an NQSO), but in any event, no later
than the expiration date of the Options.
(b) If the Participant is Terminated because of Participant's death or
Disability (or the Participant dies within three (3) months after
a Termination other than because of Participant's death or
Disability), then Participant's Options may be exercised only to
the extent that such Options would have been exercisable by
Participant on the Termination Date and must be exercised by
Participant (or Participant's legal representative or authorized
assignee) no later than twelve (12) months after the Termination
Date (or such shorter or longer time period not exceeding five (5)
years as may be determined by the Committee, with any such
exercise beyond (a) three (3) months after the Termination Date
when the Termination is for any reason other than the
Participant's death or Disability, or (b) twelve (12) months after
the Termination Date when the Termination is for Participant's
death or Disability, deemed to be an NQSO), but in any event no
later than the expiration date of the Options.
(c) Notwithstanding the provisions in paragraph 5.6(a) above, if a
Participant is determined by the Board to have committed an act of
theft, embezzlement, fraud, dishonesty or a breach of fiduciary
duty to the Company or Subsidiary, neither the Participant, the
Participant's estate nor such other person who may then hold the
Option shall be entitled to exercise any Option with respect to
any Shares whatsoever, after termination of service, whether or
not after termination of service the Participant may receive
payment from the Company or
-3-
<PAGE>
Subsidiary for vacation pay, for services rendered prior to
termination, for services rendered for the day on which
termination occurs, for salary in lieu of notice, or for any other
benefits. In making such determination, the Board shall give the
Participant an opportunity to present to the Board evidence on his
behalf. For the purpose of this paragraph, termination of service
shall be deemed to occur on the date when the Company dispatches
notice or advice to the Participant that his service is
terminated.
5.7 Limitations on Exercise. The Committee may specify a
-----------------------
reasonable minimum number of Shares that may be purchased on any exercise of an
Option, provided that such minimum number will not prevent Participant from
exercising the Option for the full number of Shares for which it is then
exercisable.
5.8 Limitations on ISO. The aggregate Fair Market Value
------------------
(determined as of the date of grant) of Shares with respect to which ISO are
exercisable for the first time by a Participant during any calendar year (under
this Plan or under any other incentive stock option plan of the Company, Parent
or Subsidiary of the Company) will not exceed $100,000. If the Fair Market
Value of Shares on the date of grant with respect to which ISO are exercisable
for the first time by a Participant during any calendar year exceeds $100,000,
then the Options for the first $100,000 worth of Shares to become exercisable in
such calendar year will be ISO and the Options for the amount in excess of
$100,000 that become exercisable in that calendar year will be NQSO. In the
event that the Code or the regulations promulgated thereunder are amended after
the Effective Date of this Plan to provide for a different limit on the Fair
Market Value of Shares permitted to be subject to ISO, such different limit will
be automatically incorporated herein and will apply to any Options granted after
the effective date of such amendment.
5.9 Modification, Extension or Renewal. The Committee may
----------------------------------
modify, extend or renew outstanding Options and authorize the grant of new
Options in substitution therefor, provided that any such action may not, without
the written consent of a Participant, impair any of such Participant's rights
under any Option previously granted. Any outstanding ISO that is modified,
extended, renewed or otherwise altered will be treated in accordance with
Section 424(h) of the Code. The Committee may reduce the Exercise Price of
outstanding Options without the consent of Participants affected by a written
notice to them; provided, however, that the Exercise Price may not be reduced
-------- -------
below the minimum Exercise Price that would be permitted under Section 5.4 of
this Plan for Options granted on the date the action is taken to reduce the
Exercise Price.
5.10 No Disqualification. Notwithstanding any other provision
-------------------
in this Plan, no term of this Plan relating to ISO will be interpreted, amended
or altered, nor will any discretion or authority granted under this Plan be
exercised, so as to disqualify this Plan under Section 422 of the Code or,
without the consent of the Participant affected, to disqualify any ISO under
Section 422 of the Code.
6. RESTRICTED STOCK. A Restricted Stock Award is an offer by the
----------------
Company to sell to an eligible person Shares that are subject to restrictions.
The Committee will determine to whom an offer will be made, the number of Shares
the person may purchase, the price to be paid (the "Purchase Price"), the
restrictions to which the Shares will be subject, and all other terms and
conditions of the Restricted Stock Award, subject to the following:
6.1 Form of Restricted Stock Award. All purchases under a
------------------------------
Restricted Stock Award made pursuant to this Plan will be evidenced by an Award
Agreement ("Restricted Stock Purchase Agreement") that will be in such form
(which need not be the same for each Participant) as the Committee will from
time to time approve, and will comply with and be subject to the terms and
conditions of this Plan. The offer of Restricted Stock will be accepted by the
Participant's execution and delivery of the Restricted Stock Purchase Agreement
and full payment for the Shares to the Company within thirty (30) days from the
date the Restricted Stock Purchase Agreement is delivered to the person. If
such person does not execute and deliver the Restricted Stock Purchase Agreement
along with full payment for the Shares to the Company within thirty (30) days,
then the offer will terminate, unless otherwise determined by the Committee.
6.2 Purchase Price. The Purchase Price of Shares sold
--------------
pursuant to a Restricted Stock Award will be determined by the Committee and
will be at least 85% of the Fair Market Value of the Shares on the date the
Restricted Stock Award is granted, except in the case of a sale to a Ten Percent
Stockholder, in which case
-4-
<PAGE>
the Purchase Price will be 100% of the Fair Market Value. Payment of the
Purchase Price must be made in accordance with Section 8 of this Plan.
6.3 Restrictions. Restricted Stock Awards will be subject to
------------
such restrictions (if any) as the Committee may impose. The Committee may
provide for the lapse of such restrictions in installments and may accelerate or
waive such restrictions, in whole or part, based on length of service,
performance or such other factors or criteria as the Committee may determine.
7. STOCK BONUSES.
-------------
7.1 Awards of Stock Bonuses. A Stock Bonus is an award of
-----------------------
Shares (which may consist of Restricted Stock) for services rendered to the
Company or any Parent or Subsidiary of the Company. A Stock Bonus may be awarded
for past services already rendered to the Company, or any Parent or Subsidiary
of the Company (provided that the Participant pays the Company the par value of
the shares awarded by such Stock Bonus in cash) pursuant to an Award Agreement
(the "Stock Bonus Agreement") that will be in such form (which need not be the
same for each Participant) as the Committee will from time to time approve, and
will comply with and be subject to the terms and conditions of this Plan. A
Stock Bonus may be awarded upon satisfaction of such performance goals as are
set out in advance in the Participant's individual Award Agreement (the
"Performance Stock Bonus Agreement") that will be in such form (which need not
be the same for each Participant) as the Committee will from time to time
approve, and will comply with and be subject to the terms and conditions of this
Plan. Stock Bonuses may vary from Participant to Participant and between groups
of Participants, and may be based upon the achievement of the Company, Parent or
Subsidiary and/or individual performance factors or upon such other criteria as
the Committee may determine.
7.2 Terms of Stock Bonuses. The Committee will determine the
----------------------
number of Shares to be awarded to the Participant and whether such Shares will
be Restricted Stock. If the Stock Bonus is being earned upon the satisfaction
of performance goals pursuant to a Performance Stock Bonus Agreement, then the
Committee will determine: (a) the nature, length and starting date of any
period during which performance is to be measured (the "Performance Period") for
each Stock Bonus; (b) the performance goals and criteria to be used to measure
the performance, if any; (c) the number of Shares that may be awarded to the
Participant; and (d) the extent to which such Stock Bonuses have been earned.
Performance Periods may overlap and Participants may participate simultaneously
with respect to Stock Bonuses that are subject to different Performance Periods
and different performance goals and other criteria. The number of Shares may be
fixed or may vary in accordance with such performance goals and criteria as may
be determined by the Committee. The Committee may adjust the performance goals
applicable to the Stock Bonuses to take into account changes in law and
accounting or tax rules and to make such adjustments as the Committee deems
necessary or appropriate to reflect the impact of extraordinary or unusual
items, events or circumstances to avoid windfalls or hardships.
7.3 Form of Payment. The earned portion of a Stock Bonus
---------------
may be paid currently or on a deferred basis with such interest or dividend
equivalent, if any, as the Committee may determine. Payment may be made in the
form of cash, whole Shares, including Restricted Stock, or a combination
thereof, either in a lump sum payment or in installments, all as the Committee
will determine.
7.4 Termination During Performance Period. If a Participant
-------------------------------------
is Terminated during a Performance Period for any reason, then such Participant
will be entitled to payment (whether in Shares, cash or otherwise) with respect
to the Stock Bonus only to the extent earned as of the date of Termination in
accordance with the Performance Stock Bonus Agreement, unless the Committee will
determine otherwise.
-5-
<PAGE>
8. PAYMENT FOR SHARE PURCHASES.
---------------------------
8.1 Payment. Payment for Shares purchased pursuant to this
-------
Plan may be made in cash (by check) or, where expressly approved for the
Participant by the Committee and where permitted by law:
(a) by cancellation of indebtedness of the Company to the Participant;
(b) by surrender of shares that either: (1) have been owned by
Participant for more than six (6) months and have been paid for
within the meaning of SEC Rule 144 (and, if such shares were
purchased from the Company by use of a promissory note, such note
has been fully paid with respect to such shares); or (2) were
obtained by Participant in the public market;
(c) by tender of a full recourse promissory note having such terms as
may be approved by the Committee and bearing interest at a rate
sufficient to avoid imputation of income under Sections 483 and
1274 of the Code; provided, however, that Participants who are not
-------- -------
employees or directors of the Company will not be entitled to
purchase Shares with a promissory note unless the note is
adequately secured by collateral other than the Shares; provided,
further, that the portion of the Purchase Price or Exercise Price
equal to the par value of the Shares, if any, must be paid in
cash;
(d) by waiver of compensation due or accrued to the Participant for
services rendered; provided, however, that the portion of the
Purchase Price or Exercise Price equal to the par value of the
Shares, if any, must be paid in cash;
(e) with respect only to purchases upon exercise of an Option, and
provided that a public market for the Company's stock exists:
(1) through a "same day sale" commitment from the Participant
and a broker-dealer that is a member of the National
Association of Securities Dealers (an "NASD Dealer")
whereby the Participant irrevocably elects to exercise
the Option and to sell a portion of the Shares so
purchased to pay for the Exercise Price, and whereby the
NASD Dealer irrevocably commits upon receipt of such
Shares to forward the Exercise Price directly to the
Company; or
(2) through a "margin" commitment from the Participant and a
NASD Dealer whereby the Participant irrevocably elects to
exercise the Option and to pledge the Shares so purchased
to the NASD Dealer in a margin account as security for a
loan from the NASD Dealer in the amount of the Exercise
Price, and whereby the NASD Dealer irrevocably commits
upon receipt of such Shares to forward the Exercise Price
directly to the Company; or
(f) by any combination of the foregoing.
8.2 Loan Guarantees. The Committee may help the Participant
---------------
pay for Shares purchased under this Plan by authorizing a guarantee by the
Company of a third-party loan to the Participant.
9. WITHHOLDING TAXES.
-----------------
9.1 Withholding Generally. Whenever Shares are to be issued
---------------------
in satisfaction of Awards granted under this Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares. Whenever, under this Plan,
payments in satisfaction of Awards are to be made in cash, such payment will be
net of an amount sufficient to satisfy federal, state, and local withholding tax
requirements.
-6-
<PAGE>
9.2 Stock Withholding. When, under applicable tax laws, a
-----------------
Participant incurs tax liability in connection with the exercise or vesting of
any Award that is subject to tax withholding and the Participant is obligated to
pay the Company the amount required to be withheld, the Committee may in its
sole discretion allow the Participant to satisfy the minimum withholding tax
obligation by electing to have the Company withhold from the Shares to be issued
that number of Shares having a Fair Market Value equal to the minimum amount
required to be withheld, determined on the date that the amount of tax to be
withheld is to be determined. All elections by a Participant to have Shares
withheld for this purpose will be made in accordance with the requirements
established by the Committee and be in writing in a form acceptable to the
Committee
10. PRIVILEGES OF STOCK OWNERSHIP.
-----------------------------
10.1 Voting and Dividends. No Participant will have any of
--------------------
the rights of a stockholder with respect to any Shares until the Shares are
issued to the Participant. After Shares are issued to the Participant, the
Participant will be a stockholder and have all the rights of a stockholder with
respect to such Shares, including the right to vote and receive all dividends or
other distributions made or paid with respect to such Shares; provided, that if
--------
such Shares are Restricted Stock, then any new, additional or different
securities the Participant may become entitled to receive with respect to such
Shares by virtue of a stock dividend, stock split or any other change in the
corporate or capital structure of the Company will be subject to the same
restrictions as the Restricted Stock; provided, further, that the Participant
-------- -------
will have no right to retain such stock dividends or stock distributions with
respect to Shares that are repurchased at the Participant's original Purchase
Price pursuant to Section 12.
10.2 Financial Statements. The Company will provide
--------------------
financial statements to each Participant prior to such Participant's purchase of
Shares under this Plan, and to each Participant annually during the period such
Participant has Awards outstanding; provided, however, the Company will not be
-------- -------
required to provide such financial statements to Participants whose services in
connection with the Company assure them access to equivalent information.
11. TRANSFERABILITY. Awards granted under this Plan, and any interest
---------------
therein, will not be transferable or assignable by Participant, and may not be
made subject to execution, attachment or similar process, otherwise than by will
or by the laws of descent and distribution or as determined by the Committee and
set forth in the Award Agreement with respect to Awards that are not ISOs..
During the lifetime of the Participant an Award will be exercisable only by the
Participant, and any elections with respect to an Award may be made only by the
Participant unless otherwise determined by the Committee and set forth in the
Award Agreement with respect to Awards that are not ISOs.
12. RESTRICTIONS ON SHARES. At the discretion of the Committee, the
----------------------
Company may reserve to itself and/or its assignee(s) in the Award Agreement a
right to repurchase a portion of or all Unvested Shares held by a Participant
following such Participant's Termination at any time within ninety (90) days
after the later of Participant's Termination Date and the date Participant
purchases Shares under this Plan, for cash and/or cancellation of purchase money
indebtedness, at the Participant's Exercise Price or Purchase Price, as the case
may be.
13. CERTIFICATES. All certificates for Shares or other securities
------------
delivered under this Plan will be subject to such stock transfer orders, legends
and other restrictions as the Committee may deem necessary or advisable,
including restrictions under any applicable federal, state or foreign securities
law, or any rules, regulations and other requirements of the SEC or any stock
exchange or automated quotation system upon which the Shares may be listed or
quoted.
14. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
------------------------
Participant's Shares, the Committee may require the Participant to deposit all
certificates representing Shares, together with stock powers or other
instruments of transfer approved by the Committee, appropriately endorsed in
blank, with the Company or an agent designated by the Company to hold in escrow
until such restrictions have lapsed or terminated, and the Committee may cause a
legend or legends referencing such restrictions to be placed on the
certificates. Any Participant who is permitted to execute a promissory note as
partial or full consideration for the purchase of Shares
-7-
<PAGE>
under this Plan will be required to pledge and deposit with the Company all or
part of the Shares so purchased as collateral to secure the payment of
Participant's obligation to the Company under the promissory note; provided,
--------
however, that the Committee may require or accept other or additional forms of
- -------
collateral to secure the payment of such obligation and, in any event, the
Company will have full recourse against the Participant under the promissory
note notwithstanding any pledge of the Participant's Shares or other collateral.
In connection with any pledge of the Shares, Participant will be required to
execute and deliver a written pledge agreement in such form as the Committee
will from time to time approve. The Shares purchased with the promissory note
may be released from the pledge on a pro rata basis as the promissory note is
paid.
15. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time or
-----------------------------
from time to time, authorize the Company, with the consent of the respective
Participants, to issue new Awards in exchange for the surrender and cancellation
of any or all outstanding Awards. The Committee may at any time buy from a
Participant an Award previously granted with payment in cash, Shares (including
Restricted Stock) or other consideration, based on such terms and conditions as
the Committee and the Participant may agree.
16. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award will not
----------------------------------------------
be effective unless such Award is in compliance with all applicable federal and
state securities laws, rules and regulations of any governmental body, and the
requirements of any stock exchange or automated quotation system upon which the
Shares may then be listed or quoted, as they are in effect on the date of grant
of the Award and also on the date of exercise or other issuance.
Notwithstanding any other provision in this Plan, the Company will have no
obligation to issue or deliver certificates for Shares under this Plan prior to:
(a) obtaining any approvals from governmental agencies that the Company
determines are necessary or advisable; and/or (b) completion of any registration
or other qualification of such Shares under any state or federal law or ruling
of any governmental body that the Company determines to be necessary or
advisable. The Company will be under no obligation to register the Shares with
the SEC or to effect compliance with the registration, qualification or listing
requirements of any state securities laws, stock exchange or automated quotation
system, and the Company will have no liability for any inability or failure to
do so.
17. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award
-----------------------
granted under this Plan will confer or be deemed to confer on any Participant
any right to continue in the employ of, or to continue any other relationship
with, the Company or any Parent or Subsidiary of the Company or limit in any way
the right of the Company or any Parent or Subsidiary of the Company to terminate
Participant's employment or other relationship at any time, with or without
cause.
18. CORPORATE TRANSACTIONS.
----------------------
18.1 Assumption or Replacement of Awards by Successor. In the
------------------------------------------------
event of
(a) a dissolution or liquidation of the Company;
(b) a merger or consolidation in which the Company is not the
surviving corporation (other than a merger or consolidation with a
----- ----
wholly-owned subsidiary, a reincorporation of the Company in a
different jurisdiction, or other transaction in which there is no
substantial change in the stockholders of the Company or their
relative stock holdings and the Awards granted under this Plan are
assumed, converted or replaced by the surviving corporation, which
assumption will be binding on all Participants);
(c) a merger in which the Company is the surviving corporation but
after which the stockholders of the Company immediately prior to
such merger (other than any stockholder that merges with the
Company in such merger, or which owns or controls another
corporation that merges, with the Company in such merger) cease to
own their shares or other equity interest in the Company;
(d) the sale of all or substantially all of the assets of the Company;
or
-8-
<PAGE>
(e) the acquisition, sale or transfer of more than 50% of the
outstanding shares of the Company by tender offer or similar
transaction;
any or all outstanding Awards will automatically vest for one additional year
and may also be assumed, converted or replaced by the surviving corporation (if
any), which assumption, conversion or replacement will be binding on all
Participants. The Committee may, in its sole discretion, provide for additional
accelerated vesting of any or all Awards that are assumed, converted or replaced
by the surviving corporation. In lieu of assuming, converting or replacing such
Awards, the surviving corporation may substitute equivalent Awards or provide
substantially similar consideration to Participants as was provided to
stockholders (after taking into account the existing provisions of the Awards
and the one year additional vesting). The surviving corporation may also issue,
in place of outstanding Shares of the Company held by the Participant,
substantially similar shares or other property subject to repurchase
restrictions no less favorable to the Participant. In the event such surviving
corporation (if any) refuses to assume or substitute Awards, as provided above,
pursuant to a transaction described in this Subsection 18.1, such Awards will
automatically vest for one additional year and will expire on such transaction
at such time and on such conditions as the Committee will determine, provided,
however, that the Committee may, in its sole discretion, provide for additional
accelerated vesting of any or all Awards granted pursuant to this Plan. If such
accelerated options are not exercised prior to the consummation of the corporate
transaction, they shall terminate in accordance with the provisions of this
Plan.
18.2 Other Treatment of Awards. Subject to any greater
-------------------------
rights granted to Participants under the foregoing provisions of this Section
18, in the event of the occurrence of any transaction described in Section 18.1,
any outstanding Awards will be treated as provided in the applicable agreement
or plan of merger, consolidation, dissolution, liquidation, sale of assets or
other "corporate transaction."
18.3 Assumption of Awards by the Company. The Company, from
-----------------------------------
time to time, also may substitute or assume outstanding awards granted by
another company, whether in connection with an acquisition of such other company
or otherwise, by either; (a) granting an Award under this Plan in substitution
of such other company's award; or (b) assuming such award as if it had been
granted under this Plan if the terms of such assumed award could be applied to
an Award granted under this Plan. Such substitution or assumption will be
permissible if the holder of the substituted or assumed award would have been
eligible to be granted an Award under this Plan if the other company had applied
the rules of this Plan to such grant. In the event the Company assumes an award
granted by another company, the terms and conditions of such award will remain
unchanged (except that the exercise price and the number and nature of Shares
------
issuable upon exercise of any such option will be adjusted appropriately
pursuant to Section 424(a) of the Code). In the event the Company elects to
grant a new Option rather than assuming an existing option, such new Option may
be granted with a similarly adjusted Exercise Price.
19. ADOPTION AND STOCKHOLDER APPROVAL. This Plan will become
---------------------------------
effective on the date on which the registration statement filed by the Company
with the SEC under the Securities Act registering the initial public offering of
the Company's Common Stock is declared effective by the SEC (the "Effective
Date"); provided, however, that if the Effective Date does not occur on or
-------- -------
before December 31, 1997, this Plan will terminate having never become
effective. This Plan shall be approved by the stockholders of the Company,
consistent with applicable laws, within twelve (12) months before or after the
date this Plan is adopted by the Board.
20. TERM OF PLAN/GOVERNING LAW. Unless earlier terminated as provided
--------------------------
herein, this Plan will terminate ten (10) years from the date this Plan is
adopted by the Board or, if earlier, the date of stockholder approval. This
Plan and all agreements thereunder shall be governed by and construed in
accordance with the laws of the State of Connecticut.
21. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time
--------------------------------
terminate or amend this Plan in any respect, including without limitation
amendment of any form of Award Agreement or instrument to be executed pursuant
to this Plan.
22. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan by
--------------------------
the Board, the submission of this Plan to the stockholders of the Company for
approval, nor any provision of this Plan will be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements
-9-
<PAGE>
as it may deem desirable, including, without limitation, the granting of stock
options and bonuses otherwise than under this Plan, and such arrangements may be
either generally applicable or applicable only in specific cases.
23. DEFINITIONS. As used in this Plan, the following terms will have
-----------
the following meanings:
"Award" means any award under this Plan, including any Option,
Restricted Stock or Stock Bonus.
"Award Agreement" means, with respect to each Award, the signed
written agreement between the Company and the Participant setting forth the
terms and conditions of the Award.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the committee appointed by the Board to
administer this Plan, or if no such committee is appointed, the Board. The
Committee, if appointed, will consist of not less than two members of the Board.
"Company" means TSI International Software, Ltd. or any successor
corporation.
"Disability" means a disability, whether temporary or permanent,
partial or total, within the meaning of Section 22(e)(3) of the Code, as
determined by the Committee.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exercise Price" means the price at which a holder of an Option
may purchase the Shares issuable upon exercise of the Option.
"Fair Market Value" means, as of any date, the value of a share of
the Company's Common Stock determined as follows:
(a) if such Common Stock is then quoted on the Nasdaq National Market,
its closing price on the Nasdaq National Market on the date of
determination as reported in The Wall Street Journal;
-----------------------
(b) if such Common Stock is publicly traded and is then listed on a
national securities exchange, its closing price on the date of
determination on the principal national securities exchange on
which the Common Stock is listed or admitted to trading as
reported in The Wall Street Journal;
-----------------------
(c) if such Common Stock is publicly traded but is not quoted on the
Nasdaq National Market nor listed or admitted to trading on a
national securities exchange, the average of the closing bid and
asked prices on the date of determination as reported in The Wall
--------
Street Journal;
--------------
(d) in the case of an Award made on the Effective Date, the price per
share at which shares of the Company's Common Stock are initially
offered for sale to the public by the Company's underwriters in
the initial public offering of the Company's Common Stock pursuant
to a registration statement filed with the SEC under the
Securities Act; or
(e) if none of the foregoing is applicable, by the Committee in good
faith.
-10-
<PAGE>
"Insider" means an officer or director of the Company or any other
person whose transactions in the Company's Common Stock are subject to Section
16 of the Exchange Act.
"Option" means an award of an option to purchase Shares pursuant
to Section 5.
"Parent" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if each of such
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
"Participant" means a person who receives an Award under this
Plan.
"Plan" means this TSI International Software, Ltd. 1997 Equity
Incentive Plan, as amended from time to time.
"Restricted Stock Award" means an award of Shares pursuant to
Section 6.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means shares of the Company's Common Stock reserved for
issuance under this Plan, as adjusted pursuant to Sections 2 and 18, and any
successor security.
"Stock Bonus" means an award of Shares, or cash in lieu of Shares,
pursuant to Section 7.
"Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
"Termination" or "Terminated" means, for purposes of this Plan
with respect to a Participant, that the Participant has for any reason ceased to
provide services as an employee, officer, director, consultant, independent
contractor, or advisor to the Company or a Parent or Subsidiary of the Company.
An employee will not be deemed to have ceased to provide services in the case of
(i) sick leave, (ii) military leave, or (iii) any other leave of absence
approved by the Committee, provided, that such leave is for a period of not more
than 90 days, unless reemployment upon the expiration of such leave is
guaranteed by contract or statute or unless provided otherwise pursuant to
formal policy adopted from time to time by the Company and issued and
promulgated to employees in writing. In the case of any employee on an approved
leave of absence, the Committee may make such provisions respecting suspension
of vesting of the Award while on leave from the employ of the Company or a
Subsidiary as it may deem appropriate, except that in no event may an Option be
exercised after the expiration of the term set forth in the Option agreement.
The Committee will have sole discretion to determine whether a Participant has
ceased to provide services and the effective date on which the Participant
ceased to provide services (the "Termination Date").
"Unvested Shares" means "Unvested Shares" as defined in the Award
Agreement.
"Vested Shares" means "Vested Shares" as defined in the Award
Agreement.
-11-
<PAGE>
EXHIBIT 10.03
TSI INTERNATIONAL SOFTWARE, LTD.
1997 DIRECTORS STOCK OPTION PLAN
As Adopted May 8, 1997
1. Purpose. This 1997 Directors Stock Option Plan (this "Plan") is
established to provide equity incentives for nonemployee members of the Board of
Directors of TSI International Software, Ltd. (the "Company"), who are described
in Section 6.1 below, by granting such persons options to purchase shares of
stock of the Company.
2. Adoption and Stockholder Approval. This Plan is effective on the date
(the "Effective Date") it is adopted by the Board of Directors of the Company
(the "Board"). This Plan shall be approved by the stockholders of the Company,
consistent with applicable laws, within twelve (12) months after the Effective
Date.
3. Types of Options and Shares. Options granted under this Plan shall be
non-qualified stock options ("NQSOs"). The shares of stock that may be
purchased upon exercise of Options granted under this Plan (the "Shares") are
shares of the Common Stock of the Company.
4. Number of Shares. The maximum number of Shares that may be issued
pursuant to Options granted under this Plan (the "Maximum Number") is 150,000
Shares, subject to adjustment as provided in this Plan. If any Option is
terminated for any reason without being exercised in whole or in part, the
Shares thereby released from such Option shall be available for purchase under
other Options subsequently granted under this Plan. At all times during the
term of this Plan, the Company shall reserve and keep available such number of
Shares as shall be required to satisfy the requirements of outstanding Options
granted under this Plan; provided, however that if the aggregate number of
-------- -------
Shares subject to outstanding Options granted under this Plan plus the aggregate
number of Shares previously issued by the Company pursuant to the exercise of
Options granted under this Plan equals or exceeds the Maximum Number, then
notwithstanding anything herein to the contrary, no further Options may be
granted under this Plan until the Maximum Number is increased or the aggregate
number of Shares subject to outstanding Options granted under this Plan plus the
aggregate number of Shares previously issued by the Company pursuant to the
exercise of Options granted under this Plan is less than the Maximum Number.
5. Administration. This Plan shall be administered by the Board or by a
committee of not less than two members of the Board appointed to administer this
Plan (the "Committee"). As used in this Plan, references to the Committee shall
mean either such Committee or the Board if no Committee has been established.
The interpretation by the Committee of any of the provisions of this Plan or any
Option granted under this Plan shall be final and binding upon the Company and
all persons having an interest in any Option or any Shares purchased pursuant to
an Option.
6. Eligibility and Award Formula.
6.1 Eligibility. Options shall be granted only to directors of the
-----------
Company who are not employees of the Company or any Parent or Subsidiary of the
Company, as those terms are defined in Section 17 below (each such person
referred to as an "Optionee").
6.2 Initial Grant. Each Optionee who is a member of the Board on
-------------
May 10, 1997 or who after May 10, 1997 becomes a member of the Board will
automatically be granted an Option for 10,000 Shares (an "Initial Grant") on the
later of May 10, 1997 or the date such Optionee first becomes a member of the
Board.
<PAGE>
6.3 Succeeding Grants. The Optionee will automatically be granted an
-----------------
Option for 2,500 Shares on each annual anniversary of the Start Date (as defined
below) of his or her Initial Grant (a "Succeeding Grant"), provided the Optionee
is a member of the Board on such anniversary date and has served continuously as
a member of the Board since the Start Date of his or her Initial Grant.
7. Terms and Conditions of Options. Subject to the following and to
Section 6 above:
7.1 Form of Option Grant. Each Option granted under this Plan shall
--------------------
be evidenced by a written Stock Option Grant ("Grant") in such form (which need
not be the same for each Optionee) as the Committee shall from time to time
approve, which Grant shall comply with and be subject to the terms and
conditions of this Plan.
7.2 Vesting. Options granted under this Plan shall be exercisable as
-------
they vest. The date an Optionee receives an Initial Grant or a Succeeding Grant
is referred to in this Plan as the "Start Date" for such Option.
(a) Initial Grants. Each Initial Grant will vest as to twenty-
--------------
five percent (25%) of the Shares on the last day of the twelve month period
commencing on the Start Date for such Initial Grant and thereafter as to twenty-
five percent (25%) of the Shares at the end of each succeeding twelve month
period.
(b) Succeeding Grants. Each Succeeding Grant will vest as to one
-----------------
hundred percent (100%) of the Shares on the last day of the twelve month period
commencing on the Start Date for such Succeeding Grant.
7.3 Exercise Price. The exercise price of an Option shall be the Fair
--------------
Market Value (as defined in Section 17.3) of the Shares on the Start Date.
7.4 Termination of Option. Except as provided below in this Section,
---------------------
each Option shall expire ten (10) years after its Start Date (the "Expiration
Date"). The Option shall cease to vest when the Optionee ceases to be a member
of the Board or a consultant of the Company. The date on which the Optionee
ceases to be a member of the Board or a consultant of the Company shall be
referred to as the "Termination Date". An Option may be exercised after the
Termination Date only as set forth below:
(a) Termination Generally. If the Optionee ceases to be a member
---------------------
of the Board or consultant of the Company for any reason except death of the
Optionee or disability of the Optionee (whether temporary or permanent, partial
or total, as determined by the Committee), then each Option then held by such
Optionee, to the extent (and only to the extent) that it would have been
exercisable by the Optionee on the Termination Date, may be exercised by the
Optionee no later than three (3) months after the Termination Date, but in no
event later than the Expiration Date.
(b) Death or Disability. If the Optionee ceases to be a member
-------------------
of the Board or consultant of the Company because of the death of the Optionee
or the disability of the Optionee (whether temporary or permanent, partial or
total, as determined by the Committee), then each Option then held by such
Optionee, to the extent (and only to the extent) that it would have been
exercisable by the Optionee on the Termination Date, may be exercised by the
Optionee (or the Optionee's legal representative) no later than twelve (12)
months after the Termination Date, but in no event later than the Expiration
Date.
8. Exercise of Options.
8.1 Exercise Period. Subject to the provisions of Section 8.5 below,
---------------
Options shall be exercisable as they vest.
8.2 Notice. Options may be exercised only by delivery to the Company
------
of an exercise agreement in a form approved by the Committee stating the number
of Shares being purchased, the restrictions imposed on the Shares and such
representations and agreements regarding the Optionee's investment intent and
access to information as may be required by the Company to comply with
applicable securities laws, together with payment in full of the exercise price
for the number of Shares being purchased.
-2-
<PAGE>
8.3 Payment. Payment for the Shares purchased upon exercise of an
-------
Option may be made (a) in cash or by check; (b) by surrender of shares of Common
Stock of the Company that have been owned by the Optionee for more than six (6)
months (and which have been paid for within the meaning of Securities and
Exchange Commission ("SEC") Rule 144 and, if such shares were purchased from the
Company by use of a promissory note, such note has been fully paid with respect
to such shares) or were obtained by the Optionee in the open public market,
having a Fair Market Value equal to the exercise price of the Option; (c) by
waiver of compensation due or accrued to the Optionee for services rendered; (d)
provided that a public market for the Company's stock exists, through a "same
day sale" commitment from the Optionee and a broker-dealer that is a member of
the National Association of Securities Dealers (an "NASD Dealer") whereby the
Optionee irrevocably elects to exercise the Option and to sell a portion of the
Shares so purchased to pay for the exercise price and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares to forward the exercise price
directly to the Company; (e) provided that a public market for the Company's
stock exists, through a "margin" commitment from the Optionee and an NASD Dealer
whereby the Optionee irrevocably elects to exercise the Option and to pledge the
Shares so purchased to the NASD Dealer in a margin account as security for a
loan from the NASD Dealer in the amount of the exercise price, and whereby the
NASD Dealer irrevocably commits upon receipt of such Shares to forward the
exercise price directly to the Company; or (f) by any combination of the
foregoing.
8.4 Withholding Taxes. Prior to issuance of the Shares upon exercise
-----------------
of an Option, the Optionee shall pay or make adequate provision for any federal
or state withholding obligations of the Company, if applicable.
8.5 Limitations on Exercise. Notwithstanding the exercise periods set
-----------------------
forth in the Grant, exercise of an Option shall always be subject to the
following limitations:
(a) An Option shall not be exercisable unless such exercise is in
compliance with the Securities Act of 1993, as amended (the "Securities Act")
and all applicable state securities laws, as they are in effect on the date of
exercise.
(b) The Committee may specify a reasonable minimum number of
Shares that may be purchased upon any exercise of an Option, provided that such
minimum number will not prevent the Optionee from exercising the full number of
Shares as to which the Option is then exercisable.
9. Nontransferability of Options. During the lifetime of the Optionee, an
Option shall be exercisable only by the Optionee or by the Optionee's guardian
or legal representative, unless otherwise determined by the Committee. No
Option may be sold, pledged, assigned, hypothecated, transferred or disposed of
in any manner other than by will or by the laws of descent and distribution,
unless otherwise determined by the Committee.
10. Privileges of Stock Ownership. No Optionee shall have any of the
rights of a stockholder with respect to any Shares subject to an Option until
the Option has been validly exercised. No adjustment shall be made for
dividends or distributions or other rights for which the record date is prior to
the date of exercise, except as provided in this Plan. The Company shall
provide to each Optionee a copy of the annual financial statements of the
Company at such time after the close of each fiscal year of the Company as they
are released by the Company to its stockholders.
11. Adjustment of Option Shares. In the event that the number of
outstanding shares of Common Stock of the Company is changed by a stock
dividend, stock split, reverse stock split, combination, reclassification or
similar change in the capital structure of the Company without consideration,
the number of Shares available under this Plan and the number of Shares subject
to outstanding Options and the exercise price per share of such outstanding
Options shall be proportionately adjusted, subject to any required action by the
Board or stockholders of the Company and compliance with applicable securities
laws; provided, however, that no fractional shares shall be issued upon exercise
-------- -------
of any Option and any resulting fractions of a Share shall be rounded up to the
nearest whole Share.
-3-
<PAGE>
12. No Obligation to Continue as Director. Nothing in this Plan or any
Option granted under this Plan shall confer on any Optionee any right to
continue as a director of the Company.
13. Compliance With Laws. The grant of Options and the issuance of Shares
upon exercise of any Options shall be subject to and conditioned upon compliance
with all applicable requirements of law, including without limitation compliance
with the Securities Act, compliance with all other applicable state securities
laws and compliance with the requirements of any stock exchange or national
market system on which the Shares may be listed. The Company shall be under no
obligation to register the Shares with the SEC or to effect compliance with the
registration or qualification requirement of any state securities laws, stock
exchange or national market system.
14. Acceleration of Options on Certain Corporate Transactions. In the
event of (a) a dissolution or liquidation of the Company, (b) a merger or
consolidation in which the Company is not the surviving corporation (other than
----- ----
a merger or consolidation with a wholly-owned subsidiary, a reincorporation of
the Company in a different jurisdiction, or other transaction in which there is
no substantial change in the stockholders of the Company or their relative stock
holdings and the Options granted under this Plan are assumed, converted or
replaced by the surviving corporation, which assumption, conversion or
replacement will be binding on all Optionees), (c) a merger in which the Company
is the surviving corporation but after which the stockholders of the Company
immediately prior to such merger (other than any stockholder that merges with
the Company in such merger, or which owns or controls another corporation which
merges, with the Company in such merger) cease to own their shares or other
equity interests in the Company, (d) the sale of all or substantially all of the
assets of the Company, or (e) the acquisition, sale or transfer of more than 50%
of the outstanding shares of the Company by tender offer or similar transaction,
the vesting of all options granted pursuant to this Plan will accelerate and the
options will become exercisable in full prior to the consummation of such event
at such times and on such conditions as the Committee determines, and if such
options are not exercised prior to the consummation of the corporate
transaction, they shall terminate in accordance with the provisions of this
Plan.
15. Amendment or Termination of Plan. The Board may at any time terminate
or amend this Plan or any outstanding option, provided that the Board may not
terminate or amend the terms of any outstanding option without the consent of
the Optionee. In any case, no amendment of this Plan may adversely affect any
then outstanding Options or any unexercised portions thereof without the written
consent of the Optionee.
16. Term of Plan. Options may be granted pursuant to this Plan from time
to time within a period of ten (10) years from the Effective Date.
17. Certain Definitions. As used in this Plan, the following terms shall
have the following meanings:
17.1 "Parent" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if each of such
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
17.2 "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
17.3 "Fair Market Value" means, as of any date, the value of a share
of the Company's Common Stock determined as follows:
(a) if such Common Stock is then quoted on the Nasdaq National
Market, its closing price on the Nasdaq National Market on the
date of determination as reported in The Wall Street Journal;
-----------------------
-4-
<PAGE>
(b) if such Common Stock is publicly traded and is then listed on a
national securities exchange, its closing price on the date of
determination on the principal national securities exchange on
which the Common Stock is listed or admitted to trading as
reported in The Wall Street Journal;
-----------------------
(c) if such Common Stock is publicly traded but is not quoted on the
Nasdaq National Market nor listed or admitted to trading on a
national securities exchange, the average of the closing bid and
asked prices on the date of determination as reported in The
---
Wall Street Journal;
-------------------
(d) in the case of an Option granted on the Effective Date, the
price per share at which shares of the Company's Common Stock
are initially offered for sale to the public by the Company's
underwriters in the initial public offering of the Company's
Common Stock pursuant to a registration statement filed with the
SEC under the Securities Act; or
(e) if none of the foregoing is applicable, by the Committee in good
faith.
-5-
<PAGE>
EXHIBIT 10.04
TSI INTERNATIONAL SOFTWARE, LTD.
1997 EMPLOYEE STOCK PURCHASE PLAN
As Adopted May 8, 1997
1. Establishment of Plan. TSI International Software, Ltd. (the
"Company") proposes to grant options for purchase of the Company's Common Stock
to eligible employees of the Company and its Participating Subsidiaries (as
hereinafter defined) pursuant to this Employee Stock Purchase Plan (this
"Plan"). For purposes of this Plan, "Parent Corporation" and "Subsidiary"
(collectively, "Participating Subsidiaries") shall have the same meanings as
"parent corporation" and "subsidiary corporation" in Sections 424(e) and 424(f),
respectively, of the Internal Revenue Code of 1986, as amended (the "Code").
"Participating Subsidiaries" are Parent Corporations or Subsidiaries that the
Board of Directors of the Company (the "Board") designates from time to time as
corporations that shall participate in this Plan. The Company intends this Plan
to qualify as an "employee stock purchase plan" under Section 423 of the Code
(including any amendments to or replacements of such Section), and this Plan
shall be so construed. Any term not expressly defined in this Plan but defined
for purposes of Section 423 of the Code shall have the same definition herein.
A total of 500,000 shares of the Company's Common Stock is reserved for issuance
under this Plan. Such number shall be subject to adjustments effected in
accordance with Section 14 of this Plan.
2. Purpose. The purpose of this Plan is to provide eligible employees of
the Company and Participating Subsidiaries with a convenient means of acquiring
an equity interest in the Company through payroll deductions, to enhance such
employees' sense of participation in the affairs of the Company and
Participating Subsidiaries, and to provide an incentive for continued
employment.
3. Administration. This Plan shall be administered by the Board or by a
committee of not less than two members of the Board appointed to administer this
Plan (the "Committee"). As used in this Plan, references to the "Committee"
shall mean either such committee or the Board, if no committee has been
established. Subject to the provisions of this Plan and the limitations of
Section 423 of the Code or any successor provision in the Code, all questions of
interpretation or application of this Plan shall be determined by the Board and
its decisions shall be final and binding upon all participants. Members of the
Board shall receive no compensation for their services in connection with the
administration of this Plan, other than standard fees as established from time
to time by the Board for services rendered by Board members serving on Board
committees. All expenses incurred in connection with the administration of this
Plan shall be paid by the Company.
4. Eligibility. Any employee of the Company or the Participating
Subsidiaries is eligible to participate in an Offering Period (as hereinafter
defined) under this Plan except the following:
(a) employees who are not employed by the Company or Participating
Subsidiaries ninety (90) days before the beginning of such Offering Period,
except that employees who are employed on the effective date of the registration
statement filed by the Company with the Securities and Exchange Commission
("SEC") under the Securities Act of 1933, as amended (the "Securities Act")
registering the initial public offering of the Company's Common Stock shall be
eligible to participate in the first Offering Period under the Plan;
(b) employees who are customarily employed for less than fifteen (15)
hours per week;
(c) employees who, together with any other person whose stock would be
attributed to such employee pursuant to Section 424(d) of the Code, own stock or
hold options to purchase stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of the Company or any of
its Participating Subsidiaries or who, as a result of being granted an option
under this Plan with respect to such Offering Period, would own stock or hold
options to purchase stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of the Company or any of
its Participating Subsidiaries; and
(d) individuals who provide services to the Company or any of its
Participating Subsidiaries as independent contractors whether or not
reclassified as common law employees, unless the Company or a Participating
Subsidiary
<PAGE>
withholds or is required to withhold U.S. Federal employment taxes for such
individuals pursuant to Section 3402 of the Code.
5. Offering Dates. The offering periods of this Plan (each, an
"Offering Period") shall be of twelve (12) months duration commencing on
February 1 and August 1 of each year and ending on the next January 31 and July
31 respectively, thereafter; provided, however, that notwithstanding the
-----------------
foregoing, the first such Offering Period shall commence on the first business
day on which price quotations for the Company's Common Stock are available on
the Nasdaq National Market (the "First Offering Date") and shall end on July 31,
1998. Except for the first Offering Period, each Offering Period shall consist
of two (2) six-month purchase periods (individually, a "Purchase Period") during
which payroll deductions of the participants are accumulated under this Plan.
The first Offering Period shall consist of two Purchase Periods, any of which
may be greater or less than six months as determined by the Committee. The
first business day of each Offering Period is referred to as the "Offering
Date". The last business day of each Purchase Period is referred to as the
"Purchase Date". The Board shall have the power to change the duration of
Offering Periods or Purchase Periods with respect to offerings without
stockholder approval if such change is announced at least fifteen (15) days
prior to the scheduled beginning of the first Offering Period or Purchase Period
to be affected.
6. Participation in this Plan. Eligible employees may become participants
in an Offering Period under this Plan on the first Offering Date after
satisfying the eligibility requirements by delivering a subscription agreement
to the Company's treasury department (the "Treasury Department") not later than
fifteen (15) days before such Offering Date unless a later time for filing the
subscription agreement authorizing payroll deductions is set by the Board for
all eligible employees with respect to a given Offering Period. An eligible
employee who does not deliver a subscription agreement to the Treasury
Department by such date after becoming eligible to participate in such Offering
Period shall not participate in that Offering Period or any subsequent Offering
Period unless such employee enrolls in this Plan by filing a subscription
agreement with the Treasury Department not later than fifteen (15) days
preceding a subsequent Offering Date. Once an employee becomes a participant in
an Offering Period, such employee will automatically participate in the Offering
Period commencing immediately following the last day of the prior Offering
Period unless the employee withdraws or is deemed to withdraw from this Plan or
terminates further participation in the Offering Period as set forth in Section
11 below. Such participant is not required to file any additional subscription
agreement in order to continue participation in this Plan.
7. Grant of Option on Enrollment. Enrollment by an eligible employee in
this Plan with respect to an Offering Period will constitute the grant (as of
the Offering Date) by the Company to such employee of an option to purchase on
the Purchase Date up to that number of shares of Common Stock of the Company
determined by dividing (a) the amount accumulated in such employee's payroll
deduction account during such Purchase Period by (b) the lower of (i) eighty-
five percent (85%) of the fair market value of a share of the Company's Common
Stock on the Offering Date (but in no event less than the par value of a share
of the Company's Common Stock), or (ii) eighty-five percent (85%) of the fair
market value of a share of the Company's Common Stock on the Purchase Date (but
in no event less than the par value of a share of the Company's Common Stock),
provided, however, that the number of shares of the Company's Common Stock
- -----------------
subject to any option granted pursuant to this Plan shall not exceed the lesser
of (a) the maximum number of shares set by the Board pursuant to Section 10(c)
below with respect to the applicable Purchase Date, or (b) the maximum number of
shares which may be purchased pursuant to Section 10(b) below with respect to
the applicable Purchase Date. The fair market value of a share of the Company's
Common Stock shall be determined as provided in Section 8 hereof.
8. Purchase Price. The purchase price per share at which a share of
Common Stock will be sold in any Offering Period shall be eighty-five percent
(85%) of the lesser of:
(a) The fair market value on the Offering Date; or
(b) The fair market value on the Purchase Date.
For purposes of this Plan, the term "Fair Market Value" means, as of
any date, the value of a share of the Company's Common Stock determined as
follows:
-2-
<PAGE>
(a) if such Common Stock is then quoted on the Nasdaq National
Market, its closing price on the Nasdaq National Market on
the date of determination as reported in The Wall Street
Journal; ---------------
--------
(b) if such Common Stock is publicly traded and is then listed on
a national securities exchange, its closing price on the date
of determination on the principal national securities
exchange on which the Common Stock is listed or admitted to
trading as reported in The Wall Street Journal;
-----------------------
(c) if such Common Stock is publicly traded but is not quoted on
the Nasdaq National Market nor listed or admitted to trading
on a national securities exchange, the average of the closing
bid and asked prices on the date of determination as reported
in The Wall Street Journal; or
------------------------
(d) if none of the foregoing is applicable, by the Board in good
faith, which in the case of the First Offering Date will be
the price per share at which shares of the Company's Common
Stock are initially offered for sale to the public by the
Company's underwriters in the initial public offering of the
Company's Common Stock pursuant to a registration statement
filed with the SEC under the Securities Act.
9. Payment Of Purchase Price; Changes In Payroll Deductions; Issuance Of
Shares.
(a) The purchase price of the shares is accumulated by regular payroll
deductions made during each Offering Period. The deductions are made as a
percentage of the participant's compensation in one percent (1%) increments not
less than two percent (2%), nor greater than fifteen percent (15%) or such lower
limit set by the Committee. Compensation shall mean base salary, provided
however, that for purposes of determining a participant's base salary, any
election by such participant to reduce his or her regular cash remuneration
under Sections 125 or 401(k) of the Code shall be treated as if the participant
did not make such election. Payroll deductions shall commence on the first
payday following the Offering Date and shall continue to the end of the Offering
Period unless sooner altered or terminated as provided in this Plan.
(b) A participant may lower (but not increase) the rate of payroll
deductions during an Offering Period by filing with the Treasury Department a
new authorization for payroll deductions, in which case the new rate shall
become effective for the next payroll period commencing more than fifteen (15)
days after the Treasury Department's receipt of the authorization and shall
continue for the remainder of the Offering Period unless changed as described
below. Such change in the rate of payroll deductions may be made at any time
during an Offering Period, but not more than one (1) change may be made
effective during any Offering Period. A participant may increase or decrease
the rate of payroll deductions for any subsequent Offering Period by filing with
the Treasury Department a new authorization for payroll deductions not later
than fifteen (15) days before the beginning of such Offering Period.
(c) All payroll deductions made for a participant are credited to his
or her account under this Plan and are deposited with the general funds of the
Company. No interest accrues on the payroll deductions. All payroll deductions
received or held by the Company may be used by the Company for any corporate
purpose, and the Company shall not be obligated to segregate such payroll
deductions.
(d) On each Purchase Date, so long as this Plan remains in effect and
provided that the participant has not submitted a signed and completed
withdrawal form before that date which notifies the Company that the participant
wishes to withdraw from that Offering Period under this Plan and have all
payroll deductions accumulated in the account maintained on behalf of the
participant as of that date returned to the participant, the Company shall apply
the funds then in the participant's account to the purchase of whole shares of
Common Stock reserved under the option granted to such participant with respect
to the Offering Period to the extent that such option is exercisable on the
Purchase Date. The purchase price per share shall be as specified in Section 8
of this Plan. Any cash remaining in a participant's account after such purchase
of shares shall be refunded to such participant in cash, without interest;
provided, however that any amount remaining in such participant's account on a
Purchase Date which is less than the amount necessary to purchase a whole share
shall be carried forward, without interest, into the next Purchase Period or
Offering Period as the case may be. In the event that this Plan has been
oversubscribed, all funds not used to purchase
-3-
<PAGE>
shares on the Purchase Date shall be returned to the participant, without
interest. No Common Stock shall be purchased on a Purchase Date on behalf of any
employee whose participation in this Plan has terminated prior to such Purchase
Date.
(e) As promptly as practicable after the Purchase Date, the Company
shall issue shares for the participant's benefit representing the shares
purchased upon exercise of his or her option.
(f) During a participant's lifetime, such participant's option to
purchase shares hereunder is exercisable only by him or her. The participant
will have no interest or voting right in shares covered by his or her option
until such option has been exercised.
10. Limitations on Shares to be Purchased.
(a) No participant shall be entitled to purchase stock under this Plan
at a rate which, when aggregated with his or her rights to purchase stock under
all other employee stock purchase plans of the Company or any Subsidiary,
exceeds $25,000 in fair market value, determined as of the Offering Date (or
such other limit as may be imposed by the Code) for each calendar year in which
the employee participates in this Plan.
(b) No more than two hundred percent (200%) of the number of shares
determined by using eighty-five percent (85%) of the fair market value of a
share of the Company's Common Stock on the Offering Date as the denominator may
be purchased by a participant on any single Purchase Date.
(c) No participant shall be entitled to purchase more than the Maximum
Share Amount (as defined below) on any single Purchase Date. Not less than
thirty (30) days prior to the commencement of any Offering Period, the Committee
may, in its sole discretion, set a maximum number of shares which may be
purchased by any employee at any single Purchase Date (hereinafter the "Maximum
Share Amount"). Until otherwise determined by the Committee, there shall be no
Maximum Share Amount. In no event shall the Maximum Share Amount, if any,
exceed the amounts permitted under Section 10(b) above. If a new Maximum Share
Amount is set, then all participants must be notified of such Maximum Share
Amount prior to the commencement of the next Offering Period. Once the Maximum
Share Amount is set, it shall continue to apply with respect to all succeeding
Purchase Dates and Offering Periods unless revised by the Committee as set forth
above.
(d) If the number of shares to be purchased on a Purchase Date by all
employees participating in this Plan exceeds the number of shares then available
for issuance under this Plan, then the Company will make a pro rata allocation
of the remaining shares in as uniform a manner as shall be reasonably
practicable and as the Committee shall determine to be equitable. In such
event, the Company shall give written notice of such reduction of the number of
shares to be purchased under a participant's option to each participant affected
thereby.
(e) Any payroll deductions accumulated in a participant's account
which are not used to purchase stock due to the limitations in this Section 10
shall be returned to the participant as soon as practicable after the end of the
applicable Purchase Period, without interest.
11. Withdrawal.
(a) Each participant may withdraw from an Offering Period under this
Plan by signing and delivering to the Treasury Department a written notice to
that effect on a form provided for such purpose. Such withdrawal may be elected
at any time at least fifteen (15) days prior to the end of an Offering Period.
(b) Upon withdrawal from this Plan, the accumulated payroll deductions
shall be returned to the withdrawn participant, without interest, and his or her
interest in this Plan shall terminate. In the event a participant voluntarily
elects to withdraw from this Plan, he or she may not resume his or her
participation in this Plan during the same Offering Period, but he or she may
participate in any Offering Period under this Plan which commences on a date
subsequent to such withdrawal by filing a new authorization for payroll
deductions in the same manner as set forth above for initial participation in
this Plan.
-4-
<PAGE>
(c) If the purchase price on the first day of any current Offering
Period in which a participant is enrolled is higher than the purchase price on
the first day of any subsequent Offering Period, the Company will automatically
enroll such participant in the subsequent Offering Period. Any funds
accumulated in a participant's account prior to the first day of such subsequent
Offering Period will be applied to the purchase of shares on the Purchase Date
immediately prior to the first day of such subsequent Offering Period. A
participant does not need to file any forms with the Company to automatically be
enrolled in the subsequent Offering Period
12. Termination of Employment. Termination of a participant's employment
for any reason, including retirement, death or the failure of a participant to
remain an eligible employee of the Company or of a Participating Subsidiary,
immediately terminates his or her participation in this Plan. In such event,
the payroll deductions credited to the participant's account will be returned to
him or her or, in the case of his or her death, to his or her legal
representative, without interest. For purposes of this Section 12, an employee
will not be deemed to have terminated employment or failed to remain in the
continuous employ of the Company or of a Participating Subsidiary in the case of
sick leave, military leave, or any other leave of absence approved by the Board;
provided that such leave is for a period of not more than ninety (90) days or
- --------
reemployment upon the expiration of such leave is guaranteed by contract or
statute.
13. Return of Payroll Deductions. In the event a participant's interest
in this Plan is terminated by withdrawal, termination of employment or
otherwise, or in the event this Plan is terminated by the Board, the Company
shall promptly deliver to the participant all payroll deductions credited to
such participant's account. No interest shall accrue on the payroll deductions
of a participant in this Plan.
14. Capital Changes. Subject to any required action by the stockholders
of the Company, the number of shares of Common Stock covered by each option
under this Plan which has not yet been exercised and the number of shares of
Common Stock which have been authorized for issuance under this Plan but have
not yet been placed under option (collectively, the "Reserves"), as well as the
price per share of Common Stock covered by each option under this Plan which has
not yet been exercised, shall be proportionately adjusted for any increase or
decrease in the number of issued and outstanding shares of Common Stock of the
Company resulting from a stock split or the payment of a stock dividend (but
only on the Common Stock) or any other increase or decrease in the number of
issued and outstanding shares of Common Stock effected without receipt of any
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 shall be final, binding and conclusive. Except
as expressly provided herein, no issue by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock subject to an option.
In the event of the proposed dissolution or liquidation of the Company, the
Offering Period will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Committee. The Committee may,
in the exercise of its sole discretion in such instances, declare that the
options under this Plan shall terminate as of a date fixed by the Committee and
give each participant the right to exercise his or her option as to all of the
optioned stock, including shares which would not otherwise be exercisable. In
the event of (i) a merger or consolidation in which the Company is not the
surviving corporation (other than a merger or consolidation with a wholly-owned
----- ----
subsidiary, a reincorporation of the Company in a different jurisdiction, or
other transaction in which there is no substantial change in the stockholders of
the Company or their relative stock holdings and the options under this Plan are
assumed, converted or replaced by the surviving corporation, which assumption,
conversion or replacement will be binding on all participants), (ii) a merger in
which the Company is the surviving corporation but after which the stockholders
of the Company immediately prior to such merger (other than any stockholder that
merges with the Company in such merger, or which owns or controls another
corporation that merges, with the Company in such merger) cease to own their
shares or other equity interest in the Company, (iii) the sale of all or
substantially all of the assets of the Company or (iv) the acquisition, sale, or
transfer of more than 50% of the outstanding shares of the Company by tender
offer or similar transaction, each option under this Plan may be assumed or an
equivalent option may be substituted by such surviving corporation or a parent
or subsidiary of such surviving corporation. In the event such surviving
corporation does not assume or substitute the options under this Plan, (x) this
Plan will terminate upon the consummation of such transaction, unless otherwise
provided by the Committee and (y) the Committee may declare that the options
under this Plan shall terminate as of a date fixed by the Committee and give
each participant the right to exercise his or her option as to all of the
optioned stock. If the Committee makes an option fully exercisable in the event
-5-
<PAGE>
of a merger, consolidation or sale of assets, the Committee shall notify the
participant that the option shall be fully exercisable for a certain period, and
the option and this Plan will terminate upon the expiration of such period.
The Committee may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per share of Common Stock covered by each outstanding option, in the event that
the Company effects one or more reorganizations, recapitalizations, rights
offerings or other increases or reductions of shares of its outstanding Common
Stock, or in the event the Company is consolidated with or merged into any other
corporation.
15. Nonassignability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under this Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 22 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be void and
without effect.
16. Reports. Individual accounts will be maintained for each participant
in this Plan. Each participant shall receive promptly after the end of each
Purchase Period a report of his or her account setting forth the total payroll
deductions accumulated, the number of shares purchased, the per share price
thereof and the remaining cash balance, if any, carried forward to the next
Purchase Period or Offering Period, as the case may be.
17. Notice of Disposition. Each participant shall notify the Company if
the participant disposes of any of the shares purchased in any Offering Period
pursuant to this Plan if such disposition occurs within two (2) years from the
Offering Date or within one (1) year from the Purchase Date on which such shares
were purchased (the "Notice Period"). Unless such participant is disposing of
any of such shares during the Notice Period, such participant shall keep the
certificates representing such shares in his or her name (and not in the name of
a nominee) during the Notice Period. The Company may, at any time during the
Notice Period, place a legend or legends on any certificate representing shares
acquired pursuant to this Plan requesting the Company's transfer agent to notify
the Company of any transfer of the shares. The obligation of the participant to
provide such notice shall continue notwithstanding the placement of any such
legend on the certificates.
18. No Rights to Continued Employment. Neither this Plan nor the grant of
any option hereunder shall confer any right on any employee to remain in the
employ of the Company or any Participating Subsidiary, or restrict the right of
the Company or any Participating Subsidiary to terminate such employee's
employment.
19. Equal Rights And Privileges. All eligible employees shall have equal
rights and privileges with respect to this Plan so that this Plan qualifies as
an "employee stock purchase plan" within the meaning of Section 423 or any
successor provision of the Code and the related regulations. Any provision of
this Plan which is inconsistent with Section 423 or any successor provision of
the Code shall, without further act or amendment by the Company or the Board, be
reformed to comply with the requirements of Section 423. This Section 19 shall
take precedence over all other provisions in this Plan.
20. Notices. All notices or other communications by a participant to the
Company under or in connection with this Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
21. Term; Stockholder Approval. After this Plan is adopted by the Board,
this Plan will become effective on the date that is the First Offering Date (as
defined above); provided, however, that if the First Offering Date does not
-------- -------
occur on or before December 31, 1997, this Plan will terminate having never
become effective. This Plan shall be approved by the stockholders of the
Company, in any manner permitted by applicable corporate law, within twelve (12)
months before or after the date this Plan is adopted by the Board. No purchase
of shares pursuant to this Plan shall occur prior to such stockholder approval.
This Plan shall continue until the earlier to occur of (a) termination of this
Plan by the Board (which termination may be effected by the Board at any time),
(b) issuance of all of the shares of Common Stock reserved for issuance under
this Plan, or (c) ten (10) years from the adoption of this Plan by the Board.
-6-
<PAGE>
22. Designation of Beneficiary.
(a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account under
this Plan in the event of such participant's death subsequent to the end of an
Purchase Period but prior to delivery to him of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under this Plan in the event
of such participant's death prior to a Purchase Date.
(b) Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant and
in the absence of a beneficiary validly designated under this Plan who is living
at the time of such participant's death, the Company shall deliver such shares
or cash to the executor or administrator of the estate of the participant, or if
no such executor or administrator has been appointed (to the knowledge of the
Company), the Company, in its discretion, may deliver such shares or cash to the
spouse or to any one or more dependents or relatives of the participant, or if
no spouse, dependent or relative is known to the Company, then to such other
person as the Company may designate.
23. Conditions Upon Issuance of Shares; Limitation on Sale of Shares.
Shares shall not be issued with respect to an option unless the exercise of such
option and the issuance and delivery of such shares pursuant thereto shall
comply with all applicable provisions of law, domestic or foreign, including,
without limitation, the Securities Act, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange or automated quotation system upon which the shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
24. Applicable Law. The Plan shall be governed by the substantive laws
(excluding the conflict of laws rules) of the State of Connecticut.
25. Amendment or Termination of this Plan. The Board may at any time
amend, terminate or extend the term of this Plan, except that any such
termination cannot affect options previously granted under this Plan, nor may
any amendment make any change in an option previously granted which would
adversely affect the right of any participant, nor may any amendment be made
without approval of the stockholders of the Company obtained in accordance with
Section 21 hereof within twelve (12) months of the adoption of such amendment if
such amendment would:
(a) increase the number of shares that may be issued under this Plan;
or
(b) change the designation of the employees (or class of employees)
eligible for participation in this Plan.
-7-
<PAGE>
EXHIBIT 10.08
SECOND AMENDMENT OF LEASE
-------------------------
This Second Amendment of Lease is made as of this 20th day of September
1996, by and between Robert D. Scinto, of Milford, Connecticut (hereinafter
referred to as "Landlord"), and TSI International, Ltd. of Wilton, Connecticut
(hereinafter refereed to as "Tenant").
In consideration of the mutual benefits and obligations set forth herein,
the parties hereby amend a certain lease between Landlord and Tenant dated
January 2, 1990 previously amended by a First Amendment dated February 26, 1992,
all for the lease of space in Landlord's building at 45 Danbury Road, Wilton,
Connecticut (the January 2, 1990 lease and all amendments thereto hereinafter
referred to collectively as the "Lease"), in the following manner:
A. The First Amendment of Lease is hereby canceled and restated, as
amended by this Second Amendment of Lease, such that as of the Second Amendment
of Leave, the Lease shall be read and interpreted by reference to only the
original January 2, 1990 lease and this Second of Lease.
B. Paragraph 1.01 of the Lease is deleted and is replaced with the
following:
"1.01 The Tenant's Net Rentable Area fluctuates over the Term of the
Lease, and the following square footages represent the Tenant's Net
Rentable Area for the various periods during the Term of the Lease:
[i] 25,700 square feet (the "Original Leased Premises") for
the period from January 1, 1990 to February 29, 1992;
[ii] 27,510 square feet, for the period from March 1, 1992 to
August 31, 1996; and
[iii] 19,609 square feet from September 1, 1996 to the end of
the Initial Term of the Lease."
On or before August 31, 1996, Tenant shall promptly vacate that
portion of the Leased Premises on the second floor which is being deleted
by this Second Amendment of Lease.
C. Paragraph 1.02 of the Lease is deleted and is replaced with the
following:
"1.02 The Leased Premises is located don the third and second floors of
Landlord's building located at 45 Danbury Road, Wilton, Connecticut. For the
period set forth in paragraph 1.01[i], the Leased Premises is defined by the
floor area outline set forth in Exhibit A, Sheet 1 & Sheet 2; For the period set
forth in paragraph 1.01[ii], the Leased Premises is defined by the floor area
outline set forth in Exhibit A, Sheet 1 & Sheet 3; and for the period set forth
in paragraph 1.01[iii] the Leased Premises is defined by the floor area outline
set forth in Exhibit A, Sheet 1 & Sheet 4. Exhibit A, Sheets 1, 2, 3 & 4 are
attached hereto."
<PAGE>
D. Paragraph 1.02 of the Lease is deleted and is replaced with the
following:
"1.03 The initial Term of this Lease is from January 1, 1990 until
August 31, 2001."
E. Paragraph 1.05 of the Lease is deleted and is replaced with the
following:
"1.05 The Basic Minimum Annual Rent for the Initial Term is:
<TABLE>
<CAPTION>
Basic Minimum Monthly
Period Annual Rent Installments
<S> <C> <C>
1/1/90 to 11/30/90 - 0 - - 0 -
12/1/90 to 2/28/93 $457,452.00 $38,121.00
3/1/93 to 8/31/96 $489,672.00 $40,806.00
9/1/96 to the end of the
Initial Term $289,223.00 $24,103.00
</TABLE>
F. The following sentence is added to the bottom Paragraph 2.04:
"Tenant's Pro Rata Share for the leased Premises shall be 55.72% for
the period from January 1, 1990 until February 29, 1992; 59.64% for the
period from March 1, 1992 until August 31, 1996; and 42.51% from September
1, 1996 until the end of the Initial Term."
G. Paragraph 4.02 is revised by:
"[i] deleting ". . . a reasonable time after the commencing of
Landlord's fiscal operating year . . ." and replacing it with ". . . within
one hundred-twenty days of the commencement date of Landlord's fiscal
operating year . . . ; and
[ii] deleting ". . . In no event shall Landlord recoup more than 100%
of the expenses actually incurred by Landlord." and replacing it with ". .
. In no event shall Landlord recoup more than 100% of the expenses actually
incurred by Landlord which expenses shall also include all charges for
utilities owed pursuant to Article VIII."
H. New paragraph, Paragraph 19.08 is added to the Lease as follows:
"19.08 Paragraphs 19.01 through 19.07 govern the condition of the
initial Leased Premises. Landlord shall remodel the Leased Premises in
accordance with the "Schematic Plan dated 7/22/96 prepared by Architrave
Designs" attached hereto as Exhibit E (the work done pursuant to the
remodeling plan herein referred to as the "Remodeling Work"). The
Remodeling Work shall be performed by Landlord at Landlord's sole cost and
expense and in a diligent and workmanlike manner. The Remodeling Work will
include [i] replacing the carpeting in the Leased Premises; [ii] painting
the entire Leased Premises; and [iii] voice and data wiring (the cost not
to
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<PAGE>
exceed $17,695.00). The Remodeling Work, including the millwork shown as
Note 6 on Exhibit E, shall be done with materials similar in quality to the
materials provided for the Original Leased Premises. In addition Landlord
will pay for Tenant's architect fee of $10,000.00 and shall pay for, or at
Landlord's option, provide personnel and equipment to move Tenant's
furniture within the Leased Premises during the Remodeling Work. The
Remodeling Work shall commence within thirty days of written notice from
Tenant and shall be completed within sixty (60) days of the commencement of
the Remodeling work except the Remodeling Work that is to be done to the
computer room area on the second floor shall be commenced immediately upon
and completed within fifteen days after the execution of this Second
Amendment of Lease. In conjunction with the Remodeling Work, Landlord, at
its expense, will [i] replace the carpeting in the building's lobby, lobby
stairways, and elevator lobby; [ii] paint the walls in the building's
lobby, lobby stairways, and elevator lobby; and [iii] extend the existing
marble treatment on the floor of the lobby of the building to the elevator.
Tenant shall be responsible for reasonably prompt turn-around time in
making any architectural decisions which are Tenant's responsibility. The
Remodeling Work shall be performed primarily after normal business hours
and on weekends.
I. ARTICLE XXI of the Lease is deleted and is replaced with the
following:
"ARTICLE XXI
Option to Extend
21.01 Provided that at the time of exercise of Tenant's right under
this paragraph this Lease shall then be in full force and effect and Tenant
shall not be in default of the Lease beyond any applicable notice and cure
period, then Tenant shall have the right to extend the Term of the Lease in
accordance with the further provisions of this Article (Tenant's "Right To
Extend"). The Right To Extend may only be exercised by the Tenant giving
written notice thereof to Landlord not less than nine months prior to
expiration of the Initial Term of the Lease. Tenant's Right To Extend
shall be for one option term (the "Option Term") beyond the Initial Term,
the Option Term to begin immediately upon the expiration of the Initial
Term. The terms and conditions of the Lease shall remain the same during
the Option Term except for the Basic Minimum Annual Rent. The Basic
Minimum Annual Rent for the Option Term shall be the lesser of: [i] the
Basic Minimum Annual Rent in effect immediately prior to the commencement
of the Option Term per annum increased by the percentage increase in the
United States Department of Labor Bureau of Labor Statistics Consumer Price
Index-All Urban Consumer-All Cities (1982-84 = 100) (the "CPI") between the
dates of June 1, 1996 and June 1, 2001; or [ii] 90% of the fair market rent
for the Leased Premises at the commencement of the Option Term. Provided
further, that if at the time for the determination of the rental increase
as herein provided the CPI is no longer published or issued, the Landlord
shall use such other index as is then generally recognized and accepted for
similar determination of purchasing power. Said fair market rent shall be
determined as the fair market rent for a new lease; of the same type as
this net Lease; with a term equal to the length of term for the Option
Term; with a uniform rental rate over the length of the term; and for a
premises comparable to the Leased Premises in a property comparable to the
Project. In the event
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<PAGE>
Landlord and Tenant cannot agree upon the fair market rent on or before the
seventh month before the commencement of the Option Term, they shall submit
to arbitration. The arbitration shall be a three member arbitration panel,
one arbitrator selected by each of the parties and a third arbitrator
selected by the first two arbitrators. Each arbitrator shall be a
commercial real estate appraiser licensed in Connecticut. The manner of
arbitration shall be that Landlord and Tenant shall each submit, in
writing, one figure corresponding to such party's opinion of Basic Minimum
Annual Rent for the Option Term (a "Last Best Offer"). The arbitrators
shall then find the Basic Minimum Annual Rent for the Option Term to be
only either the Last Best Offer given by Tenant. The majority vote of the
arbitrators shall control. Landlord and Tenant shall share in the fees of
the arbitrators equally. If the fair market rent has not been determined
prior to the commencement of the Option Term, then the Basic Minimum Annual
Rent previously in effect, on a per square foot of Tenant's Net Rentable
Area, shall continue in effect until the fair market rent is determined, at
which time there shall be a retroactive adjustment, and Tenant shall
immediately owe the amount of any under paid Basic Minimum Annual Rent,
together with interest from the shortfall in such underpaid Basic Minimum
Annual Rent, at the rate of Wall Street Prime plus 2%. Tenant's exercise of
Tenant's Right To Extend will only valid if it is in strict compliance with
the provisions of this paragraph. Further, notwithstanding any other
provisions for determining of the Basic Minimum Annual Rent, the Basic
Minimum Annual Rent for the Option Term shall in no event be less than the
Basic Minimum Annual Rent in effect immediately preceding the commencement
of the Option Term."
J. New paragraph, Paragraph 25.09 is added to the Lease, as follows:
"25.09 Tenant may use the lunch room located on the second floor of
the building until Landlord finds a tenant to lease it. When Landlord
finds a tenant to lease it, Landlord will notify Tenant and the other
tenants in the building. If Tenant and some or all of the other tenants in
the building want to continue to use it for a lunchroom, provided Tenant
and some or all of the other tenants agree to add a proportionate share of
the area of the lunchroom to their Leased Premises, and to increase their
Basic Minimum Annual Rent and Tenant's Pro Rata Share accordingly, Landlord
will continue to maintain the lunchroom as such otherwise, Landlord may
proceed with a lease of the space currently used as a lunch room. While
the space is maintained as a lunchroom, Landlord will be responsible for
the cleaning and maintenance of it."
K. Exhibit A of the January 2, 1990 Lease is deleted is replaced with
Exhibit A, Sheets 1, 2, 3, & 4, attached hereto. "Exhibit E" is also added to
the Lease and incorporated into it as a new exhibit, attached to the Second
Amendment of Lease.
L. Tenant has sublet a portion of the Original Leased Premises to
Spinergy, Inc. ("Spinergy") pursuant to a Sublease Agreement between Tenant and
Spinergy dated the 1st of February 1994 ("Spinergy Sublease"). Effective
September 1, 1996, Tenant assigns its rights and Landlord assumes Tenant's
obligations under the Spinergy Sublease and Tenant shall have no further
obligation with respect to the Spinergy Sublease or that portion of the Original
Leased Premises covered by the Spinergy Sublease.
-4-
<PAGE>
M. It is acknowledged that as of the date of execution of the Second
Amendment of Lease, there are no defaults by either the Landlord or Tenant under
the January 2, 1990 lease or the First Amendment of Lease.
In the event of any conflict between this Second Amendment of Lease, any
previous lease amendment and the January 2, 1990 lease, this Second Amendment of
Lease shall control, the Lease being hereby ratified and to remain in full force
and effect in all other respects.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals as
of the day and year first above written.
TSI International, Ltd.
By:/s/ Ira Gerard
------------------------------
its duly authorized
---------------------------------
/s/ Robert Scinto
---------------------------------
Robert D. Scinto
State of Connecticut )
) s.s. Town of Wilton
County of Fairfield )
Personally appeared Ira Gerard, signer and sealer of the foregoing
instrument and duly authorized VP Finance and Administration and CFO of TSI
International, Ltd., who acknowledged the same to be his/her free act and deed
and the duly authorized free act and deed of TSI International, Ltd. before me
this 9th day of September, 1996.
/s/ Laurie Picerno
-------------------------------
Commissioner of the
Superior Court/Notary Public
-5-
<PAGE>
State of Connecticut )
) s.s. City of Shelton
County of Fairfield )
Personally appeared Robert D. Scinto, signer and sealer of the foregoing
instrument, who acknowledged his execution to be his free act and deed and,
before me, this 20th day of September, 1996.
/s/ William Piacitelli
-----------------------------
Commissioner of the
Superior Court/Notary Public
-6-
<PAGE>
FIRST LEASE AMENDMENT
---------------------
This First Lease Amendment is made as of this 26th day of February 1992, by
and between Robert D. Scinto, of Greenwich, Connecticut (hereinafter referred to
as "Landlord"), and TSI International, Ltd., Inc., a Connecticut corporation
(hereinafter refereed to as "Tenant").
In consideration of the mutual benefits and obligations set forth herein,
the parties hereby amend a certain lease between them dated January 2, 1990, for
the lease of space in Landlord's building at 45 Danbury Road, Wilton,
Connecticut (the January 2, 1990 lease and all amendments thereto hereinafter
referred to collectively as the "Lease"), in the following manner:
A. Paragraph 1.01 of the Lease is deleted and the following is replaced
with the following:
"1.01 The Initial Tenant's Net Rentable Area is 25,700 square feet.
As of March 1, 1992 (the "Effective Date for the Additional Second Floor
Space"), the Tenant's Net Rentable Area is adjusted to a new total of
27,610 square feet."
B. Paragraph 1.05 of the Lease is deleted and replaced with the following:
"1.05 From the Commencement Date until December 1, 1990, the Basic
Minimum Annual Rent shall be -$0-. From December 1, 1990 through to
February 28, 1993, the Basic Minimum Annual Rent shall be Four Hundred
Fifty-Seven Thousand Four Hundred and Fifty Two Dollars ($457,452) per
annum, payable in equal monthly installments of Thirty-Eight Thousand One
Hundred and Twenty-One Dollars ($38,121) per month. From March 1, 1993
through to the end of the Initial Term of this Lease, the Basic Minimum
Annual Rent shall be Four Hundred Eighty-Nine Thousand Six Hundred and
Seventy-Two Dollars ($489,672) per annum, payable in equal monthly
installments of Forty Thousand Eight Hundred and Six Dollars ($40,806) per
month. The Basic Minimum Annual Rent is payable on the first day of each
month, in advance."
C. The following sentence is added to the bottom of paragraph 2.08 of the
Lease:
"As of the March 1, 1992 increase in the Tenant's Net Rentable Area of
the Leased Premises, the Tenant's Pro Rata Share for the Leased Premises
shall adjust to a new percentage of 59.64%."
D. The following is added to the bottom of paragraph 22.01 of the Lease:
"It is acknowledged that as of the Effective Date for the Additional
Second Floor Space (March 1, 1992), Tenant's Leased Premises shall be
increased by addition of 1,810 square feet of Tenant's Net Rentable Area,
furnished to Tenant in as-is condition, but which space Tenant may request
Landlord to finish at any time, as set forth in paragraph 25.09 (paragraph
25.09 being added to this Lease by way of the First Lease Amendment).
Accordingly, notwithstanding anything in this Lease to the contrary, a
further item, item
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<PAGE>
[vi], shall be added to the list of items [i] through [v] in this paragraph
above whose payment is required by Tenant for effective exercise of
Tenant's cancellation right under this paragraph, and all references in
this paragraph, above, to items [i] through [v] shall means items [i]
through [vi]. Item [vi] is the unamortized balance of the tenant
improvement work, if any, for the Additional Second Floor Space added by
way of the First Lease Amendment, performed by Landlord pursuant to
paragraph 25.09. Notwithstanding the amortization time period set forth for
any of the items [i] through [vi], above, the amortization period for item
[vi] shall be from the date of substantial completion of the tenant
improvement work for the Additional Second Floor Space to December 31,
1996. Landlord shall provide an itemized statement of the cost of the item
[vi] tenant improvement work within 120 days after its completion."
E. Paragraph 25.09 is added to the lease, as follows:
"25.09 The Additional Second Floor Space added by way of the First
Lease Amendment is furnished to Tenant in as-is, broom clean condition.
Tenant may request Landlord at any time during the Term of this Lease
finish the Additional Second Floor Space in accordance with Tenant's finish
plans, with a fit-out of up to a similar character as that provided to the
original Leased Premises. Such request must be in writing and must include
the plans and specifications for the fit-out, subject to Landlord's
approval, which shall not be unreasonably withheld or delayed. Upon
receipt of such request, Landlord shall promptly undertake and diligently
pursue to completion the fit-out of the Additional Second Floor Space.
Upon substantial completion of said space, and issuance of a certificate of
occupancy therefore, the Additional Rent shall increase by a monthly amount
which is necessary to amortize the cost of such fit-out over the balance of
the Initial Term of this Lease in equal, consecutive monthly installments,
with an interest rate of 10% per annum, the first payment commencing on the
day of the month after substantial completion of the fit-out."
F. Exhibit A of the Lease is amended by adding an additional sheet,
showing the Additional Second Floor Space added by way of the First Lease
Amendment. A copy of said sheet is attached hereto.
The intent of this First Lease Amendment is to add 1,810 square feet of
tenant's net rentable area (the "Additional Second Floor Space") to the original
Leased Premises. As of the Effective Date for the Additional Second Floor
Space, the Tenant's Net Rentable Area, the Basic Minimum Annual Rent and other
items dependent upon the square footage of the Leased Premises shall be adjusted
to reflect the addition of the Additional Second Floor Space, as set forth in
this First Lease Amendment.
In the event of any conflict between this First Lease Amendment and the
Lease, this First Lease Amendment shall control, the Lease being, and is to
remain, in full force and effect in all other respects.
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IN WITNESS WHEREOF, the parties have hereunto set their hands and seals as
of the day and year first above written.
TSI International, Ltd.
By: /s/ Richard Bankosky
---------------------------------
its duly authorized
VP Finance
------------------------------------
------------------------------------
Robert D. Scinto
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State of Connecticut
ss City / Town of _____________________
County of ______________
Personally appeared ______________, signer and sealer of the foregoing
instrument and the duly authorized ______________ of TSI International, Ltd.,
who acknowledged the same to be his or her free act and deed and the duly
authorized free act and deed of TSI International, Ltd. before me this _____ day
of __________, 1992.
-----------------------------------
Commissioner of the
Superior Court/Notary Public
State of Connecticut
ss City / Town of _____________________
County of ______________
Personally appeared Robert D. Scinto, signer and sealer of the foregoing
instrument who acknowledged the same to be his free act and deed, this _____ day
of __________, 1992.
---------------------------------
Commissioner of the
Superior Court/Notary Public
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<PAGE>
LEASE AGREEMENT
---------------
This Lease Agreement is made as of this 2nd day of January 1990, by and
between Robert D. Scinto, of Fairfield, Connecticut (hereinafter called
"Landlord") and TSI International, Ltd., a corporation organized under the laws
of the State of Connecticut (hereinafter called "Tenant").
W I T N E S S E T H:
ARTICLE I
DATA SECTION
Wherever this Lease refers to any item specified in this Data Section, such
reference shall be deemed to incorporate the information set forth in the Data
Section. Some terms mentioned in the Data Section are further defined by other
provisions in the Lease. Whenever a term is more specifically defined, the more
specific definition shall control.
1.01 The Leased Premises consists of 25,700 square feet of Tenant's Net
Rentable area.
1.02 The Leased Premises is located on the third and second floors of
Landlord's building at 45 Danbury Road, Wilton, Connecticut. The Leased Premises
is further defined by the floor area outline attached to this Lease as Exhibit
A.
1.03 The Initial Term of the Lease is seven years.
1.04 The Commencement Date is January 1, 1990.
1.05 From the Commencement Date until December 1, 1990, the Basic Minimum
Annual Rent shall be -$0-. From December 1, 1990 through the end of the Initial
Term of this Lease, the Basic Minimum Annual Rent shall be Four Hundred Fifty-
Seven Thousand Four Hundred and Fifty-Two Dollars (457,452.00) per annum,
payable in equal monthly installments of Thirty-Eight Thousand One Hundred and
Twenty-One Dollars ($38,121.00) per month, on the first day of each month, in
advance.
1.06 The Security Deposit shall be $38,121.00.
1.07 Tenant shall use the Leased Premises for the sole purpose of a
general corporate business office, which may include the accessory uses of
training, demonstrations, research and development, customer support, systems
integration and sale of equipment.
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1.08 The Notice Address for each of the parties is:
Landlord Tenant:
Robert D. Scinto TSI International, Ltd.
One Corporate Drive 45 Danbury Road
Shelton, Connecticut 06484 Wilton Connecticut 06897
but until occupancy
TSI International, Ltd.
295 Westport Avenue
Norwalk, Connecticut 06851
ARTICLE II
DEFINITIONS
The following words and phrases shall have the following meanings.
2.01 "Leased Premises" means the usable area leased to Tenant in
Landlord's building. The outer vertical boundary of the Leases Premises is
outlined on the floor plan attached hereto as Exhibit A. The upper boundary of
the Leased Premises shall be the lower surface of the suspended or finished
ceiling. The lower boundary of the Leased Premises shall be the surface of the
unfinished floor. The vertical boundary of the Leased Premises shall be the
unfinished surface exposed to the Leased Premises of all walls bounding the
exterior of the building, other rentable area, building common area, and other
area not for use by Tenant (HVAC duct chases and structural column enclosures
for example).
2.02 "The Project" means the real property appurtenant to the building in
which the Leased Premises is located. The current real property boundary is
described in Exhibit B, attached hereto.
2.03 "Tenant's Net Rentable Area" means the approximate area of the Leased
Premises plus a share of the core area of the buildings in the Project.
2.04 "Tenant's Pro Rata Share" means the percentage obtained by dividing
Tenant's Net Rentable area by the total Net Rentable Area in the Project.
Although a specific Pro Rata Share may be set forth in the Data Section, the Pro
Rata Share shall be subject to adjustment upon increase or decrease of the total
Net Rentable Area in the Project. The total Net Rentable Area in the Project as
of the execution of this Lease is 46,125 square feet, and Tenant's Pro Rata
Share upon execution of this Lease is 55.72%.
2.05 "General Common Area" means all areas and facilities in the building
in which the Leased Premises is located and all exterior areas of the Project
which are available for the use of all tenants. The General Common Area
includes corridors, janitor closets, rest rooms
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and parking facilities. General Common Area does not include restricted areas
such as boiler rooms, machine rooms for elevator equipment and utility rooms of
the Landlord.
2.06 "Lease Year" shall mean the period from the Commencement Date to the
expiration of the first full twelve calendar month period of the Initial Term of
this Lease and each succeeding twelve month period of the Term of this Lease.
If the Commencement Date is not the first day of a calendar month, the first
Lease Year shall be twelve months plus the remaining portion of the partial
month of the Commencement Date.
2.07 "Term of this Lease" means the Initial Term, and if the Lease grants
any option to extend the Term of this Lease, Term of this Lease shall include
any validly exercised option to extend.
2.08 "Basic Operating Cost" shall mean all Operating Expenses of the
Project, which shall be computed on the accrual basis and shall consist of all
costs and expenses incurred by Landlord to maintain all facilities in the
operation of the Project and such additional facilities now and in subsequent
years as may be determined by Landlord to be necessary to the Project. All
Operating Expenses shall be determined in accordance with generally accepted
accounting principles, which shall be consistently applied (with accruals
appropriate to Landlord's business, provided that accruals shall not include any
depreciation). The term "Operating Expenses" shall include the amortized cost
of capital items, provided, however, that the useful life of any item shall in
no event exceed fifteen years, and provided that capital replacements shall not
be made unless the cost of repair shall be greater than the annual amount of the
amortized cost of the replacement. The term "operating expenses" as used herein
shall mean all expenses and costs of every kind and nature which Landlord shall
pay or become obligated to pay because of or in connection with the ownership
and operation of the Project and supporting facilities of the Project.
Operating Expenses shall be limited so as not to include: specific costs which
are otherwise allocated to tenant areas under other provisions of this Lease;
expenses and costs which are billed to and paid by specific tenants; and
expenses associated with any financing indebtedness of Landlord, whether or not
secured by the Project. Operating expenses, include, but are not limited to,
the following: (a) the cost of all supplies, materials and equipment used
solely in the operation and maintenance of the Project; (b) the cost of
utilities, including water and power, heating, lighting, air conditioning and
ventilating the entire Project; (c) management fees at rates in accordance with
the prevailing rates charged for comparable properties in the area of the
Project; (d) the cost of all maintenance, janitorial and service agreements for
the Project and the equipment therein, including, without limitation, alarm
service, window cleaning and elevator maintenance; (e) accounting costs,
including the costs of audits by certified public accountants; (f) the cost of
all insurance, including but not limited to fire, casualty, liability, rental
abatement, workers compensation and any other type of insurance reasonably
obtained, all as limited to those coverages applicable to the Project and the
employee's and Landlord's personal property used in connection therewith; (g)
the cost of repairs, replacement and general maintenance (excluding repairs and
general maintenance paid by proceeds of insurance or by Tenant or other third
parties, and alterations attributable solely to tenants of the Project other
than Tenant); (h) gardening, landscaping, planting (except for original
landscaping and planting), replanting and replacing of flowers and shrubbery;
(i) any and all General Common Area maintenance costs relating to public areas
of the Project, including sidewalks, parking areas, landscaping and service
areas, including repaving, restriping, plowing and sanding of the walks
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and parking areas, and including rubbish removal from the Project; (j)
compensation to personnel to implement all of the services set forth in this
paragraph, including wages, workers compensation insurance premiums and other
items paid for the employment of said personnel; (k) all taxes, service payments
in lieu of taxes, excises, assessments, levies, fees or charges, general and
special, ordinary and extraordinary, unforeseen as well as foreseen, of any kind
which are assessed, levied, charged, confirmed, or imposed by any public
authority upon the Project, its operation or the rent provided for in this Lease
Agreement (It is agreed that Tenant will be responsible for ad valorem taxes on
Tenant's personal property, if any, and on the value of leasehold improvements
to the extent that same exceed standard building allowances provided by Landlord
under this Lease); and (l) any other item reasonably expended for the
maintenance, operation, repair and insurance of the Project. Notwithstanding the
foregoing, Basic Operating Costs shall not include: (i) the cost of repairs to
the structural members of the building or the building roof, the performance and
cost of which shall be Landlord's responsibility; (ii) legal costs for the
enforcement of any lease against any tenant; (iii) any environmental cleanup
costs for any condition existing at the Project as of the date of this Lease;
(iv) the cost of completion of the Project and any and all construction of any
tenant spaces, including the construction of Tenant's Leased Premises; and (iv)
the cost of repair or replacement associated with any latent construction
defects or defects in the design of the Project. For the purposes of the
preceding sentence, "structural members" shall mean the building columns and
beams, the exterior concrete walls, the foundation, loan bearing walls, the
floor slabs, the conduits and the stairs.
2.09 "Repair" shall mean replacement wherever reasonably necessary.
2.10 "Consent" or "Approval" of Landlord shall mean approval or consent in
writing.
2.11 "Notice" from either party to the other shall mean written notice,
served by either party upon the other by a receipted, nationally recognized
courier service (such as Federal Express or UPS) or by certified mail, return
receipt requested, at the address herein set forth or at such other address as
either party may from time to time designate.
ARTICLE III
GRANT AND TERM
3.01 In consideration of the rent and covenants herein reserved and
contained on the part of Tenant to be observed and performed, Landlord demises
and leases to Tenant and Tenant rents from Landlord the Leased Premises and the
improvements now or hereafter therein. Together with the Leased Premises,
Landlord grants to Tenant and Tenant's employees and invitees the right to use
the General Common area, subject to the rules and regulations reasonably
established by Landlord.
3.02 The Initial Term shall be the period of time set forth in the Data
Section. The Term of this Lease shall commence on the Commencement Date.
Notwithstanding the exact number of years and/or months set forth for the
Initial Term in the Data Section, unless express provision is made to the
contrary, if the Commencement Date is not the first day of a calendar
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<PAGE>
month, the Initial Term set forth in the Data Section shall be increased by any
partial month from the Commencement Date to the end of the calendar month.
ARTICLE IV
RENT
4.01 Tenant agrees to pay Landlord during the Term of this Lease the Basic
Minimum Annual Rent, it being understood that the Basic Minimum Annual Rent is
$0 until December 1, 1990.
4.02 Tenant agrees to pay Landlord during the Term of this Lease
Additional Rent, consisting of: (i) Tenant's Pro Rata Share of the Basic
Operating Cost; (ii) all utility charges which are not included as items of
Basic Operating Cost but are the cost responsibility of Tenant under other
provisions of this Lease (which have not been paid by Tenant directly to the
utility providing the service under other provisions of this Lease); (iii) and
any other item specifically set forth elsewhere in this Lease as an item of
Additional Rent or as an item which is in any other manner the cost
responsibility of Tenant. Landlord shall give Tenant within a reasonable time
after the commencement of Landlord's fiscal operating year for the Project a
statement of Tenant's Pro Rata Share of estimated Basic Operating Cost for the
ensuing year. Tenant agrees to pay Tenant's Pro Rata Share of the Basic
Operating Cost for each fiscal year in monthly installments in accordance with
Landlord's statement. Landlord shall, within ninety days after the end of each
fiscal year for which Basic Operating Cost has been charged in accordance with
the estimated charges, give to Tenant a statement of the actual Basic Operating
Cost incurred for the previous year. Adjustment shall be made for any
overpayment or underpayment of the actual charges resulting from any variance
between the actual Basic Operating Cost for the previous year and the estimated
Basic Operating Cost paid by Tenant, which adjustment may be made by increasing
or decreasing the Additional Rent charges for the next year, a refund or a lump
sum charge, provided, however, that Landlord shall not be required to make such
adjustment more than once per year. If during any fiscal operating year,
Landlord shall not have delivered to Tenant the statement mentioned for such
year, Tenant shall continue to pay Landlord the sums payable for the immediately
preceding year, until the statement for the current year shall have been
delivered, at which time the monthly payments by Tenant shall be adjusted
retroactively. Upon the request of Tenant, Landlord shall supply reasonable
itemization and documentary back-up for the statement of the actual Basic
Operating Cost. If during all or part of any fiscal year any particular item or
items of service or work (which would constitute an element of Additional Rent
hereunder) are not furnished to any portion of the Project due to the fact that
such portion is not completed, occupied or leased, then for the purposes of
computing Additional Rent payable hereunder, the amount of such expenses for
such items shall be increased by an amount equal to the expenses which would
have reasonably been incurred during such period if Landlord had at his own
expense furnished such items of service or work to such portion of the Project,
provided in no event shall Landlord recoup more than 100% of the expenses
actually incurred by Landlord. Utility charges set forth as a portion of
Additional Rent, above, may be included with the statement of estimated Basic
Operating Cost and billed and adjusted in the same manner as Tenant's Pro Rata
Share of the Basic Operating Cost. If any part of the first or last Lease Years
of the Term of this Lease shall include part of a tax or operating expense year,
Tenant's liability
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under this paragraph shall be apportioned so that Tenant shall pay only for such
parts of such tax year and operating expense years that shall be included in the
Term of this Lease. Landlord may elect to bill the full amount of any item of
Additional Rent which is not an item of Basic Operating Cost as such item of
expense is incurred by Landlord (repair of damage caused by Tenant, for
example). All items of Additional Rent which are capital items not specifically
the immediate cost responsibility of Tenant pursuant to other terms of the Lease
shall be amortized in accordance with generally accepted accounting principles,
provided that no item shall have a useful life of more than fifteen years.
Notwithstanding the foregoing, items (i) and (ii) of additional rent shall be
payable for the period beginning with the Leased Premises Completion Date
(defined in Article XIX) and shall not begin to accrue until such date.
4.03 The Basic Minimum Annual Rent and the monthly installment portion of
the Additional Rent shall be due in installments, commencing with the
Commencement Date and continuing on the first day of each month thereafter, in
advance. If the Commencement Date is not the first day of a calendar month, the
installment due on the Commencement Date shall be pro rated for the fractional
period remaining in the month of the Commencement Date. It is the intention of
the Landlord and Tenant that the rents herein specified shall be net to the
Landlord in each year during the Term of this Lease, payable without any
reduction, abatement or setoff, and that all costs, expenses and obligations of
every kind relating to the Leased Premises, whether or not specifically set
forth in this Lease, which may arise or become due under any contingency
whatsoever during the Term of this Lease shall be paid by the Tenant and the
Tenant shall indemnify the Landlord and save the Landlord harmless from and
against all such costs, expenses and obligations. All installments of rent past
due beyond thirty days shall bear interest at the lesser of two percentage
points per annum over the prime rate of interest as announced by The Connecticut
Bank and Trust Company, N.A., or its successor, or the maximum rate permitted by
applicable law, from date due until payment is received. Any liability for
unpaid Basic Minimum Annual Rent and Additional Rent shall survive the
termination of the Lease.
ARTICLE V
CONDUCT OF TENANT
5.01 Tenant agrees that Tenant and Tenant's permitted assignees or sub-
lessees shall use the Leased Premises for the sole and exclusive purpose set
forth in the Data Section. The use of the Leased Premises shall also be in
accordance with the ordinances and regulations of the municipality in which the
Leased Premises is located. Unless the use set forth in the Data Section
expressly provides otherwise, the use of the Leased Premises shall be limited to
the operation of a general business office. Without limitation of the
foregoing, Tenant agrees that the Leased Premises will not be used for any
purpose other than that provided above. Tenant agrees to comply with all rules
and regulations, of which Tenant is given notice, reasonably established by
Landlord for the governing of conduct of tenants in general in the Project. The
current rules and regulations for tenants in the Project are set forth in
Exhibit C.
5.02 Tenant agrees that Tenant will not keep, use, sell or offer for sale
in or upon the Leased Premises any article which may be prohibited by the
standard form of fire insurance policy. Tenant agrees to pay any increase in
premiums for fire and extended and/or all risk
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coverage insurance that may be charged during the Term of this Lease on the
amount of such insurance which may be carried by Landlord on the Project,
resulting from the type of equipment, merchandise or services used by Tenant in
the Leased Premises, whether or not Landlord has consented to the same. In
determining whether increased premiums are the result of Tenant's use of the
Leased Premises, a schedule issued by the organization making the insurance rate
on the Leased Premises, showing the various components of such rate, shall be
conclusive evidence of the several items and charges which make up the fire
insurance rate on the Leased Premises and the Project.
5.03 Tenant shall not commit or suffer to be committed any waste upon the
Leased Premises or Project or any nuisance or other act or thing which may
disturb the quiet enjoyment of any other tenant in the Project.
5.04 Tenant shall, at Tenant's sole cost and expense, comply with all of
the requirements of all county, municipal, state, federal and other applicable
governmental authorities, now in force or which may hereafter be in force and
not being reasonably disputed by Tenant, pertaining to the Tenant's use of the
Leased Premises. Tenant shall faithfully observe in the use of the Leased
Premises all federal, state, county and municipal laws, ordinances and
regulations now in force or which may hereafter be in force not being reasonably
disputed by Tenant, excepting any structural changes required by such
authorities which are not caused by the act or neglect of the Tenant or by
Tenant's specific use of the Leased Premises. Specific references is made to
Tenant's duty to comply with all state, federal and local laws concerning
environmental protection and Tenant's conduct at the Project. Tenant shall not
undertake any activity which would cause the Leased Premises to be classified as
an "Establishment" under the Connecticut General Statutes. Tenant agrees to
indemnify Landlord against any cost and expense which Landlord may suffer by
reason of Tenant's failure to comply with the laws governing its conduct at the
Project, including all laws concerning environmental protection. Landlord
warrants that the Project and the Leased Premises shall comply with all
applicable laws affecting their construction, as of the date of Tenant's
occupancy, specific reference being made to building codes and environmental
laws. Landlord further represents that the use of the Leased Premises as a
general office is permitted under the zoning regulations of the Town of Wilton,
and the Leased Premises shall comply with all applicable laws affecting its use
as a general office as of the date of occupancy.
5.05 Tenant will not place or maintain, or cause to be placed or
maintained, on any portion of the Project exterior to the Leased Premises or any
portion of the Project (including the Leased Premises) visible from the exterior
of the Leased Premises, any sign or advertising matter without Landlord's
written consent. Tenant shall not place any object on any portion of the
Project exterior to the Leased Premises without Landlord's written consent.
Landlord shall provide the Project with two monuments at the front of the
Project, adjacent Danbury Road, one monument to be for signage to the effect of
"TSI International Building" and the other monument to be for the address of the
building and to contain the signage for other tenants of the building, the two
monuments to be of equal size. Landlord shall not unreasonably withhold
Landlord's consent to Tenant's design of the "TSI International Building"
signage, but the same shall also be subject any required approval under the
Wilton Zoning Regulations. Tenant shall not install or maintain any window
treatment without the prior written consent of Landlord.
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5.06 Tenant agrees to keep the Leased Premises in a clean and sanitary
condition and free from trash, inflammable material and other objectionable
matter and to make all interior repairs other than to Landlord's electrical,
plumbing and mechanical systems. Tenant shall maintain all equipment installed
by Tenant at Tenant's own cost and expense. Tenant shall not make any building
alteration or addition to the Leased Premises without Landlord's consent, which
shall not be unreasonably withheld.
5.07 If Tenant refuses or neglects to perform any item of maintenance or
repair which is Tenant's responsibility within a reasonable time, Landlord may
make such repairs without liability to Tenant for any loss or damage that may
accrue to Tenant's merchandise, fixtures, or other property or to Tenant's
business by reason thereof, and upon completion thereof, Tenant shall pay
Landlord's cost for making such repairs upon presentation of an invoice
therefor, as Additional Rent, which shall include interest from the time payment
of such sums by Tenant is thirty days past due, at the same rate as that due for
overdue rental payments. In the case of a repair which is not an emergency
repair, Landlord shall not exercise Landlord's right to make the repair unless
Tenant has not commenced the repair within ten days after written demand from
Landlord and proceeds to complete same with diligence.
5.08 Tenant shall promptly pay all contractors and materialmen hired by
Tenant to furnish any labor or materials which may give rise to the filing of a
mechanic's lien against the Project attributable to contracts entered into by
the Tenant. Should any such lien be made or filed, Tenant shall cause same to
be discharged as a lien against the Project within the sooner of (i) forty-five
days after Tenant receives notice of such lien or (ii) forty-five days after
request by Landlord to remove such lien. If bond is filed and such lien is
discharged, Tenant shall not be obligated to discharge the lien by payment.
Notwithstanding any notice and grace period before default elsewhere set forth
in this Lease, if Tenant shall fail to discharge such lien within the time
period set forth in this paragraph above, and shall further fail to discharge
such lien within ten more business days after notice of failure to discharge the
lien is given from Landlord, then Tenant shall be in material default of the
Lease, without any further notice or grace period.
ARTICLE VI
LANDLORD'S CONDUCT AND SERVICES AT THE PROJECT
6.01 Landlord agrees to keep the parking areas in the Project reasonably
free of snow, ice and debris and to keep same reasonably lighted Monday through
Friday from 7:00 a.m. to 9:00 p.m. and Saturday from 8:00 a.m. to 2:00 p.m.
Notwithstanding the foregoing, if Landlord has not controlled the parking
lighting to be on during all hours of darkness, Tenant shall be provided with an
override switch to turn the parking lighting on during all hours of darkness
that Tenant shall use the Leased Premises. Landlord shall provide the Leased
Premises with heating, ventilation and air conditioning Monday through Friday
from 7:00 a.m. to 9:00 p.m. and Saturday from 8:00 a.m. to 2:00 p.m. Further
notwithstanding the foregoing, if Landlord shall not provide the Leased Premises
with after hours HVAC, Tenant shall be provided with an override switch to turn
the HVAC on during after hours, except for a second shift. Landlord agrees to
keep the General Common Area (including any common restrooms) in reasonably good
repair and order. Landlord shall perform all structural repairs to the building
or buildings in the
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Project, all General Common Area in the Project, and all mechanical equipment
installed by Landlord for heating, ventilation and air conditioning, plumbing
and other mechanical systems of the Leased Premises. Tenant shall pay: (i)
Tenant's Pro Rata Share for maintenance and repair of the portion of said
mechanical systems which are building standard; and (ii) the full cost of said
maintenance and repair for the portion of said mechanical systems servicing the
Leased Premises in excess of building standard. Although Landlord is responsible
for the performance of certain work under this paragraph, the cost of such work
may be Tenant's responsibility under this and other provisions of the Lease, in
full or as a Pro Rata Share.
6.02 Landlord shall furnish keys to Tenant so that Tenant may have access
to the Leased Premises before and after normal business hours. No locks other
than those furnished by Landlord shall be installed on the doors providing
access to the Leased Premises without Landlord's written consent. Tenant shall
furnish to Landlord keys to any such locks allowing access to Tenant's Leased
Premises.
6.03 Landlord shall have the right to make alterations and/or additions to
the Project and the buildings in the Project. Landlord shall have the right to
construct or demolish other buildings and structures in the Project and may
alter the grade and/or location of the improvements in the Project. The
exercise by Landlord of any right under this paragraph shall be limited so that
there shall be no unreasonable interference with Tenant's use of the Leased
Premises, the General Common Area or Tenant's use of the parking area.
6.04 Landlord shall have the right to establish rules and regulations for
the use of the parking areas by Tenant and other tenants in the project, but
Landlord shall not have any duty to police the traffic in the parking areas.
Tenant shall have the use of the parking areas, existing from time to time in
the Project, for the benefit of Tenant's employees, visitors and customers, in
common with other tenants in the Project, which use is to be in accordance with
Tenant's Pro Rata Share of the parking areas available for all tenants in the
Project. The ratio of parking spaces to the tenant's net rentable area for the
entire building is 3.94 spaces per thousand square feet of tenant's net rentable
area, and Tenant shall have its 3.94 spaces per square foot of its Net Rentable
Area available for its use at all times.
ARTICLE VII
INSURANCE, INDEMNITY AND SUBROGATION WAIVER
7.01 Tenant shall, from the Leased Premises Completion Date, keep in full
force and effect a policy of public liability and property damages insurance.
Tenant's insurance policy shall insure against Tenant's liability for all acts
and omissions with respect to conduct in the Leased Premises and the Project of
Tenant and Tenant's agents, servants, employees, licensees and invitees. The
policy limits of Tenant's insurance shall be at least $1,000,000 per occurrence,
or such other limits as to public liability and property damage as Landlord may
reasonably require. Tenant's policy shall name Landlord as an additional
insured and shall contain a clause providing that the insurer will not cancel or
change the insurance without first giving the Landlord fifteen days prior
written notice. Tenant's insurance policy shall be with an insurance company
selected by Tenant and approved by Landlord; Landlord's approval not to be
unreasonably withheld and
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to be based upon a sufficient rating by a service such as A. M. Best. A copy of
the policy or a certificate of insurance shall be delivered to Landlord prior to
the Leased Premises Completion Date.
7.02 Tenant shall, from the Leased Premises Completion Date, keep in full
force and effect a hazard and all risk insurance policy, including fire,
extended and all risk type coverage, in an amount adequate to cover the cost of
repair and replacement of all alterations, decorations, or improvements made by
Tenant in the Leased Premises. Tenant's policy shall name Landlord as an
additional insured and shall contain a clause that the insurer will not cancel
or change the insurance without first giving the Landlord fifteen days prior
written notice. Tenant's insurance policy shall be with an insurance company
selected by Tenant and approved by Landlord, Landlord's approval not to be
unreasonably withheld and to be based upon a sufficient rating by a service such
as A. M. Best. A copy of the policy or a certificate of insurance shall be
delivered to Landlord prior to the Leased Premises Completion Date.
7.03 Landlord agrees to maintain or cause to be maintained hazard and all
risk insurance, with fire, extended and all risk type coverage, upon all of the
buildings, structures or improvements (excluding tenant improvements required to
be insured by Tenant under other terms of this Lease) in the Project, in an
amount adequate to cover the cost of replacing the foregoing in the event of
fire or other destruction. In the event of fire or other destruction to such
property, Landlord agrees, subject to the rights of any bona fide mortgagee to
insurance proceeds, to immediately collect or cause to be collected the
insurance proceeds and to apply the same to the reconstruction and repair of the
damaged property. Tenant shall pay Tenant's Pro Rata Share of the premiums for
the insurance specified herein as an item of Basic Operating Cost Additional
Rent.
7.04 Each policy of public liability insurance, hazard insurance or other
insurance insuring risks arising out of any occurrence at the Project, carried
by Tenant or Landlord, shall provide that the insurer waives any rights of
subrogation against the Landlord (in the case of Tenant's policies) and against
the Tenant (in the case of Landlord's policies) in connection with or arising
out of any claim or benefit provided under such insurance policy. In no event
shall Tenant or any person or corporation claiming an interest in the Leased
Premises by, through or under Tenant and over whom Tenant shall have control,
claim, maintain or prosecute any action or suit at law or in equity against the
Landlord for any loss, cost or damage caused by or resulting from fire or other
risk or casualty in the Project for which Tenant is or may be insured under a
standard hazard and all risk insurance policy, including fire, extended and/or
all risk type coverage, whether or not the property (tangible or intangible) is
insured or required to be insured under this Lease, and whether or not caused by
the negligence of the Landlord, or the agents, or servants, or employees of the
Landlord. In no event shall Landlord or any person or corporation claiming an
interest in the Project by, through or under Landlord and over whom Landlord
shall have control, claim, maintain or prosecute any action or suit at law or in
equity against the Tenant for any property damage to the Project caused by or
resulting from fire or other risk or casualty in the Project for which Landlord
is required to be insured under the provisions of the Lease, whether or not
caused by the negligence of the Tenant or the agents, servants and/or employees
of the Tenant.
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7.05 Tenant will indemnify Landlord and save Landlord harmless from and
against any and all third party claims, actions, damages, liability and expense
in connection with loss of life, personal injury and/or damages to property
arising from or out of any occurrence in, upon or at the Project occasioned
wholly or in part by any act or omission of Tenant, or Tenant's agents,
servants, employees, licensees or invitees. In case Landlord shall be made a
party to any litigation commenced by or against Tenant in any action described
in this paragraph, the Tenant shall protect Landlord and hold Landlord harmless
and shall pay all costs, expenses and reasonable attorney's fees incurred or
paid by Landlord in connection with such litigation.
7.06 Landlord will indemnify Tenant and save Tenant harmless from and
against any and all third party claims, actions, damages, liability and expense
in connection with loss of life, personal injury and/or damages to property
arising from or out of any occurrence in, upon or at the Project occasioned
wholly or in part by any act or omission or Landlord, or Landlord's agents,
servants, employees, licensees or invitees, and not in any part by Tenant or
Tenant's agents, servants, employees, licensees or invitees. In case Tenant
shall be made a party to any litigation commenced by or against Landlord in any
action described in this paragraph, the Landlord shall protect Tenant and hold
Tenant harmless and shall pay all costs, expenses and reasonable attorney's fees
incurred or paid by Tenant in connection with such litigation.
7.06 Landlord will indemnify Tenant and save Tenant harmless from and
against any and all third party claims, actions, damages, liability and expense
in connection with loss of life, personal injury and/or damages to property
arising from or out of any occurrence in, upon or at the Project occasioned
wholly or in part by any act or omission of Landlord, or Landlord's agents,
servants, employees, licensees or invitees, and not in any part of Tenant or
Tenant's agents, servants, employees, licensees or invitees. In case Tenant
shall be made a party to any litigation commenced by or against Landlord in any
action described in this paragraph, the Landlord shall protect Tenant and hold
Tenant harmless and shall pay all costs, expenses and reasonable attorney's fees
incurred or paid by Tenant in connection with such litigation.
ARTICLE VIII
UTILITIES
8.01 From and after the Commencement Date, Tenant shall pay all charges
for utilities used, consumed in or allocable to the Leased Premises, including,
but not limited to, fuel, electricity, water and gas. Said utilities may be
either directly metered to Tenant or shared with other tenants. If any utility
consumption in the Leased Premises is not separately metered, Landlord may
allocate the shares utility consumption to the Leased Premises in any reasonable
manner, except that the Tenant electric shall be allocated and charged as
provide below. In the case of building systems such as HVAC, utility
consumption of such systems may be allocated in accordance with Tenant's Pro
Rata Share. The charges for all utilities not paid directly to the utility
providing the service shall be paid to Landlord as an element of Additional
Rent; and Tenant shall, at Landlord's option, either pay the separately metered
utilities directly to the utility providing the service, or pay for said
separately metered utilities as an item of Additional Rent. Tenant and Landlord
acknowledge that the electricity consumed in the Leased Premises is not
separately metered, and Tenant and Landlord agree that the electricity consumed
in the Leased
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Premises by Tenant shall be fixed at $1.25 per square foot of Tenant's Net
Rentable Area for the first year from the Leased Premises Completion Date and
shall be $1.25 per square foot plus any rate increase by the utility providing
the electricity from the Leased Premises Completion Date. The electricity
charges shall be billed in monthly installments as set forth in Articles IV. The
$1.25 per square foot rate set forth above is based on normal office usage, and
Landlord reserves the right to increase the Tenant electric charges in the event
that Tenant's electric consumption shall be in excess of normal office usage
(for example, excess usage due to a large computer installation with high energy
consumption). Landlord acknowledges that Landlord has inspected Tenant's
existing premises at 295 Westport Avenue, Norwalk, Connecticut. Landlord further
acknowledges that if the usage in the new Leased Premises is the same as that in
the 295 Westport Avenue Premises, on a per square foot basis, such usage would
be normal office space usage and as such would not be subject to increase due to
excess usage.
ARTICLE IX
ESTOPPEL STATEMENT,
ATTORNEY, SUBORDINATION
9.01 Upon request of Landlord or any mortgages of Landlord, Tenant shall
execute an estoppel certificate, certifying the status of any facts with respect
to the Lease. Estoppel certification may include: whether the Lease is in full
force and effect; the rentals due under the Lease and the degree to which same
have been paid; that there are no defenses or claims against Landlord for any
alleged violation of the Lease by Landlord, or a statement of such defenses or
claims; acknowledgment of the interpretation or meaning of any term of the
Lease, provided such acknowledgment shall not change any term or provision
hereof; any such other matters reasonably requested to be certified in the
estoppel certificate.
9.02 The Tenant agrees that the Lease and all rights of the Tenant herein
shall, at the election of Landlord or mortgagee, be subordinate to the lien of
any bona fide mortgage or mortgages now or with may hereafter be placed on the
Project or any part of the Project during the term of this Lease, provided such
mortgages provides a standard right of non-disturbance to Tenant. In the event
any proceeding is brought for the foreclosure of the Leased Premises, Tenant
agrees to attorn to the mortgages in the event of strict foreclosure, or to the
purchaser in the event of foreclosure by sale or deed in lieu of foreclosure,
and recognize such mortgages or purchaser (as the case may be) as the Landlord
under this Lease, provided such mortgages or purchaser recognizes Tenant's right
of non-disturbance. Tenant further agrees to execute any further instrument or
instruments which the Landlord or its successors in title may reasonably at any
time require to evidence the subordination of this Lease to the lien of any such
mortgage or mortgages and Tenant's agreement to attorn, provided, however, that
the Landlord obtains a standard non-disturbance agreement from the mortgages for
the benefit of the Tenant. Notwithstanding the foregoing, if there shall be a
bona fide first mortgage placed on all or a portion of the Project, this Lease
shall not be subordinated to any other encumbrance subsequent in right to the
first mortgage unless the first mortgagee shall consent to such subordination,
in writing.
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9.03 Tenant agreed to execute and deliver to Landlord or the party
designated by Landlord, within ten days after presentation of the proposed form,
any estoppel certificate and/or subordination, attornment and/or non disturbance
agreement requested to be executed by Tenant pursuant to the terms of this
Lease. Tenant further agrees to include in any such documents if requested by
Landlord: an agreement not to pay Landlord rent for more than one month in
advance; an agreement to give any bona fide mortgagee a notice of any alleged
default by Landlord and a reasonable time for such mortgagee to have such
default cured before Tenant will exercise any right to terminate this Lease; and
an agreement that Tenant will not look to such mortgages for the return of any
security deposit or other monies not actually received by such mortgages. If
Tenant shall not have delivered the executed documents, required to be executed
and delivered under this Article, within the ten day period set forth above,
Landlord may give Tenant written notice of Tenant's failure to deliver such
documents, and if Tenant shall then fail to deliver said executed documents
within three business days after delivery of such written notice,
notwithstanding any provision for notice and grace period for default elsewhere
contained in this Lease, Tenant shall be in material default of the Lease, and
Landlord shall have all rights provided for in the event of such default,
including termination; and Tenant shall be liable for all resulting
consequential damages to Landlord.
ARTICLE X
DESTRUCTION OF LEASED PREMISES
10.01 Landlord agrees, subject to and excepting the other provisions of
this Article, that if the Leased Premises shall be damaged by fire or other
casualty during the terms of this lease, Landlord shall, at Landlord's own
expense, use best efforts to cause the damage to be promptly repaired within a
reasonable time after such damage has occurred, which period shall not exceed
six months. If by reason of such occurrence, any portion of the Leased Premises
is thereby rendered untenantable and Tenant cease use of said portion, the rent
and other charges payable by Tenant hereunder shall be abated in proportion to
the area of the Leased Premises which is rendered untenantable and which is not
used by Tenant, said abatement to continue until the sooner of the time when the
Leased Premises is repaired or until Tenant uses the damages portion of the
Leased Premises. Landlord's obligation to restore under this Article shall be
limited to the extent of insurance proceeds made available by any mortgagee
having control over the disposition of such proceeds. If Landlord shall fail to
commence repair within two months of the casualty and diligently pursue same to
completion, all as a result of the mortgage failing to make available casualty
insurance proceeds for such repair, either party may terminate this Lease upon
written notice to the other.
10.02 In the event that forty percent or more of the Leased Premises shall
be damaged or destroyed by fire or other cause during the Term of this Lease,
Landlord or Tenant shall have the right, to be exercised by written notice to
the other party, within sixty days from and after said occurrence, to elect to
cancel and terminate this Lease. Upon the giving of such notice, the term of
this Lease shall expire by lapse of time upon the ninetieth day after such
notice is given, and Tenant shall vacate the Leased Premises and surrender the
same to Landlord on such date of expiration.
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ARTICLE XI
EMINENT DOMAIN AND CESSATION OF BUSINESS
11.01 In the event any portion of the Leased Premises or any portion of
the Project which renders the Leased Premises unusable is taken in condemnation
proceedings or by any right of eminent domain or for any public or quasi-public
use, this Lease shall terminate as of the date of vesting of title in the
condemning authority and all rent, including additional rent, payable under this
lease shall be paid to that date.
11.02 In the event of any taking provided for in this Article, all
proceeds of any award, judgment or settlement payable by the condemning
authority shall be and remain the sole and exclusive property of Landlord, and
Tenant waives any right to make any claim to said award, judgment or settlement
received by Landlord. Tenant may pursue its own claim against the condemning
authority permitted by statute to be paid to Tenant without diminishing or
reducing the award, judgment or settlement payable to Landlord.
ARTICLE XII
ASSIGNMENT AND SUBLETTING
12.01 Tenant will not assign this Lease in whole or in part nor sublet all
or any part of the Leased Premises without the prior written consent of
Landlord, which shall not be unreasonably withheld. Landlord hereby expressly
consents to any assignment or subletting to a related entity which controls
Tenant, which Tenant controls, which is a substantial stockholder or partner in
Tenant or in which Tenant is a substantial stockholder or partner. The consent
by Landlord to any assignment of subletting shall not constitute a waiver of the
necessity for such consent to any subsequent assignment or subletting. This
prohibition against assigning or subletting shall be construed to include a
prohibition against any assignment or subletting by operation of law. If the
Leased Premises shall be occupied by anybody other than Tenant, Landlord may
collect rent from the assignee, under-tenant or occupant and apply the net
amount collected to the rent herein reserved, but no such assignment,
underletting, occupancy or collection shall be deemed a waiver of this covenant,
or the acceptance of the assignee, under-tenant or occupant as tenant, or a
release of Tenant from the further performance by Tenant of covenants on the
part of Tenant herein contained. Notwithstanding any assignment or sublease,
Tenant shall remain primarily liable on this Lease and shall not be released
from performing any of the terms, covenants and conditions of this Lease, but
Tenant and such assignee, under-tenant or occupant shall thereafter be jointly
and severally liable for the full and faithful performance of the obligations of
Tenant under this Lease. Any attempted assignment by Tenant without the prior
written consent of Landlord shall be void. No assignment or subletting shall
provide for a rental payment, or other payment for use and occupancy or
utilization, based in whole or in part on the net income or profits derived by
any person or entity from the property assigned, subleased, occupied or utilized
(other than an amount based upon a fixed percentage of sales), and any such
purported assignment or subletting base upon such payment shall be void and any
amount payable thereunder or any rental amount therefor passed to any person or
entity shall not have deducted therefrom any expenses or costs related in any
way to the leasing of such space.
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12.02 In the event Tenant desires to sublet or assign this Lease in whole
or in part to a non related entity and the resulting agreement provides the
Tenant with any net profit, Landlord and Tenant shall share in such profit on
the basis of 50% to Landlord and 50% to Tenant. Net profit shall be the gross
difference between the rent payable by the subtenant or assignee and the rent
payable by Tenant hereunder (on a per square foot basis in the case of a partial
space), net of any reasonable rent concessions given to the subtenant or
assignee as an inducement to enter into the sublease or assignment, any
reasonable real estate brokerage commission and reasonable renovation expense
Tenant incurs in the course of the subletting or assigning to the subtenant or
assignee. If the rent payable to the subtenant or assignee is not greater than
the rent payable by Tenant hereunder, there shall be no net profit.
ARTICLE XIII
DEFAULT OF THE TENANT
13.01 In the event of any failure of Tenant to pay any Basic Minimum
Annual Rent, Additional Rent or any other monies payable to Landlord under this
Lease within ten (10) days after written notice of failure to pay said sums,
Tenant shall be in material default of the Lease. Tenant shall also be in
material default of this Lease upon the happening of any of the following: (i)
the failure to deliver any estoppel or subordination, non disturbance and/or
attornment agreement within the time limits set forth for default in the Article
of this Lease requiring execution and delivery of such documents; (ii) the
failure to have any mechanic's lien discharged within the time period set forth
for default in the Article requiring removal of mechanic's liens; (iii) the
failure to commence within thirty (30) days after written notice of failure to
perform, and diligently pursue the performance of, any other of the terms,
conditions or covenants of this Lease to be observed or performed by Tenant;
(iv) if Tenant or any guarantor shall become bankrupt or insolvent, or file any
debtor proceedings, or take or have taken against them, in any court, pursuant
to any statute either of the United States or of any State, a petition in
bankruptcy or insolvency or for the reorganization or for the appointment of a
receiver or trustee of all or a portion of Tenant's property or make an
assignment for the benefit of creditors; or (v) if Tenant's interest in this
Lease shall be taken under any writ of execution. The foregoing conditions of
default shall be limited to the extent required by any state or federal laws
affecting this Lease and Landlord's rights against Tenant, including the United
States bankruptcy laws. To the extent permitted by law, all payments are due on
the due dates set forth in the Lease, and there shall be no grace period for the
due date of the rent other than the above ten day period after notice from
Landlord.
13.02 In the event of default, then Landlord, besides other rights or
remedies Landlord may have, shall have the right to terminate this Lease and
proceed under any law entitling Landlord to recover possession of the Leased
Premises, and to the extent permitted by law, shall be entitled the right of
immediate reentry and to eject Tenant from the Project, without resort to court
proceedings. Upon such default, to the extent permitted by law, Tenant's
property may be removed and stored in a public warehouse or elsewhere at the
cost of, and for the account of Tenant. Tenant acknowledges that this Lease is
a commercial Lease, and to the extent permitted by law, Tenant waives the
requirement of a statutory notice to quit possession prior to commencement of
summary process proceedings.
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13.03 Should Landlord elect to reenter, as herein provided, or should it
take possession pursuant to legal proceedings or pursuant to any notice provided
for by law, Landlord may either terminate this Lease or Landlord may from time
to time, without terminating this Lease, make such alterations and repairs as
may be necessary in order to relet the Leased Premises, or any part thereof, for
such term or terms (which may be for a term extending beyond the terms of this
Lease) and at such rental or rentals and upon such other terms and conditions as
Landlord in Landlord's discretion may deem advisable. Upon each such reletting,
all rentals received by the Landlord from such reletting shall be applied first
to the payment of any indebtedness other than rent due hereunder from Tenant to
Landlord; second, to the payment of any costs and expenses of such reletting,
including brokerage fees and attorney's fees and of costs of such alterations
and repairs; third, to the payment of rent due and unpaid hereunder, and the
residue, if any, shall be held by Landlord and applied in payment of future rent
as the same may become due and payable hereunder. If such rentals received from
such reletting during any month are less than that to be paid during that month
by Tenant hereunder, Tenant shall pay any deficiency to Landlord. Such
deficiency shall be calculated and paid monthly. No such reentry or taking
possession of the Leased Premises by Landlord shall be construed as an election
on Landlord's part to terminate this Lease unless a written notice of such
intention be given to Tenant or unless the termination thereof be decreed by a
court of competent jurisdiction. Notwithstanding any such reletting without
termination, Landlord may at any time thereafter elect to terminate this Lease
for such previous breach. Should Landlord at any time terminate this Lease for
any breach, in addition to any other remedies Landlord may have, Landlord may
recover from Tenant all damages Landlord may incur by reason of such breach,
including the cost of recovering the Leased Premises, reasonable attorney's
fees, and the present value of the lost rent resulting from the failure of
Landlord or Tenant to obtain another Tenant for the Leased Premises for any
period of time after Tenant's default, and/or resulting from the fact that the
reasonable rental value of the Lease Premises at the time of Tenant's default is
less than the value of the remaining rental payments due under this Lease.
Landlord acknowledges a duty to mitigate damages under the law.
13.04 In case Landlord shall retain an attorney to enforce the provisions
of this Lease or if suit shall be brought for recovery of possession of the
Leased Premises, for the recovery of rent or any other amount due under the
provisions of this Lease, or because of the breach of any other covenant herein
contained on the part of Tenant to be kept or performed, Tenant shall pay to
Landlord all reasonable expenses incurred therefor, including a reasonable
attorney's fee.
ARTICLE XIV
SECURITY DEPOSIT
14.01 Tenant's Security Deposit shall be due and payable to Landlord upon
execution of this Lease, and may be in the form of an unconditional and
irrevocable letter of credit in favor of Landlord or Landlord's heirs,
successors or assigns. The Security Deposit shall be security for the full and
faithful performance of all the covenants and conditions contained herein during
the Term of this Lease and any extension or renewal thereof. The rights and
remedies reserved to the Landlord under this Lease are cumulative, and in the
event of a default by the Tenant, the Landlord shall not be required to resort
to the Security Deposit before exercising any other remedy available to Landlord
under this Lease or by law. The Security Deposit shall be refunded
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without interest to the Tenant within ten days following the expiration of this
Lease, or any renewal or extension thereof, unless there shall be damages or
unpaid rent due Landlord, in which event the same shall be deducted by Landlord
and the remainder returned to Tenant. In no event, except when the Landlord
elects at Landlord's sole option to do so, may the Tenant set off or apply any
part of the Security Deposit against any rent owing by the Tenant to the
Landlord hereunder.
ARTICLE XV
LIMITATION OF LIABILITY OF LANDLORD
15.01 In the event of any alleged default of Landlord, Tenant agrees that
Tenant shall not seek to secure any claim for damages or indemnification by any
attachment, garnishment or other security proceeding against any property of the
Landlord other than the Project or property related thereto, and in the event
Tenant obtains any judgment against Landlord by virtue of an alleged default by
Landlord under this Lease, Tenant agrees that Tenant will not look to any
property of Landlord other than the Project for satisfaction of such judgment.
15.02 Landlord shall not be liable for any damage to property of Tenant or
of others located on the Leased Premises, or for the loss of or damage to any
property of Tenant or of others by theft or otherwise. Landlord shall not be
liable for any injury or damage to persons or property resulting from fire,
explosion, falling plaster, steam, gas, electricity, water, rain or snow or
leaks from any part of the Leased Premises or from the pipes, appliances or
plumbing works or from the roof, street or subsurface or from any other place or
by dampness or by any other cause of whatsoever nature. Landlord shall not be
liable for any such damage caused by other tenants or persons in the Project, by
occupants of adjacent property to the Project, by other members of the public,
or caused by operation or construction of any other private or public work. All
property of Tenant kept or stored on the Leased Premises shall be so kept or
stored at the risk of Tenant only.
15.03 Upon any transfer of Landlord's interest in the Project, the then
transferor Landlord shall be relieved of any and all liability to Tenant under
this Lease, except for claims of Tenant against Landlord arising out of events
occurring prior to such transfer.
ARTICLE XVI
QUIET ENJOYMENT
16.01 Upon payment by the Tenant of the rents herein provided, and upon
the observance and performance of all the covenants, terms and conditions on
Tenant's part to be observed and performed, Tenant shall peaceably and quietly
hold and enjoy the Leased Premises for the term hereby demised without hindrance
or interruption by Landlord, subject, nevertheless to the terms and conditions
of this Lease, and subject to the restrictions and easements or other matters as
appear in Exhibit B.
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ARTICLE XVII
MISCELLANEOUS COVENANTS
17.01 The Landlord and Tenant hereby waive trial by jury in any action,
proceeding or counterclaim brought by Landlord for possession of the Leased
Premises. In any dispute between the parties relating to the tenancy hereby
created, the exclusive forum for any such legal action shall be the Norwalk,
Connecticut, state courthouse, if venue shall be accepted by such court, or the
nearest state courthouse to Bridgeport having jurisdiction and venue over the
matter. Connecticut law shall apply to all state law matters arising under this
Lease.
17.02 The waiver by Landlord of any breach by Tenant of any term, covenant
or condition herein contained shall not be deemed to be a waiver of such term,
covenant or condition or any subsequent breach of the same or any other term,
covenant or condition herein contained. The subsequent acceptance of rent
hereunder by Landlord shall not be deemed to be a waiver of any preceding breach
by Tenant of any term, covenant or condition of this Lease, other than the
failure of Tenant to pay the particular rental so accepted, regardless of
Landlord's knowledge of such preceding breach at the time of acceptance of such
rent. No covenant, term or condition of this lease shall be deemed to have been
waived by Landlord unless such waiver be in writing by Landlord.
17.03 No payment by Tenant or receipt by Landlord of a lesser amount then
the monthly rent herein stipulated shall be deemed to be other than on account
of the earliest stipulated rent, nor shall any endorsement or statement on any
check or any letter accompanying any check or payment as rent be deemed an
accord and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance of such rent or pursue any
other remedy in this Lease provided.
17.04 This Lease and the Exhibits, attached hereto and forming a part
hereof, set forth all the covenants, promises, agreements, conditions and
understandings between Landlord and Tenant concerning the Leased Premises and
there are no covenants, promises, agreements, conditions or understandings,
either oral or written, between the parties other than those herein set forth.
No subsequent alteration, amendment, change or addition to this lease shall be
binding upon Landlord or Tenant unless reduced to writing and signed by the
party to be charged.
17.05 If any term, covenant or condition of this Lease or the application
thereof to any person or circumstances shall, to any extent, be invalid or
unenforceable, the remainder of this Lease, or the application of such term,
covenants 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 the Lease shall be valid and enforced to the
fullest extent permitted by law.
17.06 If the Commencement Date is not a date certain, the Commencement
Date shall in no event be later than a time which would not violate any
applicable rule against perpetuities, determined as if all relevant lives in
being ceased as of the date of execution of this Lease.
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17.07 In the event that Landlord shall be delayed in, hindered in, or
prevented from, the performance of any act required hereunder by reason of Force
Majeure, which shall mean strikes, lock-outs, labor troubles, inability to
procure materials, failure of power, restrictive governmental laws or
regulations, riots, insurrection, war or other reason of a like nature not the
fault of the Landlord and despite his good faith efforts to avoid such Force
Majeure, then performance of such act shall be excused for the period of the
delay. Notwithstanding the foregoing, any Force Majeure shall not affect
Tenant's cancellation right in the event the Leased Premises Completion Date is
not within 180 days of the date Tenant submits its final plans, as set forth in
paragraph 19.01.
17.08 Tenant agrees that the Landlord and Landlord's agents and other
representatives shall have the right to enter into and upon the Leased Premises
at all reasonable hours, upon reasonable notice, consistent with Tenant's
security requirements, (without notice in the case of an emergency) for the
purpose of making such repairs or alterations therein as may be necessary for
the safety and preservation the Project. Tenant shall have the right to have a
member of Tenant's staff accompany the person making the entry on behalf of
Landlord, except in the case of an emergency.
17.09 During the Term of this Lease, Tenant agrees to permit the Landlord
or Landlord's agents to show the Leased Premises to persons wishing to purchase
the same upon reasonable notice to Tenant and at reasonable hours. During the
six months next prior to the expiration of the term (which term has not then
been renewed), Tenant agrees to permit the Landlord or Landlord's agents to show
the Leased Premises to persons wishing to rent the same upon reasonable notice
to Tenant and at reasonable hours.
17.10 Tenant shall not encumber or obstruct the General Common area in the
Project, nor allow the same to be obstructed or encumbered in any manner.
Landlord shall not obstruct the entrance to the Leased Premises and shall not
unreasonably interfere with Tenant's use of the General Common Area.
17.11 The submission of this Lease for examination does not constitute a
reservation of or option for the Leased Premises and this Lease shall become
effective only upon execution and delivery thereof by Landlord and Tenant.
17.12 Neither party shall record this Lease, but the parties hereto agree
to execute a Notice of Lease drawn in accordance with the Connecticut statutes,
and the parties agree to execute in recordable form an agreement establishing
the specific commencement date of this Lease when the same is ascertainable.
17.13 If there shall be one or more tenants or one or more landlords, each
tenant and landlord shall be jointly and severally liable for all of the
covenants and obligations of the Tenant and Landlord hereunder, as the case may
be, except as express provision may be elsewhere made to the contrary.
17.14 The use of the neuter singular pronoun to refer to Landlord or Tenant
shall be deemed a proper reference even though Landlord or Tenant may be an
individual, a partnership, a corporation, or a group of two or more individuals
or corporations. The necessary grammatical
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changes required to make the provisions of this Lease apply in the plural sense
where there is more than one Landlord or Tenant, or to either corporations,
associations, partnerships, or individuals, males or females, shall in all
instances be assumed as though in each case fully expressed.
17.15 The headings, section numbers and article numbers appearing in this
Lease are inserted only as a matter of convenience and in no way define, limit,
construe, or describe the scope or intent of such sections or articles of this
Lease nor in any way affect this Lease.
ARTICLE XVIII
SURRENDER AND HOLDING OVER
18.01 At the expiration of the tenancy hereby created, whether by lapse of
time or otherwise, Tenant shall surrender the Leased Premises in the same
condition as the Leased Premises were in upon delivery of possession thereto
under this Lease, reasonable wear and tear and insured casualty excepted, and
Tenant shall surrender all keys for the Leased Premises to Landlord at the place
then fixed for the payment of rent, and Tenant shall inform Landlord of all
combinations on locks, safes and vaults, if any, in the Leased Premises. Tenant
shall remove all its trade fixtures and/or, at the option of the Landlord, any
alteration or improvements installed by Tenant, before surrendering the premises
as aforesaid and shall repair any damage to the Leased Premises caused thereby.
Tenant's obligation to observe or perform this covenant shall survive the
expiration or other termination of the term of this Lease. If Tenant fails to
remove such trade fixtures and restore the Leased Premises, then upon the
expiration or sooner termination of this Lease, and upon the Tenant's removal
from the premises, all such alterations, decorations, additions and improvements
shall become the property of the Landlord.
18.02 Holding over with the written consent of Landlord shall be at the
Basic Minimum Annual Rent and the Additional Rent specified herein and shall
otherwise be on all terms and conditions set forth herein, except for the term,
which shall be month to month, and without any right of first refusal or options
to extend the term, lease other space and/or purchase property. Should Tenant
withhold possession of the premises from Landlord after termination of the
within Lease, whether by lapse of time, by termination by either party as
provided herein, or in any other manner, and except in the case where the
Landlord has given written consent to holding over, the damages Tenant shall be
liable for are hereby liquidated at a monthly sum equal to one and one-half the
monthly minimum and additional rent in effect for the month immediately
preceding the holdover period, plus any items of additional rent Tenant would
otherwise be responsible for under this Lease (attorney's fees and damage to
Landlord's property, for example).
ARTICLE XIX
WORK TO BE PERFORMED IN THE LEASED PREMISES
19.01 The work set forth in this Article below and any plans initialed and
approved by both the Landlord and Tenant are hereby made a party of this Lease
and set forth the Landlord's responsibility with respect to work to be done in
the Leased Premises. Upon Tenant's furnishing
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to Landlord Tenant's finish plans, Landlord shall promptly undertake the
construction of the Leased Premises and pursue the same to completion with
diligence. The date on which a certificate of occupancy is issued for the Leased
Premises, substantially complete in accordance with Tenant's finish plans is the
"Leased Premises Completion Date", which is date upon which the Additional rent
(defined in Article IV) begins to accrue. "Substantially complete" shall mean
that: (i) the carpet shall have been installed; (ii) the computer room and
telephone room floors and all mechanical/electrical to be supplied to the rooms
by Landlord shall have been installed; and (iii) all mechanical/electrical
systems and light fixtures provided by Landlord shall be working. It is
estimated that the Leased Premises Completion Date shall be 90 days from the
date Tenant furnishes Landlord with approved finish plans. Notwithstanding the
foregoing, if Landlord shall be delayed in completing work which is Landlord's
responsibility or if Landlord shall be otherwise delayed in obtaining a
certificate of occupancy for the Leased Premises, and if such delay is caused by
the failure of Tenant to provide Tenant's finish plans within a reasonable time,
the failure of Tenant to provide reasonable turn around time on architectural
decisions to be made by Tenant, or the failure of Tenant to provide items to the
Leased Premises on time which are Tenant's responsibility, then the Leased
Premises Completion Date shall be the date on which the Leased Premises would
have been ready but for the delay due to Tenant. If the Leased Premises
Completion Date shall not be within 180 days of the date Tenant has delivered
its architectural drawings, Tenant shall have the right to cancel this Lease by
giving written notice to Landlord not sooner than the 181st day and not later
than the 190th day. If Tenant shall exercise its cancellation right under this
paragraph, this Lease shall immediately come to and end by lapse of time. If
Tenant shall not exercise its cancellation right within the above time period,
the right shall expire. Notwithstanding the provisions of paragraph 1.05 and
Article IV, if the Leased Premises Completion Date shall not be on or before 150
days after Tenant has delivered its architectural drawings, for every day beyond
the 150 days until the Leased Premises Completion Date, the Basic Minimum Annual
Rent shall be abated by an additional two days beginning December 1, 1990 and
continuing for the cumulative total of the two abatements. Notwithstanding the
foregoing, if Tenant shall not delivery its architectural plans, the 180 day and
150 day periods and 181st and 190th dates set forth above shall be extended by
one day for every day of delay beyond 30 days in the delivery of the final and
complete finish plans.
19.02 The work performed by Landlord in the Leased Premises and in the
construction of the Project shall be warranted for a period of one year from the
completion date, and Tenant shall not be responsible for repair or replacement
of said items during said one year period. Thereafter, repair and replacement
of the aforesaid shall be an element of Additional Rent, either by Tenant's Pro
Rata Share or the full responsibility of Tenant, as otherwise provided in this
Lease.
19.03 Tenant shall, on or before December 31, 1989, deliver to Landlord a
final architectural plan, a final ceiling plan, a final lighting plan and plan
from an electrical estimation may be made. The architectural plan shall include
a layout for Tenant's partitions, including specifications for the partitions,
and layout for the door openings and any other openings. Tenant shall, within
30 days after the submission of the aforementioned plans, deliver the final
electrical plan, final finish plans and all specifications, and any and all
other information as may be necessary to complete the Leased Premises, including
the flooring selection, color choices and other finish materials selection.
Notwithstanding any provision for determination of the Leased
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Premises Completion Date elsewhere set forth in this Lease, if Tenant shall fail
to submit the plans required above, within the time limits required above, the
Leased Premises Completion Date shall be accelerated by the period of delay in
submission of the aforementioned plans beyond the promised dates.
19.04 All plans shall be reviewed by the Landlord's architect and shall
include both Exhibit D Work and Extra Work (defined in paragraph 19.05) and
shall be consistent with the design, construction and equipment of the Building.
Such plans shall show the location and extent of any excess floor loading and
all special requirements for air conditioning, plumbing and electricity, and the
estimated total electrical load. All such plans and specifications are
expressly subject to Landlord's written approval, which Landlord will not
unreasonably withhold or delay, and Landlord shall provide prompt turnaround
time in the review of all plans. Landlord shall bear the cost and expense of
filing such plans and specifications with the appropriate governmental agencies.
19.05 Landlord shall bear the cost of all work set forth in Exhibit D,
attached hereto, except for the noted exceptions (the "Exhibit D Work"). Unless
the Lease is cancelled pursuant to paragraph 19.01, Tenant shall pay for the
cost of all that part, if any, of the work not set forth in Exhibit D as
Landlord's responsibility (the "Extra Work"). No allowance shall be made for
the omission of any Exhibit D Work except as specifically set forth herein.
Tenant may elect to pay for the Extra Work, if any, in equal monthly
installments beginning with the Leased Premises Completion Date and ending on
December 1, 1996, amortized at the rate of 10% per annum, or Tenant may elect to
prepay the outstanding and unpaid balance at any time during the initial Term of
this Lease, without penalty. Notwithstanding the foregoing, if this Lease shall
terminate for any reason and if there shall remain any sums due Landlord for the
Extra Work, such sums shall become immediately due and payable upon the
termination. Tenant may have a shower and locker room facility in its own
Leased Premises, at its own cost and expense (Extra Work). Tenant shall have
the right to obtain bids for any extra work, or for work where an allowance has
been set, that may reasonably be performed or supplied by a contractor other
than the contractors used by Landlord for performance of the Exhibit D work.
For example, if Tenant requires a specialized partition that is integral with
the standard partitions, Landlord may require that the work be done by
Landlord's drywall contractor. If, however, Tenant requires a special carpet,
Tenant may obtain bids for the special carpet. Notwithstanding anything in this
article to the contrary, if the bidding shall cause any portion of the Leased
Premises construction job to be delayed, the Leased Premises Completion Date
shall be accelerated by the period of delay. Landlord shall notify Tenant
within 10 days after Landlord becomes aware that any bidding process is
beginning to cause delay in the Leased Premises construction job. Change orders
up to a total value of $1,000 in extra cost may be made verbally by Richard
Bankosky, Constance Galley or Ann Ericson. Any other change order must be in
writing.
19.06 Landlord will, subject to all the covenants, agreements, terms,
provisions and conditions of this Lease give access to the Leased Premises to
decorators and other contractors employed by Tenant for the purpose of making
improvements therein, when so long as, in Landlord's reasonable judgment, the
work to be done in the Leased Premises by Landlord as provided herein shall have
been completed to such an extent that the making of such improvements will not
interfere with or delay Landlord's performance of the remaining portion of its
work; it being understood that Tenant shall not be deemed to have entered into
occupancy of
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the Leased Premises by reason of the presence in the Leased Premises of any
decorator or other contractor. If at any time such entry shall cause disharmony,
delay or interference with Landlord's performance of the remaining portion of
the work, this license may be withdrawn by Landlord immediately upon written
notice to Tenant.
19.07 In the event Landlord shall be delayed in obtaining delivery of any
item specially ordered for Tenant's Leased Premises in accordance with Tenant's
finish plans and if such delay shall cause a delay in Landlord's obtaining a
certificate of occupancy, the Leased Premises Completion Date shall be the date
on which Landlord would have been able to obtain a certificate of occupancy but
for the delay in obtaining the specially ordered item. Landlord shall use best
efforts to obtain prompt delivery of all items required for completion of the
Leased Premises in time to complete the Leased Premises on time. In the event,
however, that Landlord shall foresee difficulty in obtaining timely delivery of
any such specially ordered item referred to above, Landlord shall notify Tenant
of this condition, and Tenant shall have the option of obtaining delivery of
said item through Tenant's own source or replacing the item for which timely
delivery is not obtainable with an item with an earlier delivery date.
ARTICLE XX
EXPANSION SPACE
20.01 Provided that this Lease shall then be in full force and effect and
the Tenant shall not then be in default of the Lease, Tenant shall have the
right to add an additional approximately 5,000 square feet of Tenant's Net
Rentable Area to its Leased Premises (the "Expansion Space"). Tenant may only
exercise its right to add the Expansion Space under this paragraph by giving
written notice to Landlord on or before January 1, 1992. If Tenant exercises
its right to add the Expansion Space, Landlord shall prepare the space in
accordance with Tenant's finish plans, the Exhibit D portion of the work to be
Landlord's expense and the Extra Work to be at Tenant's expense, payable upon
completion of the work. Tenant shall provide Landlord with all architectural
plans, ceiling plans, electrical plans, lighting plans, final finishes and all
specifications and any other plans necessary to construct the Leased Premises,
within ninety days after notice of exercise of the right to expand under this
paragraph. Upon the Expansion Commencement Date, the Tenant's Net Rentable Area
shall be adjusted by addition of the square footage for the Expansion Space, the
Basic Minimum Annual Rent for the Initial Term shall be increased by $17.80 per
square foot of Tenant's Net Rentable Area for the Expansion Space, and all other
items based on Tenant's Net Rentable Area shall be adjusted accordingly. The
"Expansion Commencement Date" shall be the date upon which Landlord obtains a
certificate of occupancy for the space, substantially completed (as defined in
paragraph 19.01) in accordance with Tenant's finish plans, which in either case
shall be, at Landlord's election, during the 34th month through the 40th month
from the original Commencement Date (January 1, 1990). Notwithstanding the
foregoing, in the case where the Expansion Space has not been previously fitted
up, if Tenant shall not furnish Tenant's finish plans within the time period set
forth above or the Expansion Commencement Date shall be accelerated by the
period of the delay in providing the finish plans. If the Expansion
Commencement Date shall not be on or before the last day of the 40th month from
the original Commencement Date, and provided that Tenant has delivered its final
and complete finish plans within 90 days after notice of exercise of its right
to
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add the Expansion Space, the Basic Minimum Annual Rent for the Expansion Space
shall be abated by two days for every day beyond the last day of the 40th month
that the Expansion Commencement Date is delayed.
ARTICLE XXI
OPTIONS TO EXTEND
21.01 At the expiration of the Initial Term, if Tenant shall not then be
in default of the Lease, then Tenant shall have the option to extend this Lease
(the "First Option Term"), upon the same terms and conditions excepting the
provision for minimum rental, for one option term of five years, the First
Option Term to commence on expiration of the Initial Term. The First Option
Term shall be exercised by the Tenant first giving written notice to Landlord of
Tenant's request to commence the procedure for determining fair market rent for
the First Option Term, the written notice to be given not less than sixteen (16)
months prior to the expiration of the Initial Term. The Basic Minimum Annual
Rent for the First Option Term shall be the lesser of: (i) the Basic Minimum
Annual Rent in effect immediately prior to the commencement of the First Option
Term (adjusted to reflect the Expansion Space) annum increased by the percentage
increase in the United States Department of Labor Bureau of Labor Statistics
Consumer Price Index-All Urban Consumers-All Cities (1982-84 = 100) (the "CPI")
between the dates of October 1, 1989 and October 1, 1995; or (ii) 90% of the
fair market rent for the space on the commencement of the First Option Term.
Provided further, that if at the time for the determination of the rental
increase as herein provided the CPI is no longer published or issued, the
Landlord shall use such other index as is then generally recognized and accepted
for similar determinations of purchasing power. Said fair market rent shall be
determined as the fair market rent for net leases on a square foot basis for
similar property located in the Town of Wilton, which comparable rates shall
apply to new leases. Upon receipt of the notice to commence the procedure for
determining fair market rent, Landlord and Tenant shall attempt to agree upon
said fair market rent. In the event Landlord and Tenant cannot agree upon said
fair market rent prior to fifteen months before the commencement of the First
Option Term, within fifteen days thereafter they each shall appoint a person
experienced in commercial rental appraisals to act in their behalf in arriving
at said market rent. If the two appraisers cannot arrive at an agreement at
least thirteen months and fifteen days prior to the commencement of the First
Option Term, then the representatives shall, within fifteen days thereafter,
select and agree upon a third party who shall be the arbitrator. The two
appraisers and the arbitrator shall then vote upon the fair market rent, and the
majority vote being controlling. The figure upon which the vote is taken may be
the figure of either appraiser or a figure between the figures of the two
appraisers. The vote shall be made not later than thirteen months prior to the
commencement of the First Option Term. Notwithstanding the foregoing, the Basic
Minimum Annual Rent for the First Option Term, on a per square foot of Tenant's
Net Rentable Area basis, shall in no event be less than the Basic Minimum Annual
Rent in effect immediately preceding the commencement of the First Option Term.
If Tenant then wishes to exercise the First Option Term, Tenant may only do so
by giving written notice to Landlord not later than twelve (12) months prior to
the commencement of the First Option Term that Tenant is exercising the First
Option Term. The Basic Minimum Rent shall be as determined as above, and all
other terms and conditions of the extension will be exactly the same as the
conditions set forth in this Lease including all provisions for additional
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rent and payments, but without, however, containing a further provision for
extension or renewal except as set forth in paragraph 21.02.
21.02 At the expiration of the preceding, validly exercised First Option
Term, if this Lease shall then be in full force and effect and if Tenant shall
not then be in default of the Lease, then Tenant shall have the option to extend
this Lease (the "Second Option Term"), upon the same terms and conditions
excepting the provision for minimum rental, for another option term of five
years, the Second Option Term to commence on expiration of the First Option
Term. The Second Option Term shall be exercised by the Tenant giving written
notice to Landlord of Tenant's request to commence the procedure for determining
fair market rent for the Second Option Term, the written notice to be given not
less than sixteen (16) months prior to the expiration of the First Option Term.
The Basic Minimum Annual Rent for the Second Option Term shall be 100% of the
fair market rent for the space on the commencement of the Second Option Term.
Said fair market rent shall be determined as the fair market rent for net leases
on a square foot basis for similar property located in the Town of Wilton, which
comparable rates shall apply to new leases. Upon receipt of the notice to
commence the procedure for determining fair market rent, Landlord and Tenant
shall attempt to agree upon said fair market rent. In the event Landlord and
Tenant cannot agree upon said fair market rent prior to fifteen months before
the commencement of the Second Option Term, within fifteen days thereafter they
each shall appoint a person experienced in commercial rental appraisals to act
in their behalf in arriving at said market rent. If the two appraisers cannot
arrive at an agreement at least thirteen months and fifteen days prior to the
commencement of the Second Option Term, then the representatives shall, within
fifteen days thereafter, select and agree upon a third party who shall be the
arbitrator. The two appraisers and the arbitrator shall then vote upon the fair
market rent, and the majority vote being controlling. The figure upon which the
vote is taken may be the figure of either appraiser or a figure between the
figures of the two appraisers. The vote shall be made not later than thirteen
months prior to the commencement of the Second Option Term. Notwithstanding the
foregoing, the Basic Minimum Annual Rent for the Second Option Term, on a per
square foot of Tenant's Net Rentable Area basis, shall in no event be less than
the Basic Minimum Annual Rent in effect immediately preceding the commencement
of the Second Option Term. If Tenant then wishes to exercise the Second Option
Term, Tenant may only do so by giving written notice to Landlord not later than
twelve (12) months prior to the commencement of the Second Option Term that
Tenant is exercising the Second Option Term. The Basic Minimum Rent shall be as
determined as above, and all other terms and conditions of the extension will be
exactly the same as the conditions set forth in this Lease including all
provisions for additional rent and payments, but without, however, containing a
further provision for extension or renewal.
ARTICLE XXII
CANCELLATION RIGHT
22.01 If this Lease shall then be in full force and effect and if Tenant
shall not then be in default of the Lease, then Tenant shall have the right to
cancel and terminate this Lease, the effective date of the termination to be the
end of any calendar month from December 31, 1994 through and including November
30, 1996. Tenant may only exercise its right to cancel by
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delivering to Landlord, not less than twelve months prior to the effective date
of the termination, written notice of Tenant's exercise of this cancellation
right, which shall include the effective date of the termination, and payment of
or a letter of credit for the following items: (i) the unamortized balance all
tenant improvement work (Exhibit D Work and Extra Work) for construction of the
original Leased Premises (defined in paragraph 19.05); (ii) the unamortized
balance of the Rent Reduction Amount; (iii) the unamortized balance of the
$45,000 moving allowance; (iv) the unamortized balance of the amounts expended
by Landlord for the payment of Tenant's lease obligations on its 295 Westport
Avenue, Norwalk premises ($23,657 per month from January 1, 1990 to October 7,
1990); and (v) the unamortized cost of all tenant improvement work (Exhibit D
Work and Extra Work) for the construction of the Expansion Space. Tenant's
written notice of exercise shall not be valid unless the payments set forth in
items (i) through (v) above, or an irrevocable letter of credit therefor,
accompany the notice or have been delivered to Landlord prior to the notice. If
Tenant shall elect to deliver an irrevocable letter of credit, the letter shall
be drawn on a Connecticut or national bank having an office in Bridgeport,
Connecticut, callable by Landlord, or Landlord's assignee, at said Bridgeport
office, upon the effective date of the termination and any consecutive business
day thereafter, the letter to expire not sooner than 60 days after the effective
date of the termination. Landlord shall provide an itemized statement of the
cost of the item (i) tenant improvement work within 120 days of completion of
the Leased Premises and shall provide an itemized statement of the cost of the
item (v) tenant improvement work within 120 days of the Expansion Space
Commencement Date. The item (ii) Rent Reduction Amount shall be the amount of
11/12ths multiplied by $17.80 per annum per square foot of Tenant Net Rentable
Area on the original Leased Premises. The amortization of items (i) through (iv)
shall be calculated such that the items are completely amortized on the basis of
equal monthly installments, beginning January 1, 1991 and ending on December 31,
1996, at the rate of 10% per annum. The "unamortized balance" in items (i)
through (v) above shall mean the unamortized balance as of the effective date of
the termination. The amortization of item (v) shall be calculated in the same
manner as items (i) through (iv), except that the amortization period for item
(v) shall be from the Expansion Commencement Date to December 31, 1996. If
Tenant shall exercise its right of cancellation under this Article, the Lease
shall come to an end by lapse of time, as if the Initial Term expired on the
effective date of the termination.
ARTICLE XXIII
RIGHT OF FIRST REFUSAL TO LEASES
23.01 Provided that this Lease shall then be in full force and effect and
the Tenant shall not then be in default of the Lease, after the sooner of the
initial rent up of the building or January 1, 1991, Tenant shall have the right
of first refusal to any lease of other space in the building. Landlord shall
notify Tenant when Landlord becomes aware that space will become available in
the building after its initial rent up, and Landlord shall copy Tenant on all
initial proposals to prospective tenants for space available in the building
after the initial rent up. Landlord shall also notify the Tenant in writing of
the terms of any bona fide offer to lease space to which Tenant's right of
refusal applies, and Tenant shall have five (5) business days after receipt of
said notice of terms of rental to notify Landlord of its acceptance of said
rental terms, in writing. If Tenant shall not exercise its right of refusal
within the five business day time
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period, Landlord shall be free to rent the space which was subject to the offer
at the rent set forth in the offer or at a higher rent, and Tenant's refusal
right shall be of no further force and effect with respect to any space that
Landlord so rents, except that if such Lease shall terminate prior to the
termination of Tenant's Lease, Tenant's right of refusal shall reapply to the
space whose lease terminated. If Landlord wishes to rent the space at a lower
rent, Landlord must again notify Tenant of the terms of any such bona fide offer
acceptable to Landlord and the above process shall be repeated. If the
notification of bona fide offer to Tenant shall not be in the form of a formal
lease and if Tenant shall accept the offer, Tenant shall promptly execute a
formal lease in accordance with the accepted offer (the offer not necessarily
addressing legal terms such as subordination, casualty and eminent domain, for
example). If Tenant shall fail to execute the proffered lease, Landlord may give
notice to Tenant that unless Tenant delivers the executed lease within five days
to Landlord, Landlord intends to rent the space to another party. If Tenant
shall fail to deliver the executed lease within such five day period, Landlord
shall be free to rent the space on the terms set forth in such lease to another
party, and upon such renting, the space shall be free of Tenant's right of
refusal.
ARTICLE XXIV
RIGHT OF FIRST REFUSAL TO SALE
24.01 If this Lease shall then be in full force and effect and if Tenant
shall not then be in default of the Lease, then during the Term of this Lease,
Tenant shall have the right of refusal to a sale of the Project, under the
following terms and conditions. Provided that Tenant's right of refusal shall
be in full force and effect and in the event the Landlord shall receive a bona
fide offer to purchase the Project upon terms and conditions satisfactory to
Landlord, then Landlord shall give Tenant written notice of the terms and
conditions of the bona fide offer, which may include other real estate in
addition to the Exhibit B property. Tenant shall have the right to purchase the
Project upon the same terms and conditions presented in Landlord's notice. If
Tenant wishes to exercise the right to refusal to sale, Tenant must give written
notice of its exercise of the right and acceptance of the terms and conditions
set forth in Landlord's notice within fifteen days of the date of Landlord's
notice to Tenant. If Landlord's notice to Tenant shall be in the form of a
proposed formal contract, Tenant's acceptance shall be accompanied by return of
the contract with Tenant's execution and the payment of any deposit, if and when
required under the terms of the contractor. If said contract is not presented
at the time of Landlord's notice of offer to Tenant, Tenant shall sign and
return the formal contract embodying the terms and conditions of the offer
within fifteen days of presentment of same by Landlord. Notwithstanding any
time period for closing in the offer received by Landlord. If Tenant shall
exercise its right to purchase under this paragraph, Landlord may require the
closing of title to be not later than sixty days from the signing of the
contract. If Tenant shall fail to exercise the right of refusal to sale with
respect to any notice of bona fide given by Landlord, Landlord shall be free to
sell the Project to any party at any later date at a price at least as high as
that in the offer which Tenant failed to accept. The rights of Tenant under
this paragraph shall be subordinate to any bona fide mortgage on the Project,
and such rights shall not be applicable to a foreclosure of the Project or deed
in lieu thereof and shall not survive the passing of title under such
foreclosure or deed in lieu of foreclosure. The right of refusal under this
paragraph shall also not be applicable in the case of a transfer of the Project
or an interest therein to a corporation, a partnership or another
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entity in which the original Landlord or an immediate family member or members
of the original Landlord retain a majority interest. If Tenant shall accept the
terms and conditions of Landlord's notice but shall thereafter default in the
obligations of Tenant under this paragraph or in the obligations of purchaser
under the contract signed by Tenant, Tenant's right to refusal of sale shall
terminate.
ARTICLE XXV
MISCELLANEOUS
25.01 Upon the Leased Premises Completion Date and occupancy of the Leased
Premises by Tenant, if this Lease shall then be in full force and effect and if
Tenant shall not then be in default of this Lease, then Landlord shall pay to
Tenant $45,000 as a moving allowance. Landlord agrees to make the $45,000
payment on the date Tenant moves into and occupies the Leased Premises.
25.02 All construction work on the building lobby shall be complete upon
the completion of the Leased Premises construction, except that the art work for
the lobby may not then be installed. Tenant shall have reasonable input on the
decor and art work for the lobby and any common corridors on the second and
third floors.
25.03 Unless incidental to an office use, Landlord shall not, without
Tenant's approval, lease the remaining space in the building for either of the
following uses: a restaurant; or the retail sale of goods to the public on site.
The intent of this paragraph is that a permitted use of other space would be
incidental to an office use. For example, a cafeteria within an office for the
use of the employees of the office would be permitted. Landlord shall also not
rent other space in the building for any use which would interfere with the
operation of Tenant's business or be incompatible with uses appropriate for a
first class office building in Fairfield County.
25.04 Landlord shall mark ten parking spaces near the front door of the
building as visitor parking.
25.05 Tenant shall have the right to approve or disapprove of the design
of the signage for the tenants on the monument which is to be for the building
address, as set forth in paragraph 5.05, which approval shall not be
unreasonably withheld by Tenant.
25.06 Subject to Landlord's approval, which shall not be unreasonably
withheld, and any required governmental approval (such as Wilton zoning
approval), Tenant shall have the right to place a small satellite dish on the
roof of the Leased Premises building. Any such dish shall be for the use of
Tenant only and shall not be used as a utility transmission or reception
station.
25.07 Landlord shall complete the Project, at Landlord's sole cost as
expense, in accordance with the plans entitled: "Wilton Office Building, 47
Danbury Road, Route 7, Wilton, Connecticut, Prepared for R.D. Scinto by Kasper
Associates/Design Collaborative Architects, Sheet SP-4 (landscape plan - last
revised 1/6/89, Sheets A-1, A-2 & A-3 (architectural plans - last revised
2/24/89) and Sheets A-5 & A-6 (architectural plans - last revised 8/28/89)".
-28-
<PAGE>
25.08 If and so long as this Lease shall then be in full force and effect
and if Tenant shall not then be in default of this Lease, Landlord shall
reimburse Tenant for any rental liability Tenant may incur on its existing
premises at 295 Westport Avenue, Norwalk for the period from January 1, 1990 to
October 7, 1990, provided further that Landlord's liability under this paragraph
shall not exceed $23,657 per month, with partial months to be pro rated.
Payments shall commence January 1, 1990 to continue on the first day of each
month thereafter. The reimbursement payments shall be made payable directly to
Tenant. Landlord shall promptly provide Tenant with an irrevocable letter of
credit to secure Landlord's obligation under this paragraph. In the event that
any draw shall be made on the letter of credit, in accordance with its terms,
and in the further event that Landlord's payment was made too late to be
credited for the month in which a draw was made, Tenant shall promptly reimburse
Landlord for any overpayment by reason of Tenant receiving both a payment from
Landlord and a draw on the letter of credit for any particular month.
This agreement shall inure for the benefit and be binding upon the parties
hereto, their respective heirs, representatives, successors and assigns, except
where provided to the contrary by express provisions contained herein.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals as
of the day and year first above written.
TSI International, Ltd.
By: /s/ Richard Bankosky
------------------------------
its duly authorized
---------------------------------
/s/ Robert Scinto
---------------------------------
Robert D. Scinto
-29-
<PAGE>
State of Connecticut )
) s.s. City/Town of Stanford
County of Fairfield )
Personally appeared Richard Bankosky, signer and sealer of the foregoing
instrument and the duly authorized VP Finance of TSI International, Ltd., who
acknowledged the same to be his or her free act and deed and the duly authorized
free act and deed of TSI International, Ltd. before me this 23rd day of
December, 1989.
/s/ Barbara Schadt
---------------------------------
Commissioner of the
Superior Court/Notary Public
State of Connecticut )
) s.s. City of Shelton
County of Fairfield )
Personally appeared Robert D. Scinto, signer and sealer of the foregoing
instrument, who acknowledged the same to be his free act and deed, before me
this 2nd day of January, 1990.
/s/ Paul A. Sobel
-----------------------------------
Paul A. Sobel
Commissioner of the Superior Court
-30-
<PAGE>
EXHIBIT B
All those certain pieces or parcels of land together with the buildings and
improvements thereon, situated in the Town of Wilton, County of Fairfield and
State of Connecticut, shown and designated as Parcel B, Parcel C, Parcel D and
the Right of Way 15 ft. in width, on a certain map entitled, "Map of Property at
Wilton-Conn. Surveyed for Fortunato Parrillo, Scale 1 in. = 50 ft., dated Aug.
1940," Certified Substantially Correct by Chas. A. Whitney, C.E. which map is on
file in the Wilton Land Records as Map No. 476.
Said premises are also known as 45 Danbury Road.
TOGETHER WITH:
1. The benefits, if any, set forth in favor of the Grantee in an easement in
favor of the Connecticut Light and Power Company from A.W. Lane and Nena B.
Lane dated December 27, 1935 and recorded in Volume 45, Page 470 of the
Wilton Land Records.
SUBJECT TO ONLY THE FOLLOWING ENCUMBRANCES:
1. Any and all provisions of any municipal ordinance or regulation, and any
federal, state or local public or private laws, special reference being had
to zoning rules and regulations affecting the property.
2. Taxes due to the Town of Wilton on the List of October 1, 1988, and
thereafter, for sums not currently due and payable.
3. Riparian rights of others in and to any brook or stream or other body of
water which crosses or abuts said premises.
4. Sewer assessment notices recorded in Volume 314 at Pages 104 and 106 of the
Wilton Land Records.
5. Sewer assessment notice recorded in Volume 360 at Page 28 of the Wilton
Land Records.
6. A first mortgage and security agreement in favor of The Connecticut Bank &
Trust Company, N.A.
-31-
<PAGE>
EXHIBIT C
RULES AND REGULATIONS
The Tenant agrees to abide by the following rules and regulations and such
revised or additional rules and regulations of which Tenant has notice and which
have been reasonably established by Landlord:
1. The delivery or shipping of merchandise, supplies and fixtures to and from
the Leased Premises and the Project shall be subject to such rules and
regulations as in the judgment of the Landlord are necessary for the proper
operation of the Leased Premises and Project and shall not interfere with
other tenant's use of the Project.
2. All garbage and refuse shall be kept in the kind of container specified and
shall be placed outside of the Leased Premises, prepared for collection at
the location, in the manner and at the times specified by Landlord. Tenant
shall pay the cost of removal of any of Tenant's refuse or rubbish.
3. No aerial shall be erected on the roof or exterior wall of the Leased
Premises or in any other area of the Project exterior to the Leased
Premises without, in each instance, the prior written consent of the
Landlord. Any aerial so installed without such written consent shall be
subject to removal without notice at any time.
4. No electronic interference shall emanate from the Leased Premises which
shall interfere with any reception or emission of any other person's
telephone signal, television signal, radio signal, data signal or
electricity.
5. No loud speakers, televisions, phonographs, radios or other devices shall
be used in a manner so as to be heard or seen outside of the Leased
Premises without the prior written consent of the Landlord.
6. Tenant shall keep the Leased Premises at a temperature sufficiently high to
prevent freezing of water pipes and fixtures.
7. The plumbing facilities shall not be used for any other purposes than that
for which they are constructed, and no foreign substance of any kind shall
be thrown therein. The expense of any breakage, stoppage, or damage
resulting from a violation of this provision shall be borne by Tenant who,
or whose employees, agents or invitees have, caused such damage.
8. Tenant shall not burn any trash or garbage of any kind in or about the
Leased Premises or Project.
-32-
<PAGE>
9. Tenant and Tenant's employees and agents shall not solicit business in the
Parking areas or other General Common Area, nor shall Tenant distribute any
handbills or other advertising matter in automobiles parked in the parking
area or other General Common Area.
10. Tenant shall not install or maintain any window treatment without the prior
written consent of Landlord.
-33-
<PAGE>
EXHIBIT 10.09
FIRST AMENDMENT OF OFFICE LEASE
-------------------------------
THIS FIRST AMENDMENT OF OFFICE LEASE (this "First Amendment") is made as of
the __ day of November, 1995, by and between AMERICAN NATIONAL BANK AND TRUST
COMPANY OF CHICAGO, not individually but as Trustee under Trust Agreement dated
June 1, 1978 and known as Trust no. 42978 ("Landlord"), and TSI INTERNATIONAL
SOFTWARE LTD., a Delaware corporation ("Tenant").
R E C I T A L S:
- - - - - - - --
A. Landlord and Tenant entered into that certain Office Building Lease
dated as of the 5th day of February, 1994 ("Office Lease") for the lease of
certain Premises consisting of 12,095 rentable square feet as depicted on
Exhibit A to the Office Lease and designated as Suite E-100 (the "Original
Premises"), located in that certain building commonly know as Bannockburn Lake
Office Plaza-Building B and having a common address of 2345 Waukegan Road,
Bannockburn, Illinois ("Building").
B. The Term of the Office Lease as set forth therein will expire on the
31st day of December, 1995, unless sooner terminated as provided in the Office
Lease, and the parties thereto desire to extend the Term of the Office Lease,
modify the Premises leased and provide for certain other matters as hereinafter
described.
NOW, THEREFORE, in consideration of the foregoing Recitals and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Landlord and Tenant agree as follows:
1. RECITALS; CAPITALIZED TERMS; CAPTIONS. The Recitals set forth
-------------------------------------
hereinabove are incorporated herein as a substantive part of this First
Amendment. All capitalized terms used herein and not otherwise defined herein
shall have the meanings ascribed thereto in the Office Lease. The Office Lease
as amended by this First Amendment is sometimes hereinafter referred to as the
"Lease." The Paragraph headings are for convenience of reference only, do not
define or construe the contents of such paragraphs and shall be ignored in any
construction thereof.
2. EXTENSION OF TERM. The Term of the Office Lease is hereby extended
-----------------
for a period of five (5) years from January 1, 1996 through December 31, 2000
(the "Extension Period"), unless sooner terminated as provided in the Lease,
upon all of the same terms, covenants and conditions as set forth in the Office
Lease, except as modified hereby.
3. MODIFICATION OF PREMISES. Effective as of January 1, 1996, (the
------------------------
"Effective Date") the Office Lease is hereby amended to modify the Premises from
the Original Premises to that portion of the Original Premises which the parties
agree consists of 10,552 rentable square feet as depicted on Exhibit A attached
hereto and made a part hereof (the "Modified Premises"). From and after January
1, 1996, the Modified Premises shall become
<PAGE>
Premises for all purposes under the Lease as if the Modified Premises had been
the Premises originally leased under the Lease; and effective as of 12:00 AM on
December 31, 1995, except as provided in Paragraph 8 hereof, Tenant shall have
no further right, title or interest in or to or have any right to possession of
that portion of the Original Premises which is not contained in the Modified
Premises (which is agreed to contain 1,543 rentable square feet, and is
sometimes hereinafter referred to as the "Surrendered Space").
4. EXTENSION PERIOD BASE RENT. From and after the Effective Date, Tenant
shall pay Base Rent in monthly installments of Monthly Base Rent for the
Extension Period at the same times and in the same manner as provided for in the
Office Lease during the initial Term, but at the following amounts for the
stated periods:
<TABLE>
<CAPTION>
Annual Monthly
Period Base Rent Base Rent
------ --------- ---------
<S> <C> <C>
January 1, 1996 -
December 31, 1996 137,175.96 $11,431.33
January 1, 1997 -
December 31, 1997 140,605.32 11,717.11
January 1, 1998 -
December 31, 1998 144,120.48 12,010.04
January 1, 1999 -
December 31, 1999 147,723.48 12,310.29
January 1, 2000 -
December 31, 2000 151,416.60 12,618.05
</TABLE>
For and during the Extension Period, Tenant shall not pay Additional Rent on
account of increases in the Consumer Price Index. The stated increases in the
Base Rent are in lieu of Additional Rent on account of increases in the Consumer
Price Index pursuant to Section 4 of the Office Lease.
Tenant shall not be liable for the payment of either interest at the Default
Rate or any Late Charges pursuant to the seventh (7th) grammatical paragraph of
Section 4 of the Office Lease until the expiration of the tenth (10th) day
following the due date for any rent under the Lease.
5. MODIFICATION OF TENANT'S PROPORTION. In addition to Base Rent, from
-----------------------------------
and after the Effective Date, Tenant shall pay Additional Rent for the Modified
Premises in the same manner and at the same times as was paid with respect to
the Original Premises, based upon a modification of Tenant's Proportion to be
nine and 9,811/10,000 percent (9.9811%).
6
<PAGE>
6. ALLOCATION OF ELECTRIC CHARGES. Notwithstanding anything contained
------------------------------
herein or elsewhere in the Lease to the contrary, Landlord and Tenant
acknowledge that when the Premises are modified from the Original Premises to
the Modified Premises, the Surrendered Space will "share" an electric meter and
panel with the Premises, and Landlord or the tenant of the Surrendered Space and
Tenant will be required to share, on an equitable basis, the electric costs
associated with the Premises and the Surrendered Space. Initially such parties
shall share the cost on a square footage basis, that is, initially eighty-seven
and 24/100 percent (87.24%) to the Premises and twelve and 76/100 percent
(12.76%) to the Surrendered Space, as modified from time to time if the Premises
shall be expanded to include some or all of the Surrendered Space pursuant to
Paragraph 8 hereof or otherwise. The parties further agree, however, that Tenant
may utilize an electric load which may be substantially greater than the
electrical load utilized at the Surrendered Space, and, therefore, a pure "pro
rata" basis may not equitably apportion the amount to each space. In such event,
the parties shall, in good faith, determine a reasonable allocation based upon
the electrical loads each party utilizes.
7. CAP ON EXPENSES. Notwithstanding anything in the Lease to the
---------------
contrary, for the purpose of computing Additional Rent under the Lease only, the
amount of Expenses for Adjustment Years 1996, 1997, 1998, 1999 and 2000 which
shall be payable by Tenant shall be subject to the following limitation:
Expenses payable by the Tenant for Adjustment Year 1996 (if any) shall not
exceed an amount equal to $5.40 per rentable square foot of the Premises.
Thereafter for Adjustment Years 1997, 1998, 1999 and 2000 (the "Capped Years"),
Tenant's expense Adjustment (hereinafter defined) with respect to Expenses (or
components of Expenses) which are not "Uncontrollable Expenses," shall not
increase by more than five percent (5%) over the prior Adjustment Year during
the Capped Years on a cumulative compounding basis. The capped amount of
Expenses for any Capped Year is herein referred to as the "Capped Expense
Amount." The portion of the Expense Adjustment attributable to Expenses (or
components of Expenses) which are Uncontrollable Expenses (as hereinafter
defined) shall not be capped. "Uncontrollable Expenses (including uncontrollable
components of Expenses)" shall mean: the cost of snow removal, the cost of road
salt, the cost of insurance premiums required to be carried by Landlord
hereunder, the cost of internal and external common area utilities, including
electricity, water and gas, supplies and union wages for both direct employees
and employees of contractors.
8. RIGHT OF FIRST OFFER. Landlord hereby grants to Tenant the continuing
--------------------
right of opportunity ("Right of Opportunity"), during the Extension Period of
the Lease to lease the Surrendered Space as depicted on and described in Exhibit
C attached hereto and made a part hereof (which is referred to hereinafter as
the "Opportunity Premises"), subject to the terms and conditions hereinafter set
forth.
Prior to entering into the negotiation of any lease with any tenant prospect
for any part or all of the Opportunity Premises (such portion which Landlord
intends to lease to any such tenant prospect at any time being the "Offered
Premises") during the Extension Period of the Lease, so long as Tenant shall not
be in Default under this Lease, Landlord shall notify Tenant in writing of the
business and economic terms (including, without limitation, the proposed term of
the tenancy) upon which Landlord would be willing to lease the Offered Premises
to such tenant
7
<PAGE>
prospect, and Tenant shall have the right for a period of ten (10) calendar days
from and after the giving of such notice within which to notify Landlord that it
will lease the Offered Premises on the terms and conditions as contained in
Landlord's notice and other terms and conditions of the Lease not in conflict
with the terms in the notice. Provided, however, during the period from January
1, 1996 through June 30, 1996, if Tenant shall exercise its Right of Opportunity
to lease the Offered Premises, the Base Rent shall be at the then applicable
rates for the applicable periods set forth in Paragraph 4 above per square foot
of rentable area of such Offered Premises, and the Landlord's contribution
toward the cost of tenant improvements in such Offered Premises will be an
amount equal to Eleven and 82/100 Dollars ($11.82) per rentable square foot of
Offered Premises for any Offered Premises leased in January 1996, and reduced by
$.1970 each month thereafter through June, 1996, so that for space leased during
February, 1996, the amount would be Eleven and 62/100 Dollars ($11.62), for
space leased in March, 1996, the amount would be Eleven and 43/100 Dollars
($11.43) and so forth. If Tenant shall timely elect to lease the Offered
Premises, then Landlord and Tenant shall proceed in good faith to finalize such
lease of the Offered Premises. If Tenant elects to lease the Offered Premises,
the Offered Premises shall be added to the Lease and become Premises by an
amendment to the Lease and shall be governed by the terms and conditions of this
Lease as modified or supplemented by the terms in the notice or the alternate
rent and construction contribution provision, if applicable, as aforesaid. If
Tenant fails to notify Landlord in writing that it will accept the Offered
Premises within the prescribed ten (10) calendar day period, Tenant's right to
lease such Offered Premises shall be terminated and Landlord may thereafter
lease such Offered Premises to such other tenant prospect free of the rights of
Tenant, except as provided in the next sentence. If Landlord elects to offer the
Offered Premises to such tenant prospect on terms economically less favorable
(from Landlord's perspective) by ten percent (10%), then Landlord shall again
offer the Offered Premises to Tenant on such less favorable (from Landlord's
perspective) economic terms in accordance with the provisions in this
grammatical paragraph.
Tenant may not elect to lease less than all of the Offered Premises described
in any notice from Landlord to Tenant concerning the Right of Opportunity. In
addition, Tenant's right to exercise the Right of Opportunity in any instance
and the commencement of the term for any Offered Premises shall be conditioned
upon satisfaction of the following terms and conditions: (a) at the time of the
exercise of the Right of Opportunity this Lease shall be in full force and
effect, and Tenant's right to possession of the Premises shall not have been
terminated, and Tenant shall not be in Default hereunder, and, at Landlord's
option, at the time the term of the lease for the related Offered Premises
commences, the Lease shall be in full force and effect and Tenant's right to
possession of the Premises shall not have been terminated, and Tenant shall not
be in Default hereunder; (b) at the time of the exercise of the Right of
Opportunity and, at Landlord's option, at the time the term of the lease for the
related Offered Premises commences, the original Tenant named herein or an
affiliate of Tenant as described in Section 42a of the Office Lease (a "Tenant
Affiliate") shall be occupying all of the Rentable Area of the Premises, and
such Tenant shall not have assigned the lease or sublet any portion of the
Premises other than to a Tenant Affiliate, it being agreed that the Right of
Opportunity granted hereby is personal to the named Tenant or a Tenant
Affiliate; (c) the term of the lease for the Offered Premises shall commence on
the date set forth in the opportunity notice given with respect to such Offered
Premises; (d) in the event Landlord shall be unable to tender possession of any
Offered Premises
8
<PAGE>
to Tenant upon the commencement of the term thereof, Landlord shall not be
subject to any liability on account thereof and the failure to do so shall not
affect the validity of the Lease or the obligations of Tenant under the Lease or
the lease of the Offered Premises by Tenant, or be construed to extend the term
as to such Offered Premises, or the Term of the remainder of the Premises, but
Rent shall not commence with respect to such Offered Premises until Landlord
tenders possession thereof to Tenant; and (e) Tenant shall accept possession
from Landlord of all Offered Premises in their "as is" condition as of the date
upon which the term of the lease for such Offered Premises commences unless
specifically provided to the contrary in the pertinent opportunity notice.
9. WORKLETTER APPLICABLE TO MODIFIED PREMISES. Tenant acknowledges and
------------------------------------------
agrees that it is leasing the Modified Premises in "as is" condition except as
provided in the Modified Premises Workletter attached hereto as Exhibit B and
made a part hereof (the "Modified Premises Workletter"), and Landlord shall have
no obligation to provide or pay for or reimburse Tenant for any improvements to
the Modified Premises, except as provided in the Modified Premises Workletter.
The Modified Premises shall be improved pursuant to and in accordance with the
provisions of the Modified Premises Workletter.
10. REAL ESTATE BROKERS. The parties agree that Stein & Company Investor
-------------------
Services, Inc. and Julien J. Studley, Inc. are the only brokers with whom the
parties have dealt in connection with this First Amendment and the modification
of Premises and the extension of the Term of the Extension Period, and whose
commissions, if any, shall be paid by Landlord pursuant to separate agreement,
and each of the parties hereto agrees to indemnify and hold the other (and in
the case of Landlord, its beneficiaries), and their affiliates and the
respective partners, shareholders, directors, officers, agents and employees of
each of the foregoing harmless from all damages, liability and expense
(including reasonable attorneys' fees) arising from any claims or demands of any
other broker or brokers or finders for any commission alleged to be due any such
broker or brokers or finders in connection with participating with the
indemnifying party in effecting this First Amendment and the modification of
Premises and the extension of the Term for the Extension Period in violation of
the indemnifying party's representation above or otherwise claiming by, through
or under such indemnifying party.
11. SUBORDINATION TO MORTGAGES AND DEEDS OF TRUST. Section 25 of the Office
---------------------------------------------
Lease is hereby amended by adding the following paragraph at the end of the
Section:
Notwithstanding any of the foregoing, Tenant shall not be
obligated to subordinate its interest in the Lease pursuant to
any of the foregoing provisions to any new Mortgagee after the
date hereof, unless such new Mortgagee requesting such
subordination executes a non-disturbance agreement providing that
if there is a foreclosure of such Mortgage and no Default then
exists (a) such Mortgagee cannot make Tenant a party defendant to
such foreclosure or termination nor in any other way foreclose
Tenant from its rights, evict Tenant, disturb Tenant's possession
under the Lease or
9
<PAGE>
terminate or disturb Tenant's leasehold estate or rights under
the Lease, subject, however, to the terms of the Lease, and (b)
the Lease shall continue as a direct lease between Mortgagee and
Tenant (any such agreement or any agreement of similar import,
from any Mortgagee being hereinafter called a "Non-Disturbance
Agreement"), provided that such Non-Disturbance Agreement may
contain such other terms and conditions as are contained in the
customary form of non-disturbance agreement of any such Mortgagee
(provided that such other terms and conditions and such customary
form will not materially adversely change the rights and
obligations of Tenant under the Lease), and Tenant may be
required to execute such Non-Disturbance Agreement prior to its
execution by the Mortgagee.
12. ADDITIONAL AMENDMENTS OF OFFICE LEASE. The Office Lease is hereby
-------------------------------------
amended in the following additional respects:
(a) The third (3rd) grammatical paragraph of the subparagraph
(I), Taxes, portion of the "Additional Rent Formula" appearing on
page 6 of the Office Lease is hereby deleted in its entirety from
the Lease, and is of no further force or effect.
(b) Section 13 appearing on page 13 of the Office Lease is hereby
modified by inserting the following after the word "Term"
appearing in the first (1st) line thereof:
(provided, however, that so long as Tenant is not in Default
under the terms of this Lease, including, without
limitation, in the payment of any Rent, Tenant's vacation of
the Premises shall not constitute an abandonment)
(c) The clause "and (ii) to refrain form publicly advertising a
rental rate less than that then-quoted by the Landlord for space
within the Building or complex" appearing in the last sentence of
Section 14 of the Office Lease is hereby deleted, and is of no
further force or effect.
(d) The words "and fee of 21%" appearing in the third (3rd)
sentence of Section 42(b) on page 28 of the Office Lease are
hereby deleted, and are of no further force or effect.
(e) Sections 42(c), 42(d) and 42(e) of the Office lease are
hereby deleted in their entirety and agreed to be of no further
force or effect.
10
<PAGE>
13. CANCELLATION OPTION. Tenant shall have the option (the
-------------------
"Cancellation Option") to terminate the Lease for all of the Premises under the
Lease effective as of December 31, 1998 (the "Tenant Termination Date"). Tenant
may elect the Cancellation Option by giving written notice to Landlord (the
"Termination Notice") given not later than December 31, 1997. In the event
Tenant does not give its notice exercising the Cancellation Option prior to
December 31, 1997, Tenant shall have no further right pursuant to the
Cancellation Option to terminate the Lease. Once elected as provided herein, and
subject to the other terms and conditions of this Paragraph and otherwise in the
Lease, an election hereunder by Tenant shall be irrevocable. Additionally, the
Cancellation Option is subject to he following terms, conditions and
limitations:
(a) (i) At the time of the exercise of the Cancellation Option the
Lease shall be in full force and effect and Tenant's right to
possession of the premises shall not have been terminated, and
Tenant shall not be in Default, and (ii) at the time of the Tenant
Termination Date the Lease shall be in full force and effect and
Tenant's right to possession of the Premises shall not have been
terminated, and Tenant shall not be in Default; provided, however,
Landlord may at its option waive any of the conditions set forth
in this subsection (a). Notwithstanding the foregoing, Tenant
shall in any event have the right to effect the completion of the
termination o the Lease by paying to Landlord all rent and other
sums (including, without limitation, the Cancellation Fee) due and
to become due (until the Tenant Termination Date) to Landlord and
complying with all other material obligations of Tenant under the
Lease through the later of the Tenant Termination Date and
Tenant's vacation of the Premises and curing any default under the
Lease.
(b) Contemporaneously with the notice timely electing the
Cancellation Option, Tenant shall pay a fee (the "Cancellation
fee") equal to the sum of (I) all brokerage commissions, agreed to
be in the amount of Froth-Nine Thousand Sixty-Six and 80/100
Dollars ($49,066.80), all tenant improvement allowances, agreed to
be in the amount of One Hundred Twenty-Four Thousand Seven Hundred
Thirty-Nine and 00/100 Dollars ($124,739.00) and all architectural
allowances agreed to be in the amount of Five Thousand Two Hundred
Seventy-Six and No/100 ($5,276.00), applicable to the Modified
Premises and the Surrendered Space, that remain unamortized
following the Tenant Termination Date were the same to be
amortized on a straight line basis at an interest rate of ten
percent (10%) per annum over the Extension Period, and (ii) an
amount equal to the sum of the monthly installments of the Base
Rent and Additional Rent as reasonably estimated by Landlord
payable for each of the months of January through June, inclusive,
1999.
If the Lease is terminated pursuant to this paragraph 13, the Term shall
expire on the Tenant Termination Date as if such date had been set forth in the
Lease as the expiration date of
11
<PAGE>
the Term, and Tenant shall vacate the Premises on or before the Tenant
Termination Date in the manner and subject to all of the provisions and
obligations required by the Lease. All obligations of Tenant and Landlord which
accrue under the Lease on or before the later of the Tenant Termination Date and
the date upon which Tenant shall surrender possession of the Premises shall
survive such termination and neither the exercise of such right to terminate nor
such termination shall affect Landlord's or Tenant's remedies on account of any
default by Tenant or Landlord which may exist as of the date on which notice of
exercise of such right is given or as of the Tenant Termination Date and is not
cured (including, without limitation, any matter which, with the giving of
notice or the passage of time, or both, would constitute a Default by Tenant
under the Lease pursuant to Section 20 of the Office Lease).
14. CONFIRMATION OF LEASE. Except as expressly modified by this First
---------------------
Amendment, all of the terms and provisions of the Office Lease shall remain
unmodified, and the Lease is in full force and effect.
15. EXCULPATORY PROVISIONS. This instrument is executed by American
----------------------
National Bank and Trust Company of Chicago, not personally but solely as Trustee
under Trust No. 42978. All covenants and conditions to be performed hereunder by
American National Bank and Trust Company of Chicago are undertaken by it solely
as Trustee as aforesaid and not individually and no personal liability shall be
asserted or be enforceable against American National Bank and Trust Company of
Chicago, the beneficiaries thereof or their agents or representatives by reason
of any of the covenants, statements, representations or warranties contained in
this instrument. All of the further Exculpatory Provisions set forth in Section
44 of the Office Lease are incorporated by this reference into this Paragraph 15
as if fully set forth and are fully applicable to this First Amendment.
[THIS SPACE INTENTIONALLY LEFT BLANK;
SIGNATURES APPEAR ON PAGE 9.]
12
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have caused this First
Amendment to be executed as of the date and year first above written.
TENANT: LANDLORD:
TSI INTERNATIONAL SOFTWARE AMERICAN NATIONAL BANK AND
LTD., a Delaware corporation TRUST COMPANY OF CHICAGO, as
Trustee under Trust Agreement dated
June 20, 1978 and known as Trust No. 42978
By: /s/ Ira Gerard By: /s/ Peter Johansen
---------------------------- ------------------------------
Its: V.P. Finance Its:
------------------------ --------------------------
13
<PAGE>
EXHIBIT A
MODIFIED PREMISES
10,552 rsf
[GRAPHICS OF SUCH SPACE]
14
<PAGE>
EXHIBIT B
MODIFIED PREMISES WORKLETTER
This is the modified Premises Workletter ("Workletter") referred to in
the foregoing First Amendment by and between American National Bank and Trust
Company of Chicago, as Trustee under Trust No. 42978 ("Landlord"), and TIS
International, ltd. ("Tenant"). Capitalized or defined terms used herein shall
have ht respective meanings assigned to them in the First Amendment or the
Office Lease (as defined in the First Amendment), except as otherwise provided
or defined herein.
Landlord and Tenant agree as follows:
1. WORK. At Tenant's sole cost and expense, except as provided
----
hereinafter, Landlord shall provide the material, hardware, equipment and labor
used to demise and construct and install improvements to the Modified Premises
as describe don the Plans (as hereinafter defined), such items had labor being
herein referred to as the "Tenant Work". Landlord shall proceed diligently with
the Tenant Work, subject to the provisions of this Workletter and the Lease.
2. PLANS. Tenant agrees to cause an interior space planner acceptable
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to Landlord (the "Interior Space Planner") and a consulting engineer designated
by Landlord (the "Consulting Engineer") to deliver to Landlord architectural and
engineering working drawings including (1) furniture plans showing details of
space occupancy, (2) reflected ceiling plans, (3) partition and door location
plans, (4) telephone and electrical plans noting any special lighting and power
load requirements, (5) environmental design criteria and all security and
communications information, (6) detail plans, (7) mechanical, dire protection
and engineering plans, (8) finish plans and schedules and (9) plans and
specifications relative to the demise of the Modified Premises and complete
specifications for the Tenant Work to be performed in the Modified Premises
which are acceptable to Tenant (the working drawings and specifications for the
Tenant Work, as finally approved by Landlord as provided hereinafter, are
referred to as the ":Plans"). The working drawings and specifications shall be
submitted for Landlord's review and approval, and if Landlord does not approve
such working drawings and specifications as the Plans, Landlord shall promptly
advise Tenant generally of the changes required in such working drawings and
specification so that they will meet Landlord's approval as the Plans for the
Tenant Work. Tenant shall cause the Interior Space Planner and Consulting
Engineer to deliver to Landlord revised architectural and engineering working
drawings and specifications which are acceptable to Landlord as Plans and are in
form and condition suitable to be released and issued for construction. Landlord
shall not arbitrarily refuse to approve Tenant's Plans or arbitrarily request
modifications or revisions thereto, but Tenant acknowledges that, in addition to
other factors which might justify Landlord's request for modifications and
revisions, Landlord shall have the right to request modifications and revisions
in the event that Tenant's Plans adversely affect mechanical, electrical,
plumbing, HVAC or other system sin the Building, violate any applicable
governmental law, regulation or ordinance, impair the structural integrity,
exterior appearance or safety of the Building or the shell and core work, or are
not consistent with the first-class nature of the Building.
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3. APPROVAL OF COST ESTIMATE. Following Landlord's approval of the
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Plans, Landlord shall obtain and submit to Tenant estimates of the cost of the
Tenant Work from not less than three (3) qualified bidders. Tenant shall approve
or disapprove (in whole or in part) an estimate and give Landlord a notice to
proceed with the construction based upon the approved Plans and cost estimate.
If Tenant shall disapprove the cost estimate, Tenant shall have the right to
modify the Plans Subject tot landlord's approval as provided above) in order to
modify the cost of the Tenant Work. Following any modifications to the Plans,
Landlord shall submit to Tenant a revised cost estimate for Tenant's approval.
Landlord shall not commence performance of the Tenant Work until Tenant approves
an estimate of the cost thereof and gives Landlord a notice to proceed.
In the event that the cost of the Tenant Work contained in the approved
cost estimate exceeds Landlord's Contribution to Landlord, for deposit in
Landlord's trust account for payment for the Tenant Work as the Tenant Work
progresses, upon approval of the cost estimate. In the event the cost of the
Tenant Work thereafter exceeds or further exceeds Landlord's Contribution,
tenant shall pay the deficiency form time to time within five (5) days after
receipt of a statement therefor from Landlord. If Tenant shall fail to so pay
any such amount to Landlord, Landlord may defer commencement of construction or
suspend construction and all delay and cost arising from the same shall be
considered delay by Tenant and Tenant shall be responsible for all costs
thereof.
4. FEES/COST OF TENANT WORK. The fees of the Interior Space Planner and
------------------------
the Consulting Engineer in connection with the Plans and construction
administration, including the cost of any and all revisions to the Plans
required to complete the Tenant Work shall also include the direct costs
thereof, plus general conditions (including rubbish removal, hoisting, permits,
field supervision and the like), plus the contractor's charges for overhead and
fees, together with the sum of Twenty-Six Thousand Three Hundred Eighty and
No/100 dollars ($26,380) (which is equal to $2.50 multiplied by the Rentable
Area of the Modified Premises) to Stein & Company or an affiliate thereof as
Landlord shall designate as a fee for its overhead and administrative expenses
in connection with the Tenant Work.
5. LANDLORD'S CONTRIBUTION. Landlord shall contribute up to the sum of
-----------------------
One Hundred Thirty-One Thousand Seven Hundred Ninety-Four and 48/100 Dollars
($131,794.48), which is the product of Twelve and 49/100 Dollars ($12.49)
multiplied by the Rentable Area of the Modified Premises ("Landlord's
Contribution"). The Landlord's Contribution shall first be applied toward the
costs associated with demise of Modified Premises (the "cost of Demising). Upon
full payment of the Cost of Demising, the remaining Landlord's Contribution, to
the extent thereof, shall be applied toward the remaining cost of construction
of the Tenant Work, including all fees as described in Paragraph 4 hereinabove.
If the entire Landlord's Contribution shall not be required for completion of
the Tenant Work, Tenant shall be entitled to apply up to forty-two Thousand Two
Hundred Eight and No/100 Dollars ($42,208.00) (which is equal to Four and No/100
Dollars ($4.00) per rentable square foot of the Modified Premises) of any excess
Landlord's Contribution after payment of all costs of the Tenant Work
(including, without limitation, all Costs of Demising) and all fees as above
provided as a setoff against Base Rent next coming due under the Lease. Any
portion of the Landlord's Contribution which shall not be utilized for
construction of the Tenant Work which is in excess of $4.00 per rentable square
foot
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of the Modified premises shall not be applied against Base Rent as aforesaid or
in any other way be paid to or for the benefit of or be made available to
Tenant.
6. MISCELLANEOUS.
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(a) The Tenant Work shall be done by Landlord, or its designees,
contractors or subcontractors, in accordance with the terms, conditions and
provisions herein contained.
(b) Except as herein or in the Lease expressly set forth, Landlord has
no agreement with Tenant and has no obligation to do any other work with respect
to the Modified premises. Any additional work or alterations to the Modified
Premises desired by Tenant after the Effective Date of the Extension Period
shall be subject to the provisions of Section 11 of the Office Lease.
(c) Time is of the essence under this Workletter.
(d) Any person signing this Workletter on behalf of Landlord or Tenant
warrant s and represents he has authority to do so.
(e) This Workletter shall not be deemed applicable to any additional
office space added to the Modified Premises at any time or form time to time,
whether by any options or rights under the Lease or otherwise, or to any portion
of the Modified Premises or any additions thereto in the event of a further
renewal or extension of the Term of the Lease, whether by any options under the
Lease or otherwise, unless expressly so provided in the Lease or any amendment
or supplement thereto.
(f) With respect to any amounts owed by Tenant hereunder and not paid
when due to Tenant's failure to perform its obligations hereunder, Landlord
shall have all of the rights and remedies granted to Landlord under the Lease
for nonpayment by Tenant of any amounts owed thereunder or failure by Tenant to
perform its obligations thereunder.
(g) Neither Landlord nor Stein & company or any affiliate thereof shall
have any responsibility for construction means, methods or techniques or safety
precautions in connection with the Tenant Work, or for the accuracy or
completeness of the Plans or any design error therein or any costs attributable
to any lack of adequacy of or nay design error in the Plans.
7. EXCULPATORY CLAUSE. This instrument is executed by American
------------------
National Bank and Trust Company of Chicago, not personally but solely as Trustee
under Trust No. 42978. All the convenants and conditions to be performed
hereunder by American National Bank and Trust Company of Chicago are undertaken
by it solely as Trustee, as aforesaid, and not individually, and no personal
liability shall be asserted or be enforceable against American National bank and
Trust Company of Chicago, the beneficiaries thereof nor any of their respective
partners, shareholders, directors, officers, agents or employees by reason of
any of the covenants, statements, representations or warranties contained in
this instrument. All of the further exculpatory provisions of Section 44 of the
Office Lease are incorporated herein as if fully set forth herein and are fully
applicable to this Workletter as if fully set forth.
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IN WITNESS WHEREOF, the parties hereto have executed this Workletter as
of the date and year on which the lease was executed and was executed
contemporaneously therewith.
LANDLORD:
AMERICAN NATIONAL BANK AND TRUST
COMPANY OF CHICAGO, not personally but as
Trustee as aforesaid
By: /S/ Ira Gerard
----------------------------------
Its: VP, Finance
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TENANT:
TSI INTERNATIONAL SOFTWARE LTD. a(n)
________________ corporation
By: /s/ Peter Johansen
----------------------------------
Its:
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ATTEST:
/s/ Ann Curry
- -----------------------------
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EXHIBIT C
SURRENDERED SPACE
1,543 rsf
[GRAPHICS OF SUCH SPACE]
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- --------------------------------------------------------------------------------
BANNOCKBURN LAKE OFFICE PLAZA
- --------------------------------------------------------------------------------
OFFICE LEASE
TSI INTERNATIONAL SOFTWARE LTD.
------------
OFFICE BUILDING LEASE
------------
BUILDING B
2345 WAUKEGAN ROAD
BANNOCKBURN, ILLINOIS 60015
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OFFICE BUILDING LEASE
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SECTION
NUMBER SECTION CAPTION PAGE
6
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SUMMARY OF
BASIC LEASE PROVISIONS
ITEM
A. BUILDING AND ADDRESS
Building B
Bannockburn Lake Office Plaza
2345 Waukegan Road
Bannockburn, Illinois 60015
B. LANDLORD AND CURRENT ADDRESS
Landlord:
American National Bank and Trust Company of Chicago,
not individually but solely as Trustee under
Trust No. 42978
In Care of Landlord's Beneficiary:
Bannockburn Lake Office Plaza
Limited Partnership II
2201 Waukegan Road, Suite E-250
Bannockburn, Illinois 60015
C. TENANT AND CURRENT ADDRESS:
TSI International Software Ltd.
2345 Waukegan Road
Bannockburn, Illinois 60015
D. DATE OF LEASE February 5, 1994
E. LEASE TERM Twenty (20) months
F. COMMENCEMENT OF DATE OF TERM: May 1, 1994
G. EXPIRATION DATE OF TERM December 31, 1995
H.1 INITIAL BASE RENT (Triple-Net):
(i) Annualized: One Hundred Forty-Five Thousand
One Hundred Forty and
00/100 Dollars ($145,140.00)
(ii) Monthly Twelve Thousand Ninety-Five
and no/100 Dollars ($12,095.00)
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H.2 INITIAL OPERATING EXPENSES
AND TAXES:
(As Estimated for the calendar year 1994 only
at $7.00 RSF and $1.23 RSF, respectively,
and subject to adjustment pursuant to the
provisions of Section 6 hereinafter):
(i) Annualized: Ninety-Nine Thousand Five Hundred Forty-One
and 92/100 Dollars ($99,541.92)
(ii) Monthly Eight Thousand Two Hundred Ninety-Five
and 16/100 Dollars ($8,295.16)
ITEM
I. RENTABLE AREA OF THE PREMISES: 12,095 Square Feet
J. RENTABLE AREA OF THE BUILDING 105,720 Square Feet
K. TENANT'S PROPORTION OF THE BUILDING Eleven and 4,406/10,000 Percent
(11.4406%)
L. AMOUNT OF SECURITY DEPOSIT: Security deposit waived by Landlord
M. FLOOR, WING AND SUITE: First Floor, East Wing, Known as
Suite # E-100
N. NAME(s) OF BROKER(s): For Tenant:
None
For Landlord:
Park Brokerage Group Limited
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Bannockburn Lake Office Plaza
OFFICE LEASE
TSI INTERNATIONAL SOFTWARE LTD.
OFFICE BUILDING LEASE
BUILDING B
2345 WAUKEGAN ROAD
BANNOCKBURN, ILLINOIS 60015
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Bannockburn Lake Office Plaza
OFFICE BUILDING LEASE
BUILDING B
2345 Waukegan Road
Bannockburn, Illinois 60015
THIS OFFICE BUILDING LEASE is entered into, upon or as of the day and
year set forth on preceding page iii, Item D, by and between AMERICAN NATIONAL
BANK AND TRUST COMPANY OF CHICAGO, a national banking association, not
individually but solely as Trustee under Trust Agreement dated June 1, 1978 and
known as Trust No. 42978 ("Landlord") and the tenant the name of which is set
forth as Item C on preceding page iii ("Tenant").
WITNESSETH:
THE DEMISE:
Landlord does hereby to Tenant and Tenant hereby leases from Landlord
those certain premises (the "Premises"), said Premises containing approximately
the number of rentable square feet set forth in Item I and as designated in Item
M as depicted on the Plan of Premises attached hereto as Exhibit A and made a
part hereof, which Premises are situated in that certain building, Building B
(the "Building"), commonly known as 2345 Waukegan Road, Village of Bannockburn,
Illinois, and located on the property (the "Property") which is legally
described on Exhibit B attached and made a part hereof.
Such lease is upon and subject to the terms, covenant sand conditions
herein asset fort and Tenant covenants as material part of the consideration of
this Lease to keep and perform each and all of said terms, covenants and
conditions by it to be kept and performed and that this Lease is made upon the
condition of such performance. Notwithstanding the date set forth of the
commencement of the Term, the provisions of this Lease shall apply from the date
hereof.
1. PURPOSE.
The Premises are to be used for general office purpose and uses
incidental thereto and for no other purpose without the prior written consent of
Landlord.
2. TERM.
The term of this Lease shall be for the period set forth as Item E,
commencing and expiring on the dates set forth as Items F and G, respectively
(the "Term"), or unless sooner terminated as provided in this Lease.
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3. INTENTIONALLY DELETED.
4. BASE RENT.
The Initial Base Rent for the Premises during such portion of the Term
as false within calendar year 1994 shall be at the annualized "triple-net" rate
set forth as Item H.1(i) payable in monthly installments of the amount set forth
in Item H.1(ii) and shall be paid in advance on or before the first day of the
first full calendar month of 1994 and a like sum on or before the first day of
each and every successive calendar month thereafter during 1994, and such Base
Rent shall be payable together with Additional Rent, other rent, and all other
amounts provided herein due to Landlord from time to time, upon or prior to such
dates.
The Base Rent for the Premises during the calendar yea 1995 shall be
annualized "triple-net" rate of $12.30 RSF, amounting to One Hundred Forty-Eight
Thousand Seven Hundred Sixty-Eighty and 56/100 Dollars ($148,768.56) annually
and Twelve Thousand Three Hundred Ninety-Seven and 38/100 Dollars ($12,397.38)
monthly. In addition, Operating Expenses and Taxes, and all other charges due
and payable under the Lease, shall be paid be paid by Tenant to Landlord in
accordance with the terms of the Lease. Such Operating Expenses and Taxes for
1995 will be estimated on or before March 1, 1995.
In the event that Tenant shall validly exercise its option to extend
the Term by Option A (as that Option A set forth in Section 42 (c) hereinbelow),
the "triple-net" Base Rent during such extended term of eighteen (18) months
shall be the following annual rates and annual and monthly amounts:
<TABLE>
<CAPTION>
Term Rate Annual Amount Monthly Amount
---- ---- ------------- --------------
<S> <C> <C> <C>
January 1, 1996 - December 31, 1996 $12.60 RSF $152,397.00 $12,699.75
January 1, 1997 - June 30, 1997 $12.90 RSF $165,025.56 $13,002.13
</TABLE>
During the Term, or if extended by the exercise of Option A pursuant to
Section 2 (c), no increase in the Consumer Price Index shall affect or increase
Base Rent.
In the event that Tenant shall validly exercise its option to extend
the Term by Option B (as that Option B is set forth in Section 42 (d)
hereinbelow), the "triple-net" Base Rent during such term of five (5) years
shall beat the rate computed by application of the formula set forth in said
Section 42 (d) and increases in the Consumer price Index will have an annual
affect upon Base Rent commencing with January 1, 1997 and January 1st of the
Subsequent years to the calendar year 1997.
The Base Rent, Additional Rent, other rent and all other amounts
provided herein as may be due to Landlord from time to time shall be paid to
Landlord's Beneficiary, without deduction or offset, in lawful money of the
United States of America a the designated office of Landlord in the Building or,
if none, then to Bannockburn Lake Office Plaza Limited Partnership II, Suite
E-
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250, 2201 Waukegan Road, Bannockburn, Illinois 60015, or at such the agent or at
such other place as Landlord may from time to time designate in writing.
Any rent (whether Base Rent, Additional Rent or other rent or other
amount provided herein as may be due to Landlord [collectively sometimes
referred to as "rent"]) or other amount due from Tenant to Landlord under this
Lease which is not paid promptly when due shall, at Landlord's mortgagee's
option, either (i) bear interest from the date due until the date paid at the
Default Rate as specified in Landlord's mortgagee's Substitute (Mortgage) Not
dated September 1, 1983 or (ii) be subject to a five percent (5%) late charge
("Late Charge") upon the total of Base Rent and Additional Rent due also as
specified in the aforesaid Substitute (Mortgage) Note. Partial payment of
monthly rent shall be construed to be first applied on account of Operating
Express and Taxes and, thereafter, toward Base Rent and other Additional Rent.
The Late Charge shall apply if Tenant has failed to pay such rent or other
amount in a timely manner for any two (2) months within a calendar year during
the term hereof and if Landlord's mortgagee does, in fact, impose the full five
percent (5%) Late Charge or a lesser sum for such month in which Tenant shall
not have paid rent on or before the first day of the month. In such event, then
all of Tenant's late payments shall likewise be subject to a Late Charge in a
like percentage or proportionate sharing less any interest as shall have been
paid by Tenant pursuant to (I) above for such months. The payment, however, of
such interest or Late Charge shall not excuse or cure any default by Tenant
under this Lease. The covenants herein to pay rent (whether Base Rent,
Additional Rent or other rent) and other amounts which may become due hereunder
shall be independent of any other covenant set forth in this Lease.
5. ADDITIONAL RENT ADJUSTMENT FORMULA (AND DEFINITIONS).
To the amount of Base Rent as is set forth in Section 4 above shall be
added such additional amounts as are hereinafter set forth in its Section 5 and
in Section 6.
For the purpose of Section 5 and 6, the following words and phrases
shall have the following meanings:
DEFINITIONS
"Adjustment Date" shall mean January 1 following the commencement date
of the Term and each January 1 thereafter falling within the Term.
"Base Year" shall mean January 1 following the commencement date of the
Term and each January 1 thereafter falling within the Term.
"Consumer Price Index" shall mean the Consumer Price Index for All
Urban Consumers, City of Chicago, Illinois area (Base Year 1967 = 100) published
by the United States Department of Labor, Bureau of Labor Statistics. If the
manner in which such Consumer Price Index as determined by the Bureau of Labor
Statistics shall be substantially revised an adjustment shall be made in such
revised index which would produce results equivalent, as nearly as possible, to
those which would have been obtained if the Consumer Price Index had not been so
revised. If the 1982-84 average shall no longer be used as an index of 100, such
change shall constitute a
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substantial revision. If the Consumer Price Index shall become unavailable to
the public because publication thereof is discontinued or is otherwise
unavailable, Landlord shall substitute therefor a comparable index based upon
changes in the cost of living or purchasing power of the consumer dollar
published by any other governmental agency or, if no such index shall be
available, then a comparable index published by a major bank or other financial
institution or by a university or a recognized financial publication or
authority.
"Operating Expenses" shall mean all costs, expenses and disbursements
of every kind and nature whatsoever which Landlord shall pay or become obligated
to pay in connection with the management, operation, maintenance, replacement
and repair of the Building, the Property and of the personal property, fixtures,
machinery, equipment, systems and apparatus located in or used in connection
with the Building or the Property (all of such elements hereinafter referred to
as the "Project"), including, but not limited to, utility expenses (excluding
Tenant's outlet usage and Tenant's Premises lighting contracted for or meter and
to be paid for directly by Tenant); telephone; water; fuel; heating; air
conditioning, window cleaning; janitorial service; security; traffic control;
insurance (including but not limited to, fire, extended coverage, liability,
workmen's compensation, elevator, or any other insurance reasonably required and
carried in good faith by the Landlord and applicable to the Project); painting;
uniforms; management fees (but not in excess of four and one-half percent (4.5%)
of gross revenues of the Building); supplies; sundries; sales or use taxes on
suppliers or services; cost of wages and salaries of all persons engaged in the
operations, maintenance and repair of the Project, so-called fringe benefits,
including social security taxes, unemployment insurance taxes, cost for
providing coverage for disability benefits, cost of any pensions,
hospitalization, welfare or retirement plans, or any other similar or like
expenses incurred under the provisions of any collective bargaining agreement,
and any other cost or expense which the Landlord pays or incurs to provide
benefits for employees so engaged in the operation, maintenance and repair of
the Project; the charges of any independent contractor who, under contract with
the Landlord or its representatives, does any of the work of operating,
maintaining or repairing of the Project; legal, accounting and data processing
expenses, including, but not limited to, such expenses as relate to seeking or
obtaining reductions in and refunds of real estate taxes, or any other expense
or charge, whether or not hereinbefore mentioned, which, in accordance with
generally accepted accounting principles, would be considered as an expense of
maintaining, operating or repairing the Project; and current amortization of
such capital improvements and service warranty extensions as are reasonably
necessary for the operation and maintenance of the project. Operating Expenses
shall exclude, without limitation, all the following: (i) the cost of any
structural repairs or modifications or of any capital expenditures or capital
improvements (with the exception of the reasonable amortization, amortized
without interest over the estimated useful life of such improvement, of the cost
of any capital improvement to the Building, to the extent that such improvement
may reasonably be expected to reduce or limit increases in, or substitute for,
Operating Expenses incurred during the Lease Term, in an amortized amount during
any year not to exceed one and one-half the actual cost savings or actual
reduction in Operating Expenses during any such year); (ii) expenses for repairs
arising from any latent defect in the Building or Building equipment or expenses
for repairs for damage caused by any insurable casualty, which expenses are
reimbursed by insurance carried by Landlord, or would be reimbursed by insurance
required to be carried by Landlord pursuant to this Lease; provided, however,
deductible sums as shall be
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required to be paid I the event of a loss shall be considered operating Expenses
if and when paid or incurred by Landlord; (iii) expenses to renovate space for
new tenants or space vacated by any tenant, such as for painting, renovating,
redecorating, or similar expenses; (iv) expenses incurred in leasing or
procuring new tenants, including, without limitation, lease commissions paid to
agents of Landlord or other brokers, or advertising expenses; (v) interest or
principal payments on any mortgages; lease payments for any prime, underlying,
or ground lease; or depreciation of the Building; (vi) legal fees or expenses or
arbitration costs incurred in enforcing the terms of any lease or resolving
disputes between Landlord and any tenant of the Building as to the
interpretation or administration of any lease; provided, however, this provision
shall not be construed to limit the Tenant's liability therefor pursuant to
Section 32 or as may be specifically provided elsewhere in this Lease; (vii)
wages, salaries or other compensation paid to any employees above the grade of
"building manager", or "property manager" (i.e., the person who is the highest
level managerial employee who has the responsibility of the day-to-day
management decisions for the Building); provided, however, this provision shall
not be construed to preclude management fees as are provided for hereinabove;
(viii) costs of utilities or services payable by or charged to any tenant; (ix)
any cost or expense incurred by Landlord for performing work or services for any
other tenant under a lease with such tenant which Landlord does not perform to
any degree for Tenant under this Lease; and (x) any cost or expense of any
nature whatsoever which Landlord incurs in connection with the operation of the
Building which is specifically reimbursed to the Landlord from any source,
charged directly to the tenant on whose behalf it is incurred (whether or not
the same is finally paid), or for which Landlord is otherwise compensated, or
recoups, by way of setoff, reduction of recovery allowed, or otherwise.
"Per Square Foot Operating Expenses" shall mean the amount of Operating
Expenses for any calendar year divided by 105,720 square feet (the Rentable Area
of the Building).
"Per Square Foot Taxes" shall mean the accrued amount of Taxes for
which payment will be due for any calendar year divided by 105,720 square feet
(the Rentable Area of the Building), whether or not such payment shall actually
be paid during such year.
"Taxes" shall mean any and all federal, state, county, local
municipality, or other political subdivision, authority, agency or taxing body
taxes, assessments and charges of every kind or nature whatsoever, whether
general, special, ordinary or extraordinary, which Landlord shall pay or become
obligated to pay during a calendar year because of or in connection with the
ownership, leasing, management, control or operation of the Building and the
Property and of the personal property, fixtures, machinery, equipment, systems
and apparatus located therein or used in connection therewith including, without
limitation, real estate taxes, personal property taxes, sewer rents, water
rents, special assessments, transit or transit district taxes or assessments,
any tax or excise on rent or any other tax, however described, on account of
rental received for use and occupancy of any or all of the Building and the
Property, and including any rental or similar taxes levied in lieu of, or in
addition to, general real and/or personal property taxes. If a change occurs in
the method of taxation during the Term which change shall result in whole or in
part in the substitution of any such taxes, or any other assessment, for any
Taxes, above defined, such substituted taxes or assessments shall be included in
the Taxes. For purposes hereof, if taxes are accessed or become a lien during
one year, but are due for payment or paid in a subsequent year,
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such taxes shall constitute Taxes hereunder only during the year in which they
were assessed or became a lien; provided however, that to the extent that a
then-current year's reserve or escrow has under or over-estimated the
then-current year's taxes, the net adjustment, either additional or credit, may
constitute Taxes or a credit to Taxes, respectively, in the year following the
then-current year. It is understood the real estate tax is escrowed each month
in an amount equal to one-twelfth of the estimated tax for the then-current
calendar year so that, by December 31st of each year, an amount is reserved
approximately equal to the total tax for the then-current year, although not
payable until the calendar year subsequent to the then-current year. The sum of
all such monthly reserved amounts shall be considered as a part of Taxes for
each then-current calendar year. There shall be included in Taxes for any year
the amount of all fees, costs and expenses, including attorneys' fees, paid by
the Landlord during, or relative to, such year as pertain to seeking or
obtaining reductions in or refunds of real estate taxes. Taxes in any year shall
be reduced by the net amount of any related tax refund received by Landlord
during such year. If a special assessment which is payable in assessment and any
interest payable or paid during such year. "Taxes" shall exclude, without
limitation, all the following: (i) any income, franchise, payroll, excise,
corporate, estate, inheritance, capital stock or transfer tax levied on Landlord
(to the extent that it is not a substitute in whole or in part for real estate
taxes); (ii) any water charges, sewer rents, or similar charges in the nature of
payments for utilities, however denominated, to the extent, and if, the same are
included in Operating Expenses; (iii) any special assessments for public
improvements not generally applicable throughout a material portion of the
complex in which the Building is located; and (iv) any late payment penalties or
late payment interest charges.
"Rentable Area of the Premises" shall refer to the Tenant's Premises
and shall mean the number of square feet set forth in Item I and as a percentage
of the Rentable Area of the Building shall be equal to Item K, Tenant's
Proportion of the Building.
"Rentable Area of the Building" shall mean the sum of the aggregate
Rentable Area of the Premises of all tenants within the Building, which is
105,720 square feet.
"Subsequent Year" shall mean any calendar year during the Term of this
Lease after the calendar year during which the commencement date of the Term of
this Lease occurs.
ADDITIONAL RENT FORMULA
(i) Taxes.
The Tenant shall pay to the Landlord, as Additional Rent, the amount of
Taxes as defined in this Section ("Taxes") equal to that proportion as the
Rentable Area of the Premises bears to the Rentable Area of the Building (such
proportion hereinafter being called "Tenant's Proportion") for the Base Year and
each Subsequent Year. The amount of Taxes, attributable to the Base Year and to
Subsequent years, shall be the amount accrued during any such year, even though
the payment date for such taxes may be in a different year or years. Such sum
shall be paid in such monthly installments as shall be reasonably estimated by
Landlord.
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If the tax year for real estate taxes shall be changed by the
applicable governmental authority and shall result in the payment by the
Landlord in one calendar year of taxes which relate to more than one calendar
year, then, notwithstanding anything to the contrary contained in this Lease,
for purposes of determining the Taxes for such calendar year, such amount of
Taxes paid shall be adjusted to an amount which is equivalent to a one-year
payment of Taxes.
In the event that Property is not assessed as fully improved for the
Base Year, then, for the purposes of Sections 5 and 6 of this Lease the Real
Estate Taxes payable in such year shall be borne by the tenants based upon the
assessment of the Property in the following manner: As to the land portion of
the assessment, Tenant shall pay Tenant's Proportion thereof. As to the building
improvement portion of the assessment, Tenant shall pay Tenant's Proportion
unless it shall be shown that the Assessor limited its assessment to only the
Premise of Tenant or to a lesser area than the Rentable Area of the Building, in
which event Tenant shall pay its equitable share based upon the composition
assessment.
(ii) Operating Expenses.
The Tenant shall pay to the Landlord, as Additional Rent, Tenant's
Proportion of the amount of Operating Expense for the Base Year and each
Subsequent Year, and such sum shall be paid in such monthly installments as
shall be reasonably estimated by the Landlord.
If any Project Operating Expense, although paid in one year, relates to
more than one calendar year, at the option of Landlord such Operating Expense
may be proportionately allocated among such related calendar years.
In the event that, during all or any portion for the Base Year or any
Subsequent year, the Building is not fully rented and occupied, Landlord shall
make an appropriate adjustment of Operating Expense for such year, employing
sound accounting and management principles, to determine the Operating Expenses
that would have been paid or incurred by Tenant had the Building been fully
rented and occupied and the amount so determined shall be deemed to have been
the Operating Expenses for such year.
(iii) Cost of Living Increase.
(Applicable only if Option B, Section 42 (d) is exercised by
Tenant).
In the event that the Consumer Last Index at January 1st for any
Subsequent year shall be greater than the Consumer Price Index at January 1st of
the Base year, Tenant shall pay to the Landlord, as Additional Rent, an amount
equal to thirty-three and one-third percent (33-1/3%) of the percentage of
increase by which the Consumer Price Index at January 1st of such Subsequent
year exceeds the Consumer Price Index at January 1st of the Base Year (said
product shall be referred to herein as the "Cost of Living Increase") and then
multiplied by the aggregate amount of the Base Rent and Additional Rent for the
prior calendar year as finally adjusted.
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(iv) Triple Net Lease.
Notwithstanding any provisions of this Lease which may appear to be in
conflict herewith, the parties acknowledge and agree that this Lease is intended
to be what is commonly known in the real estate industry as a "triple net" or
"net-net-net" lease; that is, in addition to Base Rent, Tenant is obligated to
pay Landlord, as Additional Rent, Tenant's Proportion of Operating Expenses and
Taxes, as defined.
6. ADDITIONAL RENT ADJUSTMENT PAYMENT.
Effective as of each Adjustment Date, and at the time for the payment
of each monthly installment of Base Rent thereafter until the next Adjustment
Date, Tenant shall pay, as Additional rent, an amount equal to 1/12 of the
product of (a) the Rentable Area of the Premises, as specified above, multiplied
by (b) the sum of: (1) the amount of the estimated Per Square Foot Operating
Expenses for the Subsequent Year in which such Adjustment Date falls, plus (2)
the amount of the estimated Per Square Foot Taxes for the Subsequent Year in
which such Adjustment Date falls, plus (3) an amount equal to the product of :
thirty-three and one-third percent (33-1/3%) of the percentage increase, if any,
in the Consumer Price Index for the month of the Adjustment Date over the
Consumer Price Index for January of the Base Year, multiplied by the annual rate
of monthly Base Rent and Additional Rent for the prior calendar year as finally
adjusted divided by the Rentable Area of the Premises.
For purposes of calculating Taxes, Operating Expenses and the Consumer
Price Index for any Subsequent Year, as provided in the preceding paragraph,
Landlord ;may make reasonable estimates, forecasts or projections (hereinafter
the "Projections") of Taxes, Operating Expenses and changes in the Consumer
Price Index for such Subsequent Year. On or about March 1st following each
adjustment Date, Landlord shall deliver to Tenant a written statement (i)
setting forth the Projections of Operating Expenses, Taxes and changes in the
Consumer Price Index for the Subsequent Year in which such Adjustment Date
falls, and (ii) providing a calculation of the Additional Rent which became
effective retroactive to, and as of, said Adjustment Date and until the next
Adjustment Date; provided, however, that the failure of Landlord to provide any
such statement shall not relieve Tenant from its obligation to continue to pay
monthly Base Rent and Additional Rent at the rate then in effect under this
Lease, and when Tenant receives such statement from Landlord, Tenant shall pay
Additional Rent reflected thereby effective retroactively to the related
Adjustment Date.
On or about March 1st following the end of each Subsequent Year, or at
such later time as Landlord shall be able to determine the actual amounts of
Taxes, Operating Expenses and the Consumer Price Index for the Subsequent Year
last ended, Landlord shall notify Tenant in writing of such actual amounts. If
such actual amounts exceed the Projections for such Adjustment Year, then Tenant
shall, within thirty (30) days after the date of such written notice from
Landlord, pay to Landlord the amount of excess of the Additional Rent payable
for the Subsequent Year last ended based upon the actual Taxes, Operating
Expenses and the Consumer Price Index for such year over the total Additional
Rent paid by Tenant on account based on the Projections during and for such
Subsequent Year last ended. The obligation to make such
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payment shall survive the expiration or earlier termination of the Lease. If the
Additional Rent paid by Tenant during such Subsequent Year based upon the
Projections exceeds the amount payable for such year based upon the actual
Taxes, Operating Expenses and the Consumer Price Index for such Subsequent Year,
then Landlord shall credit such excess to installments of Additional Rent which
shall become payable after the date of Landlord's notice until such excess has
been exhausted or, if this Lease shall expire or terminate prior to full
application of such excess, Landlord shall pay to Tenant the balance thereof not
theretofore applied against Additional Rent within thirty (30) days after
expiration or termination. No interest or penalties shall accrue on any amounts
which Landlord is obligated to credit or pay to Tenant by reason of this Section
unless not credited as aforesaid or paid to Tenant within thirty (30) days after
expiration or termination.
The annual determination and statement of Taxes, Operating Expenses and
the Consumer Price Index shall be prepared in accordance with the income tax
basis of accounting and otherwise in accordance with generally accepted
accounting principles. Tenant shall have the right, at its sole cost and
expense, to inspect Landlord's accounting records relative to Taxes, Operating
Expenses and the Consumer Price Index at Landlord's accounting office during
normal business hours upon reasonable notice at any time within sixty (60) days
following the furnishing by Landlord to Tenant of such statement. Unless Tenant
shall take written exception to any item within such sixty (60) day period, such
statement shall be considered as final and accepted and conclusive upon the
Tenant. If Tenant makes a timely written exception, a certification as to the
proper amount of Additional Rent shall be made by an accounting firm selected by
Tenant from the twenty-five largest independent certified public accounting
firms in Chicago, as designated in the last available Crain's Chicago Business
Annual Survey of Accounting Firms, provided same has not performed work for
Tenant or its affiliates for the three (3) years immediately preceding the date
of the exception notice, which certification shall be final and conclusive.
Tenant agrees to pay the cost of such certification unless it is determined that
Landlord's presentation or determination of the aggregate amount of the Taxes,
Operating Expenses and the Consumer Price Index for the year was in error by
more than three percent (3%).
In the event of the termination of this Lease by expiration of the Term
or for any other cause or reason whatsoever prior to the determination of the
rental adjustment as hereinabove set forth, Tenant's agreement to pay Base Rent,
Additional Rent, other rent and all other sum or sums due or which may become
due to Landlord up to the time of and upon or pursuant to the expiration or
termination of this Lease, shall survive the expiration or termination of this
Lease and the Tenant shall pay amounts due to Landlord promptly upon demand.
Insofar as the annual determination and statement of Taxes is concerned,
Landlord agrees to make such additional accounting or adjustment as is necessary
following the expiration of the Lease Term, based upon the actual tax bills
received by Landlord after such date of Lease expiration inasmuch as such bills
are likely to be received after the accounting date and procedure set forth in
Section 6.
Notwithstanding anything to the contrary contained in this Lease,
Tenant shall not be entitled to any payment or credit against Base Rent in the
event that the Consumer Price Index shall decrease from its January 1, 1989
level.
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7. HOLDING OVER.
Should Tenant hold over after the termination of this Lease, by lapse
of time or otherwise, Tenant shall become a tenant from month to month only upon
each and all of the terms herein provided as may be applicable to such month to
month tenancy and any such holding over shall not constitute an extension of
this Lease, provided, however, during such holding over, Tenant shall pay
monthly Base Rent and Additional Rent (pursuant to Sections 5 and 6, or as
estimated by Landlord) at 150% of the rate payable for the month immediately
preceding said holding over and, in addition, Tenant shall pay to Landlord all
damages, consequential as well as direct, sustained by reason of Tenant's
holding over, unless Landlord has consented in writing to the hold-over. The
provisions of this Section do not exclude the Landlord's rights of re-entry or
any other right pursuant to this Lease.
8. BUILDING SERVICES.
Landlord shall furnish to Premises during reasonable hours (9:00 A.M.
to 6:00 P.M. on Mondays through Friday and 8:00 A.M. to 1:00 P.M. on Saturdays)
of generally recognized business days as reasonably determined by Landlord, and
subject to the rules and regulations of the Building, heat and air conditioning
required in Landlord's reasonable judgment for the comfortable use and occupancy
of the Premises and passenger elevator and, subject to scheduling by Landlord,
freight service. Landlord shall also furnish cleaning and janitorial maintenance
services, substantially in accordance with Exhibit D, in and about the Premises
and Building (Saturdays, Sundays and holidays excepted). Elevator service shall
mean service by existing non-attended automatic elevators. Subject to reasonable
advance notice, Landlord shall also furnish heating and air conditioning at such
other times as are not provided for herein provided Tenant pays the charge of
Landlord to furnish such additional heating or air conditioning. Landlord shall
also maintain and keep lighted the common stairs, entries and toilet rooms in
the Building at all required times. Landlord shall not be liable for, and Tenant
shall not be entitled to, any abatement or reduction of rent by reasons of
Landlord's failure to furnish any of the foregoing, nor shall such failure
constitute an eviction, whether such failure is caused by accident, breakage,
repairs, energy shortages or restrictions, strikes, lockouts or other labor
disturbances or labor disputes of any character, riots, civil disturbance or by
any other cause, similar or dissimilar, beyond the reasonable control of
Landlord. Landlord shall not be liable under any circumstances for loss of or
injury or other loss or damage, direct or indirect, regardless of type and
however occurring through, or in connection with or incidental to, failure to
furnish any of the foregoing unless such failure was caused by Landlord's
negligence.
Whenever heat generating machines or equipment , including but not
limited to, word processing, photoreproduction, computer and telephone
equipment, are selected by Tenant for us in the Premises and such machinery or
equipment adversely affects the seasonal temperature otherwise maintained by the
air conditioning system, Landlord reserves the right at its election to either
(i) install supplementary air conditioning units in the Premises and the cost
thereof including the cost of installation and the cost of operation and
maintenance thereof, shall be paid by Tenant to Landlord upon demand by
Landlord, or (ii) charge Tenant for the additional costs for air conditioning
which are being incurred as a result of Tenant's usage (and would otherwise
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be borne by the other tenants or Landlord as excessive operating expenses) as
reasonably determined from time to time by Landlord and its engineer or other
energy consultant.
Cold and hot water in common with other tenants for drinking, lavatory
and toilet purposes from regular Building supply drawn through fixtures
installed by the Landlord in common areas and drawn through fixtures installed
in the Premises, shall be supplied by Landlord. Tenant shall pay to Landlord as
an additional charge at rates based on Landlord's cost for water furnished for
any private or other purpose including, but not limited to, fixtures or
machinery within the Premises which utilizes water, or for bath or shower
facilities. The Tenant shall not waste or permit the waste of water. If the
Tenant fail to pay within twenty (20) days the Landlord's proper charges for
such special uses of water by Tenant, the Landlord, upon a notice of not less
than ten (10) days, may, in addition to any other remedy provided in this Lease,
discontinue furnishing that special service and no such discontinuance shall be
deemed an eviction or disturbance furnishing that special service and no such
discontinuance shall be deemed an eviction or disturbance furnishing that
special service and no such discontinuance shall be deemed an eviction or
disturbance of the use by Tenant of the Premises or render Landlord liable for
damages or relieve Tenant from any obligation hereunder.
Electricity for lighting the Premises and for the outlet usages of
Tenant shall not be furnished by Landlord but shall be furnished by Commonwealth
Edison Company, which services the area. Landlord shall permit the Tenant to
receive such service direct from such public utility at Tenant's cost, and shall
permit Landlord's wire and conduits, to the extent available, suitable and
safety and safely capable, to be used for such purposes. Tenant shall make all
necessary arrangements with such utility company for the metering of an payment
for electric current furnished to it and Tenant shall pay for all charges for
electric current consumed on the Premises (except for emergency lighting which
is on Building circuits) during Tenant's lease thereof including the electricity
used during the performance of janitorial services and the making by Landlord of
alterations or repairs within the Premises. Electricity used at Tenant's request
for the operation of air conditioning, heating and ventilation systems of the
Building at times other than as provided above or for the full or unnecessary
lighting of common areas during special times (other than during normal business
hours) as shall be requested by Tenant, or for the operation of any special air
conditioning systems which may required for date processing equipment or for
other special equipment or machinery installed by Tenant, shall be paid for by
Tenant to Landlord promptly upon demand. Tenant shall make no alterations of or
additions to the electrical wiring or equipment and/or appliances without the
prior written consent of the Landlord in each instance. Tenant also agrees to
purchase from the Landlord or its agents, at Landlord's reasonable cost for
labor and material, all lamps, bulbs, ballast and starters used within its
Premises after the initial installation thereof at the commencement of the
Lease. Tenant covenants and agrees that at no time shall its use of electricity
current ever exceed the capacity of the feeders to the Building or the risers or
wiring installation. Tenant will not, without the prior written consent of
Landlord, use any apparatus or device in the Premises which will in any way
increase the amount of electricity or increase the amount of water which
Landlord determines to be reasonable for use of the Premises as general office
space; nor connect with electric current (except through existing electrical
outlets in the Premises) or water pipes, any apparatus or device for the purpose
of using electric current or water. If Tenant shall require
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water or electric current in excess of the which is respectively obtainable from
existing water pipes or electrical outlets and normal for use of the Premises as
general office space, Tenant shall first obtain the written consent of Landlord.
If Landlord consents to such excess water or electric requirements, Tenant shall
pay all costs of panel equipment, meter service and installation of facilities
necessary to furnishing such excess capacity.
Tenant shall not provide any janitorial services or cleaning without
the Landlord's written consent and then only subject to supervision by Landlord
and at Tenant's sole cost and responsibility and shall be provided by janitors
or cleaning contractors or employees who at all times must be satisfactory to
Landlord.
Landlord shall: (1) carry on a program of preventative maintenance with
respect to the Premises and Building in order to minimize slow-downs or
breakdowns of the mechanical systems; (2) maintain, repair, if necessary,
replace, and keep in good working order and condition throughout the Lease Term
all equipment, facilities, pipes, lines and systems serving the Premises,
including, without limitation, the mechanical systems of the Premises and
Building, and all interior and exterior structural elements of the Premises and
Building, including, without limitation, the foundation and roof of the
Building; and (3) make all repairs made necessary by the negligence, acts or
omissions of Landlord or its officers, agents, partners, servants,
representatives, and employees; and any repairs made necessary by latent
defects, defects in construction, or defects resulting from Landlord's failure
to meet Landlord's maintenance obligation(s) hereunder, including, without
limitation, defects resulting in leakage of water to the windows and exterior
walls of the Building or other openings therein.
Throughout the Lease Term, Landlord shall operate and maintain the
Premises and Building and its structural and mechanical systems at least on a
level comparable to standards maintained in other first-class buildings in the
area in which the Building is located ("the Area"). Landlord shall keep all
common areas and public portions of the Building clean and in good operating
order, condition and repair throughout the Lease Term, including, without
limitation, the lobby, public corridors, elevators, windows, freight facilities,
if any, janitor and telephone closets, and lavatories. Landlord shall maintain
the parking areas, access roadways, and entryways in good repair and condition
and reasonably free from ice, snow and debris. All laws, shrubbery and trees on
the grounds outside the Premises and Building and in the Complex shall be
maintained in an orderly appearance. Landlord shall keep all machinery and
equipment used t provide the service to be furnished by Landlord in first-class
operating order, condition and repair at all times, including, without
limitation, all equipment servicing the mechanical systems. Nothing in the
foregoing recitation of obligations of the Landlord, however, shall be construed
to infer that any of such expenses shall not be deemed to be Operating Expenses
except as may be specifically set forth as excluded pursuant to Section 5.
9. CONDITION OF PREMISES.
Tenant is currently in occupancy and shall be deemed to have agreed
that the Premises are in good order, repair and condition (except for latent
defects). No promise of the Landlord to alter, remodel, decorate, clean or
improve the Premises or the Building and no representation or
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warranty, express or implied, respecting the condition of the Premises or the
Building has been made by the Landlord to Tenant, unless the same is contained
in and made a part of this Lease. This Lease does not grant rights to light or
air over or about the Property. At the termination of this Lease by lapse of
time or otherwise, Tenant shall return the Premises in a good condition as when
Tenant took possession (excepting ordinary wear and tear and loss by fire or
other insured casualty), failing which the Landlord may restore the Premises to
such condition and the Tenant shall pay the cost thereof promptly upon demand.
This covenant and obligation of Tenant shall survive the expiration or
termination of this Lease.
10. USES PROHIBITED.
Tenant shall not use, or permit the Premises pr any part thereof to be
used, for any purpose r purposes other than as specified in Section 1 of this
Lease. No use shall be made or permitted to be made of the Premises not acts
done which may (i) increase the existing rate of insurance or premium cost
therefor upon the Building or covering its operation or (ii) invalidate or cause
a cancellation of any insurance policy covering the Building or any part
thereof, or (iii) which may be dangerous to life, limb or property. Neither
shall Tenant sell, or permit to be kept, used, or sold, in or about the
Premises, any article which may be prohibited either by law or by the insurance
policies of Landlord. Tenant shall not commit, or suffer to be committed, any
waste upon the Premises, or any public or private nuisance, or other act or
allow anything to be brought into the Premises or the Building upon the Property
which may disturb the quite enjoyment of any other tenant in the Building, or
any adjoining property owner or tenant, nor, without limiting the generality of
the foregoing, shall Tenant shall allow the Premises to be used for any
improper, immoral, unlawful or objectionable purpose.
11. COMPLIANCE WITH LAW.
Tenant shall not use the Premises or permit anything to be done in or
about the Premises which will in any way conflict with any law, statute,
ordinance or governmental rule or regulation now in force or which may hereafter
be enacted or promulgated. At its sole cost and expense, Tenant shall promptly
comply with all laws, statutes, ordinances and governmental rules, regulations
and requirements of the local fire district and any board of fire underwriters
or other similar body now or hereafter constituted, relating to, or affecting ,
the condition (except for items to be maintained by Landlord), Tenant's
particular manner of use or occupancy of the Premises, but excluding structural
changes and changes to Building central systems not necessitated by, related to,
or affected by Tenant's improvements or acts. The judgment of any court of
competent jurisdiction or the admission of Tenant in an action against Tenant,
whether Landlord be a party thereto or not, that Tenant has violated any law,
statute, ordinance or governmental rule, regulation or requirement shall be
conclusive of that fact as between Landlord and Tenant.
12. ALTERATIONS AND REPAIRS.
Tenant shall not make any alterations in or construct any additions to
the Premise without the Landlord's prior specific written consent secured in
each and every instance. If the Landlord shall consent to such alterations or
additions, before commencement of the work or delivery of
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any materials into the Building or upon the Premises, the Tenant shall furnish
to the Landlord as it may require, the following materials for Landlord's prior
written approval: final engineering plans and specifications (and "as-builts"
after completion); names and addresses of all contractors, sub-contractors, and
materialmen, copies of all contracts and necessary permits; indemnification in
form and amount satisfactory to Landlord; required certificates of insurance
from all contractors performing labor or furnishing materials insuring the
Landlord in breadth of coverage, by type and amount, to protect it against any
and all liabilities which may arise out of or be connected in any way with said
additions or alterations; and advance waivers of lien against any and all
claims, costs, damages, liabilities and expenses of any kind which may arise in
connection with the alterations or additions. Whether the Tenant furnishes the
Landlord with the foregoing or not, the Tenant hereby agrees to hold the
Landlord, its beneficiaries and the partners thereof, 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, except liabilities resulting from the negligence of
Landlord or its agents or employees, and , if requested by Landlord, Tenant
shall, at its own costs, appear and defend Landlord, its beneficiaries and the
partners thereof, and their respective agents and employees by legal counsel
satisfactory to Landlord. Any mechanic's lien filed against the Premises, the
Building, or the Property for work or materials claimed to have been furnished
to the Tenant shall be discharges of record by the Tenant within ten (10) days
thereafter, at Tenant's expense, except if Tenant shall elect to contest as
provided hereinafter. If Tenant shall fail to have said lien satisfied and
released of record as aforesaid or, as to any lien claim which Tenant shall
elect to contest, shall fail to (i) post a satisfactory bond or other security
in such form and amount as shall be agreeable to Landlord or (ii) promptly
contest and diligently and expeditiously prosecute to successful conclusion any
such lien claim, then after ten (10) days' notice to Tenant and on behalf of
Tenant, Landlord may, without being responsible for making any investigation as
to the validity thereof, pay the amount of said lien and Tenant shall promptly
reimburse Landlord therefor. The Tenant shall pay the cost of all such
alterations and additions and also the cost of decorating the Premises as may be
occasioned by such alterations and additions. Upon completing any alterations or
addition, the Tenant shall furnish the Landlord with contractors' affidavits and
full and final waivers of lien all fully executed in proper form and subject to
approval of Landlord's counsel, and receipted bills covering all labor and
materials provided and used. All additions and alterations shall be constructed
in a good and workmanlike manner and only new, high grade, building standard or
better quality materials shall be used. All alterations and additions shall
comply with all insurance requirements and with all ordinances and regulations
of the Village of Bannockburn and any department, commission or agency thereof
and with the requirements of ll statutes and regulations of the State of
Illinois and County of Lake and of any department, commission or agency thereof.
The Tenant shall permit the Landlord to supervise construction operations in
connection with alterations or additions if the Landlord requests to do so. All
additions, hardware, non-trade fixtures and all improvements, temporary or
permanent, in or upon installation, and shall, unless the Landlord requests
their removal, by notice to Tenant, 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 notice, the Tenant does not
remove said additions, 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 promptly upon demand. Notwithstanding anything herein to the
contrary, if Landlord desires
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that any addition, hardware, non-trade fixture or improvement (whether temporary
or permanent), in or upon the Premises, be removed by Tenant at the termination
of this Lease, Landlord shall so advise Tenant prior to the installation of such
item in order that Tenant may determine whether such items should be installed
in light of Landlord's desire that such item be removed by Tenant at a later
date, provided Tenant has given Landlord, prior to the installation of such
item, reasonable written notice of the intended installation allowing Landlord
and its engineers and architects to examine such plans, and Tenant has complied
with all other provisions of this Lease which may affect such installation. The
Tenant shall remove the Tenant's furniture, machinery, safes, trade fixtures and
other items of personal property of ever kind and description from the Premises
prior to the end of the Term, however ended, or in the event Tenant's right to
possession is terminated without a termination of this Lease. If not so,
removed, the Landlord may request their removal, and if the Tenant does not
remove them, the Landlord may, but shall not be required to, do so and the
Tenant shall pay the cost of such removal to the Landlord promptly upon demand.
If the Landlord does not request their removal, all such items 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. Subject to the provisions of Section 8 and 17 and at its own cost
and expense, Tenant shall keep the Premises in good order, condition and repair
during the Term including but not limited to, the replacement of all interior
broken glass with glass of the same size and quality, with the approval of the
Landlord. If the Tenant does not make repairs promptly and adequately, the
Landlord may elect, but shall not be required, to make repairs upon ten (10)
days prior to notice to Tenant, and the Tenant shall promptly pay the cost
thereof. At any time or times, the Landlord, either voluntarily or pursuant to
governmental requirements, may, at the Landlord's own expense, make repairs,
alterations or improvements in or to the Building or any part thereof, including
the Premises, and, during operations, may close entrances, doors, corridors,
elevators or other facilities, all without any liability to the Tenant by reason
of interference, inconvenience or annoyance. 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, or street. The
Tenant shall pay the Landlord for overtime and any other expense incurred in the
event repairs, alterations, decorating or other work performed in the Premises
is performed at the Tenant's request during non-ordinary business hours.
13. ABANDONMENT OF PREMISES.
Tenant shall not abandon the Premises at any time during the Term, and
if Tenant shall abandon or surrender (whether at the end of the stated Term or
otherwise) the Premises, or be dispossessed by process of law or otherwise, any
personal property belonging to Tenant and left on the Premises for more than ten
(10) days following termination of Tenant's occupancy of the Premises shall be
deemed abandoned, at the option of Landlord.
14. ASSIGNMENT AND SUBLETTING.
Tenant shall not assign this Lease, or any interest herein, and shall
not sublet the Premises or any part thereof, or any right or privilege
appurtenant thereto, or suffer any other person or entity to occupy or use the
Premises, or any portion thereof, without the prior written consent of
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Landlord first had and obtained. Landlord agrees not to unreasonably withhold
consent to any such assignment, occupancy or subletting provided: (i) at the
time thereof Tenant is not in default under this Lease; (ii) Landlord in its
sole discretion reasonably exercised, determines that the reputation, business,
proposed use of the Premises and financial responsibility of an by the proposed
single entity or person or assignee, sublessee or occupant, as the case may be,
of the Premises are satisfactory to Landlord; (iii) any assignee or sublessee
shall expressly assume all of the obligations of Tenant under this Lease; (iv)
such consent, if given, shall not release Tenant from any of its obligations,
including, without limitation, its obligation to pay rent and other sums
becoming due to Landlord, under this Lease; (v) Tenant agrees specifically to
pay to Landlord, as Additional Rent, all sums received by Tenant under the terms
and conditions of such assignment, sublease. or occupancy which are in excess of
the sum of amounts otherwise required to be paid pursuant to this Lease and all
amounts spent by Tenant to effect such assignment or sublease; (vi) a consent to
one assignment, subletting, occupation or use by any person or entity other than
Tenant shall not be deemed to be a consent to any subsequent assignment,
subletting, occupation or use by another person or entity; and (vii) no such
assignment, subletting or occupation shall infer the ability to divide the
Premises into smaller suites or among more than one entity. Any such assignment,
subletting or occupancy without such consent shall be void and shall, at the
option of Landlord, constitute a default under this Lease. Neither this Lease
nor any interest herein shall be assignable as to the interest of Tenant by
operation of law without the written consent of Landlord, which consent may be
arbitrarily withheld. If Tenant shall at any time seek Landlord's consent to
assign this Lease or subject or have another person or entity occupy all of the
Premises as provided herein, then, within thirty (30) days following such notice
by Tenant to Landlord, which notice shall specify all particulars as Landlord
may request concerning the proposed sublease, assignment or occupancy including
but not limited to, names of proposed assignees of sublessees and term of the
proposed transaction, Landlord shall have the right to terminate this Lease as
to all of the Premises and recapture possession of the Premises, in which case
Tenant shall thereafter be released from all obligations under this Lease
accruing after such termination if such obligations relate to the remaining
portion of the Term following the date the Lease has been terminated and so long
as not in conflict with other provisions contained elsewhere in this Lease. In
the event that Tenant shall elect to attempt to assign or sublease all of its
Premises and shall choose to advertise, list with a real estate broker or
brokers, or otherwise show the Premises to prospective assignees or sub-lessees,
Tenant shall be required (i) to comply with Rules and Regulations in relation to
use of any likeness of the Building or Property, and (ii) to refrain from
publicly advertising a rental rate less than that then-quoted by the Landlord
for space within the Building or complex.
15. SIGNS.
Tenant shall not place or affix any exterior or interior signs visible
from the outside of the Building or Premises without the prior written consent
of Landlord. The Tenant shall not display, inscribe, print, paint, maintain or
affix on any place in or about the Building or Property any sign, notice,
legend, direction, figure or advertisement.
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16. DAMAGE TO PROPERTY; INJURY TO PERSONS.
As a material part of the consideration to be rendered to Landlord
under this Lease and to the full extent permitted by law, Tenant hereby waives
all claims, except claims caused by or resulting from the negligence of
Landlord, its agents or employees, which Tenant or Tenant's successors or
assigns may have against Landlord, its beneficiaries, the partners thereof and
the agents and employees of all of the foregoing, for loss, theft or damage to
property and fir injuries to persons in, upon or about the Premises, the
Building or the Property, from any cause whatsoever. Tenant will hold Landlord,
its beneficiaries , the partners thereof and the agents and employees of all of
the foregoing exempt and harmless from and on account of any damage or injury to
any person, or to the property of any person or entity arising from the use of
the Premises by Tenant or arising from the failure of Tenant to keep the
Premises in good condition as herein provided, except for damage or injury
resulting from the negligence of Landlord, its beneficiaries, the partners
thereof or the agents or employees of any of the foregoing. Neither Landlord nor
its beneficiaries, nor the partners thereof nor the agents or employees of any
of the foregoing shall be liable to Tenant for any damage by or from any act or
negligence of any co-tenant or other occupant of the Building, or by any owner
or occupant of adjoining or contiguous property. Tenant agrees to pay for all
damage to the Property or the Building or the Premises, as well as all damage to
tenants or occupants thereof caused by Tenant's misuse or neglect of the
Premises or Building its apparatus or appurtenances or caused by any licensee,
invitee, contractor, agent or employee of Tenant.
Specifically, but not in limitation of the foregoing paragraph, all
property belonging to Tenant or any occupant of the Premises or any agent,
employee, licensee or invitee of such occupant or Tenant that is on the
Property, in the Building or the Premises shall be there at the risk of Tenant
or such other person only, and neither Landlord, nor its beneficiaries, nor the
partners thereof, nor the agents or employees of any of the foregoing (except in
case of the negligence of Landlord or its beneficiaries, or its agents or
employees) shall be liable for: damages to or theft of or misappropriation of
such property; damage to property entrusted to Landlord, its agents or
employees, if any; the loss or damage to any property by theft or otherwise by
any means whatsoever, any injury or damage to persons or property resulting from
fire, explosion, falling plaster or ceiling tiles, steam, gas, electricity,
snow, water or rain which may leak from any part of the Building or from the
pipes, appliances or plumbing works therein or from the roof, street or
subsurface or from any other place or resulting from dampness, or any other
cause whatsoever; nor for interference with the light or other incorporeal
hereditaments, nor for any latent defect in the Premises or in the Building.
Tenant shall give prompt notice to Landlord in case of fire or accident in the
Premises or in the Building or of defects therein or in the fixtures pr
equipment appurtenant thereto.
Tenant agrees to indemnify and save the Landlord, its beneficiaries,
the beneficiaries, partners and their respective agents and employees, of all of
the foregoing, harmless against any and all claims, demands, costs and expenses,
including reasonable attorneys' fees, for the defense thereof ("claims"),
arising from Tenant's occupation of the Premises or from any breach or default
on the part of the 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
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Tenant, its agents, employees or invitees, in or about the Premises, the
Building or the Property, except claims resulting from the negligence of
Landlord, its beneficiaries, the partners thereof or the agents or employees of
any of the foregoing. In case of any action or proceeding brought against
Landlord, its beneficiaries, the beneficiaries, partners or their respective
agents or employees of any of the foregoing , by reason of any such claim. upon
notice from Landlord, Tenant covenants to defend such action or proceeding by
counsel reasonably satisfactory to Landlord. If any damage, whether to the
Premises or to the Building or to the Property, or any part thereof, or whether
to the Landlord or to other tenants in the Building, results from any act or
neglect of the Tenant or of the Tenant's agents, employees, licensees or
invitees, the Landlord may, at the Landlord's option, repair such damage and the
Tenant shall, upon demand by the Landlord, reimburse the Landlord forthwith for
the total costs of such repairs.
Tenant shall maintain in full force and effect during the Term of this
Lease, with financially responsible and reputable companies, insurance coverages
in type and amount as follows: (i0 fire and extended coverage insurance
(including an endorsement for vandalism and malicious mischief) covering all of
Tenant's property in, on or about the Premises, with full waiver of subrogation
rights against Landlord and in an amount equal to the full replacement cost of
such property; and (ii) Comprehensive General Liability insurance, insuring
Tenant and naming Landlord, its beneficiaries, the partners thereof and their
respective agents and employees as additional insureds against all claims,
demands and action for bodily injury, personal injury or death in any one
occurrence in an amount of not less than $1,000,000 and with an aggregate limit
of not less than $1,000,000 and for damage to property in an amount of not less
than $1,000,000 for each occurrence and $1,000,000 in the aggregate, made by or
on behalf of any person, firm or corporation, arising from, related to, or
connected with the conduct and operation of Tenant's business in the Premises
and, in addition, and in like amounts, covering Tenant's contractual liability
under the aforesaid hold harmless clause. Certificates of such insurance shall
be delivered to Landlord in advance of possession and new certificates in
advance of the dates of policy expirations. All such insurance policies shall
indicate that at least thirty (30) days' prior written notice shall be delivered
to Landlord by the insurer prior to termination, cancellation or any amendment
of such insurance.
17. DAMAGE OR DESTRUCTION.
In the event the Premises or the Building are damages by fire or other
casualty, Landlord may elect by notice to the Tenant within thirty (30) days
after the fire or casualty; (a) to terminate this Lease; or (b) to repair and
restore the Building or the Premises at Landlord's expense within one hundred
eighty (180) days after the Landlord has adjusted the loss and is able to take
possession of the damaged portions of the Building or Premises and undertake
reconstruction or repairs, in which latter event this Lease shall not terminate.
If the Landlord elects not to repair and restore, then Landlord shall, in its
written notice to Tenant of such election to terminate, specify a date for the
termination of the Lease, which shall not be more than sixty (60) days after the
giving of such notice, and upon the date specified in such notice the Term shall
expire as fully and completely as if such date were the date described above for
the expiration of this Lease. In such event, Tenant shall forthwith vacate and
surrender the Premises without prejudice, however, to Landlord's rights and
remedies against Tenant under the Lease provisions
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in effect prior to such termination, and any rent and any other amount owing to
Landlord shall be paid up to such date 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 shall serve a termination notice as provided for herein,
Landlord shall make the repairs and restorations under the conditions hereof
with all reasonable expedition. If the Landlord elects to so repair and restore
the Building or the Premises and does not substantially complete the work within
the one hundred eighty (180) day period or within such additional period to
which such period may be extended pursuant to the provisions of Section 27
hereof, either party may terminate this Lease as of the date of the fire or
casualty by notice to the other party not later than ten (10) days following the
expiration of such 180 day period or such additional period, as the case may be.
In the event any such damage not caused by the act or neglect of the Tenant, its
agents or employees renders the Premises untenantable, and if this Lease shall
not be canceled and terminated by reason of such damage as provided hereinabove,
then the base Rent and Additional Rent shall abate during the period beginning
with the date of such damage and ending with the date when the Premises are
again rendered tenantable. Such abatement shall be in an amount bearing the same
ratio to the total amount of Base Rent and Additional Rent for such period as
the untenantable portion of the Premises from time to time bears to the entire
Premises. Except as provided in this Section, there shall be no abatement of
rent and no liability of Landlord by reason of any injury to or interference
with Tenant's business or property arising from the making of any repairs,
alterations or improvements in or to any portion of the Building or the Premises
or in or to fixtures, appurtenances and equipment therein, which repairs,
alterations or improvements are necessitated by fire or other casualty.
Tenant understands that Landlord will not carry insurance of any kind
on Tenant's furniture and furnishings or on any fixtures or equipment including
but not limited to, trade fixtures, removable by Tenant under the provisions of
this Lease, and that Landlord shall not be obligated to repair any damage
thereto or to replace the same. Landlord shall not be required to repair any
damage thereto or to replace the same. Landlord shall not be required to repair
any injury or damage caused by fire or other cause or to make any repairs to or
replacements of improvements installed in the Premises by or for Tenant unless
Tenant has advised Landlord in writing prior to the loss as to all of the
pertinent details concerning replacement values. Tenant hereby agrees at
Tenant's election, to either: (i) insure the portion of tenant improvements and
other improvements made by Tenant as its cost within Tenant's premises to the
extent in excess of the Landlord's contribution as set forth in Exhibit C, and
provide Landlord a certificate of insurance evidencing such insurance coverage
which shall name Landlord as additional insured; or (ii) pay to Landlord as
Additional Rent or other rent from time to time, upon demand, the cost to
Landlord of insuring the portion of tenant improvements and other improvements
made by Tenant at its cost within Tenant's Premises to the extent in excess of
the Landlord's contribution as set forth in Exhibit C. Such charges shall b e
computed by Landlord on the basis of the appropriate prorated portion of
insurance premium allocable to Tenant at the actual rate from time to time being
charged to Landlord to insure improvements within the Building. Tenant's
election shall be in writing and shall be transmitted to Landlord prior to
completion of any such improvements. In the absence of such written election,
alternative (ii) shall apply.
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18. ENTRY BY LANDLORD.
Landlord and its agents shall have the right, upon prior notice to
Tenant (except in emergencies or as otherwise agreed by the parties), to enter
the Premises at all reasonable times and if abandoned at any time, for the
purpose of examining or inspecting the same, to supply janitorial and cleaning
services and any other service to be provided by Landlord to Tenant hereunder,
to render emergency repair or other emergency service, to investigate unusual
noises or odors, to show the same to present or prospective purchasers, lenders,
or, during the last twelve (12) months of the Term of this Lease, prospective
tenants of the Building, and to make such alterations, repairs, improvements or
additions, whether structural or otherwise, to the Premises or to the Building
as Landlord may deem necessary or desirable. Landlord may enter by means of a
master key without liability to Tenant, except for any failure to exercise due
care for Tenant" property and without affecting this Lease. Landlord shall use
reasonable efforts on any such entry not to unreasonably interrupt or interfere
with Tenant's use and occupancy of the Premises.
19. INSOLVENCY OR BANKRUPTCY.
If, at any time during the Term or prior thereto, there shall be filed
by or against Tenant ii any court pursuant to any statute, either of the United
States or of 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, and within sixty (60) days thereof Tenant shall
fail to secure a discharge thereof, or if Tenant makes an assignment for the
benefit of creditors at the option of Landlord exercised within a reasonable
time after notice of the happening of any one or more of such events, this Lease
may be canceled and terminated, in which event neither Tenant nor any person
claiming through or under Tenant by virtue of any statute or of an order of any
court shall be entitled to possession or to remain in possession of the Premises
demised, but shall forthwith quit and surrender the Premises. In addition to the
other rights and remedies Landlord has by virtue of any other provisions herein
or elsewhere in this Lease contained or by virtue of any statute or rule of law,
Tenant specifically agrees that Landlord may retain any rent, security deposit
or other monies received by it from Tenant or others in behalf of Tenant to be
applied upon the obligations of Tenant hereunder as may be or become due and
unpaid in such manner as Landlord may deem appropriate.
20. DEFAULT.
If any of the following events of default shall occur, to wit:
(i) Tenant defaults in the payment of rent (whether Base Rent
or Additional Rent or other rent) or any other sum required to be paid
hereunder or any part thereof and such default shall continue for a
period of ten (10) days after written notice thereof to Tenant, or
(ii) Tenant defaults in the prompt and full performance of any
non-monetary covenant, agreement or condition of this Lease and such
other default shall continue for a period of thirty (30) days after
written notice thereof to Tenant (unless such default
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involves a hazardous condition, in which event it shall be cured
forthwith), excepting, however, any default which cannot be cured
within such thirty (30) days period with which Tenant has commenced,
and with due diligence is proceeding to cure. or
(iii) The leasehold interest of Tenant be levied upon under
execution or be attached by process of law or if Tenant abandons the
Premises,
then, and in any such event, besides other rights or remedies it may have by law
or otherwise, Landlord shall have the immediate right of re-entry without
process of law and may remove all persons and property from the Premises; and
such property may be removed and stored in any other place, for the account of
and at the expense and at the risk of Tenant. Any such property of the Tenant
not claimed oar retaken from storage by Tenant within sixty (60) days after the
end of the Term, however, ended (or, in the event Tenant's right to possession
is terminated without a termination of this Lease, within sixty [60] days after
the date such right is 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. Tenant hereby
waives all claims for damages which may be caused by the re-entry of Landlord
and taking possession of the Premises or removing or storing the furniture and
property as herein provided, and shall save Landlord harmless from any loss,
costs or damages occasioned to Landlord thereby; and no such re-entry shall be
considered or construed to be a forcible entry or detainer, trespass or
eviction, or a relinquishment of Landlord's right to rent or other rights given
to Landlord hereunder or by operation of law.
Should Landlord elect to re-enter, as herein provided, or take
possession pursuant to legal proceedings or pursuant to any notice provided for
by law, it may either terminate this Lease or it may, either terminate this
Lease or it may, but need not, from time to time, without terminating this
Lease, relet the Premises or any part thereof for such term or terms and at such
rentals and upon such other terms and conditions as Landlord in its sole
discretion may deem advisable, with the right to make alterations and repairs to
the Premises, the costs for which shall be paid for by Tenant, provided such
costs do not exceed the aggregate remaining financial obligations of Tenant
hereunder. The Landlord shall not be required to accept any tenant offered by
Tenant or otherwise observe any instructions given by the Tenant concerning such
reletting; provided, however, that if any substitute tenant tendered by Tenant
shall be financially responsible and shall, by all other normal and reasonable
standards, be at least as acceptable to Landlord as Tenant would be if Tenant
were not in default, then the approval of Landlord shall not be unreasonably
withheld.
Landlord may elect to apply rentals received by it to any or all of the
following, in such order as Landlord may deem appropriate from time to time: (i)
to the payment of any indebtedness, other than rent, due hereunder from Tenant
to Landlord; (ii) to the payment of all costs, commissions and other expenses of
such reletting; (iii) to the payment of the cost of alterations and repairs to
the Premises; (iv) to the payment of rent due and unpaid hereunder; and the
residue, if any, shall be held by Landlord and applied in payment of future rent
as the same may become due and payable hereunder. If, at any time, the net rent
received from reletting after applications by Landlord of payments described in
the foregoing clauses (i) through (iv) be less
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than that agreed to be paid by Tenant hereunder, then Trustee shall pay such
deficiency to Landlord. Such deficiency shall be calculated by Landlord and paid
by Tenant to Landlord promptly on demand.
In lieu of electing to terminate this Lease, to terminate possession,
or to receive and apply rentals as provided in the immediately preceding
paragraph, Landlord may elect to receive from Tenant, as and for Landlord's
liquidated damages for Tenant's default, an amount equal to the sum of the
present value of (i) the entire amount of Base Rent provided for in this Lease
for the remainder of the Term, plus all other amounts to become due and payable
to Landlord under any other provisions of this Lease for the remainder of the
Term, including, but not limited to, Additional Rent, other rent and other
amounts to become due from Tenant to Landlord, as may be, at Landlord's
election, projected by Landlord at the then current rates for such item(s) or
otherwise reasonably estimated by Landlord; plus (ii) all other amounts then due
and payable to Landlord under any other provisions of this Lease, including, but
not limited to, all then accrued and unpaid Base Rent, Additional rent, other
rent and other amounts then due from Tenant to Landlord such as, but not limited
to, payment for tenant improvements. For purposes of determining present value,
Landlord shall use a discount rate equal to one percent above the then-current
published or quoted prime or base rate charged by American National Bank and
Trust Company of Chicago on short term commercial loans to its customers.
No such re-entry or taking possession of the Premises by Landlord shall
be construed as an election on its part to terminate this Lease unless a written
notice of such intention be given to Tenant pursuant to this Section 20 or
unless the termination thereof be decreed by a court of competent jurisdiction.
Notwithstanding any such reletting without termination, Landlord may at any time
thereafter elect to terminate this Lease for such previous breach.
Nothing herein contained shall limit or prejudice the right of Landlord
to obtain as damages by reason of any such termination of this Lease or of
possession an amount equal to the maximum allowed by any statute or rule of law
in effect at the time when such termination takes place, whether or not such
amount be greater, equal to, or less than the amounts of damages which Landlord
may elect to receive as set forth above.
The Tenant shall pay upon demand all the Landlord's costs, charges and
expenses, including the fees of counsel, agents and other 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.
21. RULES AND REGULATIONS.
Tenant hereby agrees to obey the following rules and regulations, as
well as such rules and regulations as may be hereafter adopted by Landlord
pursuant to the provisions of Section 29, for the safety, care and cleanliness
of, and maintenance of good order in and on the Premises, the Building, the
Property and all contiguous property and improvements thereon. The violation by
Tenant of any such rules and regulations set forth in this Section 21 or as may
be hereafter adopted, may at Landlord's option be deemed a default under this
Lease by Tenant, affording
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Landlord all those remedies set out in Section 20 hereof and Tenant agrees any
violation may also be restrained by injunction, and Tenant shall be liable for
all damages by reason of any violation, including. but not limited to, all of
the increase, if any, in insurance premiums caused by such violation. Landlord
shall not be responsible to Tenant for the non-performance by any other tenant,
occupant or invitee of the Building, the Property or any contiguous property of
any of said rules and regulations. (a) The Tenant shall occupy and use the
Premises during the Term for the purpose above specified and none other. (b) The
Tenant shall not exhibit, sell or offer for sale on the Premises or in the
Building any article or thing except those articles and things essentially
connected with the stated use of the Premises or Building without the advance
written consent of the Landlord. (c) The Tenant shall not make or permit to be
made any use of the Premises which, directly or indirectly is forbidden by
public law, zoning ordinance or governmental regulation or which may be
dangerous to life, limb or property or which may increase the premium cost of,
or invalidate any policy of insurance carried which covers the Building or its
operation. (d) The Tenant shall not display, inscribe, print, paint, maintain or
affix on any place in or about the Building any sign, notice, legend, direction,
figure or advertisement, except on the doors of the Premises and on the
directory board, and then only such name or names and matters, and in such
color, size, style, place and material, as shall first have been approved by the
Landlord in writing. (e) The Tenant 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 or Property in any circulars,
notices, advertisements or correspondence without the prior express consent in
writing of the Landlord. (f) The Tenant shall 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 or the Property. (g) No bicycle or other vehicles and no dog or other
animal or bird shall be brought or permitted to be in the Building or any part
thereof. (h) The Tenant shall not make or permit any noise or odor that is
objectionable to other tenants of the Building to emanate from the Premises, and
shall not create or maintain a nuisance thereof, and shall not disturb, solicit
or canvass any other occupant of the Building, and shall not do or permit any
act tending to injure the reputation of the Building. (i) The Tenant shall not
install or use any piano, phonograph or other musical instrument, or use any
phonograph or similar device in the Building or any antennae, or aerial wires
outside the Building without, in each and every instance, prior approval in
writing by the Landlord. The use thereof, if permitted, and also of radio or
television equipment shall be subject to control by the Landlord to the end that
others shall be disturbed or annoyed. (j) The Tenant shall not waste water. (k)
No additional locks or similar devices shall be attached to any door. No keys
for any door other than those provided by the Landlord shall be made. If an
extraordinary number of keys for one lock are desired by the Tenant. the
Landlord may provide the same upon payment to Landlord by Tenant of a reasonable
charge therefor. Upon termination of this Lease or of the Tenant's possession,
the Tenant shall surrender all keys to locks into and within the Premises and
shall make known to the Landlord combinations for locks on safes, cabinets and
vaults. (1) The Tenant shall be responsible for the locking of doors in and to
the Premises. (m) If the Tenant desires telegraphic, telephone, burglar alarm or
signal service, the Landlord will, upon request, direct where and how
connections and all wiring for such service shall be introduced and run. Without
such directions, no boring, cutting or installation of wires or cables if
permitted (except wiring and cabling under raised floors). (n) Although
furnished by Landlord, the standard venetian blinds, or from time to time, other
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Landlord-furnished interior window coverings shall be cleaned by Landlord but
kept in good repair and maintained at the expense of the Tenant and must be of
such shape, color, material and make as approved by the Landlord. (o) If elected
by Landlord, all persons-entering or leaving the Building between the hours of 6
p.m. and 8 a.m.,. Monday through Friday, or at any time on Saturdays, Sundays or
holidays, may be required to identify themselves to a watchman, by registration,
by a key and/or security card, or otherwise and to establish their rights to
enter or leave the Building. The Landlord may exclude or expel any peddler,
solicitor, beggar or other person without specific business or valid reason to
be in the Building at any time. (p) The Tenant shall not overload any floor. The
Landlord shall be notified and asked to direct the routing and location of safes
and all other heavy articles. 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 may be required to list all furniture, equipment and
similar articles to be removed from the Building, and the list must be lodged at
the office of the Building or by a designated person before Building employees
will permit any article to be removed. (1) The Tenant shall not install or
operate any steam or internal combustion engine, boiler, machinery, refrigerator
or heating device or air-conditioning apparatus in or about the Premises, or
carry on any mechanical or manufacturing business therein, or use the Premises
for housing accommodations or lodging or sleeping purposes, or do any cooking
therein except by not more than one (1) standard kitchen-sized microwave over
per wing in the employee break rooms, 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
explosives or other articles deemed extra hazardous to life, limn or property.
(r) The Tenant shall not place or allow anything to be against or near the glass
of partitions or doors of the Premises which may diminish the light in, or be
unsightly from, halls or corridors. (s) The Tenant shall 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 its equitable share of such safe capacity. The
Landlord's consent to the installation of electric equipment shall not relieve
the Tenant from the obligation not to use more electricity than its equitable
share of such safe capacity. (t) The Tenant shall not lay linoleum or other
similar floor covering so that such floor covering shall come in direct contact
with the floor of the Premises. If linoleum or other similar floor covering is
approved by Landlord, an interliner of builder's deadening felt shall first be
affixed to the floor by paste or other material soluble in water. The use of
damaging cement or other similar materials is prohibited. (u) Landlord may
establish controls for the purpose of regulating all property and packages (both
personal and otherwise) to be moved into or out of the Building and Premises.
(v) Landlord may regular delivery and service of supplies in order to insure the
cleanliness and security of the Premises and to avoid congestion of the
receiving areas and elevators. (w) Subject to the provisions of Section 18,
Landlord may show the Premises to prospective tenants at reasonable hours during
the last twelve (12) months of the Term and, if abandoned, may show the Premises
at any time. (x) Tenant shall not sue the Premises to engage in the manufacture
or sale or permit the use of any spiritous, fermented, intoxicating or alcoholic
beverages on the Premises or in the Building or on the Property. (y) Tenant
shall not use the Premises to engage in the manufacture
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or sale or permit the use of any illegal drugs on the Premises. (z) Tenant shall
not cause any unnecessary janitorial labor or services to be incurred by reason
of Tenant's special improvements made after Tenant's initial buildout, or by
carelessness or indifference to the preservation of good order and cleanliness.
22. TAXES.
During the term hereof and prior to delinquency, Tenant shall pay all
taxes assessed against and levied upon fixtures, furnishings, equipment and all
other personal property of Tenant contained in the Premises, and Tenant shall
cause said fixtures, furnishings, equipment and other personal property to be
assessed and billed separately from the real and personal property of Landlord.
In the event any or all of the Tenant's fixtures, furnishings, equipment or
other personal property shall be assessed and taxed with the Landlord's real or
personal property, the Tenant shall pay to Landlord its share of such taxes
within thirty (30) days after delivery to Tenant by Landlord of a statement in
writing setting forth the amount of such taxes applicable to the Tenants'
property.
23. INTENTIONALLY DELETED.
24. EMINENT DOMAIN.
If the Building, or a substantial part thereof or a substantial part of
the Premises, shall be lawfully taken, or condemned, or conveyed under threat of
such taking or condemnation, for any public or quasi-public use or purpose, 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 t
Tenant. Tenant shall have the right to appear at any condemnation proceeding to
claim any separate award with respect to the value of Tenant's fixtures,
improvements, furniture, partitions, equipment, relocation expenses and loss of
business. Landlord shall have the right to claim and recover all Rent and
Additional Rent and other rent or sums that would otherwise have been due under
the Lease had the Lease not been terminated. Base Rent, Additional Rent and
other rent or sums to be paid by Tenant to Landlord shall be pro-rated as of the
date of such termination. Tenant" recovery shall not in any way detract from, or
lessen, Landlord's recovery for lost rent or other consideration lost by
Landlord. If any non-substantial part of the Building other than the Premises or
a non-substantial part of the Premises shall be so taken, or condemned, or
conveyed under threat of such taking or condemnation, or if the grade of any
street adjacent to the Building is changed by any competent authority and such
taking or change of grade makes it necessary to substantially remodel or restore
the Building, Landlord shall have the right to cancel this Lease upon not less
than ninety (90) days' notice prior to the date of cancellation designated in
the notice. No money or other consideration shall be payable by Landlord to
Tenant for the right of cancellation, and Tenant shall have no right to share in
any proceeds of any sale made under any threat of condemnation or taking.
25. SUBORDINATION TO MORTGAGE AND DEEDS OF TRUST.
This Lease and the rights of Tenant hereunder shall be and are hereby
made subject and subordinate to the lien of any mortgage, mortgages or deeds of
trust now or hereafter existing
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against the Building, the Property or any part or parts thereof, and to all
renewals, modifications, consolidations, replacements and extensions thereof.
Although such subordination shall be self-operating, Tenant, or its successors
in interest, shall, upon Landlord's request, execute and deliver to Landlord any
and all instruments desired by Landlord subordinating in the manner requested by
Landlord this Lease to any such mortgage or deed of trust. Tenant shall execute
all such subordination instruments within ten (10) days after Tenant's receipt
of notice from Landlord (requiring the execution thereof.)
Should any mortgage affecting the Building or the Property be
foreclosed: (i) 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 Building or Property and such liability shall not
continue or survive after further transfer of ownership; and (ii) Tenant shall
be deemed to have attorned, as tenant, under this Lease to purchaser at any
foreclosure sale thereunder subject to the condition that Tenant shall have the
right to remain in possession subject to the terms of this Lease, and this Lease
shall continue in force and effect as a direct lease between and binding upon
Tenant and such mortgagee. As used in this Section, "mortgagee" shall include
the successors and assigns of any such party, whether immediate or remote, the
purchaser of any mortgage, whether at foreclosure or otherwise, and the
successors, assigns and mortgagee of such purchaser, whether immediate or
remote. Tenant, to the extent not prohibited by law, waives the provisions of
any statute or rule of law, now or hereafter in effect, which may give or
purport to give Tenant any right or election to terminate or otherwise adversely
affect this Lease and the obligation of Tenant hereunder in the event any such
foreclosure proceeding is brought, prosecuted or completed.
Notwithstanding the foregoing, if any mortgagee or trustee elects to
have this Lease and the interest of Tenant hereunder superior to any such
interest or right and evidences such election by notice given to Tenant, then
this Lease and the interest of Tenant hereunder shall be deemed superior to any
such instrument, whether this Lease was executed before or after such instrument
and in that event such mortgagee or trustee shall have the same rights with
respect to this Lease as if it had been executed and delivered prior to the
execution and delivery of such instrument and had been assigned to such
mortgagee or trustee. The provisions of this paragraph shall be self-operative
if such election shall be made and no further instrument shall be required;
provided, however, in confirmation thereof Tenant shall execute such further
assurances as may be required.
So long as Tenant shall observe and perform its covenants and
agreements hereunder, Tenant shall, at all times during the Term herein granted,
peacefully and quietly have and enjoy possession of the Premises without any
encumbrance or hindrance by, from or through Landlord, its successors or
assigns, including any mortgagee.
Landlord further reserves the right from time to time, without notice
to Tenant, to collaterally assign this Lease and the rents to become due to
Landlord hereunder as security for a loan or loans. Tenant Hereby consents to
all such assignments from time to time
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(notwithstanding any lack of notice thereof) and upon notice to Tenant, Tenant
is hereby directed and agrees to comply with the terms of any such assignment.
26. NON-WAIVER.
The waiver by Landlord of any breach of any term, covenant or condition
therein contained shall not be deemed to be a waiver of the subsequent breach of
the same or any other term, covenant or condition herein contained. The
acceptance of rent or any other sums due to Landlord hereunder shall not be
construed to be a waiver of any breach by Tenant of any term, covenant or
condition of this Lease. It is understood and agreed that the remedies herein
given to Landlord shall be cumulative and the exercise of any one remedy by
Landlord shall not be to the exclusion of any other remedy.
27. INABILITY TO PERFORM.
This Lease and the obligation of Tenant to pay rent and other sums due
to Landlord hereunder and perform all of the other covenants and agreements
hereunder on the part of Tenant to be performed shall not be affected, impaired
or excused, nor shall Landlord at any time be deemed to be in default hereunder,
because Landlord is unable to fulfill any of its obligations under this Lease or
cannot supply or is delayed in supplying any service expressly or by implication
to be supplied or performed or is unable to make or is delayed in making any
Building improvements, repairs, additions, alterations or decorations or is
unable to supply or is delayed in supplying any equipment or fixtures if
Landlord is prevented or delayed from so doing by reason of any cause whatsoever
beyond the reasonable control of Landlord, including but not limited to strike
or labor disputes, Acts of God, riots and civil disturbances or energy shortages
or governmental preemption in connection with a national emergency or by reason
of any rule, order or regulation of any department or subdivision thereof or any
government agency or quasi-government agency or by reason of the conditions of
supply and demand which have been, are or may be affected by, war or other
emergency.
28. SUBROGATION.
The parties hereto agree to use good faith efforts to have any and all
fire, extended coverage and any and all material damage insurance which may be
carried endorsed with a subrogation clause to the effect that such insurance
shall not be invalidated nor shall the right of the insured to recovery
thereunder be adversely affected should the insured waive in writing prior to a
loss any or all right of recovery against any party for loss occurring to the
property described therein; and each party hereto hereby waives all claims for
recovery from the other party for any loss or damage (whether or not such loss
or damage is caused by negligence of the other party and notwithstanding any
provision or provisions contained in this Lease to the contrary) to any of its
property insured under valid and collectible insurance policies to the extent of
any recovery collected under such insurance, subject to the limitation that this
waiver shall apply only when it is not prohibited by the applicable policy of
insurance.
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29. PLATS AND RIDERS.
Clauses, plats and riders, if any, signed by Landlord and Tenant and
endorsed on or affixed to this Lease are a part hereof, and in the event of
variation or discrepancy, a counterpart or duplicate original hereof, including
such clauses, plats and riders, if any, as held by Landlord shall control. Any
commercially reasonable rules and regulations which may be promulgated by
Landlord from time to time whether or not attached hereto are specifically made
a part of this Lease, whether signed by Tenant or not, effective on the
thirtieth (30th) day following Tenant's receipt of a notice of the promulgation
of such rule or regulation, unless prompted by, or as may be considered, an
emergency.
30. SALE BY LANDLORD.
In the event of a sale or conveyance by Landlord of the fee of the
Building containing the Premises, the same shall operate to release Landlord
from any future liability upon any of the covenants or conditions express or
implied, herein contained in favor of Tenant, and in such event Tenant agrees to
look solely to the responsibility of the successor in interest of Landlord in
and to this Lease. If any security deposit has been made by Tenant, Landlord may
transfer or credit such security deposit to such successor in interest of
Landlord and thereupon Landlord shall be released from any further obligations
hereunder.
31. RIGHT OF LANDLORD TO PERFORM.
All covenants and agreements to be performed by Tenant under any of the
terms of this Lease shall be performed by Tenant at Tenant's sole cost and
expense and without any abatement of rent or setoff of any other amount due from
Tenant to Landlord. If Tenant shall fail to pay any sum of money, other than
rent, required to be paid by it hereunder, or shall fail to perform any other
act on its part to be performed hereunder, and Tenant shall not have commence to
cure such failure within ten (10) days after notice thereof by Landlord (except
in an emergency when no notice shall be required), Landlord may, but shall not
be so obligated, without waiving or releasing Tenant from any obligations of
Tenant, make any such payment or perform any such other act on Tenant's part to
be made or performed as in this Lease provided. All sums so paid by Landlord and
all necessary incidental costs together with interest thereon at the rate set
forth in Section 4 from time to time during such period from the date of such
payment by Landlord, shall be payable to Landlord promptly on demand. Tenant
covenants to pay all such sums and Landlord shall have, in addition t any other
right or remedy of Landlord, the same rights and remedies in the event of the
non-payment thereof by Tenant as in the case of default by Tenant in the payment
of rent.
32. ATTORNEY'S FEES.
In the event of any litigation between Tenant and Landlord to enforce
any provision of this Lease or any right of either party hereto, the
unsuccessful party of such litigation shall pay to the successful party all
costs and expenses, including reasonable attorneys' fees incurred therein. If
Landlord or any of its beneficiaries or the partners, agents or employees
thereof, without fault, is made a party to or threatened with any litigation or
caused to become involved in any
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controversy or matter instituted by or against Tenant, Tenant shall indemnify
Landlord and its beneficiaries and the partners, agents, and employees thereof
against and save them harmless from all costs, loss, and expenses, including
reasonable attorneys' fees, incurred by any one or all of them in connection
therewith and if requested by Landlord, to appear and defend such action by
legal counsel satisfactory to Landlord.
33. ESTOPPEL CERTIFICATE.
Tenant shall, at any time and from time to time, within ten (10) days
after a written request from Landlord addressed to Tenant's National Facilities
Manager is received at Tenant's headquarters in Northbrook, Illinois, execute,
acknowledge and deliver to Landlord and to such other parties as Landlord shall
direct, a statement in writing certifying, inter alia, that this Lease is
unmodified and in full force and effect (or if modified, stating the nature of
such modification and certifying that this Lease, as so modified, is in full
force and effect); the dates to which the rent and other charges are paid and
acknowledging that there are not any uncured defaults on the part of Landlord
hereunder (or specifying such defaults if any are claimed); that the Premises
have been completed in accordance with the terms of this Lease and that Tenant
is in occupancy and paying rent on a current basis with no rental offsets or
claims (or if any specifying the nature and amount); there has been no
prepayment of rent other than as specified in the Lease, if any; and such other
matters as may be required by the Landlord or its mortgagee. It is expressly
understood and agreed that any such statement may be relied upon by any
prospective purchaser or encumbrancer of all or any portion of the Property of
which the Premises are a part. Tenant's failure to deliver such statement within
such time shall be conclusive upon Tenant that this Lease is in full force and
effect, without modification except as may be represented by Landlord, that
there are no uncured defaults in Landlord's performance and that nor more than
one (1) months' rent has been paid in advance. Further, such failure by Tenant
shall, at the written election of Landlord and not otherwise, constitute a
default hereunder and render Tenant liable for all damages caused by such
default. The form and content of Estoppel Certificate as is presently required
by Landlord and its mortgagee is attached hereto as Exhibit E.
34. INTENTIONALLY DELETED.
35. NOTICE.
Any notice from Landlord to Tenant or from Tenant to Landlord shall be
served either personally or by certified or registered mail, postage prepaid,
return receipt requested. If served by mail, notice shall be deemed served on
the second (2nd) calendar day after mailing addressed to Tenant at the Premises
or to Landlord at the place from time to time established by it for the payment
of rent. Either party may change the place for the giving of notices by a
written notice delivered in the manner provided herein. A copy of each notice
served upon Tenant shall be sent to the address of Tenant's headquarters: TSI
International Software Ltd., Attn: Vice President of Finance and Administration
and Chief Financial Officer, 45 Danbury Road, Wilton, Connecticut 06897-0840.
36. INTENTIONALLY DELETED.
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37. RIGHTS RESERVED TO LANDLORD.
Landlord reserves the following rights, exercisable without notice and
without liability to Tenant for damage or injury to property, person or business
and without effecting an eviction, constructive or actual, or disturbance of
Tenant's use or possession or giving rise to any claim for setoff or abatement
of rent:
(a) To change the Building's name or street address.
(b) To install, affix and maintain any and all signs on the
exterior and interior of the Building and upon the Property.
(c) To control all interior lighting that may be visible from the
exterior of the Building and all exterior lighting on the
Property.
(d) To designate, restrict and control all sources from which
Tenant may obtain sign painting and lettering, drinking water,
towels, toilet supplies, catering, food and beverages, or
other services in the Building and on the Premises, and in
general to designate, limit, restrict and control any service
in or to the Building and its tenants. No vending or
dispensing machines of any kind shall be placed in or about
the Premises without the prior written consent of Landlord.
(e) To decorate or to make repairs, alterations, additions or
improvements, whether structural or otherwise, in and about
the Property or Building, or any part thereof, including the
Premises, and for such purposes to enter upon the Premises,
and during the continuance of said work to temporarily close
doors, entryways, public spaces and corridors in the Building
and to interrupt or temporarily suspend Building services and
facilities.
(f) To have and retain a paramount title to the Premises free and
clear of any act of Tenant. Tenant has no authority or power
and warrants it shall not cause or permit the recording or
assertion of any lien, this Lease, or any lease or encumbrance
of any kind whatsoever, whether created by the act of Tenant,
by operation of law or otherwise, to attach to, be placed
upon, or cloud or complicate Landlord's title or interest in
the Property, Building or Premises, and any and all liens and
encumbrances created by Tenant shall attach to Tenant's
interest only and shall be promptly removed by Tenant upon
demand by Landlord.
(g) To grant to anyone the exclusive right to conduct any business
or render any services within the Building or to, or on, the
Property, provided that such exclusive right does not
interfere with Tenant's right to conduct its own business.
(h) Notwithstanding the provisions of (d) and (g) above, Tenant
shall not be required to obtain a service from a vendor
specified by Landlord if such vendor's charges for comparable
service are not competitive.
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38. INTENTIONALLY DELETED.
39. REAL ESTATE BROKER(S).
Tenant represents that it has dealt directly with, and only with, its
broker(s) set forth as such in Item N as broker in connection with this Lease
and that, insofar as it knows, no other broker negotiated or participated on its
behalf in the negotiation of this Lease or submitted or showed the Premises to
Tenant or is entitled to any commission in connection therewith by reason of the
actions of Tenant. Landlord hereby agrees to pay the commissions due to each of
the broker(s) named in Item N in connection with the Lease in such amount, if
any, and manner as Landlord has agreed with such broker(s) by separate
agreement. Tenant hereby agrees to indemnify, appear and defend, and hold
harmless the Landlord from all loss, costs, liability and expense, including but
not limited to attorneys' fees, arising from any claim or demand for a broker's
commission in respect to this Lease by any other broker with whom the Tenant has
been in contact other than the broker, if any, named in Item N as having acted
for it.
40. MISCELLANEOUS DEFINITIONS AND PROVISIONS.
A. The term "office" or "offices" wherever used in this Lease shall not
be construed to mean or permit the Premises to be used at any time as a store or
stores, for the sale or display of goods, wares or merchandise of any kind, or
as a restaurant, shop, booth, including but not limited to, cigar store, shoe
repair or other stand, or for providing personal service of any kind including,
but not limited to, a beauty shop or a barbershop, or for other similar
purposes, or for manufacturing. The words "re-enter" or "re-entry" as used in
this Lease are not restricted to their technical legal meaning. The term
"Landlord" as used in this Lease means only the Landlord from time to time, and
upon conveying its interest, Landlord shall be relieved from any further
obligation or liability pursuant to section 30. The words "Landlord" and
"Tenant" whenever used in this Lease shall be construed to mean the plural and
singular where necessary and the necessary grammatical changes required to make
the provisions hereof apply either to corporations, other entities, individuals,
men or women, shall in all cases be assumed as though in each case more
specifically and fully expressed.
B. Time is of the essence of this Lease and each and all of its
provisions.
C. Submission by Landlord or its agent of this instrument for
examination or signature by Tenant does not constitute a reservation of or offer
or option for lease, and it is not effective as a lease or otherwise until
execution and delivery by both Landlord and Tenant; provided, however, the
execution and delivery of this instrument by Tenant to Landlord or the agent of
Landlord's beneficiary shall constitute an irrevocable offer coupled with an
interest by Tenant to lease the Premises upon the terms and conditions herein
contained, which offer may not be revoked for thirty (30) days after such
delivery to Landlord or the agent of Landlord" beneficiary.
D. The invalidity or unenforceability of any provision hereof shall not
affect or impair any other provisions.
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E. This Lease shall be governed by and construed pursuant to the laws
of the State of Illinois.
F. Should any mortgagee or proposed mortgagee require a modification of
this Lease, which modification shall not bring about any increased cost or
expense to Tenant or in any other way substantially change the rights and
obligations of Tenant hereunder, then and in such event, Tenant agrees that this
Lease may be so modified.
G. All rights and remedies of Landlord under this Lease, or that may be
provided by law, may be exercised by Landlord in its name individually, or in
its name by its beneficiary or agent, and all legal proceedings for the
enforcement of any such rights or remedies including, but not limited to,
distress for rent, forcible detainer, and any other legal or equitable
proceedings, may be commenced and prosecuted to final judgment and execution by
Landlord in its own name individually or in its name by its beneficiary or
agent. Tenant expressly stipulates that any rights or remedies available to
Landlord either by the provisions of this Lease or otherwise may be enforced by
Landlord in its own name as Trustee aforesaid or in its name by agent or
beneficiary.
H. The marginal headings and titles to the paragraphs of this Lease are
provided primarily for ease of reference and shall not be construed to affect
the construction or interpretation of any provision hereof.
I. No receipt of money by the Landlord from the Tenant after the
termination of this Lease or after service of any notice or demanded or after
the commencement of any suit or after final judgment for possession of the
Premises shall renew, reinstate, continue or extend the term of this Lease or be
construed to affect any such notice, demand or suit.
J. Notwithstanding anything to the contrary set forth in this Lease,
wherever in this Lease Landlord's consent or approval is required to any action,
such consent or approval shall not be unreasonably withheld or delayed. Wherever
Landlord's judgment or discretion is to be exercised, it shall be exercised
reasonably. Any fees, costs, charges, or expenses that Tenant is required to
reimburse to Landlord shall mean Landlord's actual, direct, and reasonable,
costs, charges, fees or expenses in all such cases.
41. SUCCESSORS AND ASSIGNS.
The covenants and conditions herein contained shall apply to and
benefit and bind the respective heirs, successors, executors, administrators and
assigns of the parties hereto. The terms "Landlord" and "Tenant" shall include
the successors and assigns of either such party, whether immediate or remote.
42. ADDITIONAL RIDER PROVISIONS.
a. Assignment and Subletting, Further Provisions. Anything to the
---------------------------------------------
contrary in Section 14 of the Lease notwithstanding, upon a prior written
notification to Landlord sufficiently detailed as to the circumstances and
financial aspects, but without requiring the prior consent of the Landlord,
Tenant may assign the Lease or sublet the Premises to any directly or
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indirectly wholly- or partially-owned subsidiary of The Dun & Bradstreet
Corporation or an affiliate thereof or Tenant or parent of Tenant or an
affiliate of Tenant or a successor corporation by a merger, consolidation or
sale of assets, subject to the condition that Tenant shall remain liable for the
faithful performance of all of the terms and covenants of the Lease, and further
subject to the condition that the financial responsibility of Tenant or Assignee
shall not have been materially diminished by merger, consolidation, sale of
assets, acquisition by a parent or other company or for any other reason and
that Assignee possesses a financial worth at least equivalent to Tenant's
financial worth at the date of execution hereof or can, in Landlord's
estimation, fulfill Tenant's obligations under this Lease. Tenant hereby agrees
to notify Landlord with the specifics thereof in advance of, or
contemporaneously with, any such merger, consolidation, sale of assets or
acquisition.
Anything to the contrary in Section 14 of the Lease notwithstanding,
the spaces shall be so subleased in a manner so as not to divide the Premises
into small separate areas of less than one full wing, and the foregoing does not
and shall not be construed to be a waiver of Landlord's rights to approve any
alterations and additions as provided in Section 12 of this Lease.
In the event Tenant shall at any time be required to seek Landlord's
consent to assign this Lease or sublet a portion or all of the Premises as
provided in Section 14 of this Lease and Landlord shall thereafter elect not to
terminate pursuant to said Section 14, then, in such event, Tenant shall pay to
Landlord, at the time and in the manner that it makes monthly payments of rent,
fifty percent (50%) of the excess (if any), after deducting Tenant's expenses
incurred in effecting the assignment or sublease, of the rent and all other
similar amounts received by Tenant from any such assignee or subtenant over the
sum of Base Rent (as periodically adjusted) and Additional Rent (as periodically
adjusted) then being paid by Tenant to Landlord for such space.
b. Security System. Landlord shall provide Landlord's standard security
---------------
system for the Building which currently includes an after-hours key system for
entrance to the outer vestibule and, currently, a Honeywell magnetic card system
for access to the inner lobby atrium area. A Schlage central processing unit is
currently maintained by the Building management and controls card access into
the Building. If Tenant shall so elect, the Landlord shall make available to
Tenant magnetic card readers, wiring and related equipment for use at such of
its entrances as Tenant may choose, at a per-reader material, labor and an
overhead cost and fee of 21% to Tenant. The cost will vary depending upon floor,
distance of card reader from central connections within the Building and any
other necessary or desired related equipment. Currently, there is no charge for
use of conduit, wiring or other equipment of Landlord as may be located outside
the Building. A nominal monthly maintenance charge, on a per-card reader basis,
will be charged to Tenant if individual card readers are elected by Tenant for
the use of its employees in gaining entry into any of Tenant's Premises within
the Building. If requested, and at Tenant's costs, Landlord shall cooperate with
Tenant to cause a security key-pad or card reader to be installed in the
elevators and/or within the stairwells so as to bar access to the third floor
level by unauthorized persons.
c. Option to Extend - Option A. Tenant shall have the right, to be
---------------------------
exercised as hereinafter provided, to extend the term for one (1) consecutive
period of eighteen (18) months,
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which shall commence on the day following the day upon which the Initial Term
expires and shall end on a date which is the eighteenth (18th) month anniversary
of the commencement date of the Initial term (the "Extension Period"), upon
satisfaction of the following terms and conditions:
(i) At the time of the exercise of such right and at the time the
Extension Period begins, Tenant shall not be in either material nor monetary
default in the performance of any of the terms, covenants or conditions herein
contained;
(ii) This Lease shall not have been terminated during the initial
Term, and shall be in full force and effect at the date of the exercise of the
right to extend and at the date upon which the Extension Period begins;
(iii) The extension shall be upon the same terms, covenants and
conditions contained in this Lease, except that the Base Rent and determination
of Additional Rent shall be as set forth in Section 4, Base Rent in this Lease
and provided further that no new rights to extend shall be construed to be
thereby created and no other inapplicable provisions such as, but not limited
to, any obligation to construct or contribute toward tenant improvements, for
rental abatement, or for any reimbursement by, or cost to, Landlord, shall be
construed to be contained in or govern such Extension period; and
(iv) the extension shall be an extension of the entire leased Premises
and Tenant shall have no right to exercise the right of extension as to less
than the entire Premises.
Tenant shall exercise its right of extension for the Extension Period
granted hereby only in the following manner: no later than six (6) months prior
to the end of the Initial term, Tenant shall notify Landlord in writing of its
election to exercise its right to extend the Term of this Lease for such
additional period at the amounts of annual base rent set forth in Section 4,
pursuant to the right granted hereby. Such notice shall be given in the manner
in this Lease provided relative to notices.
Tenant shall also pay to Landlord during the Extension Period its
proportion of all Operating Expenses and Taxes from the commencement date of the
Extension Period.
Landlord shall have the right to elect to waive any condition or
default so as to effectuate an extension by Tenant.
d. Option to Extend - Option B. Tenant shall have the right, to be
---------------------------
exercised as hereinafter provided, to extend the term for one (1) consecutive
period of five (5) years, which shall commence on the day following the day upon
which the Initial Term expires and shall end on a date which is the fifth (5th)
anniversary of the commencement date of the Initial Term (the "Extension
Period"), upon satisfaction of the following terms and conditions:
(i) At the time of the exercise of such right and at the time the
Extension period begins, Tenant shall not be in default either material or
monetary default in the performance of any of the terms, covenants or conditions
herein contained;
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(ii) This Lease shall not have been terminated during the Initial
Terms, and shall be in full force and effect at the date of the exercise of the
right to extend and at the date upon which the Extension Period begins;
(iii) The extension shall be upon the same terms, covenants and
conditions contained in this Lease, except that the Base Rent and determination
of Additional Rent shall be modified as set forth hereinafter elsewhere in this
Lease, and except that no new rights to extend shall be construed to be thereby
created and no other inapplicable provisions such as, but not limited to , any
obligation to construct or contribute toward tenant improvements, for rental
abatement, or for any reimbursement by, or cost to, Landlord, shall be construed
to be contained in and govern such Extension Period; and
(iv) The extension shall be an extension of the entire leased Premises
and Tenant shall have no right to exercise the right of extension as to less
than the entire Premises.
Landlord shall notify Tenant no later than seven (7) months prior to
the end of the Initial Term of the amount of annual Base Rent for the Premises
for the Extension Period granted hereby, which shall be determined by Landlord
according to the following formula: the rate per rentable square foot being
quoted for newly-leased space within the Building as of the date of Landlord's
notice to Tenant shall be reduced by $2.00 per rentable square foot for the
Extension Period, when multiplied by the rentable square footage of the
Premises, 12,095 rentable square feet, shall equal the amount of annual Base
Rent for the Premises during the Extension Period. Tenant shall exercise its
right of extension for the Extension Period granted hereby. Such notices shall
be given in the manner in this Lease provided relative to notices.
Tenant shall also pay to Landlord during the Extension Period its
proportion of all Operating Expenses and Taxes from the commencement date of the
Extension Period and for annual increases in the Consumer Price Index (Cost of
Living Increase) based upon the Base Year, 1994, in accordance with the
provisions of Sections 5 and 6 of this Lease. The Base Year for the
determination of such Cost of Living Increase for such Extension Period shall be
the calendar year 1994.
Landlord shall have the right to elect to waive any condition or
default so as to effectuate an extension by Tenant.
e. Landlord's Conditional Right to Terminate. Notwithstanding any
-----------------------------------------
provision to the contrary as may be contained elsewhere within this Lease, the
Landlord shall have the sole right and option, upon a prior notice to Tenant of
at least one hundred twenty (120) days, to terminate this Lease or any extension
thereof, effective as of and on December 31, 1994, or at the end of any calendar
month thereafter. Such right to terminate shall be conditioned upon the event
that either A. C. Nielsen or The Dun and Bradstreet Corporation or any
partially- or wholly-owned subsidiary or affiliate thereof shall have executed a
Lease with Landlord for the premises demised hereby.
44
<PAGE>
43. TENANT'S AUTHORITY.
Tenant warrants and represents that it has full power and authority to
enter into this Lease and all related agreements and undertakings and, upon
request, will provide to Landlord such instruments and assurances in that
respect as Landlord shall request including, but not limited to, a certified
copy of a corporate or partnership resolution authorizing, confirming or
ratifying these actions by the respective officers or general partners executing
this Lease and related documents.
44. EXCULPATORY CLAUSE.
This instrument is executed by the undersigned Land Trustee, not
personally but solely as Trustee in the exercise of the power and authority
conferred upon and vested in it as such trustee. It is expressly understood and
agreed that all of the warranties, indemnities, representations, covenants,
undertakings and agreements herein made on the part of the Trustee are
undertaken by it solely in its capacity as Trustee and not personally. No
personal liability or personal responsibility is assumed by or shall at any time
be asserted or enforceable against the trustee on account of any warranty,
indemnity, representation, covenant, undertaking or agreement of the Trustee in
this instrument.
LANDLORD:
AMERICAN NATIONAL BANK AND TRUST
COMPANY OF CHICAGO, not individually but
solely as Trustee under Trust Agreement dated
[Corporate Seal] June 1, 1978 and known as Trust No. 42978
ATTEST: By: /S/ Peter Johansen
------------------------------------------
Its: Vice President
- -----------------------------
Its: Assistant-Secretary
TENANT:
[Corporate Seal] TSI INTERNATIONAL SOFTWARE LTD
ATTEST: By: /s/ Constance Galley
------------------------------------------
Its: President
/s/ Richard Bankosky Authorized Signatory
- -----------------------------
Its: VP, Finance
Authorized Signatory
45
<PAGE>
STATE OF ILLINOIS }as
COUNTY OF COOK
I, Dorothy Thiel, a Notary Public duly authorized in and for
-------------
said County, in the State aforesaid, DO HEREBY CERTIFY, that Peter Johansen
--------------
of American National Bank and Trust Company of Chicago and
Peter Johansen of said Banking Association who are personally known to
- --------------
me to be the same persons whose names are subscribed to the foregoing Office
Building Lease as Vice-President and Assistant-Secretary, respectively, appeared
before me this day in person and acknowledged that they signed and delivered the
Office Building Lease as their own free and voluntary act and as the free and
voluntary act of said Banking Association, the Trustee as aforesaid, for the
uses and purposes therein set forth; and the said Assistant-Secretary then and
there acknowledged that he, as custodian of the corporate seal of said Banking
Association, did affix the corporate seal of said Banking Association to said
Office Building Lease as his own free and voluntary act and as the free and
voluntary act of said Banking Association, as Trustee as aforesaid, for the uses
and purposes therein set forth.
GIVEN under my hand and Notarial Seal this 12th day of March, 1994.
---- ----- --
[Notarial Seal] (Seal)
---------------------
Notary Public
My commission expires:
02/11/96
----------------------------
STATE OF Connecticut ]as
-----------
COUNTY OF Fairfield
---------
I, Laurie Picerno, a Notary Public duly authorized in and for said
--------------
County, in the State aforesaid, DO HEREBY CERTIFY, that Constance Galley and
----------------
Richard Bankosky who are personally known to me as the same persons whose names
- ----------------
are subscribed to the foregoing Office Building Lease as (Vice-) President and
(Assistant-) Secretary, respectively, of the Tenant named therein, appeared
before me this day in person and severally acknowledged before me that they
signed and delivered the Office Building Lease as such officers as their own
free and voluntary act of said Corporation, for the uses and purposes therein
set forth, having sworn before me that they are duly authorized and fully
empowered to execute said Office Building Lease, and the said (Assistant-)
Secretary then and there acknowledged that he, as custodian of the corporate
seal of said Corporation, did affix the corporate seal of said Corporation to
said Office Building Lease as his own free and voluntary act and as the free and
voluntary act of said Corporation for the uses and purposes therein set forth.
GIVEN under my hand and Notarial Seal this 22nd day of March, 1994.
---- ----- --
[Notarial Seal] (Seal)
----------------------
Notary Public
My commission expires:
March 31, 1995
----------------------------
46
<PAGE>
EXHIBITS
47
<PAGE>
GRAPHICS
[Plan of Premises, Building B First Floor]
48
<PAGE>
EXHIBIT B
Legal Description of Property
Land (10.043 acres) and Building
- --------------------------------
PARCEL 1: THAT PART OF THE NORTH 1/2 OF THE NORTH EAST 1/4 OF THE NORTH WEST 1/4
OF SECTION 20, TOWNSHIP 43 NORTH, RANGE 12, EAST OF THE THIRD PRINCIPAL
MERIDIAN, LYING EASTERLY OF THE RIGHT OF WAY OF THE CHICAGO, MILWAUKEE AND ST.
PAUL RAILROAD COMPANY (EXCEPT THEREFROM THE WESTERLY 60 FEET THEREOF NOW USED AS
A PUBLIC HIGHWAY) AND THE WESTERLY 200 FEET (AS MEASURED ALONG THE NORTH AND
SOUTH LINES THEREOF) OF THE NORTH 1/2 OF THE NORTH WEST 1/4 OF THE NORTH EAST
1/4 OF SECTION 20 AFORESAID, AND THE EAST 20 FEET OF THE WEST 220 FEET (AS
MEASURED ALONG THE NORTH AND SOUTH LINES AFORESAID) OF THE SOUTH 200 FEET OF THE
NORTH 1/2 OF THE NORTH WEST 1/4 OF THE NORTH EAST 1/4 OF SECTION 20 AFORESAID
(EXCEPTING THEREFROM THAT PART THEREOF LYING WESTERLY OF THE FOLLOWING DESCRIBED
LINE: BEGINNING AT A POINT ON THE NORTH LINE OF THE NORTH WEST 1/4 OF SECTION
20, AFORESAID, 360 FEET WEST OF THE EAST LINE OF THE NORTH EAST 1/4 OF THE NORTH
WEST 1/4 OF SAID SECTION 20; THENCE SOUTHERLY ALONG A LINE 360 FEET WEST OF AND
PARALLEL WITH THE AFOREMENTIONED EAST LINE OF THE NORTH EAST 1/4 OF THE NORTH
WEST 1/4, 266.08 FEET; THENCE WEST PARALLEL WITH THE NORTH LINE OF THE NORTH
WEST 1/4 OF SECTION 20 AFORESAID, 161 FEET; THENCE SOUTH PARALLEL WITH THE
AFOREMENTIONED EAST LINE OF THE NORTH EAST 1/4 OF THE NORTH WEST 1/4, 297.24
FEET TO THE SOUTH LINE OF THE NORTH 1/2 OF THE NORTH EAST 1/4 OF THE NORTH WEST
1/4 OF SAID SECTION 20; ALSO EXCEPT THE SOUTH 14 FEET OF THE WEST 126 FEET OF
THE EAST 442.45 FEET (AND ALSO EXCEPT THE SOUTH 1.00 FOOT OF THE EAST 316.45
FEET) OF THE NORTH 1/2 OF THE NORTH EAST 1/4 OF THE NORTH WEST 1/4 OF SAID
SECTION 20, TOWNSHIP 43 NORTH, RANGE 12, EAST OF THE THIRD PRINCIPAL MERIDIAN,
LYING EAST OF THE EASTERLY RIGHT OF WAY LINE OF THE CHICAGO, MILWAUKEE AND ST.
PAUL RAILROAD, IN LAKE COUNTY, ILLINOIS.
Parking Easement
PARCEL 2: EASEMENT FOR INGRESS, EGRESS, PARKING AND OTHER PURPOSES, FOR THE
BENEFIT OF PARCEL 1 AS STATED BY THE FIRST RESTATEMENT OF CROSS-EASEMENT
AGREEMENT DATED JANUARY 11, 1982 AND RECORDED JANUARY 19, 1982 AS DOCUMENT
2146522 AND AS STATED BY SECOND RESTATEMENT OF CROSS-EASEMENT AGREEMENT DATED
MAY 1, 1986 AND RECORDED OCTOBER 6, 1986 AS DOCUMENT 2490734 AND BY THIRD
CROSS-EASEMENT AGREEMENT DATED AUGUST 1, 1990 AND RECORDED DECEMBER 17, 1990 AS
DOCUMENT 2973898, (EXCEPT ANY PART THEREOF FALLING IN PARCEL 1), ALL IN LAKE
COUNTY, ILLINOIS.
49
<PAGE>
EXHIBIT D
CLEANING AND JANITORIAL MAINTENANCE SERVICES
Landlord shall furnish cleaning and janitorial maintenance services as
described below at least as frequently as set forth:
MONDAY THROUGH FRIDAY
1. Sweep, dry mop or vacuum all floors, compete. Remove gum, tar,
etc., adhering to the floors.
2. Empty and damp wipe all ashtrays.
3. Dust all horizontal surfaces that can be reached without a
ladder with a treated cloth, mitt or duster.
4. Clean, polish and sanitize all drinking fountains.
5. Sweep all steps, sidewalks, and plazas.
6. Clean passenger elevator cab and landing doors, including
floors.
7. Empty all waste containers.
8. Clean all public wash and restrooms:
(a) All cleaning will be performed with approved
germicidal detergents at disinfectant strengths.
(b) All toilets and urinals will be cleaned on all
surfaces nightly; acid bowl cleaner to be used in
the interior.
(c) All wash basins, shelves, dispensers and all other
washroom fixtures will be cleaned nightly.
(d) All mirrors will be cleaned and polished nightly.
(e) All chrome and other bright work, including exposed
plumbing, toilet seat hinges, etc., will be cleaned
and polished nightly.
(f) All waste receptacles are to be emptied and cleaned
nightly.
(g) All lavatory floors will be swept and mopped with a
germicidal detergent solution nightly.
(h) Washroom supplies will be replenished nightly, as
needed.
9. All normal rubbish and office waste paper shall be removed
from tenant floors and carried to a designated location.
WEEKLY
1. Dust and wipe clean with dust cloth all desk tops.
2. Spot clean all doors, switch plates, wall and glass areas
adjacent to doors.
3. Dust and wipe all tops of all file cabinets and counters.
4. Sweep building stairwells.
5. Damp mop floors and/or spray buff for heavy scuffs, if
necessary.
6. Clean glass in building directory.
50
<PAGE>
7. Wipe all waste containers.
8. Wash all glass entrance doors and side panels inside and out.
MONTHLY
1. When possible, sweep and hose down outside terrace space,
exterior walks, trucking areas and shipping platforms.
2. Shampoo all elevator carpeting.
3. Dust all windowsills.
4. Once each month, remove hard water stains from toilet
fixtures by using bowl cleaner after normal cleaning.
EVERY THREE MONTHS
1. When possible, wash all windows, both interior and exterior,
but not less than three times per year.
2. Dust all vertical surfaces of all furniture.
3. Scrub all resilient floor areas so as to maintain a highly
polished surface.
4. All lavatory floors will be machine scrubbed every three
months.
SNOW AND ICE REMOVAL
1. Landlord shall be responsible for snow and ice removal from
the parking lots, sidewalks and roadways serving the Property.
INITIALS:
For Landlord: /s/ CG
------------------
For Tenant: /s/ PJ
------------------
51
<PAGE>
EXHIBIT E
ESTOPPEL CERTIFICATE
May 1, 1994
Transamerica Life Insurance
and Annuity Company
1150 South Olive Street
Suite 2200
Los Angeles, CA 90015
Bannockburn Lake Office Plaza
Limited Partnership II
2345 Waukegan Road
Bannockburn, Illinois 60015
Re: Lease of Premises, Suite E-100, First Floor
in Building B at
Bannockburn Lake Office Plaza,
To TSI International Software Ltd.
Gentlemen:
In Accordance with the provisions of Paragraph 33 of that certain
Office Building Lease (the "Lease") dated January 26, 1994 by and between
American National Bank and Trust Company of Chicago, not individually but solely
as Trustee under Trust Agreement dated June 1, 1978 and known as Trust 42978
("Landlord") and TSI International Software Ltd. ("Tenant"), we hereby make the
following certifications to Transamerica Life Insurance and Annuity Company
("Transamerica")(and/or Landlord's other mortgagee):
1. The Lease is in full force and effect. The Term of the Lease
commences on May 1, 1994. The primary Least Term expires on
December 31, 1995. No necessary licenses and permits are
required. The use of the Premises is and will be lawful. The
Lease had not been modified.
2. There are not, to Tenant's knowledge, any uncured defaults on
the part of Landlord under the terms of the Lease.
3. Landlord has satisfied all conditions of an inducement nature
in the Lease.
4. Tenant has no charge, lien, claim or offset of any kind
against Landlord. Tenant will not withhold or reduce payments
on account of rent for any reason, except as may be specified
in the Lease.
52
<PAGE>
5. If a security deposit has been paid to Landlord pursuant to
the Lease, Tenant agrees not to look to Transamerica, as
mortgagee, mortgagee in possession, or successor in title to
the Property for accountability on any security deposit
received by Landlord for the prompt and full performance by
Tenant under the Lease, unless said sum has actually been
received by Landlord for performance by Tenant under the Lease
and unless said sum has actually been received by
Transamerica.
6. Tenant understands that the Lease may have been collaterally
assigned to Transamerica as security for a loan to Landlord
and agrees that Tenant has not and will not prepay rent other
than the one month's rent next becoming due.
7. Tenant agrees that it will not terminate the Lease or its
tenancy on account of any default by Landlord unless Tenant
shall first have given a written notice to Transamerica
specifying such default and afforded a reasonable opportunity
to cure such default.
We understand and agree that the above certifications may be relied upon by the
above addressees and any prospective purchaser or encumbrancer of all or a
portion of the Property of which the Premises are a part.
TENANT:
(Corporate Seal) TSI International Software Ltd.
By: /s/ Richard Bankosky
-----------------------------
Print Name:
---------------------
Title: VP, Finance
--------------------------
Authorized Signatory
ATTEST:
By: /s/ Linda Austin
--------------------------
Print Name:
------------------
Title: Executive Assistant
-----------------------
Authorized Signatory
53
<PAGE>
EXHIBIT 10.10
LAKE WYMAN PLAZA
LEASE AGREEMENT
---------------
BOCA CORNERS, L.P., LTD., A GEORGIA LIMITED PARTNERSHIP
LESSOR
AND
TSI INTERNATIONAL SOFTWARE, LTD.
--------------------------------
LESSEE
TABLE OF CONTENTS AND ESSENTIAL TERMS
-------------------------------------
<TABLE>
<CAPTION>
SECTION(S)
----------
<S> <C>
Parties 1
Premises 2
Term Floor 2nd Suite 250 3 - 3.3
--- ---
Improvements Exhibit "C"
Rent 4 - 4.3
Security Deposit 5
Use 6 - 6.2
Maintenance, Repairs, Alterations 7 - 7.3
Insurance; Indemnity 8 - 8.8
Damage or Destruction 9 - 9.8
Property Taxes 10 - 10.3
Utilities 11
Assignment and Subletting 12 - 12.5
Default, Late Charges 13 - 13.4
Condemnation 14
Estoppel Certificate 15
Lessor's Liability 16
Severability 17
Interest on Past Due Obligations: 18
Time of Essence 19
Additional Rent 20
Incorporation of Prior Assignments; Amendments 21
Notices 22
Waivers 23
Recording 24
Holding Over 25
Cumulative Remedies 26
Covenants and Conditions 27
Binding Effect; Choice of Law 28
</TABLE>
1
<PAGE>
TABLE OF CONTENTS AND ESSENTIAL TERMS
-------------------------------------
(Continued)
<TABLE>
<CAPTION>
SECTION(S)
<S> ----------
Subordination <C>
Attorney's Fees 29
Lessor's Access 30
Auctions 31
Signs 32
Merger 33
Consents 34
Guarantor 35
Quiet Possession 36
Rules and Regulations 37
Security Measure 38
Easements 39
Authority 40
Rider 41
</TABLE>
EXHIBIT "A" Description of Premises
EXHIBIT "B" Legal Description of Building
EXHIBIT "C" Work Letter
EXHIBIT "D" Building Operating Expenses Estimate
EXHIBIT "E" Rules and Regulations
EXHIBIT "F" Commencement Letter Agreement
2
<PAGE>
STANDARD OFFICE LEASE
---------------------
1. PARTIES. This lease, dated, for reference purposes only, July 1, 1996, is
made by and between BOCA CORNERS L.P., LTD., a Georgia limited partnership
(herein called "Lessor") and TSI INTERNATIONAL SOFTWARE, LTD (herein called
"Lessee").
2. PREMISES. Lessor leases to Lessee and Lessee hereby leases for Lessor, for
the term, at the rental, and upon all of the conditions set forth herein, those
certain premises substantially as shown on the floor plan attached hereto as
Exhibit "A" (herein called the "Premises"), on Floor 2, in Suite 250, in the
office building (herein called the "Building") known as Lake Wyman Plaza,
located at 2424 North Federal Highway, Boca Raton, Florida 33431.
3. TERM.
3.1 TERM. The term of this Lease shall be for sixty (60) months
commencing on December 1, 1996 ("Commencement Date") and ending on November 30,
2001 ("Termination Date") unless sooner terminated pursuant to any provision
hereof.
3.2 DELAY IN POSSESSION. Notwithstanding said commencement date, if for
any reason Lessor cannot deliver possession of the Premises to Lessee on said
date, Lessor shall not be subject to any liability therefor, nor shall such
failure affect the validity of this lease or the obligations of Lessee hereunder
or extend the term hereof, but in such case, Lessee shall not be obligated to
pay rent until possession of the Premises is tendered to Lessee.
3.3 EARLY POSSESSION. If Lessee occupies the Premises prior to said
commencement date, such occupancy shall be subject to all provisions hereof,
such occupancy shall not advance the termination date, and Lessee shall pay rent
for such period at the initial monthly rates set forth below.
4. RENT.
4.1 BASIC MONTHLY RENT. Lessee shall pay to Lessor, as initial Basic
Monthly Rent for the Premises, monthly payments of $9,642.50 each, plus
applicable sales tax as provided in paragraph 4.3(g), in advance, on the first
day of each month of the term hereof, subject to adjustments as provided in
paragraphs 4.2 and 4.3. Lessee shall pay to Lessor upon execution hereof the
sum of $15,849.10 as rent for the first month of the term hereof. Rent for any
period during the term hereof which is less than one month shall be a pro rata
portion of the monthly payment. Rent shall be payable in lawful money of the
United States to Lessor at the address stated herein or at such other persons or
at such other places as Lessor may designate in writing.
4.2 ANNUAL ADJUSTMENT. The Base Monthly shall be a minimum rental for the
initial term of this lease. Subsequent to the commencement of the second Lease
Year and subsequent to the commencement of each Lease Year thereafter, the Base
Monthly Rent shall be increased by an amount equal to four percent (4%) per
annum. Accordingly, the Base Monthly Rent due for the second Lease Year and for
each Lease Year thereafter shall equal to one hundred four percent (104%) of the
Base Monthly Rent prevailing hereunder for the Lease Year immediately preceding
the increase. Each "Lease Year" shall consist of each period of twelve (12)
month subsequent to the Commencement Date.
4.3 BUILDING EXPENSE ADJUSTMENTS.
(a) Lessee agrees to pay as additional rent for the Lessee's
proportionate share of all Building Expenses as hereinafter defined, incurred by
Lessor in the operation and maintenance of the Building and appurtenances
thereto. Such additional rent shall be payable in equal monthly installments
Page 1 of 31
<PAGE>
so as to escrow Lessee's proportionate share during each calendar year during
the term of this Lease. Lessee's proportionate shall be 5.1%.
(b) Prior to the commencement of the Lease term and of each calendar
year thereafter, Lessor shall use best efforts to provide Lessee a written
estimate of Building Expenses and Lessee's proportionate share thereof for the
ensuing year or portion thereof. If, during the course of any year, it appears
that Lessor's estimate of Building Expenses was insufficient, Lessor may revise
its written estimate. Lessee shall pay the then current estimated amount to
Lessor as additional rent, in equal monthly installments, in advance. Within
one hundred twenty (120) days after the end of each calendar year, Lessor shall
furnish to Lessee a statement showing in reasonable detail the actual Building
Expenses incurred by Lessor during such period, and the parties, shall within
thirty (30) days thereafter make any payment or allowance necessary to adjust
Lessee's estimated payments to Lessee's actual proportionate share required by
such annual payment. Any amount due to Lessee shall be credited against
installments next coming due under this paragraph 4.
(c) The term "Building Expenses" as used herein shall include all
costs of operation and maintenance of the Building and appurtenances thereto, as
determined by generally accepted accounting practices consistently applied, and
shall include the following costs by way of illustration but not limitation:
(1) salaries, wages, medical, surgical, union and general welfare
benefits (including, without limitation, group life insurance) and pension
payments of employees of Lessor and/or its agent(s) engaged in the repair,
operation and maintenance of the Building; (2) payroll taxes, workmen's
compensation, uniforms and related expenses for employees; (3) the cost of all
charges for gas, electricity, heat, ventilation, air conditioning, water, sewer,
garbage collection, and other utilities furnished to the Building (including,
without limitation, the common areas thereof), together with any taxes on such
utilities; (4) the cost of painting; (5) the cost of all charges for rent,
casualty, liability and all other types of insurance provided by Lessor and
relating to the Building and the maintenance or operation thereof; (6) the cost
or rental of all supplies (including, without limitation, cleaning supplies),
tools, materials and equipment, and sales and other taxes thereon; (7)
depreciation of hand tools and other movable equipment used in the repair,
maintenance, or operation of the Building; (8) the cost of all charges for
window and other cleaning and janitorial and security services; (9) amounts
charged to Lessor by contractors for services, materials and supplies furnished
in connection with the operation, maintenance or repair of any part of the
Building or the heating, air conditioning, ventilating, plumbing, electrical,
elevator, and other system in the Building; (10) repairs and replacements to the
Building or any portions thereof made by the Lessor at its expense; (11)
alterations and improvements to the Building made by reason of laws and
requirement of any public authorities or the requirements of insurance bodies;
(12) management fees; (13) the cost of any capital improvements to the building
or of any machinery or equipment installed in the Building which is made or
becomes operational, as the case may be, and which has the effect of reducing
the expenses which otherwise would be included in the Building Expenses, to the
extent of the lessor of: (i) such cost, amortized over the useful life of the
improvements, machinery or equipment (as reasonably estimated by Lessor), or
(ii) the amount of each reduction in the Building Expenses; (14) reasonable
legal, accounting and other professional fees incurred in connection with the
operation, maintenance, and management of the Building; (15) refurbishing,
repainting, recarpeting or redecorating any portion if the Building; (16) taxes,
as hereinafter defined; and (17) all other charges allocable to the repair,
operation, and maintenance of the Building in accordance with generally accepted
accounting principles.
The term "Taxes" as referred to in Subparagraph 4.3(d)(p) above, shall
mean the aggregate amount for which the Building, and all land or real property
owned by Lessor underlying the Building or adjacent thereto and used in
connection with the operation of the Building are assessed by the County or any
city or municipal or other governmental body having jurisdiction for the purpose
of imposition of real estate taxes, and any expenses incurred by Lessor in
contesting such taxes or
Page 2 of 31
<PAGE>
assessments of the assessed value of the Building. Any special or other
assessment or levy which is imposed upon the Building shall be added to the
amount so determined and shall be deemed to be included within the term "Taxes"
for the purpose hereof. If at any time during this Lease, the methods of
taxation prevailing on the date hereof shall be altered, such additional or
substitute tax, assessment, levy, imposition, or charge, shall be deemed to be
included within the term "Taxes" for the purpose hereof.
Notwithstanding the above, the following are excluded for the
definition of Building Expenses: depreciation (except as provided above);
interest on and amortization of debts; improvements made for new lessees' of the
Building; refinancing costs; the cost of any work or services performed for nay
lessee of the Building, to the extent that such work or service is separately
reimbursed; the cost of any repair or replacement (other than those described
above) which would be required to be capitalized under generally accepted
accounting principles, unless such cost may be, under said principles, amortized
over a period of not more than ten (10) years, in which event a proportionate
part of such costs may be included each year in Building Expenses over the
useful life (as reasonably estimated by Lessor) of such repair and replacement.
Notwithstanding any provision in this Lease to the contrary, the
Building Expenses which have a direct relationship to occupancy, shall be
determined as though the Building were at an occupancy rate of one hundred
percent (100%).
(d) Annual and other determinations of Building Expenses hereunder
shall be made reasonably and in good faith by Lessor. In the event of any
dispute as to the amount thereof. Lessee shall have the right after reasonable
notice and at reasonable times to inspect Lessor's accounting in any calendar
year. Such inspection will be conducted where Lessor maintains Building Expense
records Lessee shall not have the right to inspect at any time Lessee is in
default of any of the terms of the Lease. Inspection rights shall only pertain
to the Lessee and not any subtenants or assignees. If, after such inspection,
Lessee still disputes the Lessor's determination, certification as to the proper
amount shall be made by Lessor's independent certified public accountant, and
such certification shall be final and conclusive. Lessee agrees to pay the cost
of such certification unless it is determined that Lessor's original
determination was in error to Lessee's disadvantage by more than five percent
(5%). Lessee agrees that the payment of any disputed sum and, if applicable, the
deposit of the estimated cost of certification, shall be conditions precedent to
the initiation of the foregoing procedure.
(e) The Basic Monthly Rent, and other amounts required to be paid by
Lessee hereunder, are sometimes collectively referred to as, and shall
constitute, "rent".
(f) In addition to Base Monthly Rent, as adjusted and with all
additions thereto, Lessee shall pay all sales, use occupancy or other taxes
levied by the State of Florida, or any other governmental jurisdiction having
authority for the privilege of leasing or occupying the premises.
5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon execution hereof
$16,683.23 as security for Lessee's faithful performance of Lessee's obligations
hereunder. If Lessee fails to pay rent or other charges hereunder, or otherwise
defaults with respect to any provision of this Lease, Lessor may use, apply or
retain all or any portion of said deposit for the payment of any rent or other
charge in default or for the payment of the any other sum to which Lessor may
become obligated by reason of Lessee's default, or to compensate Lessor for any
loss or damage which Lessor may suffer thereby. If Lessor so uses or applies
all or any portion of said deposit, Lessee shall within ten (10) days after
written demand therefor deposit cash with Lessor in an amount sufficient to
restore the said deposit to the full amount hereinabove stated and Lessee's
failure to do so shall be in a material breach of this Lease. Lessor shall not
be required to keep said deposit separate from its general accounts. If Lessee
performs all of Lessee's obligations hereunder, said deposit, or so much thereof
as has not theretofore been applied by Lessor, shall be returned, without
payment of interest or other increment for its use, to Lessee (or, at Lessor's
option, to the last assignee, if any, of Lessee's interest hereunder) within
thirty (30) days of the
Page 3 of 31
<PAGE>
expiration of the term hereof, and after Lessee has vacated the Premises. No
trust relationship is created herein between Lessor and Lessee with respect to
said Security Deposit.
6. USE. The Premises shall be used and occupied only for professional or
business purposes. Only Lessee may conduct business from the Premises subject
to the requirements of paragraph 12 hereof.
6.1 COMPLIANCE WITH LAW. Lessee shall, at Lessee's expense, comply
promptly with all applicable statues, ordinances, rules regulations, orders,
covenants, and restrictions, and requirements in effect during the term of any
part of the term hereof, regulating the use by Lessee of the Premises. Lessee
shall not use or permit the uses of the Premises in any manner that will tend to
create waste or a nuisance or to disturb other tenants in the Building.
6.2 CONDITION OF PREMISES. Lessee hereby accepts the Premises in their
condition existing as of the lease commencement date or the date that Lessee
takes possession of the Premises, whichever is earlier, subject to Exhibit "C"
attached hereto and subject to all applicable zoning, municipal, county and
state laws, ordinances and regulations governing and regulating the use of the
Premises, and any covenants or restrictions, and accepts this Lease subject
thereto and to all matters disclosed thereby and any exhibits attached hereto.
Lessee acknowledges that neither Lessor nor Lessor's agent has made any
representation or warranty as to the present or future suitability of the
Premises for the conduct of Lessee's business.
7. MAINTENANCE, REPAIRS AND ALTERATIONS.
7.1 LESSOR'S OBLIGATIONS. Subject to the provisions of paragraphs 6, 7.2
and 9 and except for damage caused by any negligent or intentional act or
admission of Lessee, Lessee's agents, employees or invitees (in which event
lessee shall repair the damage), Lessor, at Lessor's expense shall keep in good
order, condition and repair the structural parts of the Building, which
structural parts include only the foundations, bearing and exterior walls,
subflooring, roof, unexposed electrical, plumbing and sewage systems, including
those portions of the said systems lying outside the Premises, window frames,
gutters, and downspouts on the Building, and heating, ventilating and air
conditioning systems servicing the Premises.
7.2 LESSEE'S OBLIGATIONS.
(a) Subject to the provisions of paragraphs 6, 7.1 and 9, Lessee, at
Lessee's expense, shall keep in good order, condition and repair the Premises
and every part thereof, including, without limiting the generality of the
foregoing, all of Lessee's personal property, fixtures, signs, interior walls
and interior surfaces of exterior walls, ceilings, windows, doors, plate glass
and skylights located within the Premises. Lessee expressly waives the benefit
of any statute now or hereinafter in effect which would otherwise afford Lessee
the right to make repairs at Lessor's expense or to terminate this lease because
of Lessor's failure to keep the premises in good order, condition and repair.
(b) If Lessee fails to perform Lessee's obligations under this
paragraph 7.2 or under any other paragraph under this Lease. Lessor may at
Lessor's option enter upon the Premises after ten (10) days prior written notice
to Lessee (except in the case of emergency, in which case no notice shall be
required), perform such obligations on Lessee's behalf and put the premises in
good order, condition and repair, and the cost thereof together with interest
thereon at the maximum rate then allowable by law shall be due and payable as
additional rent to Lessor together with the Lessee's next rental installment.
(c) On the last day of the term hereof, or on any sooner termination,
Lessee shall surrender the Premises to Lessor in the same condition as received,
ordinary wear and tear excepted, clean and free of debris. Lessee shall repair
any damage to the Premises occasioned by the installation or removal of its
trade fixtures, furnishings and equipment. Notwithstanding anything to the
contrary
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<PAGE>
otherwise stated in this Lease, Lessee shall leave the air lines, power panels,
electrical distribution systems, lighting fixtures, space heaters, air
conditioning, and plumbing in the Premises
7.3 ALTERATIONS ADDITIONS.
(a) Lessee shall not without Lessor's prior written consent make any
alterations, improvements, additions, or Utility Installations, in, on or about
the Premises, except for nonstructural alterations not exceeding $2,500 in
cumulative costs during the term of this Lease. In any event, whether or not in
excess of $2,500 in cumulative cost, Lessee shall make no change or alteration
to the exterior of the Premises nor the exterior of the Building without
Lessor's prior written consent. As used in this paragraph 7.3 the term "Utility
Installation" shall mean carpeting, window coverings, air lines, power panels,
electrical distribution systems, lighting fixtures, space heaters, air
conditioning, plumbing, and fencing. Lessor may require that Lessee remove any
or all of said alterations, improvements, additions or Utilities Installation at
the expiration of the term, and restore the Premises to their prior condition.
Lessor may require Lessee to provide Lessor, at Lessee's sole cost and expense,
a lien and completion bond in an amount equal to one and one-half times the
estimated cost of such improvements, to insure Lessor against any liability for
mechanics or materialmen's liens and to insure completion of the work. Should
Lessee make any alterations, improvements, additions, or Utility Installations
without the prior approval of Lessor, Lessor may require that Lessee remove any
or all of the same.
(b) Any alterations, improvements, additions or Utility Installation
in, or about the Premises that Lessee shall desire to make and which requires
the consent of the Lessor shall be presented to Lessor in written form, with
proposed detailed plans. If Lessor shall give its consent, the consent shall be
deemed conditioned upon Lessee acquiring a permit to do so from appropriate
governmental agencies, the furnishings of a copy thereof to Lessor prior to the
commencement of the work and the compliance by Lessee of all condition of said
permit in a prompt and expeditious manner.
(c) Lessee shall pay, when due, all claims for labor or materials
furnished or alleged to have been furnished to or for Lessee at or for use in
the Premises, which claims are or may be secured by any construction lien
against the Premises or any interest therein. Lessee shall give Lessor not less
than ten (10) days' notice prior to the commencement of any work in the
Premises, and Lessor shall have the right to record a Memorandum of Lease in the
public records as provided by law. If Lessee shall, in good faith, contest the
validity of any such lien, claim or demand, then Lessee shall, at its sole
expense defend itself and Lessor against the same and shall pay and satisfy any
such adverse judgment that may be rendered thereon before the enforcement
thereof against the Lessor or the Premises, upon the condition that if Lessor
shall require, Lessee shall furnish to Lessor a security bond satisfactory to
Lessor in an amount equal to such contested lien claim or demand indemnifying
Lessor against liability for the same and holding the Premises free from the
effect of such lien or claim. In addition, Lessor may require Lessee to pay
Lessor's attorneys fees and cost in participating in such action if Lessor shall
decide it is to its best interest to do so.
(d) Unless Lessor requires their removal, as set forth in paragraph
7.3(a). All alterations, improvements, additions and Utilities Installations
(whether or not such Utilities Installation constitute trade fixtures of
Lessee), which may be made on the Premises, shall become the property of Lessor
and remain upon and be surrendered with the Premises at the expiration of the
term. Notwithstanding the provisions of this paragraph 7.3(d) Lessee's
machinery and equipment, other than that which is affixed to the Premises so
that it cannot be removed without material damage to the Premises, shall remain
the property of Lessee and may be removed by Lessee subject to the provisions of
paragraph 7.2(c)
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<PAGE>
8. INSURANCE; INDEMNITY.
8.1 LIABILITY INSURANCE - LESSEE. Lessee shall, at lessee's expense,
obtain and keep in force during the term of this Lease a policy of Combined
Single Limit Bodily Injury and Property Damage Insurance insuring Lessee and
Lessor against any liability arising out of the use, occupancy or maintenance of
the Premises and all areas appurtenant thereto. Such Insurance shall be in the
amount not less than 1,000,000 per occurrence. The policy shall insure
performance by Lessee of the indemnity provisions of the paragraph 8. The
limits of said insurance shall not however, limit the liability of Lessee
hereunder.
8.2 LIABILITY INSURANCE - LESSOR. Lessor shall obtain and keep in force
during the term of this Lease a policy of Combined Single Limit Bodily Injury
and Property Damage Insurance, insuring Lessor, but not Lessee, against any
liability arising out of the ownership, use occupancy or maintenance of the
Premises and all areas appurtenant thereto in an amount not less than $1,000,000
per occurrence.
8.3 PROPERTY INSURANCE. Lessor shall obtain and keep in force during the
term of this Lease a policy or policies of insurance covering loss or damage, to
the Premises (but not Lessee's fixtures, equipment or tenant improvements) in an
amount not to exceed the full replacement value thereof, as the same may exist
from time to time, providing against all perils included within the
classification of fire, extended coverage, vandalism, malicious mischief, flood
(in the event same is required by a lender having a lien on the Premises)
special extended perils ("all risk" as such term is used in the insurance
industry) but not plate glass insurance. In addition, the Lessor shall obtain
and keep in force, during the term of this Lease, a policy of rental value
insurance covering a period of one year, with loss payable to Lessor, which
insurance shall also cover all real estate taxes and insurance cost for such
period.
8.4 PAYMENT OF PREMIUM INCREASE.
(a) Lessee shall not do or permit to be done anything which will
invalidate or increase the cost of any fire, extended coverage of any other
insurance policy covering the Building and/or property located therein and shall
comply with all rules, orders, regulations and requirements of the local, state
or national Fire Rating Bureau or any other organization performing a similar
function. Notwithstanding any other provision to the contrary in this paragraph
8, Lessee shall promptly upon demand reimburse Lessor for the full amount of any
additional premium charged for such policy by reason of Lessee's failure to
comply with the provisions of this paragraph, it being understood that such
demand and payment for reimbursement shall not be Lessor's exclusive remedy.
(b) Lessee shall pay any such premium increases to Lessor within 30
days after receipt by Lessee of a copy of the premium statement or other
satisfactory evidence of the amount due. If the insurance policies maintained
hereunder cover other improvements in addition to the Premises, Lessor shall
also deliver to Lessee a statement on the amount of such increase attributable
to the Premises and showing in reasonable detail, the manner in which such
amount was computed. If the term of this Lease shall not expire concurrently
with the expiration of the period covered by such insurance, Lessee's liability
for premium increases shall be prorated on an annual basis.
(c) Lessee shall not be responsible for paying any increase in the
property insurance premium caused by the acts or omissions of any other tenant
of the Building.
8.5 INSURANCE POLICIES. Insurance required hereunder shall be in
companies holding a "General Policyholders Rating" of at least B plus, or such
other rating as may be required by a lender having a lien on the Premises, as
set forth in the most current issue of "Best Insurance Guide". Lessee shall
deliver to Lessor copies of policies of liability insurance required under
paragraph 8.1 or certificates evidencing the existence and amounts of such
insurance. No such policy shall be cancelable or subject to reduction of
coverage or other modifications except after thirty (30) days prior written
notice to Lessor.
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<PAGE>
Lessee shall, at least thirty (30) days prior to the expiration of such
policies, furnish Lessor with renewals or "binders" thereof, or Lessor may order
such insurance and charge the cost thereof to Lessee, which amount shall be
payable by Lessee upon demand. Lessee shall not do or permit to be done anything
which shall invalidate the insurance policies referred to in paragraph 8.3.
Lessee agrees to name Lessor as an additional insured on all policies necessary
under paragraph 8.1, 8.2, and 8.3.
8.6 WAIVER OF SUBROGATION. Lessee and Lessor each hereby release and
relieve the other, and waive their entire right of recovery against the other
for loss or damage arising out of or incident to the perils insured against
under paragraph 8.3, which perils occur in, on or about the Premises, whether
due to the negligence of Lessor or Lessee or their agents, employees,
contractors and/or invitees. Lessee and Lessor shall, upon obtaining the
policies of insurance required hereunder, give notice to the insurance carrier
or carriers that the foregoing mutual waiver of subrogation is contained in this
Lease.
8.7 INDEMNITY. Unless due to Lessor's negligence or willful misconduct,
Lessee shall indemnify and hold Lessor harmless from and against any and all
claims arising from Lessee's use of the premises or from the conduct of Lessee's
business or from any activity, work or things done, permitted or suffered by
Lessee in or about the Premises or elsewhere and shall further indemnify and
hold Lessor harmless from and against any claims arising from any breach or
default in the performance of any obligation on Lessee's part to be performed
under the terms of this Lease, or arising from any negligence of the Lessee, or
any of Lessee's agents, contractors, or employees, and from and against all
costs, attorney's fees, expenses and liabilities incurred in the defense of any
such claim or any action or proceeding brought thereon; and in case any action
of proceeding be brought against Lessor by reason of any such claim, Lessee upon
notice from Lessor shall defend the same at Lessee's expense by counsel
satisfactory to Lessor. Lessee, as a material part of the consideration to
Lessor, hereby assumes all risk of damage to property or injury to persons, in,
upon or about the Premises arising from any cause and Lessee waives all claims
in respect thereof against Lessor.
8.8 EXEMPTION OF LESSOR FROM LIABILITY. Lessee hereby agrees that Lessor
shall not be liable for injury to Lessee's business or any loss of income
therefrom or for damage to the goods, wares, merchandise or other property of
Lessee, Lessee's employees, invitees, customers, or any other person in or about
the Premises, nor shall Lessor be liable for injury to the person of Lessee,
Lessee's employees, agents or contractors, whether such damage or injuries
caused by or results from fire, steam, electricity, gas, water or rain, or from
the breakage, leakage, obstruction or other defects of pipes, sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, or from any other
cause, whether the said damage or injury results from conditions arising upon
the Premises, upon other portions of the Building, or from other sources or
places and regardless of whether the cause of such damage or injury or the means
or repairing the same is inaccessible to Lessee. Lessor shall not be liable for
damages arising from any act or neglect of any other tenant of the Building.
9. DAMAGE OR DESTRUCTION.
9.1 DEFINITIONS.
(A) "Premises Partial Damage" shall herein mean damage or destruction
in the Premises to the extent that the cost of repair is less than 25% of the
fair market value of the Premises immediately prior to such damage or
destruction. "Premises Building Partial Damage" shall herein mean damage or
destruction of the Building to the extent that the cost of repair is less than
25% of the fair market value of the Building as a whole immediately prior to
such damage or destruction.
(b) "Premises Total Destruction" shall herein mean damage or
destruction to the Premises to the extent that the cost of repair is 25% or more
of the fair market value of the Premises immediately prior to such damage or
destruction. "Premises Building Total Destruction" shall herein
Page 7 of 31
<PAGE>
mean damage or destruction to the Building to the extent that the cost of repair
is 25% or more of the fair market value of the Building as a whole immediately
prior to such damage or destruction.
(c) "Insured Loss" shall herein mean damage or destruction which was
caused by an event required to be covered by the insurance described in
paragraph 8.
9.2 PARTIAL DAMAGE - INSURED LOSS. Subject to the provisions of
paragraphs 9.4, 9.5 and 9.6, if at any time during the term of this Lease there
is damage which is an insured loss and which falls into the classification of
Premises Partial Damage or Premises Building Partial Damage, then Lessor shall,
at Lessor's sole cost, repair such damage, but not Lessee's fixtures, equipment
or tenant improvements, as soon as reasonably possible and this lease shall
continue in full force and effect.
9.3 PARTIAL DAMAGE - UNINSURED LOSS. Subject to the provisions of
paragraphs 9.4, 9.5 and 9.6, if at any time during the term of this Lease there
is damage which is not an Insured Loss and which falls within the classification
of Premises Partial Damage or Premises Building Partial Damage, unless caused by
a negligent or willful act of Lessee (in which event Lessee shall make the
repairs at Lessee's expense). Lessor may at Lessor's option either (i) repair
such damage as soon as reasonably possible at Lessor's expense, in which event
this Lease shall continue in full force and effect, or (ii) give written notice
to Lessee within thirty (30) days after the date of the occurrence of such
damage of Lessor's intention to cancel and terminate this lease, as of the date
of the occurrence of such damage. In the event Lessor elects to give such
notice of Lessor's intention to cancel and terminate this Lease, Lessee shall
have the right within ten (10) days after the receipt of such notice to give
written notice to Lessor of Lessee's intention to repair such damage at Lessee's
expense, without reimbursement from Lessor, in which event this Lease shall
continue in full force and effect, and Lessee shall proceed to make such repairs
as soon as reasonably possible. If Lessee does not give such notice within such
10-day period this Lease shall be canceled and terminated as of the date of the
occurrence of such damage.
9.4 TOTAL DESTRUCTION. If at any time during the term of this Lease there
is damage, whether or not an Insured Loss, (including destruction required by
any authorized public authority), which falls into the classification of
Premises Total Destruction or Premises Building Total Destruction, this Lease
shall automatically terminate as of the date of such total destruction.
9.5 DAMAGE NEAR END OF TERM. If at any time during the last twelve (12)
months of the initial term of this Lease, or any extension or renewals thereof
there is damage, whether or not an Insured Loss, which falls within the
classification of Premises Partial Damage, Lessor may at Lessor's option cancel
and terminate this Lease as of the date of occurrence of such damage by giving
written notice to Lessee of Lessor's election to do so within 30 days after the
date of occurrence of such damage.
9.6 ABATEMENT OF RENT LESSEE'S REMEDIES.
(a) In the event of damage described in paragraphs 9.2 or 9.3, and
Lessor or Lessee repairs or restores the Premises pursuant to the provision of
this paragraph 9, the rent payable hereunder for the period during which damage,
repair or restoration continues shall be abated in proportion to the degree to
which Lessee's use of the Premises is impaired. Except for abatement of rent,
if any, Lessee shall have no claim against Lessor for any damage suffered by
reason of any such damage, destruction, repair or restoration.
(b) If Lessor shall be obligated to repair or restore the Premises
under the provisions of this Paragraph 9 and shall not commence such repair or
restoration within 90 days after such obligations shall accrue, Lessee may at
Lessee's option cancel and terminate this Lease by giving Lessor written notice
of Lessee's election to do so at any time prior to the commencement of such
repair or restoration. In such event this Lease shall terminate as of the date
of such notice.
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9.7 TERMINATION - ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to this Paragraph 9, an equitable adjustment shall be made concerning
advance rent and any advance payments made by Lessee to Lessor. Lessee shall,
in addition, return to Lessee so much of Lessee's security deposit as has not
theretofore been applied by Lessor.
9.8 WAIVER. Lessor and Lessee waive the provisions of any statutes which
relate to termination of leases when leased property is destroyed and agree that
such event shall be governed by the terms of this Lease.
10. REAL PROPERTY TAXES.
10.1 PAYMENT OF TAX. Lessor shall pay as part of Building Expenses, the
real property tax, as defined in paragraph 10.3, applicable to the Premises.
10.2 ADDITIONAL IMPROVEMENTS. Notwithstanding paragraph 10.1 hereof,
Lessee shall pay to Lessor upon demand therefor the entirety of any increase in
real property tax if assessed solely by reason of additional improvements placed
upon the Premises by Lessee or at Lessee's request.
10.3 DEFINITION OF "REAL PROPERTY TAX." As used herein, the term "real
property tax" shall include any form of real estate tax or assessment, general,
special, ordinary or extraordinary, and any license fee, commercial rental tax,
improvement bond or bonds, levy or tax (other than inheritance, personal income
or estate taxes) imposed on the Premises by any authority having the direct
power to tax, including any city, state or federal government, or any school,
agricultural, sanitary, fire, street, drainage or other improvement district
thereof, as against any legal equitable interest of Lessor in the Premises or in
the real property of which the Premises are a part, as against Lessor's right to
rent or other income therefrom, and as against Lessor's business of leasing the
Premises. The term "real property tax" shall also include any tax, fee, levy,
assessment or charge (i) in substitution of, partially or totally, any tax, fee,
levy, assessment or charge hereinabove included within the definition of "real
property tax" or (ii) the nature of which was hereinbefore included within the
definition of "real property tax."
10.4 PERSONAL PROPERTY TAXES.
(a) Lessee shall pay prior to delinquency all taxes assessed against
and levied upon trade fixtures, furnishings, equipment and all other personal
property of Lessee contained in the Premises or elsewhere. When possible,
Lessee shall cause said trade fixtures, furnishings, equipment and all other
personal property to be assessed and billed separately from the real property of
Lessor.
(b) If any of Lessee's said personal property shall be assessed with
Lessor's real property, Lessee shall pay Lessor the taxes attributable to Lessee
within 10 days after receipt of a written statement setting forth the taxes
applicable to Lessee's property.
11. UTILITIES. Lessee shall pay for all water, gas, heat, light, power,
telephone and other utilities and services supplied to the Premises, together
with any taxes thereon. If any such services are not separately metered to
Lessee, Lessee shall pay a reasonable proportion to be determined by Lessor of
all charges jointly metered with other premises. All such charges not
separately metered shall be a Building Expense.
12. ASSIGNMENT AND SUBLETTING.
12.1 LESSORS CONSENT REQUIRED. Lessee shall not voluntarily or
involuntarily assign, sublet, mortgage or otherwise encumber all or any portion
of its interest in this Lease or in the Premises without obtaining the prior
written consent of Lessor, which consent shall not be unreasonably withheld, and
any such attempted assignment, subletting, mortgage or other encumbrance with
such consent shall be null
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and void and of no effect. It shall not be unreasonable for Lessor to withhold
its consent in order to exercise its rights set forth in paragraph 12.4.
12.2 NO RELEASE OF LESSEE. No permitted assignment, subletting, mortgage
or other encumbrance of Lessee's interest in this Lease shall relieve Lessee of
its obligation to pay the rent and to perform all of the other obligations to be
performed by Lessee hereunder. The acceptance of rent by Lessor from any other
person shall not be deemed to be a waiver by Lessor of any provision of this
Lease or be a consent to any subletting, assignment, mortgage or other
encumbrance. Consent to one sublease, assignment, mortgage other encumbrance
shall not be deemed to constitute consent to any subsequent attempted
subletting, assignment, mortgage or other encumbrance.
12.3 SUBMISSION TO LESSOR. If Lessee desires at any time to assign this
Lease or to sublet the Premises or any portion thereof, it shall first notify
Lessor of its desire to do so and shall submit it in writing to Lessor (i) the
name of the proposed subtenant or assignee; (ii) the nature of the proposed
subtenant's or assignees business to be carried on in the Premises; (iii) the
terms and provisions of the proposed sublease or assignment; and (iv) such
financial information as Lessor may reasonably request concerning the proposed
subtenant or assignee.
21.4 LESSOR'S ELECTION TO RECAPTURE. At any time within thirty (30) days
after Lessor's receipt of the information specified in paragraph 12.3 above,
Lessor may by written notice to Lessee elect (i) to sublease the Premises or the
portion thereof so proposed to be subleased by Lessee, or to take an assignment
of Lessee's leasehold estate hereunder, or such part thereof as shall be
specified in the said notice, on the same terms stated in this Lease and in turn
sublease or assign to the proposed subtenant of assignee on the same terms as
those offered by Lessee to the proposed subtenant or assignee, as the case may
be; or (ii) to terminate this Lease as to the portion (including all) of the
Premises so proposed to be subleased or assigned, with a proportionate abatement
in the rent payable hereunder; provided, however, that if the proposed sublease
will cover less than one-half of the area of the Premises covered by this Lease,
will have a term (including all options to renew or extend the same) of less
than two years, and will terminate more than two years prior to the expiration
date of this Lease, then Lessor shall not be entitled to exercise option (ii)
above, but may exercise option (i). If Lessor does not exercise any option set
forth in this paragraph 12.4 within the said thirty (30) day period, Lessee may
thereafter within ninety (90) days after the expiration of said thirty (30) day
period enter into a valid assignment or sublease of the Premises or portion
thereof, upon the terms and conditions set forth in the information furnished by
Lessee to Lessor pursuant to paragraph 12.3 above, subject, however, in each
instance, to Lessor's consent, which shall not unreasonably be withheld as set
forth in paragraph 12.1 above.
12.5 OTHER PROVISIONS. The voluntary or other surrender of this Lease by
Lessee or a mutual cancellation hereof shall not work a merger, and shall at the
option of Lessor, terminate all or any existing subleases or subtenancies or
shall operate as an assignment to Lessor of such subleases or subtenancies. If
Lessee is a corporation, or is an unincorporated association or partnership, the
transfer, assignment or hypothecation of any stock or interest in such
corporation, association or partnership in the aggregate in excess of fifty
percent (50%) shall be deemed an assignment within the meaning of this Paragraph
12. Lessee agrees to reimburse Lessor for Lessor's reasonable costs and
attorneys' fees incurred in conjunction with the processing and documentation of
any requested assignment, subletting, transfer, change of ownership or
hypothecation of this Lease or Lessee's interest in and to the Premises.
13. DEFAULT. In the event that Lessee defaults in the payment of any rent due
hereunder or in any other obligations under this Lease, and fails to cure such
default within (5) days after notice thereof, Lessor may accelerate all rent due
hereunder and may also, at its option, proceed with any and all of its remedies
provided by this Lease, including, but not limited to, the removal of the tenant
from the Premises. Lessee shall vacate the Premises within fifteen (15) days of
notice from Lessor. Lessor may take possession of the Premises on said date and
recover all rents and damages accrued or accruing hereunder. If on account of
any breach or default by Lessee in its obligations under this lease, it shall
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become necessary for Lessor to employ legal services to enforce or defend
Lessor's rights or remedies hereunder, Lessee agrees to pay any reasonable
attorneys' fees thus incurred by Lessor. If Lessee files a petition in
bankruptcy or be adjudicated a bankrupt, or makes an assignment for the benefit
of creditors or takes advantage of any insolvency act, Lessor may, at its option
at any time thereafter, terminate this Lease upon giving Lessee fifteen (15)
days notice of Lessor's intention to do so, and this Lease shall then expire and
end on that date fixed in such notice as if said date were the date originally
fixed in this Lease for the expiration hereof. If the Premises shall be vacated
or abandoned, or in the event of a default by Lessee, for any cause whatsoever,
Lessee shall, nevertheless, remain and continue liable to Lessor in a sum equal
to all fixed and additional rent herein reserved for the balance of the term
herein originally granted; and Lessor may re-enter the Premises using such
reasonable force for that purpose as may be necessary without being liable to
any prosecution for said re-entry or the use of such force, and Lessor may
repair or alter the Premises in such manner as Lessor may deem necessary or
advisable, or relet the Premises or any or all parts thereof for the whole or
any part of the remainder of the original term hereof or for a longer period, in
Lessor's name, or as the agent of Lessee, and out of any rent so collected or
received. Lessor shall first pay to itself the expense and cost of retaking,
repossessing, repairing, or altering the Premises (including court costs and
legal fees) and the expense of removing all persons and property therefrom, and,
second, pay to itself any cost or expense sustained in securing any new tenant
or tenants, and, third, pay to itself any balance remaining on account of the
liability of Lessee to Lessor for the sum equal to the rents reserved herein and
then unpaid by Lessee for the remainder of the term originally herein demised.
Any entry or re-entry by Lessor, whether had or taken under summary proceedings
or otherwise shall not absolve or discharge Lessee from liability hereunder.
Should any rent so collected by Lessor after the payments aforesaid be
insufficient to pay to Lessor a sum equal to all fixed and additional rent
herein reserved, the balance or deficiency shall be paid by Lessee and Lessee
shall be and remain liable for any such deficiency.
Suit or suits for the recovery of any such deficiency or damages, or for a
sum equal to any installment or installments of rent or additional rent payable
hereunder, may be brought by Lessor from time to time at Lessor's election.
In the event of a breach or a threatened breach by Lessee of any of the
terms, covenants or conditions hereof, Lessor shall have the right of injunction
to restrain the same and the right to invoke any removal allowed by law or in
equity, as if specific remedies, indemnify or reimbursement where not herein
provided for.
The rights and remedies given to Lessor in this Lease are distinct,
separate and cumulative remedies and no one of them, whether or not exercised by
Lessor, shall be deemed to be in exclusion of any of the others herein by law or
equity provided.
The receipt of rent by Lessor with knowledge of any breach of this Lease by
Lessee or of any default on the part of Lessee in the observance or performance
of any of the terms, covenants, or conditions of this Lease, shall not be deemed
to be a waiver of any provision of this Lease.
No receipt of monies by Lessor from Lessee shall reinstate, continue or
extend the term hereof, or affect any notice theretofore given to Lessee, or
operate as a waiver of the right of Lessor to enforce the payment of fixed or
additional rent or other charges then due or thereafter falling due or operate
as a waiver of the right of Lessor to recover possession of the premises by
proper suit, action, proceedings or remedy; it being agreed that, after the
service of notice of default, and the expiration of the time therein specified,
if the default has not been cured in the meantime, or after the commencement of
suit, action or summary proceedings or of any other remedy, or after a final
order, warrant or judgment for the possession of the Premises, Lessor may
demand, receive, and collect any monies then due, or thereafter becoming due,
without in any manner affecting such notice, proceeding, suit, action, order,
warrant or judgment and any and all such monies so collected shall be deemed to
be payments on account for the
Page 11 of 31
<PAGE>
use and occupation of the Premises, or at the election of Lessor, on account of
Lessee's liability hereunder. Acceptance of the keys to the premises, or any
similar act, by Lessor, or any agent or employee, during the term hereof, shall
not be deemed to be an acceptance of a surrender of the Premises unless Lessor
shall consent thereto in writing.
13.3 DEFAULT BY LESSOR. Lessor shall not be in default unless Lessor
fails to perform obligations required of Lessor within a reasonable time, but in
no event later than thirty (30) days after written notice by Lessee to Lessor
and to the holder of any first mortgage or deed of trust covering the Premises
whose name and address shall have theretofore been furnished to Lessee in
writing, specifying wherein Lessor has failed to perform such obligation,
provided, however, that if the nature of Lessor's obligation is such that more
than thirty (30) days are required for performance then Lessor shall not be in
default if Lessor commences performance within such 30-day period and thereafter
diligently prosecutes the same to completion.
13.4 LATE CHARGES. Lessee hereby acknowledges that late payment by Lessee
to Lessor of rent and other sums due hereunder will cause Lessor to incur costs
not contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but are not limited to, processing
and accounting charges, and late charges which may be imposed on Lessor by the
terms of any mortgage or trust deed covering the Premises. Accordingly, if any
installment of rent or any other sum due from Lessee shall not be received by
Lessor or Lessor's designee within five (5) days after such amount shall be due,
then, without any requirement for notice to Lessee, Lessee shall pay to Lessor a
late charge equal to 6% of such overdue amount. The parties hereby agree that
such late charge represents a fair and reasonable estimate of the costs Lessor
will incur by reason of late payment by Lessee. Acceptance of such late charge
by Lessor shall in no event constitute a waiver of Lessee's default with respect
to such overdue amount, nor prevent Lessor from exercising any of the other
rights and remedies granted hereunder. In the event that a late charge is
payable hereunder, whether or not collected, for three (3) consecutive
installments of rent, then rent shall automatically become due and payable
quarterly in advance, rather than monthly, notwithstanding paragraph 4 or any
other provision of this Lease to the contrary.
14. CONDEMNATION. If the Premises or any portion thereof are taken under the
power of eminent domain, or sold under the threat of the exercise of said power
(all of which are herein called "condemnation"), this lease shall terminate as
to the part so taken as of the date the condemning authority takes title or
possession, whichever first occurs. If more than 10% of the floor area of the
Premises is taken by condemnation, Lessee may, at Lessee's option, to be
exercised in writing only within ten (10) days after Lessor shall have given
Lessee written notice of such taking (or in the absence of such notice, within
ten (10) days after the condemning authority shall have taken possession)
terminate this Lease as of the date the condemning authority takes such
possession. If Lessee does not terminate this Lease in accordance with the
foregoing, this Lease shall remain in full force and effect as to the portion of
the Premises remaining, except that the rent shall be reduced in the proportion
that the floor area taken bears to the total floor area of the Premises. Any
award for the taking of all or any part of the Premises under the power of
eminent domain or any payment made under threat of the exercise of such power
shall be the property of Lessor, whether such award shall be made as
compensation for diminution in value of the leasehold or for the taking of the
fee, or as severance damages; provided, however, that Lessee shall be entitled
to any award for loss of or damage to Lessee's trade fixtures and removable
personal property. In the event that this Lease is not terminated by reason of
such condemnation, Lessor shall to the extent of severance damages received by
Lessor in connection with such condemnation, repair any damage to the Premises
caused by such condemnation except to the extent that Lessee has been reimbursed
therefor by the condemning authority. Lessee shall pay any amount in excess of
such severance damages required to complete such repair.
Page 12 of 31
<PAGE>
15. ESTOPPEL CERTIFICATE.
(a) Lessee shall at any time upon not less than ten (10) days prior written
notice from Lessor execute, acknowledge and deliver to Lessor a statement in
writing (i) certifying that this Lease is unmodified and in full force and
effect (or, if modified, stating the nature of such modification and certifying
that this Lease, as so modified, is in full force and effect) and the date to
which the rent and other charges are paid in advance, if any, and (ii)
acknowledging that there are not, to Lessee's knowledge, any uncured defaults on
the part of Lessor hereunder, or specifying such defaults if any are claimed.
Any such statement may be conclusively relied upon by any prospective purchaser
or encumbrancer of the Premises.
(b) At Lessor's option, Lessee's failure to deliver such statement within
such time shall be a material breach of this Lease or shall be conclusive upon
Lessee (i) that this Lease is in full force and effect without modification
except as may be represented by Lessor, (ii) that there are no uncured defaults
in Lessor's performance, and (iii) that not more than one month's rent has been
paid in advance or such failure may be considered by Lessor as a default by
Lessee under this Lease.
(c) If Lessor desires to finance, refinance, or sell the Premises, or any
part thereof, Lessee hereby agrees to deliver to any lender or purchaser
designated by Lessor such financial statement of Lessee as may be reasonably
required by such lender or purchaser. Such statements shall include the past
three years' financial statements of Lessee. All such financial statements
shall be received by Lessor and such lender or purchaser in confidence and shall
be used only for the purposes herein set forth.
16. LESSOR'S LIABILITY. The term "Lessor" as used herein shall mean only the
owner or owners at the time in question of the fee title or a Lessee's interest
in a ground lease of the Premises, and except as expressly provided in paragraph
15, in the event of any transfer of such title or interest. Lessor herein names
(and in case of any subsequent transfers than the grantor) shall be relieved
from and after the date of such transfer of all liability as respects to
Lessor's obligations thereafter to be performed, provided that any funds in the
hands of Lessor or the then grantor at the time of such transfer, in which
Lessee has an interest, shall be delivered to the grantee. The obligation
contained in this Lease to be performed by Lessor shall, subject to the
aforesaid, be binding on Lessor's successor and assigns, only during their
respective periods of ownership.
17. SEVERABILITY. The invalidity of any provision of this Lease as determined
by a court of competent jurisdiction, shall in no way effect the validity of any
other provision hereof.
18. INTEREST ON PAST-DUE OBLIGATIONS. Except as expressly herein provided, any
amount due to Lessor not paid when due shall bear interest at the maximum rate
then allowable by law from the date due. Payment of such interest shall not
excuse or cure any default by Lessee under this Lease, provided, however, that
interest shall not be payable on late charges incurred by Lessee nor on any
amounts upon which late charges are paid by Lessee.
19. TIME OF ESSENCE. Time is of the essence.
20. ADDITIONAL RENT. Any monetary obligations of Lessee to Lessor under the
terms of this Lease shall be deemed to be rent.
21. INCORPORATION OF PRIOR AGREEMENTS; AMENDMENTS. This Lease contains all
agreements of the parties with respect to any matter mentioned herein. No prior
agreement or understanding pertaining to such matter shall be effective. This
Lease shall be modified in writing only, signed by the parties in interest at
the time of the modification. Except as otherwise stated in this Lease, Lessee
hereby acknowledges that neither Lessor nor any employees or agents of any of
Lessor has made any oral or written warranties or representations to Lessee
relative to the condition or use by Lessee of said Premises
Page 13 of 31
<PAGE>
and Lessee acknowledges that Lessee assumes all responsibility regarding the
Occupational Safety Health Act (OSHA), the legal use and adaptability of the
Premises and the compliance thereof with all applicable laws and regulations in
effect during the term of this Lease except as otherwise specifically stated in
this Lease.
22. NOTICES. Any notice required or permitted to be given hereunder shall be
in writing and may be given by personal delivery or by certified mail, and if
given personally or by mail shall be deemed sufficiently given if addressed to
Lessee or to Lessor at the address noted below the signature of the respective
parties as the case may be. Either party may by notice to the other specify a
different address for notice purposes accept that upon Lessee's taking
possession of the Premises the Premises shall constitute Lessee's address for
notice purposes. A copy of all notices required or permitted to be given to
Lessor hereunder shall be concurrently transmitted to such party or parties at
such addresses as Lessor may from time to time hereafter designate by notice to
Lessee.
23. WAIVERS. No waiver by Lessor of any provision hereof shall be deemed a
waiver of any provision hereof or of any subsequent breach by Lessee of the same
or any other provision. Lessor's consent to, or approval of any act, shall not
be deemed to render unnecessary the obtaining of Lessor's consent to or approval
of any subsequent act by Lessee. The acceptance of rent hereunder by Lessor
shall not be a waiver of any preceding breach by Lessee of any provisions
hereof, other than the failure of Lessee to pay the particular rent so accepted,
regardless of Lessor's acknowledge of such preceding breach at the time of
acceptance of such rent.
24. RECORDING. Lessee shall, upon request of Lessor, execute, acknowledge and
deliver to Lessor a "short form" memorandum of this Lease for recording
purposes. Unless requested by Lessor, neither this Lease nor a "short form"
hereof shall be recorded. If Lease or "short form" is recorded, other than, by
the request of Lessor, such action would be considered a material default of the
Lease.
25. HOLDING OVER. If Lessee, with Lessor's consent, remains in possession of
the Premises or any part thereof after the expiration of the term hereof, such
occupancy shall be a tenancy at sufferance. Except as set forth in this
paragraph to the contrary, all the provisions of this Lease pertaining to the
obligations of Lessee shall apply to the Tenant during its occupancy at
sufferance. All options and rights of first refusal, if any, granted to Lessee
under the terms of this Lease shall be deemed terminated and be of no further
effect during said tenancy at sufferance, Base Monthly Rent during the tenancy
at sufferance shall be one and one-half times the Base Monthly Rent for the last
month during which the Lease was in effect. The Tenant shall vacate the
Premises upon written demand by Lessor.
26. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
27. COVENANTS AND CONDITIONS. Each provision of this Lease performable by
Lessee shall be deemed both a covenant and a condition.
28. BINDING EFFECT; CHOICE OF LAW. Subject to any provisions hereof
restricting assignment or subletting by Lessee and subject to the provisions of
Paragraph 16, this Lease shall bind the parties, their personal representatives,
successors and assigns. This Lease shall be governed by the laws of the State
wherein the Premises are located, in the value of Palm Beach County.
29. SUBORDINATION.
(a) This Lease, at Lessor's option, shall be subordinate to any ground
lease, mortgage, deed of trust, or any other hypothecation or security now or
hereafter placed upon the real property of which the Premises are a part and to
any and all advances made on the security thereof and to all renewals,
modifications, consolidations, replacements and extensions thereof.
Notwithstanding such
Page 14 of 31
<PAGE>
subordination, Lessee's right to quiet possession of the Premises, as set forth
in Section 37 of this Lease, shall not be disturbed if Lessee is not in default
and so long as Lessee shall pay the rent and observe and perform all of the
provisions of this Lease, unless this Lease is otherwise terminated pursuant to
its terms. If any mortgagee, trustee or ground lessor shall elect to have this
Lease subordinate to the lien of its mortgage, deed of trust or ground lease,
and shall give written notice thereof to Lessee, this Lease shall be deemed
subordinate to such mortgage, deed of trust, or ground lease, whether this Lease
is dated prior or subsequent to the date of said mortgage, deed of trust or
ground lease or the date of recording thereof.
(b) Lessee agrees to execute any documents required to effectuate an
attornment, a subordination or to make this Lease subordinate to the lien of any
mortgage deed of trust or ground lease, as the case may be. Lessee's failure to
execute such documents within 10 days after written demand shall constitute a
material default by Lessee hereunder, or, at Lessor's option, Lessor shall
execute such documents on behalf of Lessee as Lessee's attorney-in-fact. Lessee
does hereby make, constitute and irrevocably appoint Lessor as Lessee's
attorney-in-fact and in Lessee's name, place and stead, to execute such
documents in accordance with this paragraph 29(b).
30. ATTORNEY'S FEES. If either party brings an action to enforce the terms
hereof or declare rights hereunder, the prevailing party in any such action, on
trial or appeal, shall be entitled to his reasonable attorney's fees to be paid
by the losing party as fixed by the court.
31. LESSOR'S ACCESS. Lessor and Lessor's agents shall have the right to enter
the Premises at reasonable times for the purpose of inspecting the same, showing
the same to prospective purchasers, lenders, or lessees, and making such
alterations, repairs, improvements or additions to the Premises or to the
building of which they are a part as Lessor may deem necessary or desirable.
Lessor may at any time place on or about the Premises any ordinary "For Sale"
signs and Lessor may at any time during the last 120 days of the term hereof
place on or about the Premises any ordinary "For Lease" signs, all without
rebate of rent or liability to Lessee.
32. AUCTIONS. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first having
obtained Lessor's prior written consent. Notwithstanding anything to the
contrary in this Lease, Lessor shall not be obligated to exercise any standard
of reasonableness in determining whether to grant such consent.
33. SIGNS. Lessee shall not place any sign upon the Premises. The Lessee
shall be listed in the Building Directory and shall utilize the standard
building sign at the designated area at or near the entry to its premises. All
signs must be approved by Lessor.
34. MERGER. The voluntary or other surrender of this Lease by Lessee, or a
mutual cancellation thereof or a termination by Lessor shall not work a merger,
and shall, at the option of Lessor, terminate all or any existing subtenancies
or may, at the option of Lessor, operate as an assignment to Lessor of any or
all of such subtenancies.
35. CONSENTS. Except for paragraph 32 hereof, wherever in this Lease the
consent of one party is required to an act of the other party, such consent
shall not be unreasonably withheld.
36. GUARANTOR. In the event that there is a guarantor of this Lease, said
guarantor shall have the same obligations as Lessee under this Lease.
37. QUIET POSSESSION. Upon Lessee paying the rent for the Premises and
observing and performing all of the covenants, conditions and provisions on
Lessee's part to be observed and performed hereunder. Lessee shall have quiet
possession of the Premises for the entire term hereof subject to all of the
provisions of this Lease. The individuals executing this Lease on behalf of
Lessor represent and warrant
Page 15 of 31
<PAGE>
to Lessee that they are fully authorized and legally capable of executing this
Lease on behalf of Lessor and that such execution is binding upon all parties
holding an ownership interest in the Premises.
38. RULES AND REGULATIONS. Lessee agrees that it will abide by, keep and
observe all reasonable rules and regulations which Lessor may make from time to
time for the management, safety, care, and cleanliness of the Building and
grounds, the parking of vehicles and the preservation of good order therein as
well as for the convenience of other occupants and tenants of the Building. The
violations of any such rules and regulations shall be deemed a material breach
of this Lease by Lessee.
39. SECURITY MEASURES. Lessee assumes all responsibility for the protection of
Lessee, its agents and invitees from acts of third parties.
40. EASEMENTS. Lessor reserves to itself the right, from time to time, to
grant such easements, rights and dedications that Lessor deems necessary or
desirable, and to cause the recordation of Parcel Maps and restrictions, so long
as such easements, rights, dedications, maps and restrictions do not
unreasonably interfere with the use of the Premises by Lessee. Lessee shall
sign any of the aforementioned documents upon request of Lessor and failure to
do so shall constitute a material breach of this Lease.
41. AUTHORITY. If Lessee is a corporation, trust, or general or limited
partnership, each individual executing this Lease on behalf of such entity
represents and warrants that he or she is duly authorized to execute and deliver
this Lease on behalf of said entity. If Lessee is a corporation, trust or
partnership, Lessee shall, within thirty (30) days after execution of this
Lease, deliver to Lessor evidence of such authority satisfactory to Lessor.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR INFORMED
AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS
LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND
EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
The parties hereto have executed this Lease at the place on the dates specified
immediately adjacent to their respective signatures.
Lessor's Address: Lessor:
2424 N. Federal Highway BOCA CORNERS L.P., LTD.,a Georgia
Suite 160 limited partnership
Boca Ration, Florida 33431
By: Peterson Management Company, Inc.,
a Georgia corporation and authorized
Witness:/s/ Jamie Peterson agent of the sole general partner of
---------------------- Boca Corners L.P., Ltd.
Witness: By: /s/ James B. Peterson, Vice President
---------------------- --------------------------------------
Page 16 of 31
<PAGE>
Lessee's Address: Lessee:
2424 N. Federal Highway TSI INTERNATIONAL SOFTWARE, LTD.
Suite 250
Boca Raton, Florida 33431 By:/s/ Ira Gerard
---------------------------
Title:
Witness:/s/ Valerie Schreck ------------------------
-----------------------
Date:
Witness: ------------------------
-----------------------
Page 17 of 31
<PAGE>
RIDER
-----
To the Lease Agreement between
Boca Corners, L.P., Ltd.
a Georgia Limited Partnership, as Lessor
and
TSI INTERNATIONAL SOFTWARE, LTD., as Lessee
made this 1st day of July, 1996
Insofar as the following Rider conflicts with any of the provisions of the
Lease, the following shall control:
1. PREMISES.
---------
8,265 Rentable Square Feet
2. TERM.
-----
Lessor shall, not later than thirty (30) days after Lessee takes possession
of the Premises, prepare and deliver to Lessee an agreement (hereinafter
the "Commencement Date Agreement") which shall fix the date upon which the
term commenced, the date upon which the obligation to pay Rent and
Additional Rent commenced and the date which the Lease Term shall expire.
Provided Lessee agrees with the information contained in the Commencement
Date Agreement, it shall properly execute and return said agreement to
Lessor. When fully executed and delivered the Commencement Date Agreement
shall supersede any inconsistent terms contained in this Lease and shall be
attached to this Lease as "Exhibit F".
5. BASE RENTAL.
------------
Pursuant to paragraph 4.1 and 4.2 of the Lease Agreement, the base rental
during the initial term of the lease shall be as follows:
Months Monthly Base Rent
------ -----------------
01-12 $ 9,642.50
13-24 $10,028.20
25-36 $10,429.33
37-48 $10,846.50
49-60 $11,280.36
Such amounts are payable in advance.
Page 18 of 31
<PAGE>
Landlord's Lien
Lessee acknowledges and agrees that, in addition to any such lien provided
by law, Lessor has and shall have a Landlord's lien for the rent upon the
property, fixtures, and improvements of Lessee upon, brought upon, and/or
found upon the Premises, and said landlord's lien shall be and remain in
full force and effect continuously and uninterruptedly throughout the term
of the Lease, including options, extensions and renewals thereof, and any
such landlord's lien has been, is and shall at all times be superior to any
claim that any person or entity whatsoever had or has on the Premises and
any fixtures, property, and/or improvements located on or about the
Premises, but specifically excluding an existing lien in favor of the Bank
of New York or any subsequent bank lender to Lessee, which loan document
pertaining to the lien has been provided to Lessor. Lessor shall have no
lien rights on any intellectual property of Lessee.
In addition to the rent, Lessee agrees to pay Lessor all appropriate sales
and other taxes as referred to in Paragraph 4.3(g) of the Lease Agreement.
The base rental payments are due without deduction or set off, in advance
on the first day of each month throughout the term of this Lease. The
aforesaid payments of rent are to be made to Lessor at:
Peterson Management Company
P.O. Box 102228
Atlanta, Georgia 30368-0228
6. BUILDING EXPENSES.
------------------
A. During the calendar year 1996, Lessee acknowledges that Building
Expenses as referred to in paragraph 4.3 of the Lease are estimated at
$7.80 per square foot plus applicable tax. Lessee agrees to pay
Building Expenses plus tax on the first of each month beginning on the
Lease Commencement Date.
B. Lessee acknowledges that all provisions of Paragraph 4.3 of the Lease
Agreement shall survive the expiration or earlier termination of this
Lease Agreement.
7. SERVICES.
---------
A. Lessor shall furnish the following services without charge, during
reasonable hours (7:00 a.m. to 7:00 p.m. Monday through Saturday
inclusive) on normal business days, except National Holidays observed
by Lessor: (i) elevator service; (ii) common use of restrooms and
toilets; (iii) cleaning services within both the Premises and the
Building which notwithstanding (A) above need not be performed during
business hours or on Saturday and (iv) air conditioning in Lessor's
judgment sufficient to reasonably cool or heat premises. Lessee
acknowledges there may be occasional short term power interruptions
and other events that may cause temporary loss of air conditioning.
Air conditioning will be made available to the Premises on Sundays or
Holidays at an additional charge, with twenty-four (24) hours proper
notice.
B. Lessor shall also furnish electric current on Premises for lighting
and for business machinery only (e.g., typewriters, computers, word
processors, photocopiers, kitchen appliances and other small office
equipment) using 110 volt, 20 AMP circuits, except as provided in
Exhibit "C'. Lessee will not use any electrical equipment which in
Lessor's opinion will overload the wiring installations or interfere
with the reasonable use thereof by other users in Building. Lessee
will not, without Lessor's prior written consent in each instance
(which shall not be unreasonably withheld) connect any additional
items to
Page 19 of 31
<PAGE>
Building's electrical distribution system, or make any
alteration or addition to such system. Should Lessor grant such
consent, all additional circuits or equipment required thereof shall
be provided by Lessor and the reasonable cost of installation and use
thereof shall be paid by Lessee upon Lessor's demand.
C. If Lessee uses any of the services or electric current enumerated in
this Paragraph in an amount or for a period in excess of that provided
for herein, then Lessor reserves the right to charge Lessee as
additional rent a reasonable sum as reimbursement for the direct cost
of such added services. In the event of disagreement as to
reasonableness of such charge, the opinion of the appropriate local
utility company or a local independent professional engineer shall
prevail.
D. Except for Lessor's negligence or willful misconduct, Lessor shall in
no way be liable for cessation of any of the above services caused by
strike, accident or breakdown, nor shall Lessor be liable for damages
from the stopping of elevators or elevator service, or any of the
fixtures or equipment in Building being out of repair, or for injury
to person or property, caused by any defects in the electrical
equipment, heating, ventilating and air conditioning system, elevators
or water apparatus, or for any damages arising out of failure to
furnish the services enumerated in this Paragraph 7.
E. Notwithstanding anything in the contrary in subparagraph 4.3 of the
Lease Agreement, Lessor shall have the right, at any time, to install
an electrical metering device to monitor electrical consumption on the
Premises. Lessor's right to install a metering device pursuant to
this subparagraph 7(E) shall be in addition to Lessor's right to
install such device pursuant to subparagraph 7(B) of this Lease.
F. It is understood and agreed that any and all costs and expenses for
which Lessor bills Lessee and which Lessee is liable to pay to Lessor
under the provisions of this Paragraph 7 shall be deemed to be
additional Rent due from Lessee, and any default in the payment
thereof will entitle Lessor to all remedies provided for herein or at
law or in equity on account of Lessee's failure to pay rent.
8. CANCELLATION OPTION.
--------------------
Lessee shall have the option to cancel the Lease at the end of the third or
fourth Lease Year upon giving Lessor notice of at least one hundred eighty
(180) days prior to the end of such Lease Years.
9. CANCELLATION PENALTY.
---------------------
If Lessee exercises its Cancellation Option, Lessee shall pay Lessor on the
effective date of such cancellation an amount to reimburse the Lessor for
the unamortized portion of leasing commissions and tenant improvements.
Such amount will be amortized based upon a sixty (60) month term at ten
percent (10%) interest. Such Cancellation Penalty amounts are broken down
as follows:
A. Cancellation Penalty after the Third Lease Year:
Reimbursement of Unamortized Tenant Improvements: $43,572.54
Reimbursement of Unamortized Leasing Commissions: $21,642.69
----------
$65,215.23
Page 20 of 31
<PAGE>
B. Cancellation Penalty after Fourth LeaseYear:
Reimbursement of Unamortized Tenant Improvements: $22,870.18
Reimbursement of Unamortized Leasing Commissions: $11,359.75
----------
$34,229.93
10. OPTION TO RENEW.
---------------
Provided Lessee is not in default, Lessor will provide Lessee with one,
three (3) year option to renew the Lease. Such renewal will be on the same
terms and conditions of the primary lease except the base rental rate will
be the greater of the then current market rate for comparable office
buildings in Boca Raton or one hundred four percent (104%) above the base
rental rate being paid in the last Lease Year of the primary term. The
base rental rate shall increase each subsequent year during such renewal
period by an amount equal to one hundred four percent (104%) of the Base
Monthly Rent for the Lease Year immediately preceding the increase. Lessee
must notify Lessor in writing of its intent to exercise this option at
least one hundred twenty (120) days, but in no event more than one hundred
eighty (180) days, prior to the expiration of the initial lease term.
11. RIGHT OF FIRST REFUSAL.
----------------------
Provided Lessee is not in default, Lessor shall provide Lessee an ongoing
Right of First Refusal on any contiguous space that may become available
during the term of the Lease. Upon the Lessor's intent to offer any
contiguous space for lease to any prospect, Lessor shall offer to Lessee an
option to expand into such space based upon the terms currently being
offered for the space. Lessor shall notify Lessee, in writing, of its
intent to offer such space and Lessee shall have three (3) business days
from receipt of such notice to accept such premises under the terms and
conditions being offered.
12. OCCUPANCY DATE.
--------------
Lessee shall have full use of the premises upon the issuance of a
Certificate of Occupancy ("CO"). Commencing upon such date as the "CO" is
issued, Lessee shall be obligated by all terms and conditions of the Lease.
Notwithstanding anything to the contrary, Lessee shall not be obligated to
pay base rent as stipulated in Section 4.1 until December 1, 1996. Lessee
shall be obligated to pay their proportionate share of Building Expenses
upon the date the "CO" is issued.
13. BUILDING EXPENSES.
-----------------
Notwithstanding anything to the contrary, Lessee shall be responsible for
up to a maximum five percent (5%) per annum increase on a cumulative basis
for Building Expenses, exclusive of real estate taxes and/or special
assessments, insurance, and utilities, which includes waste removal. Such
maximum increase shall be based upon the actual operating expenses for
calendar year 1996.
14. PARKING.
-------
Lessee shall have provided with parking spaces on a non-exclusive basis for
its employees at no charge during the initial term of this Lease or any
extensions or renewals thereof.
Page 21 of 31
<PAGE>
LESSOR:
Boca Corners, L.P., Ltd.
/s/ Jamie Peterson a Georgia Limited Partnership
- ----------------------------
Witness By: Peterson Management Company, Inc.,
a Georgia Corporation and authorized
agent for the sole general partner of
Boca Corners, L.P., Ltd.
- ----------------------------
Witness By: /s/ James Peterson
----------------------------
James D. Peterson
Vice President
LESSEE:
/s/ Valerie Schreck
- ---------------------------- TSI INTERNATIONAL SOFTWARE, LTD.
Witness
By: /s/ Ira Gerard
- ---------------------------- ----------------------------
Witness
Title: CFO
-------------------------
Page 22 of 31
<PAGE>
EXHIBIT "A"
To Lease Between
BOCA CORNERS L.P., LTD.,
a Georgia Limited Partnership, as Lessor,
AND
TSI INTERNATIONAL SOFTWARE, LTD.,
---------------------------------
, as Lessee.
Description of Premises
-----------------------
2424 North Federal Highway
Suite 250
---
Boca Raton, Florida 33431
Page 23 of 31
[GRAPHIC LAYOUT OF PREMISES]
<PAGE>
EXHIBIT "B'
To Lease Between
BOCA CORNERS L.P., LTD.,
a Georgia Limited Partnership, as Lessor,
AND
TSI INTERNATIONAL SOFTWARE, LTD.,
---------------------------------
, as Lessee.
Legal Description of Building
-----------------------------
A parcel of land in Section 17, Township 47 South, Range 43 East, Palm Beach
County, Florida, described as follows:
The West 300 feet of the Northwest Quarter (N.W. 1/4) of the Northeast Quarter
(N.E. 1/4) of the Southeast Quarter (S.E. 1/4) of said Section 17, less the West
10 feet of the South 466 feet thereof and together with that part of the
Northeast Quarter (N.E. 1/4) of the Northwest (N.W. 1/4) of the Southeast
Quarter (S.E. 1/4) of said Section 17, lying East of the East Right of Way line
of U.S. Highway No. 1, less the South 466 feet thereof.
Page 24 of 31
<PAGE>
EXHIBIT "C"
To Lease Between
BOCA CORNERS L.P., LTD., a Lessor,
AND
TSI INTERNATIONAL SOFTWARE, LTD., as Lessee
WORK LETTER
-----------
1. Lessor, at its expense, shall complete interior improvements in general
conformity substantially as shown on that certain space plan, dated
June 11, 1996 prepared by Kravit Architectural using building standard
-------------
materials. To the extent Lessee requests any changes from these plans
Lessor shall provide Lessee with a cost estimate for such work, and Lessee
agrees to pay Lessor for these changes upon approval of such work. In
addition to the work shown on the aforementioned plan, Lessor, at its sole
expense, shall perform the following work:
a. Recarpet the Premises with carpet of building standard quality.
Lessee shall have the right to choose its color(s) from samples
provided by Lessor.
b. Remove all existing wallcovering, prime the walls for painting, then
paint all walls with paint of building standard quality. Lessee shall
have the right to select its color(s) from samples provided by Lessor.
c. Repair or replace any damaged window treatments and stained or damaged
ceiling tiles.
d. Refinish all existing doors.
e. Install additional telephone and electric outlets as required by
Lessee.
f. Install six (6) 220 volt outlets in the Stratus/Telephone Room.
g. Perform any associated work to the electric, lighting, plumbing or
HVAC systems necessitated by the reconfiguration of a portion of the
Premises.
h. Install a separate air conditioning unit in the Stratus and Porting
Lab Rooms to provide 24 hours per day, 7 days a week cooling.
i. Demise the two (2) rooms shown on the Plan as Future Office and Future
File Room from the balance of the Premises.
Lessor hereby acknowledges that Lessee's desired occupancy date is August 1,
1996. Lessor and Lessee agree to use their best efforts to diligently expedite
the completion of the improvements to the Premises in accordance with the
following procedures in order to meet Lessee's desired occupancy date.
Within ten (10) days after full execution of this Lease, Lessor's architect
shall prepare and deliver to Lessee three (3) complete sets of construction and
architectural drawings in form required for obtaining a building permit.
Page 25 of 31
<PAGE>
Lessee shall notify Lessor in writing, within ten (10) days of receipt by Lessee
of the construction and architectural drawings, of either its approval thereof,
or of any and all changes to be made to said drawings.
In the event changes are required by Lessee, Lessor shall have five (5) days
from the date of written receipt of such changes in which to revise the
construction drawings. Such revisions shall then be presented to Lessee and
Lessee shall have five (5) days to approve and accept such revisions and the
complete revised set of construction drawings.
Promptly, upon receipt of Lessee's written authorization to proceed with the
construction of the Premises, Landlord shall, through its general contractor,
submit the construction drawings and make application to the proper governmental
authority for a building permit. Within three (3) days following issuance of
the building permit, Lessor, through its general contractor, shall commence the
work and follow it diligently until completion. All such work shall be
performed in a good, workmanlike manner using first-class materials and in
compliance with all applicable laws and all lawful ordinances, regulations and
orders of any governmental authority with jurisdiction.
Within thirty (30) days after issuance of a Certificate of Occupancy, or its
equivalent, Tenant shall submit to Landlord a written list of "punch-list" items
for correction or adjustment. Landlord shall use its best efforts to complete
such punch-list within thirty (30) days of Tenant's written notification.
Page 26 of 31
<PAGE>
EXHIBIT "D"
LAKE WYMAN PLAZA
1996 BUDGETED
OPERATING EXPENSES
BUILDING OPERATING EXPENSES BUDGET
- --------------------------- ------
Administrative 163,505
General Building 92,473
Electrical 5,480
Elevator 22,960
HVAC 16,170
Insurance 26,975
Janitorial 135,305
Landscaping 50,748
Management 112,653
Parking Lot 3,200
Plumbing 1,700
Security 71,971
Taxes 286,221
Utilities 275,400
TOTAL OPERATING EXPENSES: $1,264,761
==========
Building Rentable Area: 162,060 square feet
1996 Budgeted Operating Expenses per Square Foot: $7.80
Lessee's share of the Building's Rentable Area is 5.1%
Page 27 of 31
<PAGE>
EXHIBIT "E"
To Lease between BOCA CORNERS L.P., LTD., as Lessor, and TSI INTERNATIONAL
-----------------
SOFTWARE, LTD., as Lessee.
- --------------
RULES AND REGULATIONS
---------------------
1. The rights of Lessees in the entrances, corridors and elevators of the
Building are limited to ingress to and egress from the Lessees' premises
for the Lessees and their employees, licensees and invitees, and no Lessee
shall use, or permit the use of, the entrances, corridors, or elevators for
any other purpose. No Lessee shall invite to the Lessee's premises or
permit the visit of, persons in such numbers or under such conditions as to
interfere with the use and enjoyment of any of the plazas, entrance,
corridors, elevators and other facilities of the Building by other lessees.
No Lessee shall encumber or obstruct, or permit the encumbrance or
obstruction of any of the sidewalks, plazas, entrances, corridors,
elevators, fire exits or stairways of the Building. The Lessor reserves
the right to control and operate the public portions of the Building and
the public facilities, as well as facilities furnished for the common use
of the Lessees, in such manner as it deems best for the benefit of the
Lessees generally. Lessor is not responsible for any "down time" or other
loss of service which may result from mechanical failure or maintenance
activity.
2. The Lessor may refuse admission to the building, outside or ordinary
business hours, to any person not having a pass or key issued by the Lessor
or the Lessee whose premises are to be entered or not otherwise properly
identified, and may require all persons admitted to or leaving the Building
outside of ordinary business hours to register. Any person whose presence
in the Building at any time shall, in the judgment of the Lessor, be
prejudicial to the safety, character, reputation and interests of the
Building or of its Lessees may be denied access to the Building or may be
ejected therefrom. In case of invasion, riot, public excitement or other
commotion the Lessor may prevent all access to the Building during the
continuance of the same, by closing the doors or otherwise, for the safety
of the Lessees and protection of property in the Building. The Lessor may
require any person leaving the Building with any package or other object to
exhibit a pass from the Lessee from whose premises the package or object is
being removed, but the establishment and enforcement of such requirement
shall not impose any responsibility on the Lessor for the protection of any
Lessee against the removal of property from the premises of the Lessee.
The Lessor shall in no way be liable for any Lessee for damages or loss
arising from the admission, exclusion or ejection of any person to or from
the Lessee's premises or the Building under the provisions of this rule.
Canvassing, soliciting or peddling in the Building is prohibited and every
Lessee shall cooperate to prevent the same.
3. Soliciting of goods and services in the Building is strictly prohibited.
Lessees shall report any soliciting to the Lessor.
4. The cost of repairing any damage to the public portions of the Building or
the public facilities or to any facilities used in common with other
Lessees, caused by a Lessee or the employees, licensees or invitees of the
Lessee, shall be paid by such Lessee.
5. No lettering, sign, advertisement, notice or object shall be displayed in
or on the windows or doors, or on the outside of any Lessee's premises, or
at any point inside any Lessee's premises where the same might be visible
outside of such premises, except that the name of the Lessee may be
displayed on the entrance door of the Lessee's premises, and in the
elevator lobbies of the floors which are occupied entirely by any Lessee,
subject to the approval of the Lessor as to the size, color and style of
such display. The inscription of the name of the Lessee on the door of the
Page 28 of 31
<PAGE>
Lessee's premises shall be done by the Lessor at the expense of the Lessee.
Listing of the name of the Lessee and on the directory board in the
Building shall be done by the Lessor at its expense.
6. No awnings or other projections over or around the windows shall be
installed by any Lessee, and only such window blinds or other window
treatment visible from the windows, as are supplied or permitted by the
Lessor shall be used in a Lessee's premises. Linoleum, tile or other floor
covering shall be laid in a Lessee's premises only in a manner approved by
the Lessor.
7. Freight, furniture, business equipment, merchandise and bulky matter of any
description shall be delivered to and removed from the premises only during
hours and in a manner approved by the Lessor. Arrangements will be made by
the Lessor with any Lessee for moving large quantities of furniture and
equipment into or out of the Building. Only service elevators designated
by Lessor will be utilized for such activities. In particular, no freight,
furniture, business equipment, merchandise or other bulky matter may be
delivered to or removed from the premises without the express written
---------------------------
consent of Lessor during the hours of 6:00 p.m. to 8:00 a.m., Monday
-----------------
through Friday, or any time on Saturday or Sunday.
8. No machines or mechanical equipment of any kind, other than typewriters and
other ordinary business machines required by Lessee's normal business
activity, including those machines and mechanical equipment to be placed in
the Porting Lab and Stratus Room may be installed or operated in any
Lessee's premises without Lessor's prior written consent, and in no case
(even where the same are of a type so excepted or as so consented to by the
Lessor) shall any machines or mechanical equipment be so placed or operated
as to disturb other Lessees; but machines and mechanical equipment which
may be permitted to be installed and used in a Lessee's premises shall be
so equipped, installed and maintained by such Lessee as to prevent any
disturbing noise, vibration or electrical or other interference from being
transmitted from such premises to any other area of the Building.
9. No noise, including the playing of any musical instruments, radio or
television, which, in the judgment of the Lessor, might disturb other
Lessees in the Building, shall be made or permitted by any Lessee, and no
cooking (excluding a microwave oven) shall be done in the Lessee's
premises, except as expressly approved by the Lessor. Nothing shall be
done or permitted in any Lessee's premises, and nothing shall be brought
into or kept in any Lessee's premises, which would impair or interfere with
any of the Building services or the proper and economic cleaning or other
servicing of the Building or the premises, nor shall there be installed by
any Lessee any ventilating, air conditioning, electrical or other equipment
of any kind, except in the Porting Lab and Stratus Rooms, which, in the
judgment of the Lessor, might cause any such impairment or interference.
No dangerous, inflammable, combustible or explosive object or material
shall be brought into the Building by any Lessee or with the permission of
any Lessee. Any cuspidors or similar containers or receptacles used in any
Lessee's premises shall be cared for and cleaned by and at the expense of
the Lessee.
10. No acids, vapors or other materials shall be discharged or permitted to be
discharged into the waste lines, vents or flues of the Building which may
damage them. The water and wash closets and other plumbing fixtures in or
serving any Lessee's premises shall not be used for any purpose other than
the purposes for which they were designed or constructed, and no sweepings,
rubbish, rags, acids or other foreign substances shall be deposited
therein.
11. No additional locks or bolts of any kind shall be placed upon any of the
doors or windows in any Lessee's premises and no lock on any door therein
shall be changed or altered in any respect. Additional keys for a Lessee's
premises shall be procured only from the Lessor, which may make
Page 29 of 31
<PAGE>
a reasonable charge therefor. Upon the termination of the Lessee's lease,
all keys of the Lessee's premises shall be delivered to the Lessor.
12. All entrance doors in each Lessee's premises shall be left locked by the
Lessee when the Lessee's premises are not in use. Entrance doors shall not
be left open at any time. Lessor is not responsible for any loss or damage
which may result as a consequence of the failure of Lessee to comply with
the terms of this paragraph.
13. Hand trucks not equipped with rubber tires and side guards shall not be
used within the Building.
14. The Lessor reserves the right to rescind, alter, waive, or add to any rule
or regulation at any time prescribed for the Building when, in its
judgment, it deems it necessary, desirable or proper for its best interest
and for the best interest of the Lessees, and no alteration or waiver of
any rule or regulation in favor of one Lessee shall operate as an
alteration or waiver of any rule or regulation in favor of one Lessee shall
operate as an alteration or waiver in favor of any other Lessee. The
Lessee shall not be responsible to any Lessee for the non-observance or
violation by any other Lessee of any of the rules and regulations at any
time prescribed for the Building.
Page 30 of 31
<PAGE>
EXHIBIT F
---------
Commencement Date Agreement
June 6, 1996
TSI International Software, Ltd.
2424 North Federal Highway
Suite 250
Boca Raton, Florida 33431
Re: Lease Commencement Date Agreement - Exhibit "F"
To the Lease Agreement dated July 1, 1996
------------
between Boca Corners L.P., Ltd. and TSI International Software, Ltd.
--------------------------------
Dear Sir:
Pursuant to Rider, Section #5, of the Lease Agreement dated July 1, 1996
------------
between Boca Corners L.P., Ltd. as Lessor, and TSI International Software, Ltd.,
-------------------------------
as Lessee, for the Premises at 2424 North Federal Highway, Suite 250, Boca
---
Raton, Florida 33431 incorporating 8,265 rentable square feet, the Lease
-----
Commencement Date is December 1, 1996, with a Lease Expiration Date of November
---------------- --------
30, 2001.
- --------
The Base Rental schedule due shall be as follows:
From - To Monthly Base Rental
- --------- -------------------
12/01/96 - 11/30/97 $ 9,642.50
----------
12/01/97 - 11/30/98 $10,028.20
----------
12/01/98 - 11/30/99 $10,429.33
----------
12/01/99 - 11/30/00 $10,846.50
----------
12/01/00 - 11/30/01 $11,280.36
----------
In addition to the base rental, Lessee agrees to pay Lessor its pro rata share
of the Building Expenses and all appropriate sales and other taxes as referred
to in Paragraph 4 of the Lease Agreement.
The rental payments are due without deduction or set off, in advance on the
first day of each month throughout the term of this Lease. The aforesaid
payments of rent are to made to Lessor at:
Peterson Management Company
Post Office Box 102228
Atlanta, Georgia 30368-0228
Please acknowledge your acceptance of the above by signing below and returning
this letter to me. We are pleased to have TSI INTERNATIONAL SOFTWARE, LTD. at
Lake Wyman Plaza. If we can be of assistance, please do not hesitate to call.
Sincerely,
James D. Peterson
General Partner
Agreed to this 19 day of June , 1996.
-- --------
/S/ Ira Gerard
-----------------
(Name)
(Title) Vice President Finance & Admin, CFO
Page 31 of 31
<PAGE>
EXHIBIT 10.11
CREDIT AGREEMENT
Dated as of July 31, 1994
TSI INTERNATIONAL SOFTWARE LTD., a Delaware corporation, and THE BANK OF
NEW YORK agree as follows:
ARTICLE 1
CREDIT FACILITY
---------------
Section 1.1 Commitment to Lend. Upon the terms and subject to the
------------------
conditions of this Agreement, the Bank agrees to make, from time to time during
the period from the Agreement Date through the Termination Date, one or more
Loans to the Borrower in an aggregate unpaid principal amount not exceeding at
any time the lesser of (a) the Commitment at such time (which amount includes
the aggregate stated amount of Letters of Credit issued for the account of the
Borrower) and (b) the Borrowing Base at such time. The Loans will be made at
the rate of interest established pursuant to the terms of Section 1.3 below.
The amount of the Commitment on the Agreement Date is $4,000,000.
Section 1.2 Manner of Borrowing. (a) The Borrower shall give the
-------------------
Bank notice (which shall be irrevocable) no later
#90068563.
-1-
<PAGE>
than 10:00 a.m. (New York time) on the Business Day before the requested date
for the making of a Loan. Each such notice shall be in the form of Schedule 1.2
------------
and shall specify (i) the requested date for the making of the requested Loan,
which shall be a Business Day and (ii) the amount of such Loan, which amount
shall be, in the case of each such Loan, not less than $100,000 and in multiples
of $50,000, or, if less, the maximum amount that can then be borrowed hereunder.
Each Loan so requested shall be disbursed by the Bank not later than 12:00 noon
(New York time) on the requested date therefor in Dollars in funds immediately
available to the Borrower by credit to an account of the Borrower at the Bank's
Office or in such other manner as may have been specified in the applicable
notice and as shall be acceptable to the Bank.
(b) At the time of any drawing under a Letter of Credit, the
resulting reimbursement obligation of the Borrower (regardless of whether the
amount complies with the requirements of Section 1.2(a)(ii)) shall immediately
become a Loan and no notice of borrowing as described in Section 1.2(a) shall be
required.
Section 1.3 Letters of Credit. (a) The Bank agrees to issue
-----------------
Letters of Credit for the account of the Borrower from time to time, subject to
satisfaction by the Borrower of the provisions set forth in paragraph (b) of
this Section and provided that (i) all Letters of Credit issued by the Bank
hereunder shall expire on or before the Termination Date, (ii)
#90068563.
-2-
<PAGE>
the sum of the aggregate stated amount of outstanding Letters of Credit and the
amount of the requested Letter of Credit shall not exceed $150,000 at any time,
and (iii) each requested Letter of Credit shall be in a minimum amount of
$25,000.
(b) The Borrower may request the Bank to issue a Letter of
Credit for the account of the Borrower by delivering a written notice to the
Bank no later than 12:00 noon (New York time) on the date seven (7) Business
Days preceding the proposed date of issuance of such Letter of Credit. The
notice shall specify the proposed date of issuance of such Letter of Credit
(which shall be a Business Day), the face amount of the Letter of Credit, the
expiration date of the Letter of Credit and the name and address of the
beneficiary of the Letter of Credit, and shall contain a description of the
documents and the verbatim text of any certificate to be presented by the
beneficiary of the Letter of Credit to the Bank, which documents and
certificate, if presented by such beneficiary to the Bank prior to the
expiration date of such Letter of Credit, will require the Bank to make payment
under the Letter of Credit; provided that the Bank, in its sole judgment, may
require changes in any such documents and certificates prior to issuing any
Letter of Credit. Prior to the issuance of any new Letter of Credit, the
Borrower shall deliver to the Bank an executed and completed Application and
Agreement for Standby Letter of Credit in form and substance satisfactory to the
Bank and, together with this Agreement, the terms and conditions of such
Application shall govern the rights and duties
#90068563.
-3-
<PAGE>
of the Bank and the Borrower with respect to such Letter of Credit.
Section 1.4 Interest. (a) Rates. Each Loan shall bear interest on
-------- -----
the outstanding principal amount thereof until due at a rate per annum equal to
the Alternative Base Rate as in effect from time to time plus 1.25%. During an
Event of Default (and whether before or after judgment), each Loan (whether or
not due) and to the maximum extent permitted by Applicable Law, each other
amount due and payable under the Borrower Loan Documents shall bear interest at
a rate per annum equal to the applicable Post-Default Rate.
(b) Payment. Interest shall be payable in arrears on each
-------
Interest Payment Date, and when any Loan shall be due (whether at maturity, by
reason of notice of prepayment or acceleration or otherwise). Interest at the
Post-Default Rate shall be payable on demand.
(c) Maximum Interest Rate. Nothing contained in the Loan
---------------------
Documents shall require the Borrower at any time to pay interest at a rate
exceeding the Maximum Permissible Rate. If interest payable by the Borrower on
any date would exceed the maximum amount permitted by the Maximum Permissible
Rate, such interest payment shall automatically be reduced to such maximum
permitted amount, and interest for any subsequent period, to the extent less
than the maximum amount permitted for such period by the Maximum Permissible
Rate, shall be increased by the unpaid amount of such reduction. Any interest
actually received for any
#90068563.
-4-
<PAGE>
period in excess of such maximum amount permitted for such period shall be
deemed to have been applied as a prepayment of the Loans.
Section 1.5 Repayment. The Loans outstanding at 5:00 p.m. (New York
---------
time) on the Termination Date shall mature and become due and payable, and shall
be repaid by the Borrower, in full at such time, together with all accrued and
unpaid interest and any other amounts due to the Bank under the Loan Documents.
Section 1.6 Prepayments. (a) Optional Prepayments. The Borrower
----------- --------------------
may, at any time and from time to time, prepay the Loans in whole or in part,
without premium or penalty, except that any partial prepayment shall be in an
aggregate principal amount of at least $100,000 and in integral multiples of
$50,000 in excess thereof. The Borrower shall give the Bank notice of each
prepayment pursuant to this Section 1.6(a) no later than 10:00 a.m. (New York
time) on the Business Day before the date of such prepayment. Each such notice
of prepayment shall be in the form of Schedule 1.6(a) and shall specify (i) the
---------------
date such prepayment is to be made and (ii) the amount of each Loan to be
prepaid. Amounts to be prepaid pursuant to this Section 1.6(a) shall
irrevocably be due and payable on the date specified in the applicable notice of
prepayment, together with interest thereon as provided in Section 1.4(b).
(b) Mandatory Prepayments. If at any time the aggregate
---------------------
unpaid principal amount of the Loans exceeds the
#90068563.
-5-
<PAGE>
Borrowing Base, the Borrower shall immediately prepay the Loans in an amount not
less than the amount of such excess.
Section 1.7 Commitment Fee; Letter of Credit Fee; Reduction of
--------------------------------------------------
Commitment. (a) The Borrower shall pay to the Bank a commitment fee on the
- ----------
daily unused amount of the Commitment for each day from the Agreement Date
through the Termination Date at a rate per annum of 1/2%, payable on the last
day of each fiscal quarter of the Borrower, on the Termination Date and on the
date of any reduction of the Commitment (to the extent accrued and unpaid on the
amount of the reduction).
(b) The Borrower shall pay to the Bank a fee for the Letters
of Credit (the "Letter of Credit Fee") at the rate of two percent (2%) per
--------------------
annum on the aggregate stated amount of Letters of Credit from time to time
outstanding.
(c) The Borrower may reduce the Commitment by giving the
Bank notice (which shall be irrevocable) thereof no later than 10:00 a.m. (New
York time) on the third Business Day before the requested date of such
reduction, except that no partial reduction shall be in an amount less than
$100,000 and any partial reduction shall be in multiples of $100,000.
Section 1.8 Computation of Interest and Fees. Interest and the
--------------------------------
commitment fee shall be computed on the basis of a year of 360 days and paid for
the actual number of days elapsed. Interest for any period shall be calculated
from and including the first day thereof to but excluding the last day thereof.
#90068563.
-6-
<PAGE>
Section 1.9 Payments by the Borrower. (a) Time, Place and Manner.
------------------------ ----------------------
All payments due to the Bank under the Borrower Loan Documents shall be made in
Dollars to the Bank at the Bank's Office or to such other Person or at such
other address as the Bank may designate by notice to the Borrower. All such
payments shall be made for the account of the Lending Office. A payment shall
not be deemed to have been made on any day unless such payment has been received
by the required Person, at the required place of payment, in Dollars in funds
immediately available to such Person, no later than 12:00 noon (New York time)
on such day.
(b) No Reductions. All payments due to the Bank under the
-------------
Borrower Loan Documents, and all other terms, conditions, covenants and
agreements to be observed and performed by the Borrower thereunder, shall be
made, observed or performed by the Borrower without any reduction or deduction
whatsoever, including any reduction or deduction for any set-off, recoupment,
counterclaim (whether sounding in tort, contract or otherwise) or Tax.
(c) Taxes. If any Tax is required to be withheld or
-----
deducted from, or is otherwise payable by the Borrower in connection with, any
payment due to the Bank under the Borrower Loan Documents, the Borrower (i)
shall, if required, withhold or deduct the amount of such Tax from such payment
and, in any case, pay such Tax to the appropriate taxing authority in accordance
with Applicable Law and (ii) shall pay to the Bank (A) such
#90068563.
-7-
<PAGE>
additional amounts as may be necessary so that the net amount received by the
Bank with respect to such payment, after withholding or deducting all Taxes
required to be withheld or deducted, is equal to the full amount payable under
the Borrower Loan Documents and (B) an amount equal to all Taxes payable by the
Bank as a result of payments made by the Borrower (whether to a taxing authority
or to the Bank) pursuant to this Section 1.9(c). If any Tax is withheld or
deducted from, or is otherwise payable by the Borrower in connection with, any
payment due to the Bank under the Borrower Loan Documents, the Borrower shall,
within thirty (30) days after the date of such payment, furnish to the Bank the
original or a certified copy of a receipt for such Tax from the applicable
taxing authority. If any payment due to the Bank under the Borrower Loan
Documents is or is expected to be made without withholding or deducting
therefrom, or otherwise paying in connection therewith, any Tax payable to any
taxing authority, the Borrower shall, within 30 days after any request from the
Bank, furnish to the Bank a certificate from such taxing authority, or an
opinion of counsel acceptable to the Bank, in either case stating that no Tax
payable to such taxing authority was or is, as the case may be, required to be
withheld or deducted from, or otherwise paid by the Borrower in connection with,
such payment.
(d) Authorization to Charge Accounts. The Borrower hereby
--------------------------------
authorizes the Bank, if and to the extent any amount payable by the Borrower
under the Borrower Loan Documents
#90068563.
-8-
<PAGE>
is not otherwise paid when due, to charge such amount against any or all of the
accounts of the Borrower or any Wholly-Owned Subsidiary with the Bank or any of
its Affiliates (whether maintained at a branch or office located within or
without the United States), with the Borrower remaining liable for any
deficiency.
(e) Extension of Payment Dates. Whenever any payment to the
--------------------------
Bank under the Borrower Loan Documents would otherwise be due (except by reason
of acceleration) on a day that is not a Business Day, such payment shall instead
be due on the next succeeding Business Day. If the date any payment under the
Borrower Loan Documents is due is extended (whether by operation of any Borrower
Loan Document, Applicable Law or otherwise), such payment shall bear interest
for such extended time at the rate of interest applicable hereunder.
Section 1.10 Evidence of Indebtedness. The Loans and the Borrower's
------------------------
obligation to repay the Loans with interest in accordance with the terms of this
Agreement shall be evidenced by this Agreement, the records of the Bank and a
single Note. The records of the Bank shall be prima facie evidence of the Loans
and accrued interest thereon and of all payments made in respect thereof.
ARTICLE 2
CONDITIONS TO LOANS
-------------------
#90068563.
-9-
<PAGE>
Section 2.1 Conditions to Initial Loan. The obligation of the Bank
--------------------------
to make the initial Loan is subject to its receipt of each of the following, in
form and substance satisfactory to the Bank:
(a) a certificate of the Secretary or an Assistant Secretary
of the Borrower, dated the requested date for the making of such Loan,
substantially in the form of Schedule 2.1(a), to which shall be attached copies
---------------
of the resolutions and by-laws referred to in such certificate;
(b) a copy of the certificate of incorporation of the
Borrower and each Subsidiary, certified, as of a recent date, by the Secretary
of State or other appropriate official of such entity's jurisdiction of
incorporation;
(c) a good standing certificate with respect to the Borrower
and each Subsidiary, issued as of a recent date by the Secretary of State or
other appropriate official of such Person's jurisdiction of incorporation,
together with a telegram from such Secretary of State or other official,
updating the information in such certificate;
(d) an opinion of counsel for the Borrower, dated the
requested date for the making of such Loan, in the form of Schedule 2.1(d),
---------------
which opinion shall state that it may be relied upon by the Authority;
(e) a certificate in the form of Schedule 2.1(e) from the
---------------
appropriate officer of the Borrower;
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(f) a copy of each Governmental Approval and other consent
or approval listed on Schedule 3.3;
------------
(g) a duly executed Note and a duly executed copy of each of
the other Loan Documents;
(h) either (i) such duly executed UCC-1 financing statements
and other documents as the Bank may request, the filing or recordation of which
is necessary or appropriate in the Bank's determination to create or perfect a
security interest in the Collateral under Applicable Law, or (ii) evidence of
the filing or recordation of the same in such offices as the Bank shall have
specified;
(i) such instruments and other documents as the Bank may
request, the possession of which is necessary or appropriate in the Bank's
determination to create or perfect a security interest in the Collateral under
Applicable Law;
(j) copies of all insurance policies and loss payee
endorsements required under any Loan Document;
(k) the Bank shall have received and reviewed a complete
collateral audit of Borrower's accounts and contracts receivable and such
collateral audit shall be in form and substance acceptable to the Bank;
(l) the Bank shall have received executed documentation
evidencing the Borrower's successful renegotiation of royalty payments to be
made to JWP, Inc. under the Borrower's contract with JWP, Inc. such that monthly
payments (before interest) do not exceed $60,000 in the first month and $50,000
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per month thereafter and $910,000 in the aggregate and such documentation shall
be in form and substance satisfactory to the Bank and its counsel;
(m) the Bank shall have received and reviewed the draft
financial statements of the Borrower, prepared in accordance with Generally
Accepted Accounting Principles, for the fiscal year ended April 30, 1994
containing the information described in Section 5.1(c)(i) hereof, which
statements shall be satisfactory to the Bank, together with a letter of KPMG
Peat Marwick, the Borrower's accountants, to the effect that it will deliver its
unqualified opinion in respect of such financial statements within ten (10) days
after the initial Loan is made;
(n) the CDA Guaranty and related documents shall have been
executed and shall be in form and substance satisfactory to the Bank and its
counsel;
(o) the Loan Documents shall have been approved by the
Authority and evidence of such approval shall have been delivered to the Bank;
(p) either (i) such duly executed UCC-3 termination
statements and other documents as the Bank may request, the filing or
recordation of which is necessary or appropriate in the Bank's determination to
release any Lien on the assets of the Borrower other than Permitted Liens, or
(ii) evidence of the filing or recordation of the same in such offices as the
Bank shall have specified;
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(q) the Escrow Agreement shall have been executed and
delivered by all parties, provided, however, that if such Escrow Agreement is
-------- -------
not executed and delivered prior to the Bank's disbursement of the initial Loan
and the Borrower does not deliver the executed Escrow Agreement within ten (10)
days after the date of disbursement of the initial Loan, the failure to deliver
the Escrow Agreement shall constitute an Event of Default;
(r) a closing fee in the aggregate amount of $40,000 shall
have been paid to the Bank;
(s) the Borrower shall have received a payoff letter from
the The First National Bank of Boston; and
(t) all fees and expenses related to the transactions
described in the Loan Documents, including all fees and expenses related to the
collateral audit and counsel's fees and expenses, shall have been paid.
Section 2.2 Conditions to Each Loan. The obligation of the Bank to
-----------------------
make each Loan, including the initial Loan, is subject to the determination of
the Bank, in its sole and absolute discretion, that each of the following
conditions has been fulfilled:
(a) the Bank shall have received (i) a notice of borrowing
with respect to such Loan complying with the requirements of Section 1.2 and
(ii) a Borrowing Base Certificate as of a date not more than thirty (30) days
before the requested date of such Loan, provided, however, that the Borrowing
-------- -------
Base
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Certificate delivered in connection with the initial Loan shall (A) be as
of July 31, 1994 and (B) evidencing a Borrowing Base at least $500,000 in excess
of the amount of the initial Loan;
(b) each Loan Document Representation and Warranty shall be
true and correct at and as of the time such Loan is to be made, both with and
without giving effect to such Loan and all other Loans to be made at such time
and to the application of the proceeds thereof;
(c) no Default shall have occurred and be continuing at the
time such Loan is to be made or would result from the making of such Loan and
all other Loans to be made at such time or from the application of the proceeds
thereof;
(d) the Bank shall have received such materials as it may
have requested pursuant to Section 5.1(g);
(e) such Loan will not contravene any Applicable Law
applicable to the Bank; and
(f) all legal matters incident to such Loan and the other
transactions contemplated by the Loan Documents shall be satisfactory to Messrs.
Winthrop, Stimson, Putnam & Roberts, counsel for the Bank.
Except to the extent that the Borrower shall have disclosed in the
notice of borrowing, or in a subsequent notice given to the Bank prior to 5:00
p.m. (New York time) on the Business Day before the requested date for the
making of the requested Loan, that a condition specified in clause (b) or (c)
above will not be fulfilled as of the requested time for the
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making of such Loan, the Borrower shall be deemed to have made a Representation
and Warranty as of the time of the making of such Loan that the conditions
specified in such clauses have been fulfilled as of such time. No such
disclosure by the Borrower that a condition specified in clause (b) or (c) above
will not be fulfilled as of the requested time for the making of the requested
Loan shall affect the right of the Bank to not make the Loan requested to be
made by it if, in the Bank's determination, such condition has not been
fulfilled at such time.
ARTICLE 3
CERTAIN REPRESENTATIONS AND WARRANTIES
--------------------------------------
In order to induce the Bank to enter into this Agreement and to make
each Loan, the Borrower represents and warrants as follows:
Section 3.1 Organization; Power; Qualification. The Borrower and
----------------------------------
each Subsidiary are corporations duly organized, validly existing and in good
standing under the laws of their respective jurisdictions of incorporation, have
the corporate power and authority to own their respective properties and to
carry on their respective businesses as now being and hereafter proposed to be
conducted and are duly qualified and in good standing as foreign corporations,
and are authorized to do business, in all jurisdictions in which the character
of their respective properties or the nature of their respective businesses
requires such qualification or authorization, except
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for qualifications and authorizations the lack of which, singly or in the
aggregate, has not had and will not have a Materially Adverse Effect on (a) the
Borrower and the Subsidiaries taken as a whole or (b) the Collateral.
Section 3.2 Subsidiaries. Schedule 3.2 sets forth, as of the
------------ ------------
Agreement Date, all of the Subsidiaries, their jurisdictions of incorporation
and the percentages of the various classes of their Capital Stock owned by the
Borrower or another Subsidiary. The Borrower or another Subsidiary, as the case
may be, has the unrestricted right to vote, and (subject to limitations imposed
by Applicable Law) to receive dividends and distributions on, all Capital Stock
indicated on Schedule 3.2 as owned by the Borrower or such Subsidiary. All such
------------
Capital Stock have been duly authorized and issued and are fully paid and
nonassessable.
Section 3.3 Authorization; Enforceability; Required Consents;
-------------------------------------------------
Absence of Conflicts. The Borrower and each Subsidiary has the power, and has
- --------------------
taken all necessary action (including, if a corporation, any necessary
stockholder action) to authorize it, to execute, deliver and perform in
accordance with their respective terms the Loan Documents to which it is a party
and, in the case of the Borrower, to borrow hereunder in the unused amount of
the Commitment. This Agreement has been, and each of the other Loan Documents
to which the Borrower or any Subsidiary is a party when delivered to the Bank
will have been, duly executed and delivered by the Borrower and each Subsidiary
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that is a party thereto and is, or when so delivered will be, a legal, valid and
binding obligation of such Loan Party, enforceable against such Loan Party in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally. The execution, delivery and
performance in accordance with their respective terms by the Borrower and the
Subsidiaries of the Loan Documents to which they are parties, and each borrowing
hereunder, whether or not in the amount of the unused Commitment, do not and
(absent any change in any Applicable Law or applicable Contract) will not (a)
require any Governmental Approval or any other consent or approval, including
any consent or approval of any Subsidiary or any consent or approval of the
stockholders of the Borrower or any Subsidiary, other than Governmental
Approvals and other consents and approvals that have been obtained, are final
and not subject to review on appeal or to collateral attack, are in full force
and effect and, in the case of any such required under any Applicable Law or
Contract as in effect on the Agreement Date, are listed on Schedule 3.3, or (b)
------------
violate, conflict with, result in a breach of, constitute a default under, or
result in or require the creation of any Lien (other than the Security Interest)
upon any assets of the Borrower or any Subsidiary under, (i) any Contract to
which the Borrower or any Subsidiary is a party or by which the Borrower or any
Subsidiary or any of
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their respective properties may be bound or (ii) any Applicable Law.
Section 3.4 Litigation. Except as set forth on Schedule 3.4, there
---------- ------------
are not, in any court or before any arbitrator of any kind or before or by any
governmental or non-governmental body, any actions, suits or proceedings pending
or threatened (nor, to the knowledge of the Borrower and the Subsidiaries, is
there any basis therefor) against or in any other way relating to or affecting
(a) the Borrower or any Subsidiary or any of their respective businesses or
properties, (b) any Loan Document or (c) the Collateral, except actions, suits
or proceedings that, if adversely determined, would not, singly or in the
aggregate, have a Materially Adverse Effect on (x) the Borrower and the
Subsidiaries taken as a whole, (y) any Loan Document or (z) the Collateral.
Section 3.5 Burdensome Provisions. Neither the Borrower nor any
---------------------
Subsidiary is a party to or bound by any Contract or Applicable Law, compliance
with which might have a Materially Adverse Effect on (a) the Borrower and the
Subsidiaries taken as a whole, (b) any Loan Document or (c) the Collateral.
Section 3.6 No Adverse Change or Event. Since April 30, 1994, no
--------------------------
change in the business, assets, Liabilities, financial condition, results of
operations or business prospects of the Borrower or any Subsidiary has occurred,
and no event has occurred or failed to occur, that has had or might have, either
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alone or in conjunction with all other such changes, events and failures, a
Materially Adverse Effect on (a) the Borrower and the Subsidiaries taken as a
whole, (b) any Loan Document to which the Borrower or any Subsidiary is a party
or (c) the Collateral.
Section 3.7 Additional Adverse Facts. Except for facts and
------------------------
circumstances disclosed on Schedule 3.4 or Schedule 3.7 or in the notes to the
------------ ------------
financial statements referred to in Section 5.2(a), no fact or circumstance is
known to the Borrower, as of the Agreement Date, that, either alone or in
conjunction with all other such facts and circumstances, has had or might have
(so far as the Borrower and the Subsidiaries can foresee) a Materially Adverse
Effect on (a) the Borrower and the Subsidiaries taken as a whole, (b) any Loan
Document or (c) the Collateral. If a fact or circumstance disclosed on such
Schedules or in such notes should in the future have a Materially Adverse Effect
on (x) the Borrower and the Subsidiaries taken as a whole, (y) any Loan Document
or (z) the Collateral, such Materially Adverse Effect shall be a change or event
subject to Section 3.6 notwithstanding such disclosure.
Section 3.8 Title to Property; No Liens. The Borrower has good
---------------------------
title to all property used in connection with its business except as set forth
in Schedule 3.8. There are no Liens or encumbrances on the assets of the
------------
Borrower other than Permitted Liens.
ARTICLE 4
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CERTAIN COVENANTS
-----------------
Section 4.1 Preservation of Existence and Properties; Scope of
--------------------------------------------------
Business; Compliance with Law; Payment of Taxes and Claims; Preservation of
- ---------------------------------------------------------------------------
Enforceability. From the Agreement Date and until the Repayment Date, the
- --------------
Borrower shall and shall cause each Subsidiary to (a) preserve and maintain its
corporate existence and all of its other franchises, licenses, rights and
privileges, (b) preserve, protect and obtain all Intellectual Property, and
preserve and maintain in good repair, working order and condition all other
properties, required for the conduct of its business, (c) engage only in
businesses in substantially the same fields as the businesses conducted on the
Agreement Date, (d) comply with Applicable Law, (e) pay or discharge when due
all Taxes and all Liabilities that might become a Lien on any of its properties
and (f) take all action and obtain all consents and Governmental Approvals
required so that its obligations under the Loan Documents will at all times be
legal, valid and binding and enforceable in accordance with their respective
terms, except that this Section 4.1 (other than clauses (a), in so far as it
requires any Loan Party to preserve its corporate existence, (c) and (f)) shall
not apply in any circumstance where noncompliance, together with all other
noncompliances with this Section 4.1, will not have a Materially Adverse Effect
on (x) the Borrower and the Subsidiaries taken as a whole, (y) any Loan Document
or (z) the Collateral.
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Section 4.2 Insurance. From the Agreement Date and until the
---------
Repayment Date, the Borrower shall and shall cause each Subsidiary to maintain
insurance with responsible insurance companies against at least such risks and
in at least such amounts as is customarily maintained by similar businesses, or
as may be required by Applicable Law or reasonably requested by the Bank,
including, without limitation, general liability and business interruption
insurance at levels satisfactory to the Bank and the policies for which name the
Bank as loss payee. The Borrower shall provide evidence to the Bank on each
anniversary of the Agreement Date that the Borrower carries general liability
and business interruption insurance coverage as described in the preceding
sentence.
Section 4.3 Use of Proceeds. From the Agreement Date and until the
---------------
Repayment Date, the Borrower shall and shall cause each Subsidiary to use the
proceeds of the Loans only for working capital and general corporate purposes.
None of the proceeds of any of the Loans shall be used to purchase or carry, or
to reduce or retire or refinance any credit incurred to purchase or carry, any
margin stock (within the meaning of Regulations U and X of the Board of
Governors of the Federal Reserve System) or to extend credit to others for the
purpose of purchasing or carrying any margin stock. If requested by the Bank,
the Borrower shall complete and sign Part I of a copy of Federal Reserve Form
U-1 referred to in Regulation U and deliver such copy to the Bank.
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Section 4.4 Guaranties. The Borrower shall not, and shall not
----------
permit any Subsidiary to, directly or indirectly be obligated, at any time, in
respect of any Guaranty other than a Guaranty in favor of the Bank.
Section 4.5 Liens. The Borrower shall not, and shall not permit any
-----
Subsidiary to, directly or indirectly permit to exist, at any time, any Lien
upon any of its properties or assets of any character, whether now owned or
hereafter acquired, or upon any income or profits therefrom, except that this
Section 4.5 shall not apply to Permitted Liens, provided, however, that if,
-------- -------
notwithstanding this Section 4.5, any Lien which this Section prohibits shall be
created or arise, the Liabilities of the Loan Parties under the Loan Documents
shall, to the extent such Lien attaches to any asset that does not constitute
Collateral or to any asset with respect to which such Lien would be prior to the
Security Interest, automatically be secured by such Lien equally and ratably
with the other Liabilities secured thereby, and the holder of such other
Liabilities, by accepting such Lien, shall be deemed to have agreed thereto and
to share with the Bank, on that basis, the proceeds of such Lien, whether or not
the Bank's security interest shall be perfected, provided further, however, that
-------- ------- -------
notwithstanding such equal and ratable securing and sharing, the existence of
such Lien shall constitute a default by the Borrower in the performance or
observance of this Section 4.5.
Section 4.6 Restricted Payments. The Borrower shall not, and shall
-------------------
not permit any Subsidiary to, directly or
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indirectly make or declare or otherwise become obligated to make any Restricted
Payment, provided, however, that the Borrower may purchase its Capital Stock
-------- -------
from any former employee pursuant to an agreement between such employee and the
Borrower up to an aggregate amount of $25,000 per year.
Section 4.7 Merger or Consolidation. The Borrower shall not, and
-----------------------
shall not permit any Subsidiary to, directly or indirectly merge or consolidate
with any Person, except that, if after giving effect thereto no Default would
exist, this Section 4.7 shall not apply to (a) any merger or consolidation of
the Borrower with any one or more Persons, provided that the Borrower shall be
the continuing Person, and (b) any merger or consolidation of any Subsidiary
with any one or more other Subsidiaries, provided that (i) if such Subsidiary is
a Loan Party, such Subsidiary shall be the continuing Person and (ii) the
continuing Person shall, after giving effect to such merger or consolidation, be
an Indebtedness-Free Subsidiary.
Section 4.8 Disposition of Assets. The Borrower shall not, and
---------------------
shall not permit any Subsidiary to, directly or indirectly sell, lease, license,
transfer or otherwise dispose of any asset or any interest therein, except that
this Section 4.8 shall not apply to (i) any disposition of any asset or any
interest therein in the ordinary course of business or (ii) the disposition of
obsolete or retired property, and in any event shall not apply to dispositions
of assets from the date hereof having a total aggregate value of less than
$50,000.
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Section 4.9 Taxes of Other Persons. The Borrower shall not, and
----------------------
shall not permit any Subsidiary to, directly or indirectly (a) file a
consolidated tax return with any other Person other than, in the case of the
Borrower, a Subsidiary and, in the case of any such Subsidiary, the Borrower or
a Subsidiary, or (b) except as required by Applicable Law, pay or enter into any
Contract to pay any Taxes owing by any Person other than the Borrower or a
Subsidiary.
Section 4.10 Benefit Plans. The Borrower shall not, and shall not
-------------
permit any Subsidiary to, directly or indirectly (a) have, or permit any ERISA
Affiliate to have, any Benefit Plan other than an Existing Benefit Plan as set
forth on Schedule 4.10; (b) permit any Existing Benefit Plan to be amended in
any manner that would cause the aggregate Unfunded Benefit Liabilities under all
Existing Benefit Plans to exceed $75,000; or (c) permit any Existing Benefit
Plan to have a Funded Current Liability Percentage of less than 60%.
Section 4.11 Transactions with Affiliates. The Borrower shall not,
----------------------------
and shall not permit any Subsidiary to, directly or indirectly effect any
transaction with any Affiliate on a basis less favorable than would at the time
be obtainable for a comparable transaction in arms-length dealing with an
unrelated third party.
Section 4.12 Limitation on Restrictive Covenants. The Borrower shall
-----------------------------------
not, and shall not permit any Subsidiary to, directly or indirectly permit to
exist, at any time, any
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consensual restriction limiting the ability (whether by covenant, event of
default, subordination or otherwise) of any Subsidiary to (a) pay dividends or
make any other distributions on shares of its capital stock held by the Borrower
or any other Subsidiary, (b) pay any obligation owed to the Borrower or any
other Subsidiary, (c) make any loans or advances to or investments in the
Borrower or in any other Subsidiary, (d) transfer any of its property or assets
to the Borrower or any other Subsidiary, or (e) create any Lien upon its
property or assets whether now owned or hereafter acquired or upon any income or
profits therefrom, except that this Section 4.12 shall not apply to Permitted
Restrictive Covenants.
Section 4.13 Issuance or Disposition of Capital Stock. The Borrower
----------------------------------------
shall not, and shall not permit any Subsidiary to, directly or indirectly issue
any of its Capital Stock or sell, transfer or otherwise dispose of any Capital
Stock of any Subsidiary.
Section 4.14 Capital Expenditures. The Borrower shall not,
--------------------
and shall not permit any Subsidiary to, directly or indirectly make any Capital
Expenditures during the fiscal quarter ended on the date set forth below (taken
as one accounting period) which exceed in the aggregate the amount set forth
opposite such period below:
Date Amount
- ---- ------
July 31, 1994 $150,000
October 31, 1994 $150,000
January 31, 1995 $200,000
April 30, 1995 $200,000
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July 31, 1995 $400,000
October 31, 1995 $400,000
January 31, 1996 $400,000
April 30, 1996 $400,000
July 31, 1996 $400,000
Termination Date $400,000
Notwithstanding anything to the contrary contained above, to the extent that
Capital Expenditures made during any period set forth above are less than the
amounts set forth opposite such period above, such amount may be carried
forward for one period and utilized to make capital expenditures in excess of
the amount permitted above in the next subsequent period.
Section 4.15 Indebtedness. The Borrower shall not, and shall not
------------
permit any Subsidiary to, directly or indirectly have any Indebtedness, other
than (i) as set forth on Schedule 4.15, (ii) additional Indebtedness incurred
-------------
in connection with capital leases as to which the Borrower is lessee, which
Indebtedness may not exceed $400,000 in the aggregate, and (iii) the Loans.
Section 4.16 Subsidiaries. The Borrower shall not form any
------------
Subsidiaries after the Agreement Date without the prior written consent of the
Bank.
Section 4.17 Changes in Key Management. The Borrower shall not,
-------------------------
directly or indirectly, cease to employ either Constance Galley or Richard
Bankosky.
Section 4.18 Minimum Consolidated Tangible Net Worth. The Borrower
---------------------------------------
shall not permit Consolidated Tangible Net Worth at
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any time during the periods set forth below to be less than the amounts set
forth below:
Period Amount
------ ------
July 31, 1994 - October 30, 1994 $1,800,000
October 31, 1994 - January 30, 1995 $1,800,000
January 31, 1995 - April 29, 1995 $1,800,000
April 30, 1995 - July 30, 1995 $1,800,000
July 31, 1995 - October 30, 1995 $2,000,000
October 31, 1995 - January 30, 1995 $2,300,000
January 31, 1996 - April 29, 1995 $3,000,000
April 30, 1996 - July 31, 1996 $3,800,000
July 31, 1996 - Termination Date $3,800,000
Section 4.19 Ratio of Consolidated Total Liabilities to Consolidated
-------------------------------------------------------
Tangible Net Worth. The Borrower shall not permit Consolidated Total
- ------------------
Liabilities at any time during the periods set forth below to exceed the ratio
of Consolidated Tangible Net Worth set forth below:
Period Ratio
------ -----
July 31, 1994 - October 30, 1994 3.50:1
October 31, 1994 - December 30, 1994 3.50:1
January 31, 1995 - April 29, 1995 3.50:1
April 30, 1995 - July 30, 1995 3.50:1
July 31, 1995 - October 30, 1995 3.00:1
October 31, 1995 - January 30, 1996 2.50:1
January 31, 1996 - April 29, 1996 2.00:1
April 30, 1996 - July 31, 1996 2.00:1
July 31, 1996 - Termination Date 2.00:1
Section 4.20 Working Capital Ratio. The Borrower shall not permit
---------------------
the ratio of Consolidated Current Assets to Consolidated Current Liabilities to
fall below the ratios set forth below for the fiscal quarters ended on the
dates set forth below:
Date Ratio
---- -----
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July 31, 1994 1.10:1
October 31, 1994 1.25:1
January 31, 1995 1.25:1
April 30, 1995 1.25:1
July 31, 1995 1.25:1
October 31, 1995 1.50:1
January 31, 1996 1.50:1
April 30, 1996 1.50:1
July 31, 1996 1.50:1
Section 4.21 Net Losses. The Borrower shall not incur net losses in
----------
more than one fiscal quarter in any fiscal year or for any fiscal year.
Section 4.22 Fixed Charge Coverage Ratio. The Borrower shall not
---------------------------
permit the Fixed Charge Coverage Ratio for any period of four (4) consecutive
fiscal quarters (taken as one accounting period) ended as of the date set forth
below to be less than the ratio set forth opposite such date below:
Date Ratio
---- -----
July 31, 1994 .80:1
October 31, 1994 .80:1
January 31, 1995 .80:1
April 30, 1995 .80:1
July 31, 1995 1.00:1
October 31, 1995 1.15:1
January 31, 1996 1.50:1
April 30, 1996 1.75:1
July 31, 1996 1.75:1
Section 4.23 Interest Coverage Ratio. The Borrower shall not permit
-----------------------
the Interest Coverage Ratio for any period of four (4) consecutive fiscal
quarters (taken as one accounting period) ended as of the date set forth below
to be less than the ratio set forth opposite such date below:
Date Ratio
---- -----
July 31, 1994 1.00:1
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October 31, 1994 1.00:1
January 31, 1995 1.00:1
April 30, 1995 1.50:1
July 31, 1995 2.50:1
October 31, 1995 3.00:1
January 31, 1996 4.00:1
April 30, 1996 5.00:1
July 31, 1996 5.00:1
Section 4.24 Guaranty Agreement. The Borrower shall cause any
------------------
Subsidiary formed after the Agreement Date to execute and deliver to the Bank a
Guaranty Agreement in form and substance satisfactory to the Bank.
Section 4.25 CDA Guaranty. The Borrower shall comply with all
------------
provisions of the CDA Guaranty applicable to it and shall promptly pay all fees
and expenses owing to the Authority pursuant to the CDA Guaranty.
Section 4.26 Government Receivables. The Borrower shall not permit
----------------------
more than fifteen percent (15%) of its Eligible Receivables to consist of
Receivables arising out of transactions with a governmental body, entity or
agency.
Section 4.27 Investments. The Borrower shall not invest in (by
-----------
capital contribution or otherwise), suffer to exist any investment in, or
acquire or purchase or make any commitment to purchase the obligations or
capital stock of, or other indicia of equity rights in, any Person, or permit
any of its Subsidiaries so to do, except (a) in connection with mergers,
consolidations and acquisitions not prohibited by Section 4.7 and (b)(i) the
purchase of direct obligations of the government of the United States of
America; (ii) certificates of deposit and
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Eurodollar deposits of any bank organized or licensed to conduct a banking
business under the laws of the United States or any state thereof or any bank
organized under the laws of a foreign country which is licensed to conduct
banking business under the laws of the United States or any state thereof and in
each case rated A or better by Standard & Poor's Corporation or Moody's
Investors Service, Inc. or both; (iii) stock or obligations issued to the
Borrower or its Subsidiaries in settlement of claims against others by reason of
an event of bankruptcy or a composition or the readjustment of debt or a
reorganization of any debtor of the Borrower or its Subsidiaries; (iv)
commercial paper of any corporation organized under the laws of any state of the
United States having one of the two (2) highest ratings then given by Moody's
Investors Service, Inc. or Standard & Poor's Corporation and (v) money market
mutual funds having as their primary objectives safety of principal and
liquidity and which invest in short term securities with one of the two (2)
highest ratings then given by Moody's Investors Service, Inc. or Standard &
Poor's Corporation.
Section 4.28 Relocation of Borrower. The Borrower shall not relocate
----------------------
(as that term is defined in Section 32-5a of the Connecticut General Statutes
and regulations related thereto, as the same may be amended from time to time
("Section 32-5a")) outside of the State of Connecticut or relocate within the
State of Connecticut and fail to offer employment as provided by Section 32-5a.
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ARTICLE 5
FINANCIAL STATEMENTS AND INFORMATION
------------------------------------
Section 5.1 Financial Statements and Information. From the
------------------------------------
Agreement Date and until the Repayment Date, the Borrower shall furnish to the
Bank:
(a) Monthly Financial Statements; Officer's Certificate. As
---------------------------------------------------
soon as available and in any event within thirty (30) days after the end of
each calendar month, commencing with the month of July 1994:
(i) consolidated and consolidating balance sheets of
the Borrower and the Subsidiaries as at the end of such month and the
related consolidated and consolidating statements of income and retained
earnings of the Borrower and the Subsidiaries for such month and for
the elapsed portion of the fiscal year ended with the last day of such
month, setting forth in each case in comparative form the figures for
the corresponding periods of the previous fiscal year and of the
Borrower's Business Plan for the currently fiscal year; and
(ii) a certificate with respect thereto of the
president or chief financial officer of the Borrower in the form of
Schedule 5.1(a).
---------------
(b) Quarterly Financial Statements; Officer's Certificate.
-----------------------------------------------------
As soon as available and in any event within forty-five (45) days after the
close of each of the first three (3)
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quarterly accounting periods in each fiscal year of the Borrower, commencing
with the quarterly period ending July 31, 1994:
(i) consolidated and consolidating balance sheets of the
Borrower and the Subsidiaries as at the end of such quarterly period
and the related consolidated and consolidating statements of income,
retained earnings and cash flows of the Borrower and the Subsidiaries
for such quarterly period and for the elapsed portion of the fiscal year
ended with the last day of such quarterly period, setting forth in each
case in comparative form the figures for the corresponding periods of
the previous fiscal year and of the Borrower's Business Plan for the
current fiscal year; and
(ii) a certificate with respect thereto of the president or
chief financial officer of the Borrower in the form of Schedule 5.1(b).
---------------
(c) Year-End Financial Statements; Accountants' and
-----------------------------------------------
Officer's Certificates. As soon as available and in any event within ninety
- ----------------------
(90) days after the end of each fiscal year of the Borrower, commencing with the
fiscal year ending April 30, 1995:
(i) consolidated and consolidating balance sheets of the
Borrower and the Subsidiaries as at the end of such fiscal year and the
related consolidated and consolidating statements of income, retained
earnings and cash flows of the Borrower and the Subsidiaries for such
fiscal year,
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setting forth in comparative form the figures as at the end of and for
the previous fiscal year;
(ii) an audit report of KPMG Peat Marwick, or other
independent certified public accountants of recognized standing
satisfactory to the Bank, on such of the financial statements referred
to in clause (i) as are consolidated financial statements, which report
shall be in scope and substance satisfactory to the Bank;
(iii) a letter of such accountants addressed to the
Bank and in form and substance satisfactory to the Bank stating that
they have caused this Agreement to be reviewed and that, in making the
examination necessary for their report on such consolidated financial
statements, nothing came to their attention that caused them to believe
that, as of the date of such financial statements, any Default exists
or, if such is not the case, specifying such Default and its nature,
when it occurred and whether it is continuing and having attached the
calculations required to establish whether or not the Borrower was in
compliance at the end of the fiscal year with the covenants contained
in Sections 4.14 through 4.17; and
(iv) a certificate of the president or chief
financial officer of the Borrower in the form of Schedule 5.1(c).
---------------
(d) Borrowing Base Information. (i) Borrowing Base
-------------------------- --------------
Certificates. Within two (2) days after any request
- ------------
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therefor by the Bank and within ten (10) Business Days after the last day of
each month, commencing with the month of August 1994, a Borrowing Base
Certificate as of the date of the request therefor or the last day of such
month, as applicable.
(ii) Notice of Ineligibility. The Borrower shall notify
-----------------------
the Bank of the failure of any Collateral included in the Borrowing Base
(as calculated in the most recently delivered Borrowing Base
Certificate) to comply with the applicable criteria of eligibility
within two (2) Business Days after the Borrower first becomes, or in the
exercise of reasonable care should have become, aware of such
noncompliance.
(e) Annual Business Plan. As soon as available, and in any
--------------------
event within ninety (90) days after the end of each fiscal year of the Borrower,
commencing with the fiscal year ending April 30, 1994, an annual business plan,
which shall include monthly projected income statements, balance sheets and cash
flow statements.
(f) Reports and Filings. (i) Promptly upon receipt
-------------------
thereof, copies of all reports, if any, submitted to the Borrower or any
Subsidiary, or the Board of Directors of the Borrower or any Subsidiary, by its
independent certified public accountants, including any management letter; (ii)
as soon as practicable, copies of all such financial statements and reports as
the Borrower or any Subsidiary shall send to its stockholders and of all
registration statements and all regular or periodic
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reports that the Borrower or any Subsidiary shall file, or may be required to
file, with the Securities and Exchange Commission or any successor commission.
The Borrower hereby authorizes and directs each other Person to furnish to the
Bank any Information regarding such matters that the Bank may request from such
Person.
(g) Requested Information. From time to time and promptly
---------------------
upon request of the Bank, such Information regarding the Borrower or the Loan
Documents to which the Borrower or any Subsidiary is a party, the Loans or the
business, assets, Liabilities, financial condition, results of operations or
business prospects of the Borrower and the Subsidiaries as the Bank may request,
in each case in form and substance and certified in a manner satisfactory to the
Bank.
(h) Notice of Defaults, Material Adverse Changes and Other
------------------------------------------------------
Matters. Prompt notice of: (i) any Default, (ii) the acquisition or formation
- -------
of a new Subsidiary and, in the case of each such new Subsidiary, its name,
jurisdiction of incorporation, the percentages of the various classes of its
Capital Stock owned by the Borrower or another Subsidiary, (iii) any change in
the name of the Borrower or any Subsidiary, its jurisdiction of incorporation,
the percentages of the various classes of its Capital Stock owned by the
Borrower or another Subsidiary, (iv) the threatening or commencement of, or the
occurrence or nonoccurrence of any change or event relating to, any action, suit
or proceeding that would cause the
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Representation and Warranty contained in Section 3.4 to be incorrect if made at
such time, (v) the occurrence or nonoccurrence of any change or event that would
cause the Representation and Warranty contained in Section 3.6 to be incorrect
if made at such time, (vi) any event or condition referred to in clauses (i)
through (vii) of Section 6.1(h), whether or not such event or condition shall
constitute an Event of Default, (vii) any amendment of the certificate of
incorporation or by-laws of the Borrower or any Subsidiary that is a Loan Party
and (viii) any matter or event that has had, or may have, a Materially Adverse
Effect on Collateral.
Section 5.2 Accuracy of Financial Statements and Information.
------------------------------------------------
(a) Historical Financial Statements. The Borrower hereby
-------------------------------
represents and warrants that (i) Schedule 5.2(a) sets forth a complete and
correct list of the financial statements submitted by the Borrower to the Bank
in order to induce it to execute and deliver this Agreement, (ii) such financial
statements are complete and correct and present fairly, in accordance with
Generally Accepted Accounting Principles, the consolidated and consolidating
financial position of the Borrower and the Subsidiaries as at their respective
dates and the consolidated and consolidating results of operations, retained
earnings and, as applicable, changes in financial position or cash flows of the
Borrower and such Subsidiaries for the respective periods to which such
statements relate, and (iii)
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except as disclosed or reflected in such financial statements, as at the date of
the latest balance sheet listed on Schedule 5.2(a), neither the Borrower nor any
---------------
Subsidiary had any Liability, contingent or otherwise, or any unrealized or
anticipated loss, that, singly or in the aggregate, has had or might have a
Materially Adverse Effect on the Borrower and the Subsidiaries taken as a
whole.
(b) Future Financial Statements. The financial statements
---------------------------
delivered pursuant to Section 5.1(a), 5.1(b) or 5.1(c) shall be complete and
correct and present fairly, in accordance with Generally Accepted Accounting
Principles (except for changes therein or departures therefrom that are
described in the certificate or report accompanying such statements and that
have been approved in writing by the Borrower's then current independent
certified public accountants), the consolidated and consolidating financial
position of the Borrower and the Subsidiaries as at their respective dates and
the consolidated and consolidating results of operations, retained earnings and
cash flows of the Borrower and such Subsidiaries for the respective periods to
which such statements relate, and the furnishing of the same to the Bank shall
onstitute a representation and warranty by the Borrower made on the date the
same are furnished to the Bank to that effect and to the further effect that,
except as disclosed or reflected in such financial statements, as at the
respective dates thereof, neither the Borrower nor any Subsidiary had any
Liability, contingent or
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<PAGE>
otherwise, or any unrealized or anticipated loss, that, singly or in the
aggregate, has had or might have a Materially Adverse Effect on the Borrower and
the Consolidated Subsidiaries taken as a whole.
(c) Historical Information. The Borrower hereby represents
----------------------
and warrants that all Information furnished to the Bank by or on behalf of the
Borrower or any Subsidiary prior to the Agreement Date in connection with or
pursuant to the Loan Documents and the relationships established thereunder, at
the time the same was so furnished, but in the case of Information dated as of a
prior date, as of such date, (i) in the case of any Information prepared in the
ordinary course of business, was complete and correct in the light of the
purpose prepared, and, in the case of any Information the preparation of which
was requested by the Bank, was complete and correct in all material respects to
the extent necessary to give the Bank true and accurate knowledge of the subject
matter thereof, (ii) did not contain any untrue statement of a material fact,
and (iii) did not omit to state a material fact necessary in order to make the
statements contained therein not misleading in the light of the circumstances
under which they were made.
(d) Future Information. All Information furnished to the
------------------
Bank by or on behalf of the Borrower or any Subsidiary on or after the Agreement
Date in connection with or pursuant to the Loan Documents or in connection with
or pursuant to any amendment or modification of, or waiver of rights under,
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<PAGE>
the Loan Documents, shall, at the time the same is so furnished, but in the case
of Information dated as of a prior date, as of such date, (i) in the case of any
Information prepared in the ordinary course of business, be complete and correct
in the light of the purpose prepared, and, in the case of any Information
required by the terms of the Loan Documents or the preparation of which was
requested by the Bank, be complete and correct to the extent necessary to give
the Bank true and accurate knowledge of the subject matter thereof, (ii) not
contain any untrue statement of a material fact, and (iii) not omit to state a
material fact necessary in order to make the statements contained therein not
misleading in the light of the circumstances under which they were made, and the
furnishing of the same to the Bank shall constitute a representation and
warranty by the Borrower made on the date the same are so furnished to the
effect specified in clauses (i), (ii) and (iii).
Section 5.3 Additional Covenants Relating to Disclosure. From the
-------------------------------------------
Agreement Date and until the Repayment Date, the Borrower shall and shall cause
each Subsidiary to:
(a) Accounting Methods and Financial Records. Maintain a
----------------------------------------
System of accounting, and keep such books, records and accounts (which shall be
true and complete), as may be required or necessary to permit (i) the
preparation of financial statements required to be delivered pursuant to
Sections 5.1(a), 5.1(b) and 5.1(c) and (ii) the determination of the compliance
of
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<PAGE>
the Borrower and the Subsidiaries with the terms of the Loan Documents.
(b) Fiscal Year. Maintain the same opening and closing
-----------
dates for each fiscal year as for the fiscal year reflected in the Base
Financial Statements or, if the opening and closing dates for the fiscal year
reflected in the Base Financial Statements were determined pursuant to a
formula, determine the opening and closing dates for each fiscal year pursuant
to the same formula.
(c) Visits, Inspections and Discussions. Permit, or promptly
-----------------------------------
take such actions as are necessary or desirable in order to permit,
representatives (whether or not officers or employees) of the Bank, from time to
time, as often as may be reasonably requested, to (i) visit any of its premises
or property or any premises or property of others on which any of its property
or books and records (or books and records of others relating to it) may be
located, (ii) inspect, and verify the amount, character and condition of, any of
its property, (iii) review and make extracts from its books and records and
books and records of others relating to it, including management letters
prepared by its independent certified public accountants, (iv) cause an audit of
the Collateral to be prepared and delivered to the Bank from time to time upon
the Bank's reasonable request and at the Borrower's expense, and (v) discuss
with any Person (including its principal officers, independent certified public
accountants, suppliers, customers, debtors and other creditors)
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<PAGE>
its business, assets, Liabilities, financial condition, results of operation and
business prospects, provided, however, that, if an Event of Default is not
-------- -------
continuing, the Bank will notify the Borrower prior to discussing such matters
with any supplier or customer. Notwithstanding the foregoing, any failure by the
Bank to notify the Borrower pursuant to the preceding sentence shall not affect
the Bank's rights hereunder. The Borrower hereby authorizes and directs all
other Persons (i) to permit representatives of the Bank to make such visits,
inspections, reviews and extracts of premises, property, books and records
within their possession or control and (ii) to discuss such matters with such
representatives.
The Bank will endeavor to keep all financial information
regarding the Borrower confidential and not to release any such information to
any third party not affiliated with the Bank or the Borrower other than the
Authority, provided, however, that the Bank's noncompliance with this sentence
-------- -------
will not affect its rights under this Agreement. The Bank will request that any
representative of the Bank (other than an officer or employee of the Bank or any
of its Affiliates) execute a confidentiality agreement between such
representative and the Borrower relating to information obtained by such
representative regarding the Borrower, provided, however, that any failure of
-------- -------
such representative to execute such confidentiality agreement shall not preclude
the Bank from using the services of such representative.
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<PAGE>
ARTICLE 6
DEFAULT
-------
Section 6.1 Events of Default. Each of the following shall
-----------------
constitute an Event of Default, whatever the reason for such event and whether
it shall be voluntary or involuntary, or within or without the control of the
Borrower or any Subsidiary, or be effected by operation of law or pursuant to
any judgment or order of any court or any order, rule or regulation of any
governmental or nongovernmental body:
(a) Any payment of principal of or interest on any of the
Loans or the Notes or of the commitment fee shall not be made when and as due
(whether at maturity, by reason of notice of prepayment or acceleration or
otherwise) and in accordance with the terms of this Agreement and the Notes and,
except in the case of payments of principal, such failure shall continue for two
(2) days;
(b) Any Loan Document Representation and Warranty shall at
any time prove to have been incorrect or misleading in any material respect when
made;
(c) The Borrower shall default in the performance or
observance of
(i) any term, covenant, condition or agreement
contained in Section 4.1(a) (insofar as such Section requires the
preservation of the corporate existence
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<PAGE>
of the Borrower), 4.1(f), 4.2 through 4.28, 5.1 or 5.3 of this
Agreement;
(ii) any term, covenant, condition or agreement
contained in this Agreement (other than a term, covenant, condition or
agreement a default in the performance or observance of which is
elsewhere in this Section specifically dealt with) and, if capable of
being remedied, such default shall continue unremedied for a period of
twenty (20) days; or
(iii) any term, covenant, condition or agreement
contained in any Loan Document (other than any term, covenant, condition
or agreement a default in the performance or observance of which is
elsewhere in this Section specifically dealt with) and, if capable of
being remedied, such default shall continued unremedied for a period of
ten (10) days;
(d) (i) The Borrower or any Subsidiary shall fail to pay,
in accordance with its terms and when due and payable, any of the
principal of or interest on any Indebtedness (other than the Loans)
having a then outstanding principal amount in excess of $75,000, (ii)
the maturity of any such Indebtedness shall, in whole or in part, have
been accelerated, or any such Indebtedness shall, in whole or in part,
have been required to be prepaid prior to the stated maturity thereof,
in accordance with the provisions of any Contract evidencing, providing
for the
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creation of or concerning such Indebtedness, or (iii) (A) any event
shall have occurred and be continuing that permits (or, with the
passage of time or the giving of notice or both, would permit) any
holder or holders of such Indebtedness, any trustee or agent acting on
behalf of such holder or holders or any other Person so to accelerate
such maturity or require any such prepayment and (B) if the Contract
evidencing, providing for the creation of or concerning such
Indebtedness provides for a cure period for such event, such event
shall not be cured prior to the end of such cure period or such shorter
period of time as the Bank may specify;
(e) A default shall be continuing under any Contract (other
than a Contract relating to Indebtedness to which clause (d) of this Section 6.1
is applicable) binding upon the Borrower or any Subsidiary, except a default
that, together with all other such defaults, has not had and will not have a
Materially Adverse Effect on (i) the Borrower and the Consolidated Subsidiaries
taken as a whole, (ii) any Loan Document or (iii) the Collateral;
(f) (i) The Borrower or any Subsidiary shall (A) commence a
voluntary case under the Federal bankruptcy laws (as now or hereafter in
effect), (B) file a petition seeking to take advantage of any other laws,
domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding
up or composition or adjustment of debts, (C) consent to or fail to contest in a
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timely and appropriate manner any petition filed against it in an involuntary
case under such bankruptcy laws or other laws, (D) apply for, or consent to, or
fail to contest in a timely and appropriate manner, the appointment of, or the
taking of possession by, a receiver, custodian, trustee, liquidator or the like
of itself or of a substantial part of its assets, domestic or foreign, (E) admit
in writing its inability to pay, or generally not be paying, its debts (other
than those that are the subject of bona fide disputes) as they become due, (F)
make a general assignment for the benefit of creditors, or (G) take any
corporate action for the purpose of effecting any of the foregoing; or
(ii) (A) A case or other proceeding shall be
commenced against the Borrower or any Subsidiary seeking (1) relief
under the Federal bankruptcy laws (as now or hereafter in effect) or
under any other laws, domestic or foreign, relating to bankruptcy,
insolvency, reorganization, winding up or composition or adjustment of
debts, or (2) the appointment of a trustee, receiver, custodian,
liquidator or the like of the Borrower or any Subsidiary, or of all or
any substantial part of the assets, domestic or foreign, of the Borrower
or any Subsidiary, and such case or proceeding shall continue
undismissed or unstayed for a period of thirty (30) days, or (B) an
order granting the relief requested in such case or proceeding against
the Borrower or
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<PAGE>
any Subsidiary (including an order for relief under such Federal
bankruptcy laws) shall be entered;
(g) A judgment or order shall be entered against the
Borrower or any Subsidiary by any court, and (i) in the case of a judgment or
order for the payment of money, either (A) such judgment or order shall continue
undischarged and unstayed for a period of twenty (20) days in which the
aggregate amount of all such judgments and orders exceeds $100,000 or (B)
enforcement proceedings shall have been commenced upon such judgment or order
and (ii) in the case of any judgment or order for other than the payment of
money, such judgment or order could, in the reasonable judgment of the Bank,
together with all other such judgments or orders, have a Materially Adverse
Effect on the Borrower and the Consolidated Subsidiaries taken as a whole;
(h) (i) any Termination Event shall occur with respect to
any Benefit Plan of the Borrower, any Subsidiary or any of their respective
ERISA Affiliates, (ii) any Accumulated Funding Deficiency, whether or not
waived, shall exist with respect to any such Benefit Plan, (iii) any Person
shall engage in any Prohibited Transaction involving any such Benefit Plan, (iv)
the Borrower, any Subsidiary or any of their respective ERISA Affiliates shall
be in "default" (as defined in ERISA Section 4219(c)(5)) with respect to
payments owing to any such Benefit Plan that is a Multiemployer Benefit Plan as
a result of such Person's complete or partial withdrawal (as described in ERISA
Section 4203 or 4205) therefrom, (v) the Borrower, any
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Subsidiary or any of their respective ERISA Affiliates shall fail to pay when
due an amount that is payable by it to the PBGC or to any such Benefit Plan
under Title IV of ERISA, (vi) a proceeding shall be instituted by a fiduciary of
any such Benefit Plan against the Borrower, any Subsidiary or any of their
respective ERISA Affiliates to enforce ERISA Section 515 and such proceeding
shall not have been dismissed within thirty (30) days thereafter, or (vii) any
other event or condition shall occur or exist with respect to any such Benefit
Plan, except that no event or condition referred to in clauses (i) through (vii)
shall constitute an Event of Default if it, together with all other such events
or conditions at the time existing, has not subjected, and in the reasonable
determination of the Bank will not subject, the Borrower or any Subsidiary to
any Liability that, alone or in the aggregate with all such Liabilities, exceeds
$75,000;
(i) Any Loan Party or any Affiliate of any Loan Party
asserts, or any Loan Party or any Affiliate of any Loan Party or any other
Person institutes any proceedings seeking to establish, that (i) any provision
of the Loan Documents is invalid, not binding or unenforceable, (ii) the
Guaranty of any guarantor of the obligations hereunder is limited in amount,
(iii) the amount of obligations secured under the Security Agreement is limited,
or (iv) the Security Interest is not a valid and perfected first priority
security interest in the Collateral subject only to Permitted Liens; or
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(j) The Borrower shall fail to pay any annual guaranty fee
under the CDA Guaranty.
Section 6.2 Remedies upon Event of Default. During the continuance
------------------------------
of any Event of Default (other than one specified in Section 6.1(f)) and in
every such event, the Bank, upon notice to the Borrower, may do either or both
of the following: (a) declare, in whole or, from time to time, in part, the
principal of and interest on the Loans and the Notes and all other amounts owing
under the Borrower Loan Documents to be, and the Loans and the Notes and all
such other amounts shall thereupon and to that extent become, due and payable
and (b) terminate, in whole or, from time to time, in part, the Commitment.
Upon the occurrence of an Event of Default specified in Section 6.1(f),
automatically and without any notice to the Borrower, (a) the principal of and
interest on the Loans and the Notes and all other amounts owing under the
Borrower Loan Documents shall be due and payable and (b) the Commitment shall
terminate. Presentment, demand, protest or notice of any kind (other than the
notice provided for in the first sentence of this Section 6.2) are hereby
expressly waived.
ARTICLE 7
ADDITIONAL CREDIT FACILITY PROVISIONS
-------------------------------------
Section 7.1 Regulatory Changes. If in the determination of the Bank
------------------
(a) any Regulatory Change shall directly or indirectly (i) reduce the amount of
any sum received or receivable by the Bank with respect to any Loan or the
return
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to be earned by the Bank on any Loan, (ii) impose a cost on the Bank or
any Affiliate of the Bank that is attributable to the making or maintaining of,
or the Bank's commitment to make, any Loan, (iii) require the Bank or any
Affiliate of the Bank to make any payment on or calculated by reference to the
gross amount of any amount received by the Bank under any Loan Document or (iv)
reduce, or have the effect of reducing, the rate of return on any capital of the
Bank or any Affiliate of the Bank that the Bank or such Affiliate is required to
maintain on account of any Loan or the Bank's commitment to make any Loan and
(b) such reduction, increased cost or payment shall not be fully compensated for
by an adjustment in the applicable rates of interest payable under the Loan
Documents, then the Borrower shall pay to the Bank such additional amounts as
the Bank determines will, together with any adjustment in the applicable rates
of interest payable hereunder, fully compensate for such reduction, increased '
cost or payment. Such additional amounts shall be payable, in the case of those
applicable to prior periods, within fifteen (15) days after request by such Bank
for such payment and, in the case of those applicable to future periods, on the
dates specified, or determined in accordance with a method specified, by the
Bank. The Bank will promptly notify the Borrower of any determination made by
it referred to in clauses (a) and (b) above, but the failure to give such notice
shall not affect the Bank's right to compensation.
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Section 7.2 Capital Requirements. If, in the determination of the
--------------------
Bank, the Bank or any Affiliate of the Bank is required, under Applicable Law,
interpretations, directives, requests and guidelines (whether or not having the
force of law), to maintain capital on account of any Loan or the Bank's
commitment to make any Loan, then, upon request by the Bank, the Borrower shall
from time to time thereafter pay to the Bank such additional amounts as the Bank
determines will fully compensate for any reduction in the rate of return on the
capital that the Bank or such Affiliate is so required to maintain on account of
such Loan or commitment suffered as a result of such capital requirement. Such
additional amounts shall be payable, in the case of those applicable to prior
periods, within fifteen (15) days after request by the Bank for such payment
and, in the case of those relating to future periods, on the dates specified, or
determined in accordance with a method specified, by the Bank.
Section 7.3 Determinations. In making the determinations
--------------
contemplated by Sections 7.1 and 7.2, the Bank may make such estimates,
assumptions, allocations and the like that the Bank in good faith determines to
be appropriate, and the Bank's selection thereof in accordance with this
Section 7.3, and the determinations made by the Bank on the basis thereof,
shall be final, binding and conclusive upon the Borrower, except, in the case
of such determinations, for manifest errors in computation or transmission.
The Bank shall furnish to the Borrower upon request a certificate outlining in
reasonable
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detail the computation of any amounts claimed by it under this Article 7 and the
assumptions underlying such computations.
Section 7.4 Change of Lending Office. If an event occurs with
------------------------
respect to a Lending Office that entitles the Bank to make a claim under
Section 7.1 or 7.2, the Bank shall, if requested by the Borrower, use
reasonable efforts to designate another Lending Office or Offices the
designation of which will eliminate such operability or reduce the amount the
Bank is so entitled to claim, provided that such designation would not, in the
sole and absolute discretion of the Bank, be disadvantageous to the Bank in any
manner or contrary to Bank policy. The Bank may at any time and from time to
time change any Lending Office and shall give notice of any such change to the
Borrower. Except in the case of a change in Lending Offices made at the request
of the Borrower, the designation of a new Lending Office by the Bank shall not
entitle the Bank to make a claim under Section 7.1 or 7.2 if the operability of
such clause or such claim results solely from such designation and not from a
subsequent Regulatory Change.
ARTICLE 8
MISCELLANEOUS
-------------
Section 8.1 Notices and Deliveries. (a) Notices and
---------------------- -----------
Material Other than Collateral. Except as provided in Section 8.1(b):
- --------------------------------
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(i) Manner of Delivery. All notices, communications
------------------
and materials (including all Information) to be given or delivered
pursuant to the Borrower Loan Documents shall, except in those cases
where giving notice by telephone is expressly permitted, be given or
delivered in writing (which shall include telex and telecopy
transmissions). Notices under Sections 1.2, 1.5, 1.6 and 6.2 may be by
telephone, promptly, in the case of each notice other than one under
Section 6.2, confirmed in writing. In the case of a notice given under
Section 6.2, the Bank will endeavor to confirm its telephonic notice in
writing. In the event of a discrepancy between any telephonic notice
and any written confirmation thereof, such written confirmation shall
be deemed the effective notice except to the extent that the Bank has
acted in reliance on such telephonic notice.
(ii) Addresses. All notices, communications and
---------
materials to be given or delivered pursuant to the Borrower Loan
Documents shall be given or delivered at the following respective
addresses and telecopier and telephone numbers and to the attention of
the following individuals or departments:
(A) if to the Borrower, to it at:
TSI International Software Ltd.
45 Danbury Road
Wilton, CT 06897
Telecopier No.: 203-762-9677
Telephone No.: 203-761-8600
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Attention: Mr. Richard P. Bankosky, Vice
President, Finance and Administration,
Chief Financial Officer
(B) if to the Bank, to it at:
The Bank of New York
123 Main Street
White Plains, New York 10602
Telecopier No.: 914-421-8065
Telephone No.: 914-421-8050
Attention: Mr. Edward J. Moriarty, Vice President
with a copy to:
BNY Business Center, Inc.
3 Stamford Plaza
301 Tresser Boulevard
Stamford, CT 06901
Telecopier No.: 203-967-8006
Telephone No.: 203-967-8000
Attention: Mr. Joseph Markey, Vice President
with a copy to:
Winthrop, Stimson, Putnam & Roberts
Financial Centre
695 East Main Street
P.O. Box 6760
Stamford, CT 06904-6760
Telecopier No.: 203-965-8226
Telephone No.: 203-348-2300
Attention: Frode Jensen, III, Esq.
or at such other address or telex, telecopier or telephone number or to
the attention of such other individual or department as the party to
which such information pertains may hereafter specify for the purpose
in a notice to the other specifically captioned "Notice of Change of
Address".
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(iii) Effectiveness. Each notice and communication
-------------
and any material to be given or delivered pursuant to the Borrower Loan
Documents shall be deemed so given or delivered (A) if sent by
registered or certified mail, postage prepaid, return receipt requested,
on the third Business Day after such notice, communication or material,
addressed as above provided, is delivered to a United States post office
and a receipt therefor is issued thereby, (B) if sent by any other means
of physical delivery, when such notice, communication or material is
delivered to the appropriate address as above provided, (C) if sent by
telex, when such notice, communication or material is transmitted to the
appropriate number determined as above provided in this Section 8.1 and
the appropriate answer-back is received, (D) if sent by telecopier, when
such notice, communication or material is transmitted to the appropriate
telecopier number as above provided and is received at such number and
(E) if given by telephone, when communicated to the individual or any
member of the department specified as the individual or department to
whose attention notices, communications and materials are to be given or
delivered, or, in the case of notice by the Bank to the Borrower under
Section 6.2 given by telephone as above provided, if any individual or
any member of the department to whose attention notices, communications
and materials are to be given or delivered is unavailable at the
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time, to any other officer or employee of the Borrower, except that (x)
notices of a change of address, telex, telecopier or telephone number or
individual or department to whose attention notices, communications and
materials are to be given or delivered shall not be deemed given until
received and (y) notices, communications and materials to be given or
delivered to the Bank pursuant to Sections 1.2, 1.5 and 1.6 and Article
5 shall not be deemed given or delivered until received by the officer
of the Bank responsible, at the time, for the administration of the Loan
Documents.
(iv) Reasonable Notice. Any requirement under
-----------------
Applicable Law of reasonable notice by the Bank to the Borrower of any
event in connection with, or in any way related to, the Loan Documents
or the exercise by the Bank of any of its rights thereunder shall be met
if notice of such event is given to the Borrower in the manner
prescribed above at least ten (10) days before (A) the date of such
event or (B) the date after which such event will occur.
(b) Collateral. Until the Bank shall otherwise specify,
----------
all Collateral to be delivered to the Bank pursuant to the Borrower Loan
Documents consisting of instruments, securities, chattel paper, letters of
credit or documents shall be delivered to the Bank at the Bank's Office either
by hand delivery or by registered or certified mail, postage prepaid, return
receipt requested, in either case insured in an amount not less than the greater
of the aggregate face amount and the
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aggregate fair market value of the Collateral so being delivered. All other
Collateral to be delivered to the Bank pursuant to the Borrower Loan Documents
shall be delivered to such Person, at such address, by such means and in such
manner as the Bank may designate.
Section 8.2 Expenses; Indemnification. Whether or not any Loans
-------------------------
are made hereunder, the Borrower shall:
(a) pay or reimburse the Bank for all transfer, documentary,
stamp and similar taxes, and all recording and filing fees and taxes, payable in
connection with, arising out of, or in any way related to, the execution,
delivery and performance of the Loan Documents or the making of the Loans;
(b) pay or reimburse the Bank for all costs and expenses
(including all reasonable fees and disbursements of legal counsel, appraisers,
accountants, collateral auditors and other experts employed or retained by the
Bank) incurred by the Bank in connection with, arising out of, or in any way
related to (i) the negotiation, preparation, execution and delivery of (A) the
Loan Documents and (B) whether or not executed, any waiver, amendment or consent
thereunder or thereto, (ii) the administration of and any operations under the
Loan Documents, (iii) consulting with respect to any matter in any way arising
out of, related to, or connected with, the Loan Documents, including (A) the
protection or preservation of the Collateral, (B) the protection, preservation,
exercise or enforcement of any of its rights in, under or related to the
Collateral or the Loan
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Documents or (C) the performance of any of its obligations under or related to
the Loan Documents, (iv) protecting or preserving the Collateral or (v)
protecting, preserving, exercising or enforcing any of its rights in, under or
related to the Collateral or the Loan Documents, including defending the
Security Interest as a valid, perfected, first priority security interest in the
Collateral subject only to Permitted Liens; and
(c) indemnify and hold each Indemnified Person harmless
from and against all losses (including judgments, penalties and fines) suffered,
and pay or reimburse each Indemnified Person for all costs and expenses
(including fees and disbursements of legal counsel and other experts employed or
retained by such Indemnified Person) incurred, by such Indemnified Person in
connection with, arising out of, or in any way related to (i) any Loan Document
Related Claim (whether asserted by such Indemnified Person or the Borrower or
any other Person), including the prosecution or defense thereof and any
litigation or proceeding with respect thereto (whether or not, in the case of
any such litigation or proceeding, such Indemnified Person is a party thereto),
or (ii) any investigation, governmental or otherwise, arising out of, related
to, or in any way connected with, the Loan Documents or the relationships
established thereunder, except that the foregoing indemnity shall not be
applicable to any loss suffered by any Indemnified Person to the extent such
loss is determined by a judgment of a court that is binding on the Borrower and
such Indemnified Person,
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final and not subject to review on appeal, to be the result of acts or omissions
on the part of such Indemnified Person constituting (x) willful misconduct, (y)
knowing violations of law or (z) in the case of claims by the Borrower against
such Indemnified Person, such Indemnified Person's failure to observe any other
standard applicable to it under any of the other provisions of the Loan
Documents or, but only to the extent not waivable thereunder, Applicable
Law.
Section 8.3 Amounts Payable Due upon Request for Payment. All
--------------------------------------------
amounts payable by the Borrower under Section 8.2 and under the other provisions
of the Borrower Loan Documents shall, except as otherwise expressly provided, be
immediately due upon request for the payment thereof.
Section 8.4 Remedies of the Essence. The various rights and
-----------------------
remedies of the Bank under the Borrower Loan Documents are of the essence of
those agreements, and the Bank shall be entitled to obtain a decree requiring
specific performance of each such right and remedy.
Section 8.5 Rights Cumulative. Each of the rights and remedies of
-----------------
the Bank under the Loan Documents shall be in addition to all of its other
rights and remedies under the Loan Documents and Applicable Law, and nothing in
the Loan Documents shall be construed as limiting any such rights or remedies.
Section 8.6 Disclosures. The Bank may disclose to, and exchange and
-----------
discuss with, any other Person (the Bank and each such other Person being hereby
authorized to do so) any
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Information concerning the Collateral or the Borrower or any Subsidiary (whether
received by the Bank or such other Person in connection with or pursuant to the
Loan Documents or otherwise) for the purpose of (a) complying with Applicable
Law, (b) protecting or preserving the Collateral, (c) protecting, preserving,
exercising or enforcing any of its rights in, under or related to the Collateral
or the Loan Documents, (d) performing any of its obligations under or related to
the Loan Documents or (e) consulting with respect to any of the foregoing
matters.
Section 8.7 Amendments; Waivers. Any term, covenant, agreement or
-------------------
condition of the Borrower Loan Documents may be amended, and any right under the
Borrower Loan Documents may be waived, if, but only if, such amendment or waiver
is in writing and is signed by the Bank and, in the case of an amendment, by
the Borrower. Unless otherwise specified in such waiver, a waiver of any right
under the Borrower Loan Documents shall be effective only in the specific
instance and for the specific purpose for which given. No election not to
exercise, failure to exercise or delay in exercising any right, nor any course
of dealing or performance, shall operate as a waiver of any right of the Bank
under the Borrower Loan Documents or Applicable Law, nor shall any single or
partial exercise of any such right preclude any other or further exercise
thereof or the exercise of any other right of the Bank under the Borrower Loan
Documents or Applicable Law.
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Section 8.8 Set-Off; Suspension of Payment and Performance. The
----------------------------------------------
Bank is hereby authorized by the Borrower, at any time and from time to time,
without notice, (a) during any Event of Default, to set off against, and to
appropriate and apply to the payment of, the Liabilities of the Borrower under
the Borrower Loan Documents (whether matured or unmatured, fixed or contingent
or liquidated or unliquidated) any and all Liabilities owing by the Bank or any
of its Affiliates to the Borrower or any Subsidiary (whether payable in Dollars
or any other currency, whether matured or unmatured and, in the case of
Liabilities that are deposits, whether general or special, time or demand and
however evidenced and whether maintained at a branch or office located within or
without the United States) and (b) during any Default, to suspend the payment
and performance of such Liabilities owing by the Bank or its Affiliates and, in
the case of Liabilities that are deposits, to return as unpaid for insufficient
funds any and all checks and other items drawn against such deposits.
Section 8.9 Assignments and Participations. (a) Assignments. (i)
------------------------------ -----------
The Borrower may not assign any of its rights or obligations under the Borrower
Loan Documents without the prior written consent of the Bank, and no assignment
of any such obligation shall release the Borrower therefrom unless the Bank
shall have consented to such release in a writing specifically referring to the
obligation from which the Borrower is to be released.
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(ii) The Bank may from time to time assign any or all
of its rights and obligations under the Borrower Loan Documents and with
respect to the Collateral to one or more Persons without the consent of
the Borrower. Any assignment by the Bank of any or all of its
obligations under the Borrower Loan Documents shall release the Bank
therefrom if such assignment is to an Eligible Assignee or is consented
to in writing by the Borrower.
(b) Participations. The Bank may from time to time
--------------
sell or otherwise grant participations in any or all of its rights and
obligations under the Borrower Loan Documents and with respect to the Collateral
without the consent of the Borrower.
(c) Rights of Assignees and Participants. Each
------------------------------------
assignee of, and each holder of a participation in, the rights of the Bank under
the Borrower Loan Documents and with respect to the Collateral, if and to the
extent the applicable assignment or participation agreement so provides, (i)
shall, with respect to its assignment or participation, be entitled to all of
the rights of the Bank (as fully, in the case of a holder of a participation, as
though it were the Bank) and (ii) may exercise any and all rights of set-off or
banker's lien with respect thereto (as fully, in the case of a holder of a
participation, as though the Borrower were directly indebted to such holder for
amounts payable under the Borrower Loan Documents to which such holder is
entitled under the applicable participation agreement); provided, however, that
-------- -------
no assignee or holder of a participation
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shall be entitled to any amounts that would otherwise be payable to it with
respect to its assignment or participation under Section 1.9(b) or Section 7.1
unless (x) such amounts are payable in respect of Regulatory Changes that are
enacted, adopted or issued after the date the applicable assignment or
participation agreement was executed or (y) such amounts would have been payable
to the Bank that made such assignment or granted such participation if such
assignment had not been made or such participation granted.
Section 8.10 Governing Law. This Agreement and the Notes (including
-------------
matters relating to the Maximum Permissible Rate) shall be construed in
accordance with and governed by the law of the State of New York (without giving
effect to its choice of law principles).
Section 8.11 Judicial Proceedings; Waiver of Jury Trial. Any
------------------------------------------
judicial proceeding brought against the Borrower with respect to any Loan
Document Related Claim may be brought in any court of competent jurisdiction in
the City of New York, and, by execution and delivery of this Agreement, the
Borrower (a) accepts, generally and unconditionally, the nonexclusive
jurisdiction of such courts and any related appellate court and irrevocably
agrees to be bound by any judgment rendered thereby in connection with any Loan
Document Related Claim and (b) irrevocably waives any objection it may now or
hereafter have as to the venue of any such proceeding brought in such a court or
that such a court is an inconvenient forum. The Borrower hereby
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waives personal service of process and consents that service of process upon it
may be made by certified or registered mail, return receipt requested, at its
address specified or determined in accordance with the provisions of Section
8.1(a)(ii), and service so made shall be deemed completed on the third Business
Day after such service is deposited in the mail. Nothing herein shall affect the
right of the Bank or any other Indemnified Person to serve process in any other
manner permitted by law or shall limit the right of the Bank or any other
Indemnified Person to bring proceedings against the Borrower in the courts of
any other jurisdiction. Any judicial proceeding by the Borrower against the Bank
involving any Loan Document Related Claim shall be brought only in a court
located in the City and State of New York. THE BORROWER AND THE BANK HEREBY
WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH THEY ARE BOTH PARTIES
INVOLVING ANY LOAN DOCUMENT RELATED CLAIM.
Section 8.12 LIMITATION OF LIABILITY. NEITHER THE BANK NOR ANY OTHER
-----------------------
INDEMNIFIED PERSON SHALL HAVE ANY LIABILITY WITH RESPECT TO, AND THE BORROWER
HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE FOR, ANY SPECIAL, INDIRECT OR
CONSEQUENTIAL DAMAGES SUFFERED BY THE BORROWER IN CONNECTION WITH ANY LOAN
DOCUMENT RELATED CLAIM.
Section 8.13 Severability of Provisions. Any provision of the
--------------------------
Borrower Loan Documents that is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or
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unenforceability without invalidating the remaining provisions thereof or
affecting the validity or enforceability of such provision in any other
jurisdiction. To the extent permitted by Applicable Law, the Borrower hereby
waives any provision of Applicable Law that renders any provision of the
Borrower Loan Documents prohibited or unenforceable in any respect.
Section 8.14 Counterparts. This Agreement may be signed in any
------------
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto were upon the same instrument.
Section 8.15 Survival of Obligations. Except as otherwise expressly
-----------------------
provided therein, the rights and obligations of the Borrower, the Bank and the
other Indemnified Persons under the Borrower Loan Documents shall survive the
Repayment Date and the termination of the Security Interest.
Section 8.16 Entire Agreement. This Agreement and the Notes embody
----------------
the entire agreement between the Borrower and the Bank relating to the subject
matter hereof and supersede all prior agreements, representations and
understandings, if any, relating to the subject matter hereof.
Section 8.17 Successors and Assigns. All of the provisions of this
----------------------
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.
ARTICLE 9
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INTERPRETATION
--------------
Section 9.1 Definitional Provisions. (a) Defined Terms. For the
----------------------- -------------
purposes of this Agreement:
"Account" has the meaning ascribed to such term in the Security
-------
Agreement.
"Accumulated Funding Deficiency" has the meaning ascribed to that term
------------------------------
in Section 302 of ERISA.
"Affiliate" means, with respect to a Person, any other Person that,
---------
directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such first Person; unless
otherwise specified, "Affiliate" means an Affiliate of the Borrower.
"Agreement" means this Agreement, including all schedules, annexes and
---------
exhibits hereto.
"Agreement Date" means the date set forth as such on the last signature
--------------
page hereof.
"Alternative Base Rate" means, for any day, a rate per annum equal to
---------------------
the higher of (i) the Prime Rate in effect on such day and (ii) the sum of the
Federal Funds Rate in effect on such day plus 1/2%.
"Applicable Law" means, anything in Section 8.10 to the contrary
--------------
notwithstanding, (i) all applicable common law and principles of equity and (ii)
all applicable provisions of all (A) constitutions, statutes, rules, regulations
and orders of governmental bodies, (B) Governmental Approvals and (C) orders,
decisions, judgments and decrees of all courts (whether at law or in equity or
admiralty) and arbitrators.
"Authority" means the Connecticut Development Authority.
---------
"Bank" means (i) The Bank of New York and (ii) any Person that has been
----
assigned any or all of the rights or obligations of the Bank pursuant to Section
8.9(a).
"Bank's Office" means the address of the Bank specified in or determined
-------------
in accordance with the provisions of Section 8.1(a)(ii).
"Base Financial Statements" means the most recent, audited, consolidated
-------------------------
balance sheet of the Borrower and the Consolidated Subsidiaries referred to in
Schedule 5.2(a) and the
- --------------
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related statements of income, retained earnings and, as applicable, changes in
financial position or cash flows for the fiscal year ended with the date of such
balance sheet.
"Benefit Plan" of any Person, means, at any time, any employee benefit
------------
plan (including a Multiemployer Benefit Plan), the funding requirements of which
(under Section 302 of ERISA or Section 412 of the Code) are, or at any time
within six years immediately preceding the time in question were, in whole or in
part, the responsibility of such Person.
"Borrower" means TSI International Software Ltd., a Delaware
--------
corporation.
"Borrower Business Plan" means the annual business plan described in
----------------------
Section 5.1(e) hereof.
"Borrower Loan Documents" means the Loan Documents to which the Borrower
-----------------------
is a party.
"Borrowing Base" means, at any time, the amount equal to the sum of (A)
--------------
80% of the Eligible Accounts Receivable, (B) 75% of the Eligible Current Key
Master Receivables and (C) 70% of the Eligible Long-term Key Master Receivables
and (D) the CDA Guaranty Amount.
"Borrowing Base Certificate" means a certificate in the form of Schedule
-------------------------- --------
5.1(d).
- ------
"Business Day" means any day other than a Saturday, Sunday or other day
------------
on which banks in New York City are authorized to close.
"Capital Expenditure" means any expenditure for fixed or capital assets
-------------------
(including, without limitation, expenditures for maintenance and repairs which
should be capitalized in accordance with generally accepted Accounting
Principles and including capitalized lease obligations).
"Capital Stock" means, with respect to any Person, (i) any share of
-------------
capital stock of such Person or (ii) any security convertible into, or any
option, warrant or other right to acquire, any share of capital stock of such
Person.
"CDA Guaranty" means a partial first loss guaranty of the Authority in
------------
the amount of 30% of the aggregate amount of Loans outstanding, to a maximum of
$1,200,000, substantially in the form of Exhibit B hereto.
---------
"CDA Guaranty Amount" means the effective dollar amount of the
-------------------
guarantee of the Authority as provided in the CDA Guaranty.
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"Code" means the Internal Revenue Code of 1986.
----
"Collateral" means all property in which a Lien is created pursuant to
----------
the Loan Documents.
"Commitment" means (i) the amount set forth in Section 1.1, as the same
----------
may be reduced from time to time pursuant to Section 1.6, or (ii) as the
context may require, the obligation of the Bank to make Loans in an aggregate
unpaid principal amount not exceeding such amount.
"Consolidated Current Assets" means, at any time, the consolidated
---------------------------
current assets of the Borrower and the Subsidiaries as of such time.
"Consolidated Current Liabilities" means, at any time, (a) the sum of
--------------------------------
(i) the consolidated current liabilities of the Borrower and the Subsidiaries
(excluding the Loans) plus (ii) the current liabilities of any Person (other
than the Borrower or a Subsidiary) that are Guaranteed by the Borrower or a
Subsidiary minus (b) the current portion of deferred income-maintenance revenue
(as such term is used under Generally Accepted Accounting Principles), all as of
such time.
"Consolidated Indebtedness" means, at any time, the consolidated
-------------------------
Indebtedness of the Borrower and the Subsidiaries as of such time.
"Consolidated Tangible Net Worth" means, at any time, the consolidated
-------------------------------
stockholders' equity of the Borrower and the Subsidiaries plus deferred
income-maintenance revenue (as such term is used under Generally Accepted
Accounting Principles) as of such time.
"Consolidated Total Liabilities" means, at any time, (a) the sum of (i)
------------------------------
all consolidated liabilities of the Borrower and the Subsidiaries and (ii) all
liabilities of any Person (other than the Borrower or a Subsidiary) that are
Guaranteed by the Borrower or a Subsidiary minus (b) deferred income-maintenance
revenue (as such term is used under Generally Accepted Accounting Principles),
all as of such time.
"Contingent Obligation" shall mean, as to any Person, any obligation of
---------------------
such Person guaranteeing or intended to guarantee any Indebtedness, leases,
dividends or other obligations ("primary obligation") of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not contingent,
(i) to purchase any such primary obligation or any property constituting direct
or indirect security therefor, (ii) to advance or supply funds (x) for the
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purchase or payment of any such primary obligation or (y) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (iii) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation or (iv) otherwise to assure or hold harmless the holder
of such primary obligation against loss in respect thereof; provided, however,
-------- -------
that the term Contingent Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course of business. The
amount of any Contingent Obligation shall, unless expressly limited by its terms
to a lesser amount, be deemed to be an amount equal to the stated or
determinable amount of the primary obligation in respect of which such
Contingent Obligation is made (or such lesser amount) or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof
(assuming such Person is required to perform thereunder) as determined by such
Person in good faith.
"Contract" means (i) any agreement (whether bi-lateral or unilateral or
--------
executory or non-executory and whether a Person entitled to rights thereunder is
so entitled directly or as a third-party beneficiary), including an indenture,
lease or license, (ii) any deed or other instrument of conveyance, (iii) any
certificate of incorporation or charter and (iv) any bylaw.
"Current Key Master Receivables" means those portions of term contract
------------------------------
receivables arising from sales, leases or maintenance contracts by the Borrower
relating to Key Master Software, normally appearing on the Borrower's balance
sheet as "Current portion of investment in licensing contracts receivable,"
which will become due and payable in one (1) year or less.
"Debt" means any Liability that constitutes "debt" or "Debt" under
----
section 101(11) of the Bankruptcy Code or under the Uniform Fraudulent
Conveyance Act, the Uniform Fraudulent Transfer Act or any analogous Applicable
Law.
"Default" means any condition or event that constitutes an Event of
-------
Default or that with the giving of notice or lapse of time or both would, unless
cured or waived, become an Event of Default.
"Dollars" and the sign "$" mean lawful money of the United States of
-------
America.
"EBIT" means, with respect to any period, the earnings of the Borrower
----
for such period before deductions have been made for interest and taxes.
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"EBITDA" means, with respect to any period, EBIT before deductions have
------
been made for depreciation and amortization.
"Eligible Account Receivable" means an Eligible Receivable that is an
---------------------------
Account.
"Eligible Assignee" means (i) any commercial bank, savings and loan
-----------------
institution or savings bank organized under the laws of the United States, or
any State thereof, and having combined capital and surplus in excess of
$100,000,000, (ii) any commercial bank organized under the laws of any other
country that is a member of the Organization for Economic Cooperation and
Development ("OECD"), or a political subdivision of any such country, and having
combined capital and surplus (or the equivalent thereof under the accounting
principles applicable thereto) in excess of $100,000,000, provided that such
bank is acting through a branch, agency or Affiliate located in the country in
which it is organized or another country that is also a member of the OECD,
(iii) any Federal Reserve Bank or any central bank of any country that is a
member of the OECD, (iv) any insurance company, pension fund, mutual fund or
other financial institution of recognized standing or (v) the Authority.
"Eligible Current Key Master Receivable" means an Eligible Receivable
--------------------------------------
that is a Current Key Master Receivable.
"Eligible Long-term Key Master Receivable" means an Eligible Receivable
----------------------------------------
that is a Long-term Key Master Receivable.
"Eligible Receivable" means an Account, Current Key Master Receivable,
-------------------
Long-term Key Master Receivable of the Borrower, or such other Receivable
requested by the Borrower and approved by the Bank which in all cases the Bank
in its sole and absolute discretion determines meets all of the following
requirements:
(i) such Receivable represents a complete bona fide transaction
that, other than in the case of leases, maintenance contracts and goods for
which payment has been made but which have not yet been shipped, requires no
further act under any circumstances on the part of the Borrower to make such
Receivable payable by the account debtor and that arises from an arm's length
transaction between unrelated parties in the ordinary course of the Borrower's
business;
(ii) such Receivable shall not (A) be unpaid more than ninety (90)
days from the date of the original invoice or (B) be payable by an account
debtor (1) more than 25% of whose Receivables have remained unpaid for more than
ninety (90) days from the dates of their original invoices, (2) more than 25% of
whose Receivables do not constitute Eligible Receivables or (3)
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whose Receivables constitute, in the Bank's determination, too high a percentage
of the aggregate amount of all outstanding Receivables;
(iii) if such Receivable arises from the sale of goods, and no part of
such goods, or any other goods shipped or delivered to such account debtor has
been returned or rejected;
(iv) such Receivable is not evidenced by chattel paper or an
instrument of any kind;
(v) the account debtor with respect to such Receivable (A) is not
insolvent or the subject of any bankruptcy or insolvency proceedings of any kind
or of any other proceeding or action, threatened or pending, that might have a
Materially Adverse Effect on the business of such account debtor, (B) has not
made an assignment for the benefit of creditors or consented to or suffered the
appointment of a receiver, trustee, liquidator, custodian or the like for it or
for a significant portion of its assets or affairs or (C) is not, in the sole
discretion of the Bank, deemed ineligible for credit or other reasons;
(vi) if the account debtor with respect thereto is located outside of
the United States (excluding for this purpose the Commonwealth of Puerto Rico),
the goods that gave rise to such Receivable were shipped after receipt by the
Borrower from the account debtor of an irrevocable letter of credit, which
letter of credit has been issued or confirmed by a financial institution
acceptable to the Bank and is in form and substance acceptable to the Bank,
payable in the full face amount of the face value of the Receivable in freely
convertible Dollars at a place of payment located within such United States or
the Bank is otherwise satisfied with the collectability of the Receivable;
(vii) such Receivable is a valid, legally enforceable obligation of
the account debtor with respect thereto and is not subject to any present, or
contingent, and no facts exist that are the basis for any future, offset or
counterclaim or other defense or dispute on the part of such account debtor;
(viii) such Receivable is (A) subject to the Security Interest and the
Security Interest is perfected as to such Receivable and (B) subject to no
Liens;
(ix) such Receivable is evidenced by an invoice or other
documentation in form acceptable to the Bank;
(x) the Borrower has observed and complied with all laws of the
jurisdiction in which the account debtor on such Receivable is located that, if
not observed and complied with, would deny to the Borrower access to the courts
of such State;
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(xi) such Receivable does not arise out of any transaction with a
Subsidiary or Affiliate of the Borrower;
(xii) such Receivable is not subject to any provision prohibiting its
assignment or requiring notice of or consent to such assignment;
(xiii) if such Receivable arises from the sale of goods, the goods the
sale of which gave rise to such Receivable (A) were not, at the time of the sale
or leasing thereof, subject to any Lien, except the Security Interest and Liens
that constitute Permitted Liens under the Security Agreement and (B) were
manufactured in accordance with all Applicable Laws including those specifying
minimum wages and working conditions;
(xiv) such Receivable is payable in freely transferable Dollars;
(xv) no covenant, representation or warranty applicable to such
Receivable under any of the Loan Documents has been breached or is inaccurate in
any respect; and
(xvi) such Receivable is not determined by the Bank to be ineligible
for any other reason generally accepted in the commercial finance business as a
reason for ineligibility.
"ERISA" means the Employee Retirement Income Security Act of 1974.
-----
"ERISA Affiliate" means, with respect to any Person, any other Person,
---------------
including a Subsidiary or other Affiliate of such first Person, that is a member
of any group of organizations within the meaning of Code Sections 414(b), (c),
(m) or (o) of which such first Person is a member.
"Escrow Agreement" means an amendment to, or replacement of, the Escrow
----------------
Agreement dated as of August 17, 1992 by and among the Borrower, The First
National Bank of Boston and State Street Bank and Trust Company of Connecticut,
N.A., in form and substance satisfactory to the Bank.
"Event of Default" means any of the events specified in Section 6.1.
----------------
"Existing Benefit Plan" means any Benefit Plan listed on Schedule 4.10.
---------------------
"Existing Guaranty" means (i) any Guaranty outstanding on the Agreement
-----------------
Date, to the extent set forth on Schedule 4.4, and (ii) any Guaranty that
------------
constitutes a renewal, extension or replacement of an Existing Guaranty, but
only if (A) at the time
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such Guaranty is entered into and immediately after giving effect thereto, no
Default would exist, (B) such Guaranty is binding only on the obligor or
obligors under the Guaranty so renewed, extended or replaced, (C) the principal
amount of the obligations Guaranteed by such Guaranty does not exceed the
principal amount of the obligations Guaranteed by the Guaranty so renewed,
extended or replaced and (D) the obligations Guaranteed by such Guaranty bear
interest at a rate per annum not exceeding the rate borne by the obligations
Guaranteed by the Guaranty so renewed, extended or replaced except for any
increase that is commercially reasonable at the time of such increase.
"Existing Lien" means a Lien set forth on Schedule 4.5 hereof.
------------- ------------
"Federal Funds Rate" means, for any day, the weighted average of the
------------------
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York or, if such rate is not so published for any
day that is a Business Day, the average of quotations for such day on such
transactions received by the Bank from three (3) Federal funds brokers of
recognized standing selected by such bank.
"Fixed Charge Coverage Ratio" means, at any time, (a) the sum of
---------------------------
(i) EBITDA minus (u) Capital Expenditures and (v) purchased software and
capitalized product development costs plus (ii) Fixed Charges, divided by (b)
the sum of (x) Fixed Charges, (y) interest payments plus (z) the total amount of
principal due within one year on long-term debt, in each case as of such time.
"Fixed Charges" means the sum of rent, capitalized lease payments and
-------------
operating lease payments.
"Funded Current Liability Percentage" has the meaning ascribed to that
-----------------------------------
term in Code Section 401(a)(29).
"Generally Accepted Accounting Principles" means (i) in the case of the
----------------------------------------
Base Financial Statements, generally accepted accounting principles at the time
of the issuance of the Base Financial Statements and (ii) in all other cases,
the accounting principles followed in the preparation of the Base Financial
Statements.
"Governmental Approval" means any authorization, consent, approval,
---------------------
license or exemption of, registration or filing with, or report or notice to,
any governmental unit.
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<PAGE>
"Guaranty" of any Person means any obligation, contingent or otherwise,
--------
of such Person (i) to pay any Liability of any other Person or to otherwise
protect, or having the practical effect of protecting, the holder of any such
Liability against loss (whether such obligation arises by virtue of such Person
being a partner of a partnership or participant in a joint venture or by
agreement to pay, to keep well, to purchase assets, goods, securities or
services or to take or pay, or otherwise) or (ii) incurred in connection with
the issuance by a third Person of a Guaranty of any Liability of any other
Person (whether such obligation arises by agreement to reimburse or indemnify
such third Person or otherwise). The word "Guarantee" when used as a verb has
---------
the correlative meaning.
"Guaranty Agreement" means any Guaranty Agreement between any Subsidiary
------------------
of the Borrower and the Bank.
"Indebtedness" of any Person means (in each case, whether such
------------
obligation is with full or limited recourse) (i) any obligation of such Person
for borrowed money, (ii) any obligation of such Person evidenced by a bond,
debenture, note or other similar instrument, (iii) any obligation of such Person
to pay the deferred purchase price of property or services, except a trade
account payable that arises in the ordinary course of business but only if and
so long as the same is payable on customary trade terms, (iv) any obligation of
such Person as lessee under a capital lease, (v) any obligation of such Person
to purchase securities or other property that arises out of or in connection
with the sale of the same or substantially similar securities or property, (vi)
any non-contingent obligation of such Person to reimburse any other Person in
respect of amounts paid under a letter of credit or other Guaranty issued by
such other Person to the extent that such reimbursement obligation remains
outstanding after it becomes non-contingent, (vii) any obligation with respect
to an interest rate or currency swap or similar obligation obligating such
Person to make payments, whether periodically or upon the happening of a
contingency, except that if any agreement relating to such obligation provides
for the netting of amounts payable by and to such Person thereunder or if any
such agreement provides for the simultaneous payment of amounts by and to such
Person, then in each such case, the amount of such obligation shall be the net
amount thereof, (viii) any Indebtedness of others secured by (or for which the
holder of such Indebtedness has an existing right, contingent or otherwise, to
be secured by) a Lien on any asset of such Person, (ix) any Indebtedness of
others Guaranteed by such Person and (x) all Contingent Obligations of such
Person.
"Indemnified Person" means any Person that is, or at any time was, the
------------------
Bank, an Affiliate of the Bank or a director, officer, employee or agent of any
such Person.
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<PAGE>
"Information" means data, certificates, reports, statements (including
-----------
financial statements), opinions of counsel, documents and other information.
"Intellectual Property" has the meaning ascribed to such term in the
---------------------
Security Agreement.
"Interest Coverage Ratio" means, at any time, the ratio of EBIT to total
-----------------------
interest payment liabilities on all Indebtedness of the Borrower and the
Subsidiaries as of such time.
"Interest Payment Date" means the first day of each month.
---------------------
"Key Master Software" means the object and applications code comprising
-------------------
the product or products marketed under the trademark "Key Master."
"Key Master Software Agreements" means all of the Borrower's leases and
------------------------------
maintenance agreements relating to the Key Master Software.
"Lending Office" means 123 Main Street, White Plains, New York 10602, or
--------------
such other branch or office of the Bank designated by the Bank from time to time
as the branch or office at which Alternative Base Rate Loans are to be made or
maintained. The Bank may from time to time designate separate Lending Offices
for its Alternative Base Rate Loans and CD Rate Loans, in which case all
references to the Lending Office shall be deemed to refer to either or both of
such Offices, as the context may require.
"Letter of Credit" means a standby letter of credit issued by the Bank
----------------
for the account of the Borrower pursuant to the terms of this Agreement and an
Application and Agreement for Standby Letter of Credit.
"Liability" of any Person means (in each case, whether with full or
---------
limited recourse) any indebtedness, liability, obligation, covenant or duty of
or binding upon, or any term or condition to be observed by or binding upon,
such Person or any of its assets, of any kind, nature or description, direct or
indirect, absolute or contingent, due or not due, contractual or tortious,
liquidated or unliquidated, whether arising under Contract, Applicable Law, or
otherwise, whether now existing or hereafter arising, and whether for the
payment of money or the performance or non-performance of any act.
"Lien" means, with respect to any property or asset (or any income or
----
profits therefrom) of any Person (in each case whether the same is consensual or
nonconsensual or arises by Contract, operation of law, legal process or
otherwise) (i) any
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mortgage, lien, pledge, attachment, levy or other security interest of any kind
thereupon or in respect thereof or (ii) any other arrangement, express or
implied, under which the same is subordinated, transferred, sequestered or
otherwise identified so as to subject the same to, or make the same available
for, the payment or performance of any Liability in priority to the payment of
the ordinary, unsecured creditors of such Person. For the purposes of this
Agreement, a Person shall be deemed to own subject to a Lien any asset that it
has acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such asset.
"Loan" means any amount advanced by the Bank pursuant to Section 1.1,
----
and shall include the reimbursement obligations under any amount of any
outstanding Letter of Credit.
"Loan Document Related Claim" means any claim (whether civil, criminal
---------------------------
or administrative and whether sounding in tort, contract or otherwise) in any
way arising out of, related to, or connected with, the Loan Documents or the
relationships established thereunder, whether such claim arises or is asserted
before or after the Agreement Date or before or after the Repayment Date.
"Loan Document Representation and Warranty" means any "Representation
-----------------------------------------
and Warranty" as defined in any Loan Document and any other representation or
warranty made or deemed made under any Loan Document.
"Loan Documents" means (i) this Agreement, the Note, the Security
--------------
Agreement, the CDA Guaranty, the Application and Agreement for Standby Letter of
Credit and (ii) all other agreements, documents and instruments relating to,
arising out of, or in any way connected with (A) any agreement, document or
instrument referred to in clause (i), (B) any other agreement, document or
instrument referred to in this clause (ii) or (C) any of the transactions
contemplated by any agreement, document or instrument referred to in clause (i)
or in this clause (ii).
"Loan Party" means any Person (other than the Bank) that is a party to
----------
Loan Document.
"Long-term Key Master Receivables" means those portions of term contract
--------------------------------
receivables arising from sales, leases or maintenance contracts by the Borrower
relating to Key Master Software, normally appearing on the Borrower's balance
sheet as "Investment in licensing contracts receivable," which, pursuant to the
original terms of such contracts and not as a result of any renegotiation
thereof, will become due and payable more than one (1) year hence.
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<PAGE>
"Materially Adverse Effect" means, (i) with respect to any Person, any
-------------------------
materially adverse effect on such Person's business, assets, Liabilities,
financial condition, results of operations or business prospects, (ii) with
respect to a group of Persons "taken as a whole", any materially adverse effect
on such Persons' business, assets, Liabilities, financial conditions, results of
operations or business prospects taken as a whole on, where appropriate, a
consolidated basis in accordance with Generally Accepted Accounting Principles,
(iii) with respect to any Loan Document, any adverse effect, WHETHER OR NOT
MATERIAL, on the binding nature, validity or enforceability thereof as an
obligation of the Borrower and (iv) with respect to any Collateral pledged by
the Borrower, a materially adverse effect on its value as Collateral or its
utility in the Borrower's business or an adverse effect, WHETHER OR NOT
MATERIAL, on the validity, perfection, priority or enforceability of the
Security Interest therein.
"Maximum Permissible Rate" means, with respect to interest payable on
------------------------
any amount, the rate of interest on such amount that, if exceeded, could, under
Applicable Law, result in (i) civil or criminal penalties being imposed on the
payee or (ii) the payee's being unable to enforce payment of (or, if collected,
to retain) all or any part of such amount or the interest payable thereon.
"Multiemployer Benefit Plan" means any Benefit Plan that is a
--------------------------
multiemployer plan as defined in Section 4001(a)(3) of ERISA.
"Note" means the promissory note in the form of Exhibit A.
---- ---------
"PBGC" means the Pension Benefit Guaranty Corporation.
----
"Permitted Guaranty" means any Guaranty that is (i) an endorsement of a
------------------
check for collection in the ordinary course of business or (ii) a Guaranty of
and only of the obligations of the Borrower under the Loan Documents.
"Permitted Lien" means (i) an Existing Lien, (ii) a Lien created in
--------------
favor of the Secured Party under the Collateral Documents, (iii) a Lien
consented to in writing by the Secured Party and (iv) a Lien created in
connection with the Indebtedness permitted by Section 4.15(ii) hereof.
"Permitted Restrictive Covenant" means (i) any covenant or restriction
------------------------------
contained in any Loan Document, (ii) any covenant or restriction binding upon
any Person at the time such Person becomes a Subsidiary of the Borrower if the
same is not created in contemplation thereof, (iii) any covenant or restriction
of the type contained in Section 4.5 that is contained in any
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<PAGE>
Contract evidencing or providing for the creation of or concerning Purchase
Money Indebtedness, (iv) any covenant or restriction described in Schedule 4.12,
-------------
but only to the extent such covenant or restriction is there identified by
specific reference to the provision of the Contract in which such covenant or
restriction is contained, or (v) any covenant or restriction that (A) is not
more burdensome than an existing Permitted Restrictive Covenant that is such by
virtue of clause (ii), (iii), (iv) or (v), (B) is contained in a Contract
constituting a renewal, extension or replacement of the Contract in which such
existing Permitted Restrictive Covenant is contained and (C) is binding only on
the Person or Persons bound by such existing Permitted Restrictive Covenant.
"Person" means any individual, sole proprietorship, corporation,
------
partnership, trust, unincorporated organization, mutual company, joint stock
company, estate, union, employee organization, government or any agency or
political subdivision thereof or, for the purpose of the definition of "ERISA
Affiliate", any trade or business.
"Post-Default Rate" means the rate otherwise applicable under Section
-----------------
1.3(a) plus 3%.
"Prime Rate" means the prime commercial lending rate of The Bank of New
----------
York, as publicly announced to be in effect from time to time. The Prime Rate
shall be adjusted automatically, without notice, on the effective date of any
change in such prime commercial lending rate. The Prime Rate is not necessarily
The Bank of New York's lowest rate of interest.
"Prohibited Transaction" means any transaction that is prohibited under
----------------------
Code Section 4975 or ERISA Section 406 and not exempt under Code Section 4975 or
ERISA Section 408.
"Purchase Money Indebtedness" means (i) Indebtedness of the Borrower
---------------------------
that is incurred to finance part or all of (but not more than) the purchase
price of a tangible asset, provided that (A) neither the Borrower nor any
--------
Subsidiary had at any time prior to such purchase any interest in such asset
other than a security interest or an interest as lessee under an operating lease
and (B) such Indebtedness is incurred within thirty (30) days after such
purchase, or (ii) Indebtedness that (A) constitutes a renewal, extension or
refunding of, but not an increase in the principal amount of, Purchase Money
Indebtedness that is such by virtue of clause (i) or (ii) and (B) bears interest
at a rate per annum that is commercially reasonable at the time such
Indebtedness is incurred.
"Receivable" has the meaning ascribed to such term in the Security
----------
Agreement.
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<PAGE>
"Regulation D" means Regulation D of the Board of Governors of the
------------
Federal Reserve System.
"Regulatory Change" means any Applicable Law, interpretation, directive,
-----------------
request or guideline (whether or not having the force of law), or any change
therein or in the administration or enforcement thereof, that becomes effective
or is implemented or first required or expected to be complied with after the
Agreement Date, whether the same is (i) the result of an enactment by a
government or any agency or political subdivision thereof, a determination of a
court or regulatory authority, or otherwise or (ii) enacted, adopted, issued or
proposed before or after the Agreement Date, including any such that imposes,
increases or modifies any Tax, reserve requirement, insurance charge, special
deposit requirement, reporting or other requirement based on highly leveraged
transactions, assessment or capital adequacy requirement, but excluding any such
that imposes, increases or modifies any income or franchise tax imposed upon the
Bank by any jurisdiction (or any political subdivision thereof) in which the
Bank or any Lending Office is located.
"Repayment Date" means the later of (i) the termination of the
--------------
Commitment (whether as a result of the occurrence of the Termination Date,
reduction to zero pursuant to Section 1.6 or termination pursuant to Section
6.2) and (ii) the payment in full of the Loans and all other amounts payable or
accrued hereunder.
"Reportable Event" means, with respect to any Benefit Plan of any
----------------
Person, (i) the occurrence of any of the events set forth in ERISA Sections
4043(b) (other than a Reportable Event as to which the provision of 30 days'
notice to the PBGC is waived under applicable regulations), 4068(f) or 4063(a)
or the regulations thereunder with respect to such Benefit Plan, (ii) any event
requiring such Person or any of its ERISA Affiliates to provide security to such
Benefit Plan under Code Section 401(a)(29) or (iii) any failure to make a
payment required by Code Section 412(m) with respect to such Benefit Plan.
"Representation and Warranty" means any representation or warranty made
---------------------------
pursuant to or under (i) Section 2.2, Article 3, Section 5.2 or any other
provision of this Agreement or (ii) any amendment to, or waiver of rights under,
this Agreement, WHETHER OR NOT, IN THE CASE OF ANY REPRESENTATION OR WARRANTY
REFERRED TO IN CLAUSE (i) OR (ii) OF THIS DEFINITION (EXCEPT, IN EACH CASE, TO
THE EXTENT OTHERWISE EXPRESSLY PROVIDED), THE INFORMATION THAT IS THE SUBJECT
MATTER THEREOF IS WITHIN THE KNOWLEDGE OF THE BORROWER.
"Restricted Payment" means (i) any dividend or other distribution on
------------------
account of any shares of the Borrower's capital stock, (ii) any payment on
account of the principal of or
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premium, if any, on any Indebtedness convertible into shares of the Borrower's
capital stock or (iii) any payment on account of any purchase, redemption,
retirement, exchange or conversion of any of the Borrower's Capital Stock. For
the purposes of this definition a "payment" shall include the transfer of any
asset or the issuance of any Indebtedness or other obligation (the amount of any
such payment to be the fair market value of such asset or the amount of such
obligation, respectively).
"Secured Party" has the meaning ascribed to such term in the Security
-------------
Agreement.
"Security Agreement" means the Security Agreement, dated as of the date
------------------
hereof, between TSI International Software Ltd. and The Bank of New York.
"Security Interest" means the Liens created, or purported to be created,
-----------------
by the Loan Documents.
"Subsidiary" means, with respect to any Person, any other Person (i)
----------
securities of which having ordinary voting power to elect a majority of the
board of directors (or other persons having similar functions) or (ii) other
ownership interests of which ordinarily constituting a majority voting interest,
are at the time, directly or indirectly, owned or controlled by such first
Person, or by one or more of its Subsidiaries, or by such first Person and one
or more of its Subsidiaries; unless otherwise specified, "Subsidiary" means a
Subsidiary of the Borrower.
"Tax" means any Federal, State or foreign tax, assessment or other
---
governmental charge or levy (including any withholding tax) upon a Person or
upon its assets, revenues, income or profits.
"Termination Date" means the second anniversary of the Agreement Date.
----------------
"Termination Event" means, with respect to any Benefit Plan, (i) any
-----------------
Reportable Event with respect to such Benefit Plan, (ii) the termination of such
Benefit Plan, or the filing of a notice of intent to terminate such Benefit
Plan, or the treatment of any amendment to such Benefit Plan as a termination
under ERISA Section 4041(c), (iii) the institution of proceedings to terminate
such Benefit Plan under ERISA Section 4042 or (iv) the appointment of a trustee
to administer such Benefit Plan under ERISA Section 4042.
"Unfunded Benefit Liabilities" means, with respect to any Benefit Plan
----------------------------
at any time, the amount of unfunded benefit liabilities of such Benefit Plan at
such time as determined under ERISA Section 4001(a)(18).
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<PAGE>
"Wholly-Owned Subsidiary" means, with respect to any Person, any
-----------------------
Subsidiary of such Person all of the Capital Stock and all other ownership
interests and rights to acquire ownership interests of which (except directors'
qualifying shares) are, directly or indirectly, owned or controlled by such
Person or one or more Wholly-Owned Subsidiaries of such Person or by such Person
and one or more of such Subsidiaries; unless otherwise specified, "Wholly-Owned
Subsidiary" means a Wholly-Owned Subsidiary of the Borrower.
(b) Other Definitional Provisions. (i) Except as otherwise
-----------------------------
specified herein, all references herein (A) to any Person shall be deemed to
include such Person's successors and assigns, (B) to any Applicable Law defined
or referred to herein shall be deemed references to such Applicable Law or any
successor Applicable Law as the same may have been or may be amended or
supplemented from time to time and (C) to any Loan Document or Contract defined
or referred to herein shall be deemed references to such Loan Document or
Contract (and, in the case of any Note or other instrument, any instrument
issued in substitution therefor) as the terms thereof may have been or may be
amended, supplemented, waived or otherwise modified from time to time.
(ii) When used in this Agreement, the words "herein",
"hereof" and "hereunder" and words of similar import shall refer
to this Agreement as a whole and not to any provision of this
Agreement, and the words "Article", "Section", "Annex",
"Schedule" and "Exhibit" shall refer to Articles and Sections
of, and Annexes, Schedules and Exhibits to, this Agreement
unless otherwise specified.
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(iii) Whenever the context so requires, the neuter
gender includes the masculine or feminine, the masculine gender
includes the feminine, and the singular number includes the
lural, and vice versa.
(iv) Any item or list of items set forth following
the word "including", "include" or "includes" is set forth only
for the purpose of indicating that, regardless of whatever other
items are in the category in which such item or items are
"included", such item or items are in such category, and shall
not be construed as indicating that the items in the category in
which such item or items are "included" are limited to such
items or to items similar to such items.
(v) Each authorization in favor of the Bank or any
other Person granted by or pursuant to this Agreement shall be
deemed to be irrevocable and coupled with an interest.
(vi) Except as otherwise specified herein, all
references herein to the Bank or any Loan Party shall be deemed
to refer to such Person however designated in Loan Documents, so
that (A) a reference to rights of the Bank under the Loan
Documents shall be deemed to include the rights of such Person
as the Guaranteed Party under the Guaranty Agreement, as the
Secured Party under the Security Agreement and (B) a reference
to costs incurred by the Bank in connection with the Loan
Documents shall be deemed to
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<PAGE>
include costs incurred by such Person as the Guaranteed Party
under the Guaranty Agreement or as the Secured Party under the
Security Agreement.
(vii) Except as otherwise specified therein, all terms
defined in this Agreement shall have the meanings herein
ascribed to them when used in the Notes or any certificate,
opinion or other document delivered pursuant hereto or thereto.
Section 9.2 Accounting Matters. Unless otherwise specified herein,
------------------
all accounting determinations hereunder and all computations utilized by the
Borrower in complying with the covenants contained herein shall be made, all
accounting terms used herein shall be interpreted, and all financial statements
required to be delivered hereunder shall be prepared, in accordance with
Generally Accepted Accounting Principles, except, in the case of such financial
statements, for departures from Generally Accepted Accounting Principles that
may from time to time be approved in writing by the independent certified public
accountants who are at the time, in accordance with Section 5.1(c), reporting on
the Borrower's financial statements.
Section 9.3 Representations and Warranties. All Representations and
------------------------------
Warranties shall be deemed made (a) in the case of any Representation and
Warranty contained in this Agreement at the time of its initial execution and
delivery, at and as of the Agreement Date, (b) in the case of any Representation
and Warranty contained in this Agreement or any
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<PAGE>
other document at the time any Loan is made, at and as of such time and (c) in
the case of any particular Representation and Warranty, wherever contained, at
such other time or times as such Representation and Warranty is made or deemed
made in accordance with the provisions of this Agreement or the document
pursuant to, under or in connection with which such Representation and Warranty
is made or deemed made.
Section 9.4 Captions. Captions to Articles, Sections and
--------
subsections of, and Annexes, Schedules and Exhibits to, this Agreement are
included for convenience of reference only and shall not constitute a part of
this Agreement for any other purpose or in any way affect the meaning or
construction of any provision of this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers all as of the Agreement Date.
TSI INTERNATIONAL SOFTWARE LTD.
By /s/ Richard Bankosky
------------------------------
Name: Richard Bankosky
Title: Vice President, Finance &
Administration,
Chief Financial Officer
THE BANK OF NEW YORK
By /s/ David M Duffy
-----------------------------
Name:
Title: Vice President
Agreement Date: August 22, 1994
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<PAGE>
AMENDMENT NO. 1 TO
CREDIT AGREEMENT
----------------
This AMENDMENT NO. 1 (this "Amendment") to the Credit Agreement Dated as
of July 31, 1994 (the "Credit Agreement") between TSI INTERNATIONAL SOFTWARE
LTD., a Delaware corporation (the "Borrower"), and THE BANK OF NEW YORK (the
"Bank") is made and entered into as of the 27th day of April, 1995.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Borrower and the Bank wish to amend certain provisions of
the Credit Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower and the Bank agree as
follows:
1. Section 4.17 of the Credit Agreement is hereby amended to read
in its entirety as follows:
The Borrower shall not, directly or indirectly, cease to employ
either Constance Galley or Richard Bankosky; provided, however,
-------- -------
that the Borrower may cease to employ Richard Bankosky if the
Borrower within one hundred and eighty (180) days after any such
cessation of employment appoints a chief financial officer that
is acceptable to the Bank to replace Mr. Bankosky.
2. Section 8.1(a)(ii)(A) of the Credit Agreement is hereby amended
to read in its entirety as follows:
if to the Borrower, to it at:
TSI International Software Ltd.
45 Danbury Road
Wilton, CT 06897
Telecopier No.: 203-762-9677
-1-
<PAGE>
Telephone No.: 203-761-8600
Attention: Chief Financial Officer
3. All references in the Credit Agreement to "this Agreement,"
"herein," "hereof" and "hereunder" shall mean the Credit Agreement as amended by
this Amendment.
4. This Amendment shall be construed in accordance with and
governed by the laws of the State of New York (without giving effect to its
choice of law principles).
5. This Amendment may be executed in one or more counterparts, each
of which shall be deemed an original instrument, and all such counterparts
together shall constitute but one agreement.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their duly authorized officers as of the date first above written.
TSI INTERNATIONAL SOFTWARE LTD.
By: /s/ Constance Galley
---------------------------
Name:
Title:
THE BANK OF NEW YORK
By: /s/ Edward Moriarty
---------------------------
Name:
Title:
Acknowledged and consented to as
of the 27th day of April, 1995:
CONNECTICUT DEVELOPMENT AUTHORITY
By: /s/ Richard Graff
----------------------------
Name:
Title:
-3-
<PAGE>
AMENDMENT NO. 2 TO
CREDIT AGREEMENT
----------------
This AMENDMENT NO. 2 (this "Amendment") to the Credit Agreement Dated as
of July 31, 1994 between TSI INTERNATIONAL SOFTWARE LTD., a Delaware corporation
(the "Borrower"), and THE BANK OF NEW YORK (the "Bank"), as amended by Amendment
No. 1 thereto dated as of April 27, 1995 (as so amended, the "Credit
Agreement"), is made and entered into as of the 30th day of January, 1996.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Borrower and the Bank wish to amend certain provisions of
the Credit Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower and the Bank agree as
follows:
1. Section 4.18 of the Credit Agreement is hereby amended to read
in its entirety as follows:
The Borrower shall not permit Consolidated Tangible Net Worth at
any time during the periods set forth below to be less than the
amounts set forth below:
Period Amount
------ ------
July 31, 1994 - October 30, 1994 $1,800,000
October 31, 1994 - January 30, 1995 $1,800,000
January 31, 1995 - April 29, 1995 $1,800,000
April 30, 1995 - July 30, 1995 $1,800,000
July 31, 1995 - October 30, 1995 $2,000,000
October 31, 1995 - January 30, 1996 $2,300,000
January 31, 1996 - April 29, 1996 $3,500,000
April 30, 1996 - July 31, 1996 $3,800,000
-1-
<PAGE>
July 31, 1996 - Termination Date $3,800,000
2. Section 4.19 of the Credit Agreement is hereby amended to read
in its entirety as follows:
The Borrower shall not permit the ratio of Consolidated Total
Liabilities to Consolidated Tangible Net Worth at any time
during the periods set forth below to exceed the ratio set forth
below:
Period Ratio
------ -----
July 31, 1994 - October 30, 1994 3.50:1
October 31, 1994 - January 30, 1995 3.50:1
January 31, 1995 - April 29, 1995 3.50:1
April 30, 1995 - July 30, 1995 3.50:1
July 31, 1995 - October 30, 1995 3.00:1
October 31, 1995 - January 30, 1996 2.50:1
January 31, 1996 - April 29, 1996 1.75:1
April 30, 1996 - July 31, 1996 1.75:1
July 31, 1996 - Termination Date 1.75:1
3. Section 4.22 of the Credit Agreement is hereby amended to read
in its entirety as follows:
The Borrower shall not permit the Fixed Charge Coverage Ratio
for any period of four (4) consecutive fiscal quarters (taken as
one accounting period) ended as of the date set forth below to
be less than the ratio set forth opposite such date below:
Date Ratio
---- -----
July 31, 1994 .80:1
October 31, 1994 .80:1
January 31, 1995 .80:1
April 30, 1995 .80:1
July 31, 1995 1.00:1
October 31, 1995 1.15:1
January 31, 1996 1.25:1
April 30, 1996 1.40:1
July 31, 1996 1.40:1
4. Section 4.23 of the Credit Agreement is hereby amended to read
in its entirety as follows:
-2-
<PAGE>
The Borrower shall not permit the Interest Coverage Ratio for
any period of four (4) consecutive fiscal quarters (taken as one
accounting period) ended as of the date set forth below to be
less than the ratio set forth opposite such date below:
Date Ratio
---- -----
July 31, 1994 1.00:1
October 31, 1994 1.00:1
January 31, 1995 1.00:1
April 30, 1995 1.50:1
July 31, 1995 2.50:1
October 31, 1995 3.00:1
January 31, 1996 3.50:1
April 30, 1996 3.50:1
July 31, 1996 3.50:1
5. All references in the Credit Agreement to "this Agreement,"
"herein," "hereof" and "hereunder" shall mean the Credit Agreement as amended by
this Amendment.
6. This Amendment shall be construed in accordance with and
governed by the laws of the State of New York (without giving effect to its
choice of law principles).
7. This Amendment may be executed in one or more counterparts, each
of which shall be deemed an original instrument, and all such counterparts
together shall constitute but one agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their duly authorized officers as of the date first above written.
TSI INTERNATIONAL SOFTWARE LTD.
By: /s/ Ira Gerard
---------------------------
-3-
<PAGE>
Name:
Title:
THE BANK OF NEW YORK
By: /s/ Donald Craig
------------------------
Name:
Title:
Acknowledged and consented to as
of the 30th day of January, 1996:
CONNECTICUT DEVELOPMENT AUTHORITY
By: /s/ Richard Graff
-----------------------------
Name:
Title:
-4-
<PAGE>
AMENDMENT NO. 3 TO
CREDIT AGREEMENT
----------------
This AMENDMENT NO. 3 (this "Amendment") to the Credit Agreement Dated as
of July 31, 1994 between TSI INTERNATIONAL SOFTWARE LTD., a Delaware corporation
(the "Borrower"), and THE BANK OF NEW YORK (the "Bank"), as amended by Amendment
No. 1 thereto dated as of April 27, 1995 and Amendment No. 2 thereto dated as of
January 30, 1996 (as so amended, the "Credit Agreement"), is made and entered
into as of the 21st day of August, 1996.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Borrower and the Bank wish to amend certain provisions of
the Credit Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower and the Bank agree as
follows:
1. The definition of the term "Termination Date" in Section 9.1(a)
of the Agreement is hereby amended to read in its entirety as follows:
"Termination Date" means the date that is forty-five (45) days
----------------
after the second anniversary of the Agreement Date.
-1-
<PAGE>
2. All references in the Credit Agreement to "this Agreement,"
"herein," "hereof" and "hereunder" shall mean the Credit Agreement as amended by
this Amendment.
3. This Amendment shall be construed in accordance with and
governed by the laws of the State of New York (without giving effect to its
choice of law principles).
4. This Amendment may be executed in one or more counterparts, each
of which shall be deemed an original instrument, and all such counterparts
together shall constitute but one agreement.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their duly authorized officers as of the date first above written.
TSI INTERNATIONAL SOFTWARE LTD.
By: /s/ Ira Gerard
--------------------------
Name:
Title:
THE BANK OF NEW YORK
By: /s/ David Duffy
--------------------------
Name:
Title:
Acknowledged and consented to as
of the 21st day of August, 1996:
CONNECTICUT DEVELOPMENT AUTHORITY
By: /s/ Richard Graff
----------------------------
Name:
Title:
-3-
<PAGE>
AMENDMENT NO. 4 TO
CREDIT AGREEMENT
----------------
This AMENDMENT NO. 4 (this "Amendment") to the Credit Agreement dated as
of July 31, 1994 between TSI INTERNATIONAL SOFTWARE LTD., a Delaware corporation
(the "Borrower"), and THE BANK OF NEW YORK (the "Bank"), as amended by Amendment
No. 1 thereto dated as of April 27, 1995, Amendment No. 2 thereto dated as of
January 30, 1996 and Amendment No. 3 thereto dated as of August 21, 1996 (as so
amended, the "Credit Agreement"), is made and entered into as of the 4th day of
October, 1996.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Borrower and the Bank wish to amend certain provisions of
the Credit Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower and the
Bank agree as follows:
1. The definition of the term "Termination Date" in Section 9.1(a)
of the Credit Agreement is hereby deleted in its entirety and replaced with the
following:
"Termination Date" means the date that is ninety (90) days after
the second anniversary of the Agreement Date.
2. All references in the Credit Agreement to "this Agreement,"
"herein," "hereof" and "hereunder" shall mean the Credit Agreement as amended by
this Amendment.
3. This Amendment shall be construed in accordance with and
governed by the laws of the State of New York (without giving effect to its
choice of law principles).
4. This Amendment may be executed in one or more counterparts, each
of which shall be deemed an original instrument, and all such counterparts
together shall constitute but one agreement.
-1-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their duly authorized officers as of the date first above written.
TSI INTERNATIONAL SOFTWARE LTD.
By: /s/ Ira Gerard
---------------------------
Name:
Title:
THE BANK OF NEW YORK
By: /s/ David Duffy
---------------------------
Name:
Title:
Acknowledged and consented to as
of the 4th day of October, 1996:
CONNECTICUT DEVELOPMENT AUTHORITY
By: /s/ Richard Graff
----------------------------
Name:
Title:
-2-
<PAGE>
AMENDMENT NO. 5 TO
CREDIT AGREEMENT
----------------
This AMENDMENT NO. 5 (this "Amendment") to the Credit Agreement
dated as of July 31, 1994 between TSI INTERNATIONAL SOFTWARE LTD., a Delaware
corporation (the "Borrower"), and THE BANK OF NEW YORK (the "Bank"), as amended
by Amendment No. 1 thereto dated as of April 27, 1995, Amendment No. 2 thereto
dated as of January 30, 1996, Amendment No. 3 thereto dated as of August 21,
1996 and Amendment No. 4 thereto dated as of October 4, 1996 (as so amended, the
"Credit Agreement"), is made and entered into as of the 18th day of November,
1996.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Borrower and the Bank wish to amend certain
provisions of the Credit Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Borrower and the Bank
agree as follows:
1. Section 1.1 of the Credit Agreement is hereby deleted in
its entirety and replaced with the following:
Section 1.1 Commitment to Lend. Upon the terms and subject
------------------
to the conditions of this Agreement, the Bank agrees to make, from time
to time during the period from the Agreement Date through the
Termination Date, one or more Loans to the Borrower in an aggregate
unpaid principal amount not exceeding at any time the lesser of (a) the
Commitment at such time (which amount includes the aggregate stated
amount of Letters of Credit issued for the account of the Borrower) and
(b) the Borrowing Base at such time. Subject to Section 1.11 and the
other terms and conditions of this Agreement, the Loans may, at the
option of the Borrower, be made as, and from time to time continued as
or converted into, Prime Rate Loans or LIBOR Rate Loans of any permitted
Type, or any combination thereof. The Loans will be made at the rate of
interest established pursuant to the terms of Section 1.4 below. The
amount of the Commitment on the Agreement Date is $4,000,000.
2. Section 1.2 of the Credit Agreement is hereby deleted in
its entirety and replaced with the following:
Section 1.2 Manner of Borrowing. (a) The Borrower shall
-------------------
give the Bank notice (which shall be irrevocable) no later than 10:00
a.m. (New York time) on, in the case of Prime Rate Loans, the Business
Day, and, in the case of LIBOR Rate Loans, the second Business Day,
before the requested date for the making of a Loan. Each such notice
-1-
<PAGE>
shall be in the form of Schedule 1.2 and shall specify (i) the requested
------------
date for the making of the requested Loan, which shall be a Business
Day,(ii) the Type or Types of Loans requested and (iii) the amount of
each such Type of Loan, which amount shall be, in the case of each such
Type of Loan, not less than $50,000 and in multiples of $50,000, or, if
less, the maximum amount that can then be borrowed hereunder. Each Loan
so requested shall be disbursed by the Bank not later than 12:00 noon
(New York time) on the requested date therefor in Dollars in funds
immediately available to the Borrower by credit to an account of the
Borrower at the Bank's Office or in such other manner as may have been
specified in the applicable notice and as shall be acceptable to the
Bank.
(b) At the time of any drawing under a Letter of Credit, the
resulting reimbursement obligation of the Borrower (regardless of
whether the amount complies with the requirements of Section 1.2(a)
(iii)) shall immediately become a Prime Rate Loan and no notice of
borrowing as described in Section 1.2(a) shall be required.
3. Section 1.4 of the Credit Agreement is hereby amended by
deleting sections (a) and (b) in their entirety and replacing them with sections
(a) and (b) below, and by adding a new section (d), as set forth below:
(a) Rates. Each Loan shall bear interest on the outstanding
-----
principal amount thereof until due at a rate per annum equal to, (i) so
long as it is a Prime Rate Loan, the Alternative Base Rate as in effect
from time to time plus 1.00%, and (ii) so long as it is a LIBOR Rate
Loan, the LIBOR Rate applicable thereto plus 3.00%. During an Event of
Default (and whether before or after judgment), each Loan (whether or
not due) and to the maximum extent permitted by Applicable Law, each
other amount due and payable under the Borrower Loan Documents, shall
bear interest at a rate per annum equal to the applicable Post-Default
Rate.
(b) Payment. Interest shall be payable in arrears, (i) in
-------
the case of Prime Rate Loans, on each Interest Payment Date, and (ii) in
the case of LIBOR Rate Loans, on the last day of each applicable
Interest Period (and, if an Interest Period is longer than 90 days, at
intervals of 90 days after the first day of such Interest Period) and
(iii) in the case of any Loan, when such Loan shall be due (whether at
maturity, by reason of notice of prepayment or acceleration or
otherwise). Notwithstanding the foregoing, interest at the Post-Default
Rate shall be payable on demand.
(d) Conversion and Continuation. (i) All or any part of the
---------------------------
principal amount of Loans of any Type may, on any
-2-
<PAGE>
Business Day, be converted into any other Type or Types of Loans,
subject to the provisions of this Section 1.4(d).
(ii) Each Prime Rate Loan shall continue as a Prime Rate Loan
unless and until such Loan is converted into a Loan of another Type.
Each LIBOR Rate Loan of any Type shall continue as a Loan of such Type
until the end of the then current Interest Period therefor, at which
time it shall be automatically converted into a Prime Rate Loan unless
the Borrower shall have given the Bank notice in accordance with Section
1.4(d)(iv) requesting either that such Loan continue as a Loan of such
Type for another Interest Period or that such Loan be converted into a
Loan of another Type at the end of such Interest Period.
(iii) Notwithstanding anything to the contrary contained in
Section 1.4(d)(i) or (ii), during a Default, the Bank may notify the
Borrower that Loans may only be converted into or continued as Loans of
certain specified Types and, thereafter, until no Default shall continue
to exist, Loans may not be converted into or continued as Loans of any
Type other than one or more of such specified Types.
(iv) The Borrower shall give the Bank notice (which shall be
irrevocable) of each conversion of a Loan or continuation of a LIBOR
Rate Loan no later than 10:00 a.m. (New York time) on, in the case of a
conversion into or a continuation of a Prime Rate Loan, the Business
Day, and, in the case of a conversion into or continuation of a LIBOR
Rate Loan, the second Business Day, before the requested date of such
conversion or continuation. Each notice of conversion or continuation
shall be in the form of Schedule 1.4(d) (iv) and shall specify (A) the
--------------------
requested date of such conversion or continuation, (B) the amount and
Type and, in the case of LIBOR Rate Loans, the last day of the
applicable Interest Period, of the Loan to be converted or continued and
(C) the amount and Type or Types of Loans into which such Loan is to be
converted or as which such Loan is to be continued.
(v) Notwithstanding the terms of Section 1.4(d)(ii), a LIBOR
Rate Loan may be converted into another Type or other Types of Loans
prior to the end of the Interest Period applicable thereto (a
"Breakfunding Conversion"); provided, however, that, in the case of a
-------- -------
Breakfunding Conversion, at the written demand of the Lender the
Borrower will be pay to the Lender an amount as determined in accordance
with Section 7.6.
4. Section 1.6 of the Credit Agreement is hereby deleted in
its entirety and replaced with the following:
-3-
<PAGE>
Section 1.6 Prepayments. (a) Optional Prepayments.
----------- --------------------
The Borrower may, at any time and from time to time, prepay the Loans in
whole or in part, without premium or penalty, except that any partial
prepayment shall be in an aggregate principal amount of at least $50,000
and in integral multiples of $50,000 in excess thereof, and any
prepayment of a LIBOR Rate Loan shall be made only on the last day of
the applicable Interest Period. The Borrower shall give the Bank notice
of each prepayment pursuant to this Section 1.6(a) no later than 10:00
a.m. (New York time) on, in the case of a prepayment of a Prime Rate
Loan, the Business Day, and, in the case of a prepayment of a LIBOR Rate
Loan, the second Business Day, before the date of such prepayment. Each
such notice of prepayment shall be in the form of Schedule 1.6(a) and
---------------
shall specify (i) the date such prepayment is to be made and (ii) the
amount and Type and, in the case of LIBOR Rate Loans, the last day of
the applicable Interest Period of each Loan to be prepaid. Amounts to
be prepaid pursuant to this Section 1.6(a) shall irrevocably be due and
payable on the date specified in the applicable notice of prepayment,
together with interest thereon as provided in Section 1.4(b).
(b) Mandatory Prepayments. If at any time the aggregate
---------------------
unpaid principal amount of the Loans exceeds the Borrowing Base, the
Borrower shall immediately prepay the Loans in an amount not less than
the amount of such excess. Amounts prepaid pursuant to this Section
1.6(b) shall be applied first to prepay Prime Rate Loans and then to
prepay LIBOR Rate Loans in the order that the Interest Periods for such
Loans end. Amounts to be prepaid pursuant to this Section 1.6(b) shall
be paid within the time period specified therefor, whether or not such
payment would require a prepayment of a LIBOR Rate Loan prior to the
last day of an applicable Interest Period or would result in losses,
costs or expenses compensable under Section 7.6.
5. Section 1.10 of the Credit Agreement is hereby amended
by deleting the words "a single note" at the end of the first sentence thereof,
and inserting in lieu thereof ", in the case of Prime Rate Loans, a single Prime
Rate Note and, in the case of LIBOR Rate Loans, a single LIBOR Rate Note".
6. A new section 1.11 of the Credit Agreement is hereby
inserted following Section 1.10 of the Credit Agreement as set forth below:
Section 1.11 Limitation on Types of Loans. Notwithstanding
----------------------------
anything to the contrary contained in this Agreement, the Borrower shall
borrow, prepay, convert and continue Loans in a manner such that (a) the
aggregate principal amount of LIBOR Rate Loans having the same Interest
Period shall at all times be not less than
-4-
<PAGE>
$500,000, and (b) there shall not be, at any one time, more than two
Interest Periods in effect with respect to LIBOR Rate Loans.
7. Section 4.14 of the Credit Agreement is hereby deleted
in its entirety and replaced with the following:
Section 4.14 Capital Expenditures. The Borrower shall not,
--------------------
and shall not permit any subsidiary to, directly or indirectly, make
Capital Expenditures in excess of $400,000 during any fiscal quarter
ending on or before December 31, 1998; provided, however, that to the
-------- -------
extent that the amount of Capital Expenditures made during any fiscal
quarter ending on or before September 30, 1998 is less than $400,000,
such amount may be carried forward for one fiscal quarter and utilized
to make Capital Expenditures in excess of $400,000 in the next fiscal
quarter.
8. Section 4.17 of the Credit Agreement is hereby deleted
in its entirety and replaced with the following:
Section 4.17 Changes in Key Management. The Borrower shall
-------------------------
not, directly or indirectly, cease to employ Constance Galley.
9. Section 4.18 of the Credit Agreement is hereby deleted
in its entirety and replaced with the following:
Section 4.18 Minimum Consolidated Tangible Net Worth. The
---------------------------------------
Borrower shall not permit Consolidated Tangible Net Worth at any time
during any period set forth below to be less than the amount set forth
opposite such period below:
Period Amount
------ ------
September 30, 1996 - December 30, 1996 $3,900,000 plus
the Net Equity
Proceeds
Amount, if any
December 31, 1996 - March 30, 1997 $4,200,000 plus
the Net Equity
Proceeds
Amount, if any
March 31, 1997 - June 29, 1997 $4,600,000 plus
the Net Equity
Proceeds
Amount, if any
June 30, 1997 - September 29, 1997 $5,400,000 plus
the Net Equity
Proceeds
Amount, if any
-5-
<PAGE>
September 30, 1997 - December 30, 1997 $6,000,000 plus
the Net Equity
Proceeds
Amount, if any
December 31, 1997 - March 30, 1998 $7,000,000 plus
the Net Equity
Proceeds
Amount, if any
March 31, 1998 - June 29, 1998 $7,000,000 plus
the Net Equity
Proceeds
Amount, if any
June 30, 1998 - September 29, 1998 $7,500,000 plus
the Net Equity
Proceeds
Amount, if any
September 30, 1998 - Termination Date $7,500,000 plus
the Net Equity
Proceeds
Amount, if any
10. Section 4.19 of the Credit Agreement is hereby deleted
in its entirety and replaced with the following:
Section 4.19 Ratio of Consolidated Total Liabilities to
------------------------------------------
Consolidated Tangible Net Worth. The Borrower shall not permit the
-------------------------------
ratio of Consolidated Total Liabilities to Consolidated Tangible Net
Worth at any time during any period set forth below to be greater than
the ratio set forth opposite such period below:
Period Ratio
------ -----
September 30, 1996 - December 30, 1996 1.50:1
December 31, 1996 - March 30, 1997 1.25:1
March 31, 1997 - June 29, 1997 1.00:1
June 30, 1997 - September 29, 1997 1.00:1
September 30, 1997 - December 30, 1997 1.00:1
December 31, 1997 - March 30, 1998 1.00:1
March 31, 1998 - June 29, 1998 1.00:1
June 30, 1998 - September 29, 1998 1.00:1
September 30, 1998 - Termination Date 1.00:1
11. Section 4.20 of the Credit Agreement is hereby deleted
in its entirety and replaced with the following:
Section 4.20 Working Capital Ratio. The Borrower shall not
---------------------
permit the ratio of Consolidated Current Assets to Consolidated Current
Liabilities for any fiscal quarter beginning with the fiscal quarter
ended September 30, 1996 and ending with the fiscal quarter ended
September 30, 1998 to be less than 1.50:1; provided, however that the
-------- -------
covenant
-6-
<PAGE>
in this Section 4.20 shall become void and of no further force or effect
if, and at such time, as Borrower completes one or more Registered
Common Stock Offerings raising an aggregate Net Equity Proceeds Amount
of at least Twenty Million Dollars ($20,000,000).
12. Section 4.22 of the Credit Agreement is hereby deleted
in its entirety and replaced with the following:
Section 4.22 Fixed Charge Coverage Ratio. The Borrower shall
---------------------------
not permit the Fixed Charge Coverage Ratio for any period of four (4)
consecutive fiscal quarters (taken as one accounting period) ended on
each of the dates set forth below to be less than the ratio set forth
opposite each such date below:
Date Ratio
---- -----
December 31, 1996 1.40:1
March 31, 1997 1.40:1
June 30, 1997 1.75:1
September 30, 1997 1.75:1
December 31, 1997 2.00:1
March 31, 1998 2.00:1
June 30, 1998 2.00:1
September 30, 1998 2.00:1
December 31, 1998 2.00:1
13. Section 4.23 of the Credit Agreement is hereby deleted
in its entirety and replaced with the following:
Section 4.23 Interest Coverage Ratio. The Borrower shall not
-----------------------
permit the Interest Coverage Ratio for any period of four (4)
consecutive fiscal quarters (taken as one accounting period) beginning
with the period of four (4) consecutive fiscal quarters ended September
30, 1996 and ending with the period of four (4) consecutive fiscal
quarters ended December 31, 1998, to be less than 3.50:1.
14. A new section 4.29 of the Credit Agreement is hereby
inserted following Section 4.28 of the Credit Agreement as set forth below:
Section 4.29 Indebtedness to EBITDA Ratio. The Borrower
----------------------------
shall not permit the ratio of the Indebtedness of the Borrower to EBITDA
for any period of four (4) consecutive fiscal quarters (taken as one
accounting period) beginning with the period of four (4) consecutive
fiscal quarters ended September 30, 1996 and ending with the period of
four (4) consecutive fiscal quarters ended December 31, 1998, to be
greater than 1.5:1.
-7-
<PAGE>
15. Section 5.3(b) of the Credit Agreement is hereby amended
by inserting the following proviso at the end thereof:
; provided, however, that, on or before November 20, 1996 the
-------- -------
Borrower shall, and shall cause each of its Subsidiaries to, change the
opening and closing dates of its fiscal year to January 1 and December
31, respectively.
16. Section 7.3 of the Credit Agreement is hereby amended by
deleting the references therein to "Sections 7.1 and 7.2" and inserting in lieu
thereof "Sections 7.1, 7.2, 7.5 and 7.6".
17. Section 7.4 of the Credit Agreement is hereby deleted in
its entirety and replaced with the following:
Section 7.4 Change of Lending Office. If an event occurs
------------------------
with respect to a Lending Office that makes operable the provisions of
clause (b) or (c) of Section 7.5 or entitles the Bank to make a claim
under Section 7.1 or 7.2, the Bank shall, if requested by the Borrower,
use reasonable efforts to designate another Lending Office or Offices
the designation of which will eliminate such operability or reduce the
amount the Bank is so entitled to claim, provided that such designation
would not, in the sole and absolute discretion of the Bank, be
disadvantageous to the Bank in any manner or contrary to Bank policy.
The Bank may at any time and from time to time change any Lending Office
and shall give notice of any such change to the Borrower. Except in the
case of a change in Lending Offices made at the request of the Borrower,
the designation of a new Lending Office by the Bank shall not make
operable the provisions of clause (b) or (c) of Section 7.5 or entitle
the Bank to make a claim under Section 7.1 or 7.2 if the operability of
such clause or such claim results solely from such designation and not
from a subsequent Regulatory Change.
18. Two new sections of the Credit Agreement, Sections 7.5
and 7.6, are hereby inserted following Section 7.4 of the Credit Agreement as
set forth below:
Section 7.5 Mandatory Suspension and Conversion of Fixed
--------------------------------------------
Rate Loans. The Bank's obligations to make, continue or convert into
----------
LIBOR Rate Loans of any Type shall be suspended, all outstanding Loans
of that Type shall be converted on the last day of their applicable
Interest Periods (or, if earlier, in the case of clause (b) below, on
the last day the Bank may lawfully continue to maintain Loans of that
Type or, in the case of clause (c) below, on the day determined by the
Bank to be the last Business Day before the effective date of the
applicable restriction) into, and all pending requests for the making
or
-8-
<PAGE>
continuation of or conversion into Loans of such Type shall be deemed
requests for, Prime Rate Loans, if:
(a) on or prior to the determination of an interest rate for a
LIBOR Rate Loan of that Type, the Bank determines that for any reason
such LIBOR Rate would not accurately reflect the cost to the Bank of
making, continuing or converting into a LIBOR Rate Loan for such
Interest Period;
(b) at any time the Bank determines that any Regulatory Change
makes it unlawful or impracticable for the Bank or a Lending Office to
make, continue or convert into any LIBOR Rate Loan of that Type, or to
comply with its obligations hereunder in respect thereof; or
(c) the Bank determines that, by reason of any Regulatory
Change, the Bank or a Lending Office is restricted, directly or
indirectly, in the amount that it may hold of (i) a category of
liabilities that includes deposits by reference to which, or on the
basis of which, the interest rate applicable to LIBOR Rate Loans of that
Type is directly or indirectly determined or (ii) the category of assets
that includes LIBOR Rate Loans of that Type.
The Bank shall promptly notify the Borrower of any circumstance that
would make the provisions of this Section 7.5 applicable, but the
failure to give any such notice shall not affect the Bank's rights
hereunder.
Section 7.6 Funding Losses. The Borrower shall pay to the
--------------
Bank, upon the Bank's written request, such amount or amounts as the
Bank determines are necessary to compensate it for any loss, cost or
expense incurred by it as a result of (a) any payment, prepayment or
conversion of a LIBOR Rate Loan on a date other than the last day of
an Interest Period for such LIBOR Rate Loan or (b) a LIBOR Rate Loan
for any reason not being made or converted, or any payment of principal
thereof or interest thereon not being made, on the date therefor
determined in accordance with the applicable provisions of this
Agreement. At the election of the Bank, and without limiting the
generality of the foregoing, but without duplication, such compensation
on account of losses may include an amount equal to the excess of (i)
the interest that would have been received from the Borrower under this
Agreement on any amounts to be reemployed during an Interest Period or
its remaining portion over (ii) the interest component of the return
that the Bank determines it could have obtained had it placed such
amount on deposit in the interbank Dollar market selected by it for a
period equal to such Interest Period or its remaining portion.
-9-
<PAGE>
19. Section 8.1(a)(i) of the Credit Agreement is hereby
amended by deleting the reference therein to "Sections 1.2, 1.5, 1.6 and 6.2"
and inserting in lieu thereof "Sections 1.2, 1.4(d), 1.6, 1.7 and 6.2".
20. Sections 8.1(a)(ii)(A) and 8.1(a)(ii)(B) of the Credit
Agreement are hereby deleted in their entirety and replaced with the following:
(A) if to the Borrower, to it at:
TSI International Software Ltd.
45 Danbury Road
Wilton, CT 06897
Telecopier No.: 203-762-9677
Telephone No.: 203-761-8600
Attention: Mr. Ira A. Gerard, Vice
President, Finance and Administration,
Chief Financial Officer
(B) if to the Bank, to it at:
The Bank of New York
530 Fifth Avenue
New York, New York 10036
Telecopier No.: 212-852-4055
Telephone No.: 212-852-4056
Attention: Mr. David Duffy, Vice President
-10-
<PAGE>
with a copy to:
BNY Business Center, Inc.
10 Mason Street, 3rd Floor
Greenwich, CT 06830
Telecopier No.: 203-863-2610
Telephone No.: 203-863-2681
Attention: Mr. Joseph Markey, Vice President
and
Winthrop, Stimson, Putnam & Roberts
Financial Centre
695 East Main Street
P.O. Box 6760
Stamford, CT 06904-6760
Telecopier No.: 203-965-8226
Telephone No.: 203-348-2300
Attention: Frode Jensen, III, Esq.
or at such other address or telex, telecopier or telephone number or to the
attention of such other individual or department as the party to which such
information pertains may hereafter specify for the purpose in a notice to the
other specifically captioned "Notice of Change of Address".
21. The definition of the term "CDA Guaranty" in Section
------------
9.1(a) of the Credit Agreement is hereby amended by deleting the reference
therein to "$1,200,000" and inserting "$600,000" in lieu thereof.
22. The following definitions in Section 9.1(a) of the
Credit Agreement are hereby deleted in their entirety and replaced with the
following:
"Agreement" means this Agreement, including all schedules,
---------
annexes and exhibits hereto, as modified, renewed, supplemented or
amended from time to time.
"Agreement Date" means August 22, 1994.
--------------
"Lending Office" means 530 5th Avenue, New York, New York 10036,
--------------
or such other branch or office of the Bank designated by the Bank from
time to time as the branch or office at which the Loans are to be made
or maintained. The Bank may from time to time designate separate of its
branches or offices at which the Prime Rate Loans and LIBOR Rate Loans
are to be made or maintained, in which case "Lending Office" shall mean
either or both of such offices, as the context may require.
-11-
<PAGE>
"Note" means any LIBOR Rate Note and any Prime Rate Note.
----
"Termination Date" means November 18, 1998.
----------------
23. Section 9.1(a) of the Credit Agreement is hereby further
amended by inserting in the appropriate alphabetical order the following new
definitions:
"Breakfunding Conversion" has the meaning ascribed to such term
-----------------------
in Section 1.4(d)(v) of this Agreement.
"Interest Period" means a period commencing, in the case of the
---------------
first Interest Period applicable to a LIBOR Rate Loan, on the date of
the making of, or conversion into, such Loan, and, in the case of each
subsequent, successive Interest Period applicable thereto, on the last
day of the immediately preceding Interest Period, and ending on the day
30, 60, 90 or 180 days thereafter, except that any Interest Period that
would otherwise end on a day that is not a Business Day shall be
extended to the next succeeding Business Day, unless such Business Day
falls in another calendar month, in which case such Interest Period
shall end on the next preceding Business Day.
"LIBOR Rate" means the rate at which deposits in Dollars for the
----------
relevant Interest Period and in the amount of the Loan relevant thereto
are offered to the Bank by prime banks in the London interbank market
(adjusted upward, if not already a multiple of 1/100 of one percent, to
the nearest 1/100 of one percent) as at 11:00 a.m. two Business Days
prior to the commencement of the relevant Interest Period.
"LIBOR Rate Loan" means any Loan the interest on which is, or is
---------------
to be, as the context may require, computed on the basis of the LIBOR
Rate.
"LIBOR Rate Note" means any promissory note in the form of
---------------
Exhibit A-2.
-----------
"Net Equity Proceeds Amount" means (a) the gross proceeds
--------------------------
received by the Borrower from any one or more Registered Common Stock
Offerings, less (b) all reasonable expenses incurred in connection with
such Registered Common Stock Offerings including, but not limited to,
(i) all Securities and Exchange Commission, stock exchange or National
Association of Securities Dealers, Inc. registration and filing fees,
(ii) all fees and expenses incurred in connection with compliance with
state securities or blue sky laws (including reasonable fees and
disbursements of counsel for any underwriters in connection with blue
sky qualification), (iii) all expenses of any
-12-
<PAGE>
persons in preparing or assisting in preparing, word processing,
printing and distributing any registration statement, any prospectus,
any amendments or supplements thereto, any underwriting agreements,
securities sales agreements and other documents relating to a Registered
Common Stock Offering, (iv) the fees and disbursements of counsel for
the Borrower and (v) the fees and disbursements of the independent
public accountants of the Borrower, including the expenses related to
any special audits or "cold comfort" letters.
"Prime Rate Loan" means any Loan the interest on which is, or is
---------------
to be, as the context may require, computed on the basis of the
Alternative Base Rate.
"Prime Rate Note" means any promissory note in the form of
---------------
Exhibit A-1.
-----------
"Registered Common Stock Offering" means a registered public
-------------------------------
offering of common stock of the Borrower pursuant to an effective
registration statement under the Securities Act of 1933, as amended.
"Type" means, with respect to Loans, any of the following, each
----
of which shall be deemed to be a different "Type" of Loan: Prime Rate
Loans, LIBOR Rate Loans having a 30-day Interest Period, LIBOR Rate
Loans having a 60-day Interest Period, LIBOR Rate Loans having a 90-day
Interest Period and LIBOR Rate Loans having a 180-day Interest Period.
Any LIBOR Rate Loan having an Interest Period with a duration that
differs from the duration specified for a Type of LIBOR Rate Loan listed
above solely because, absent such difference in duration such Interest
Period would have ended on a day other than a Business Day, shall be
deemed to be a Loan of such above-listed Type notwithstanding such
difference in the duration of such Interest Period.
24. Exhibit A to the Credit Agreement is hereby deleted in
its entirety and replaced with Exhibits A-1 and A-2 to the Credit Agreement, in
the form attached as Exhibits A-1 and A-2 to this Amendment.
25. Exhibit B and Schedules 1.2 and 1.6(a) to the Credit
Agreement are hereby deleted in their entirety and replaced with Exhibit B and
Schedules 1.2 and 1.6(a) attached to this Amendment.
26. A new Schedule 1.4(d)(iv), in the form of Schedule
1.4(d)(iv) to this Amendment, is hereby added to the Credit Agreement.
27. Schedule 5.1(b) to the Credit Agreement is hereby
amended by inserting "(f) Section 4.29." below Section 3(e).
----
-13-
<PAGE>
28. Schedule 5.1(c) to the Credit Agreement is hereby
amended by inserting "(f) Section 4.29." below Section 3(e).
----
29. Schedule 5.1(d) to the Credit Agreement is hereby
amended by deleting the parenthetical "(item 7 x 30%)" from item number five
therein and replacing it with the parenthetical "(the lesser of (1) item 7 x 30%
and (2) $600,000)".
30. As of the effective date of this Amendment, all Loans
(as defined in the Credit Agreement) outstanding under the Credit Agreement
shall become Prime Rate Loans (as defined in the Credit Agreement as amended by
this Amendment (the "Amended Credit Agreement")) outstanding under the Amended
Credit Agreement.
31. All references in the Credit Agreement to "this
Agreement," "herein," "hereof" and "hereunder" shall mean the Credit Agreement
as amended by this Amendment.
32. This Amendment shall be construed in accordance with and
governed by the laws of the State of New York (without giving effect to its
choice of law principles).
33. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original instrument, and all such
counterparts together shall constitute but one agreement.
-14-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their duly authorized officers as of the date first
above written.
TSI INTERNATIONAL SOFTWARE LTD.
By: /s/ Ira Gerard
---------------------------
Name:
Title:
THE BANK OF NEW YORK
By: /s/ David Duffy
---------------------------
Name:
Title:
Acknowledged and consented to as
of the 18 day of November, 1996:
CONNECTICUT DEVELOPMENT AUTHORITY
By: /s/ Nancy Watt
----------------------------
Name:
Title:
-15-
<PAGE>
GRID
Prime Rate Note
<TABLE>
<CAPTION>
Amount of
Amount of Principal Paid, Unpaid Principal
Prime Rate Prepaid or Amount of Notation
Date Loan Converted Note Made By
---- ----------- -------------- ---------------- ---------
<S> <C> <C> <C> <C>
</TABLE>
-1-
<PAGE>
EXHIBIT A-2
TSI INTERNATIONAL SOFTWARE LTD.
LIBOR RATE NOTE
November 18, 1996
FOR VALUE RECEIVED, TSI INTERNATIONAL SOFTWARE LTD. (the
"Borrower") hereby promises to pay to the order of THE BANK OF NEW YORK (the
"Bank") the principal amount of Four Million Dollars ($4,000,000), or, if less,
the principal amount of the LIBOR Rate Loans outstanding, on the dates and in
the amounts specified in Section 1.5 of the Credit Agreement (as defined
herein), and to pay interest on such principal amount on the dates and at the
rates specified in Section 1.4 of the Credit Agreement. All payments due the
Bank hereunder shall be made to the Bank at the place, in the type of money and
funds and in the manner specified in Section 1.9 of the Credit Agreement.
Each holder hereof is authorized to endorse on the grid attached
hereto, or on a continuation thereof, each LIBOR Rate Loan and each payment,
prepayment or conversion with respect thereto.
Presentment, demand, protest, notice of dishonor and notice of
intent to accelerate are hereby waived by the undersigned.
This LIBOR Rate Note evidences Loans made under, and is entitled
to the benefits of, the Credit Agreement, dated as of July 31, 1994, between the
Borrower and the Bank, as the same may be amended from time to time (the "Credit
Agreement"). Reference is made to the Credit Agreement, as so amended, for
provisions relating to the prepayment and the acceleration of the maturity
hereof. This LIBOR Rate Note is also entitled to the benefits of the Security
Agreement.
This LIBOR Rate Note shall be construed in accordance with and
governed by the law of the State of New York (without giving effect to its
choice of law principles).
TSI INTERNATIONAL SOFTWARE LTD.
By_____________________________
Name:
Title:
-2-
<PAGE>
GRID
LIBOR Rate Note
<TABLE>
<CAPTION>
Amount of
Amount of Principal Paid, Unpaid Principal
LIBOR Rate Prepaid or Amount of Notation
Date Loan Converted Note Made By
---- ---------- -------------- ---------------- ---------
<S> <C> <C> <C> <C>
</TABLE>
-3-
<PAGE>
Schedule 1.2
------------
NOTICE OF BORROWING
The Bank of New York
10 Mason Street
Greenwich, CT 06830
Attention: Mr. Joseph F. Markey
Vice President
Date:
Ladies and Gentlemen:
Reference is made to the Credit Agreement, dated as of July 31,
1994, between TSI International Software Ltd. and The Bank of New York, as
amended from time to time (the "Credit Agreement"). The undersigned hereby
gives notice pursuant to Section 1.2 of the Credit Agreement of its request to
have the following Loans made to it on [insert requested date of borrowing]:
Type of Loan Amount
------------ ------
- ---------------------------------------- -----------------------------------
- ---------------------------------------- -----------------------------------
- ---------------------------------------- -----------------------------------
The undersigned represents and warrants that (a) the borrowing
requested hereby complies with the requirements of Section 1.2 of the Credit
Agreement and (b) [except to the extent set forth on Annex A hereto,]/1/ (i)
each Loan Document Representation and Warranty is true and correct at and as of
the date hereof and (except to the extent the undersigned gives notice to the
Bank to the contrary prior to 5:00 p.m. (New York time) on the Business Day
before the requested date for the making of the Loans) will be true and correct
at and as of the time the Loans are made, in each case both with and without
giving effect to the Loans and the application of the proceeds thereof, and (ii)
no Default has occurred and is continuing as of the date hereof or would result
from the making of the Loans or from the application of the proceeds thereof if
the Loans were made on the date hereof, and (except to the extent the
undersigned gives notice to the Bank to
- -------------------
/1/ If the representation and warranty in either clause (b) (i) or (b) (ii)
would be incorrect, include the material in brackets and set forth the
reasons such representation and warranty would be incorrect on an
attachment labeled Annex A.
-4-
<PAGE>
the contrary prior to 5:00 p.m. (New York time) on the Business Day before the
requested date for the making of the Loans) no Default will have occurred and be
continuing at the time the Loans are to be made or would result from the making
of the Loans or from the application of the proceeds thereof.
TSI INTERNATIONAL SOFTWARE LTD.
By_____________________________
Name:
Title:
-5-
<PAGE>
Schedule 1.4(d)(iv)
-------------------
NOTICE OF CONVERSION OR CONTINUATION
The Bank of New York
10 Mason Street
Greenwich, CT 06830
Attention: Mr. Joseph F. Markey
Vice President
Date:
Gentlemen:
Reference is made to the Credit Agreement, dated as of July 31,
1994, between TSI International Software Ltd. and The Bank of New York, as
amended from time to time (the "Credit Agreement"). The undersigned hereby
gives notice pursuant to Section 1.4(d)(iv) of the Credit Agreement of its
desire to convert or continue the Loans specified below into or as Loans of the
types and in the amounts specified below on [insert date of conversion or
continuation]:
<TABLE>
<CAPTION>
Converted or
Loans to be Converted or Continued Continued Loans
---------------------------------- ---------------
Type Last Day of Amount Type of Amount
of Loan/1/ Current Interest ------ ------- ------
------ Period Loan
------ -----
<S> <C> <C> <C> <C>
- ------------------------------------------- ------------------------
- ------------------------------------------- ------------------------
- ------------------------------------------- ------------------------
- ------------------------------------------- ------------------------
</TABLE>
The undersigned represents and warrants that conversions and
continuations requested hereby comply with the requirements of Section 1.4(d)
of the Credit Agreement
TSI INTERNATIONAL SOFTWARE LTD.
By_____________________________
Name:
Title:
- ------------------------
/1/ Be sure to specify the duration of the Interest Period in the case of LIBOR
Rate Loans (e.g., 90-day LIBOR Rate).
----
-6-
<PAGE>
Schedule 1.6(a)
---------------
NOTICE OF PREPAYMENT
The Bank of New York
10 Mason Street
Greenwich, CT 06830
Attention: Mr. Joseph F. Markey
Vice President
Date:
Ladies and Gentlemen:
Reference is made to the Credit Agreement, dated as of July 31,
1994, between TSI International Software Ltd. and The Bank of New York, as
amended from time to time (the "Credit Agreement"). The undersigned hereby
gives notice pursuant to Section 1.5(a) of the Credit Agreement that it will
prepay the Loans specified below on [insert date of prepayment]:
<TABLE>
<CAPTION>
Type Last Day of Amount
of Loan/1/ Current Interest ------
--------- --------
Period
-------
<S> <C> <C>
- ---------------------------------- -------------------- -----------------
- ---------------------------------- -------------------- -----------------
- ---------------------------------- -------------------- -----------------
- ---------------------------------- -------------------- -----------------
</TABLE>
The undersigned represents and warrants that the prepayment
requested hereby complies with the requirements of Section 1.5(a) of the Credit
Agreement.
TSI INTERNATIONAL SOFTWARE LTD.
By_____________________________
Name:
Title:
- ------------------------
/1/ Be sure to specify the duration of the Interest Period in the case of LIBOR
Rate Loans (e.g., 90-day LIBOR Rate).
----
-7-
<PAGE>
EXHIBIT A-1
TSI INTERNATIONAL SOFTWARE LTD.
PRIME RATE NOTE
November 18, 1996
FOR VALUE RECEIVED, TSI INTERNATIONAL SOFTWARE LTD. (the
"Borrower") hereby promises to pay to the order of THE BANK OF NEW YORK (the
"Bank") the principal amount of Four Million Dollars ($4,000,000), or, if less,
the principal amount of the Prime Rate Loans outstanding, on the dates and in
the amounts specified in Section 1.5 of the Credit Agreement (as defined
herein), and to pay interest on such principal amount on the dates and at the
rates specified in Section 1.4 of the Credit Agreement. All payments due the
Bank hereunder shall be made to the Bank at the place, in the type of money and
funds and in the manner specified in Section 1.9 of the Credit Agreement.
Each holder hereof is authorized to endorse on the grid attached
hereto, or on a continuation thereof, each Prime Rate Loan and each payment,
prepayment or conversion with respect thereto.
Presentment, demand, protest, notice of dishonor and notice of
intent to accelerate are hereby waived by the undersigned.
This Prime Rate Note evidences Loans made under, and is entitled
to the benefits of, the Credit Agreement, dated as of July 31, 1994, between the
Borrower and the Bank, as the same may be amended from time to time (the "Credit
Agreement"). Reference is made to the Credit Agreement, as so amended, for
provisions relating to the prepayment and the acceleration of the maturity
hereof. This Prime Rate Note is also entitled to the benefits of the Security
Agreement.
This Prime Rate Note shall be construed in accordance with and
governed by the law of the State of New York (without giving effect to its
choice of law principles).
TSI INTERNATIONAL SOFTWARE LTD.
By_____________________________
Name :
Title:
-1-
<PAGE>
EXHIBIT 10.12
--------------------------------------------------------
SECURITY AGREEMENT
dated as of July 31, 1994
Between
TSI INTERNATIONAL SOFTWARE LTD.
and
THE BANK OF NEW YORK
--------------------------------------------------------
-1-
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE 1
SECURITY INTEREST....................................................... 1
Section 1.1 Grant of Security Interest.......................... 1
Section 1.2 Validity and Priority of Security Interest.......... 1
Section 1.3 Maintenance of Status of Security
Interest, Collateral and Rights..................... 2
Section 1.4 Evidence of Status of Security Interest............. 2
Section 1.5 Pledgor Remains Obligated; Secured Party
Not Obligated....................................... 2
ARTICLE 2
DISPOSITION OF COLLATERAL PROCEEDS...................................... 3
Section 2.1 General............................................. 3
Section 2.2 Interest on Collateral.............................. 4
ARTICLE 3
CERTAIN REPRESENTATIONS AND WARRANTIES.................................. 5
Section 3.1 Accuracy of Information............................. 5
Section 3.2 Balance Sheet Collateral............................ 6
ARTICLE 4
CERTAIN COVENANTS....................................................... 6
A. General............................................................. 6
Section 4.1 Certain Matters Relating to Preservation
of Status of Security Interest...................... 6
Section 4.2 Ownership and Defense of Collateral................. 8
Section 4.3 Taxes; Compliance................................... 8
Section 4.4 Insurance........................................... 8
Section 4.5 Visits and Inspections.............................. 11
Section 4.6 Maintenance of Physical Property.................... 12
Section 4.7 Notice of Materially Adverse Effect................. 12
Section 4.8 Requested Information............................... 12
Section 4.9 Collection of Collateral Obligations................ 13
B. Receivables......................................................... 13
Section 4.10 Status of Receivables............................... 13
Section 4.11 Maintenance of Records.............................. 14
Section 4.12 Performance of Terms................................ 14
Section 4.13 Modification of Terms............................... 14
Section 4.14 No Dispositions of Receivables...................... 15
Section 4.15 Verification........................................ 15
Section 4.16........................................................ 15
C. General Intangibles................................................. 16
Section 4.17 Status of Intellectual Property..................... 16
Section 4.18 Performance of Terms................................ 16
Section 4.19 Modification of Terms............................... 16
Section 4.20 No Dispositions of General Intangibles.............. 17
Section 4.21 Verification........................................ 17
Section 4.22 Schedule of Certain General Intangibles............. 17
D. Inventory........................................................... 18
Section 4.23 Status of Inventory................................. 18
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Section 4.24 Maintenance of Records............................. 18
Section 4.25 Location of Inventory.............................. 19
Section 4.26 No Dispositions of Inventory....................... 19
Section 4.27 Manufacture and Sales in Compliance with
Applicable Law..................................... 19
Section 4.28 Information........................................ 19
E. Machinery and Equipment............................................ 20
Section 4.29 Status of Machinery and Equipment.................. 20
Section 4.30 Maintenance........................................ 20
Section 4.31 No Dispositions of Machinery and
Equipment.......................................... 21
Section 4.32 Evidence of Ownership of Machinery and
Equipment.......................................... 21
F. Securities and Instruments......................................... 21
Section 4.33 Status of Securities and Instrument
Collateral......................................... 21
Section 4.34 Certain Rights of Secured Party and
Pledgor............................................ 22
Section 4.35 No Amendments, etc., of Securities and
Instrument Collateral.............................. 23
Section 4.36 No Disposition of Securities and
Instrument Collateral.............................. 23
ARTICLE 5
EVENT OF DEFAULT....................................................... 23
A. Proceeds........................................................... 23
Section 5.1 Application of Proceeds............................ 23
B. Remedies........................................................... 24
Section 5.2 General............................................ 24
Section 5.3 Collateral Proceeds................................ 26
Section 5.4 Inventory; Machinery and Equipment................. 29
Section 5.5 Intellectual Property.............................. 29
Section 5.6 Securities and Instrument Collateral............... 30
ARTICLE 6
MISCELLANEOUS.......................................................... 31
Section 6.1 Expenses of Pledgor's Agreements and
Duties............................................. 31
Section 6.2 Secured Party's Right to Perform on
Pledgor's Behalf................................... 31
Section 6.3 Secured Party's Right to Use Agents and to
Act in Name of Pledgor............................. 32
Section 6.4 No Interference, Compensation or Expense........... 32
Section 6.5 Limitation of Secured Party's Obligations
with Respect to Collateral......................... 32
Section 6.6 Rights of Secured Party under Uniform
Commercial Code and Applicable Law................. 33
Section 6.7 Waivers of Rights Inhibiting Enforcement........... 33
Section 6.8 Power of Attorney.................................. 34
Section 6.9 Termination of Security Interest................... 36
Section 6.10 Notices and Deliveries............................. 37
Section 6.11 Payments by the Pledgor............................ 37
Section 6.12 Governing Law...................................... 40
Section 6.13 LIMITATION OF LIABILITY............................ 40
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Section 6.14 Counterparts........................................ 41
Section 6.15 Entire Agreement.................................... 41
Section 6.16 Successors and Assigns.............................. 41
Section 6.17 Delivery of Opinions Authorized..................... 41
ARTICLE 7
INTERPRETATION.......................................................... 42
Section 7.1 Definitional Provisions............................. 42
Section 7.2 Other Interpretative Provisions..................... 48
Section 7.3 Representations and Warranties...................... 50
Section 7.4 Captions............................................ 50
</TABLE>
<PAGE>
SCHEDULES
Schedule 1.3 Schedule of Required Action
Schedule 1.3(a) Form of UCC-1 Financing
Statement
Schedule 1.3(g)-A Memorandum of Security
Agreement - Patents
Schedule 1.3(g)-B Memorandum of Security
Agreement - Trademarks
Schedule 1.3(g)-C Memorandum of Security
Agreement - Copyrights
Schedule 3.2 Balance Sheet of Pledgor
Schedule 4.10(a) Schedule of Receivables
Discount and Allowance
Agreements
Schedule 4.33(a) Schedule of Securities and
Instrument Collateral
Schedule 7.1 Form of Security Agreement
Questionnaire
<PAGE>
TABLE OF DEFINITIONS
<TABLE>
<S> <C>
"blue sky"........................................................... 30
"Notice of Change of Executive Office and Books and Records"......... 37
"Notice of Change of Name, Identity or Corporate Structure".......... 37
"Notice of New Trade Name, Trade Style or Invoice"................... 37
"Notice of Change of Location of Inventory".......................... 37
"Notice of Change of Location of Machinery and Equipment"............ 37
"Agreement"....................................................... 42, 3
"Agreement Date"................................................. 42, 43
"Collateral"..................................................... 42, 43
"Intellectual Property"....................................... 42, 45, 4
"Permitted Lien"..................................................... 42
"Representation and Warranty".................................... 42, 47
"Security Interest".............................................. 42, 48
"Account"............................................................ 42
"Account Proceeds"................................................... 42
"Agreement".......................................................... 43
"Agreement Date"..................................................... *
"Balance Sheet"...................................................... 43
"Bank Account".................................................... 43, 3
"Collateral"......................................................... *
"Collateral Debtor".................................................. 44
"Collateral Document Related Claim".................................. 44
"Collateral Documents"............................................... 45
"Collateral Obligation".............................................. 45
"Credit Agreement"................................................... 45
"Distribution Collateral"......................................... 45, 3
</TABLE>
<PAGE>
<TABLE>
<S> <C>
"General Intangibles"............................................. 45, 4
"Intellectual Property"............................................... *
"Inventory"....................................................... 46, 4
"Lockbox Account".................................................... 46
"Lockbox Agreement".................................................. 46
"Machinery and Equipment"......................................... 46, 5
"Ordinary Distributions".......................................... 46, 3
"Pledgor"......................................................... 46, 1
"Questionnaire"...................................................... 47
"Receivables"..................................................... 47, 5
"Representation and Warranty"......................................... *
"Secured Obligations"................................................ 47
"Secured Party"................................................... 47, 1
"Securities and Instrument Collateral"............................ 47, 5
"Security Interest"................................................... *
"Uniform Commercial Code"......................................... 48, 5
"Agreement"........................................................... *
"Bank Account"........................................................ *
"Distributions"....................................................... 3
"Ordinary Distributions".............................................. *
"Extraordinary Distributions"......................................... 3
"Distribution Collateral"............................................. *
"General Intangibles"................................................. *
"Intellectual Property"............................................... *
"Inventory"........................................................... *
"Machinery and Equipment"............................................. *
</TABLE>
<PAGE>
<TABLE>
<S> <C>
"Receivables"......................................................... *
"Securities and Instrument Collateral"................................ *
"Uniform Commercial Code"............................................. *
"Security Agreement".................................................. 1
"Pledgor"............................................................. *
"Secured Party"....................................................... *
"Security Agreement".................................................. *
"Pledgor"............................................................. *
"Secured Party"....................................................... *
"Security Agreement".................................................. *
"Pledgor"............................................................. *
"Secured Party"....................................................... *
"Pledgor"............................................................. *
</TABLE>
<PAGE>
SECURITY AGREEMENT
Dated as of July 31, 1994
In consideration of the execution and delivery of the Credit Agreement
by THE BANK OF NEW YORK, TSI INTERNATIONAL SOFTWARE LTD., a Delaware
corporation, hereby agrees with THE BANK OF NEW YORK as follows (with certain
terms used herein being defined in Article 7):
ARTICLE 1
SECURITY INTEREST
-----------------
Section 1.1 Grant of Security Interest. To secure the payment,
--------------------------
observance and performance of the Secured Obligations, the Pledgor hereby
mortgages, pledges and assigns the Collateral to the Secured Party, and grants
to the Secured Party a continuing security interest in, and a continuing lien
upon, the Collateral.
Section 1.2 Validity and Priority of Security Interest. The Pledgor
------------------------------------------
agrees that the Security Interest shall at all times be valid, perfected and
enforceable against the Pledgor and all third parties, in accordance with the
terms hereof, as security
-1-
<PAGE>
for the Secured Obligations, and that the Collateral shall not at any time be
subject to any Lien, other than a Permitted Lien, that is prior to, on a parity
with or junior to such Security Interest.
Section 1.3 Maintenance of Status of Security Interest, Collateral and
----------------------------------------------------------
Rights. (a) Required Action. The Pledgor shall take all action, including
- ------ ---------------
the actions specified on Schedule 1.3, that may be necessary or desirable, or
------------
that the Secured Party may request, so as at all times (i) to maintain the
validity, perfection, enforceability and priority of the Security Interest in
the Collateral in conformity with the requirements of Section 1.2, (ii) to
protect and preserve the Collateral and (iii) to protect and preserve, and to
enable the exercise or enforcement of, the rights of the Secured Party therein
and hereunder and under the other Collateral Documents.
(b) Authorized Action. The Secured Party is hereby authorized
-----------------
to file one or more financing or continuation statements or amendments thereto
without the signature of or in the name of the Pledgor. A carbon, photographic
or other reproduction of this Agreement or of any financing statement filed in
connection with this Agreement shall be sufficient as a financing statement.
Section 1.4 Evidence of Status of Security Interest. The Pledgor
---------------------------------------
shall from time to time, upon request of the Secured Party, deliver to the
Secured Party (a) such file search reports from such Uniform Commercial Code
and other filing and recording
-2-
<PAGE>
offices and (b) such opinions of counsel relating to the Collateral, the
attachment and perfection of the Security Interest and otherwise to this
Agreement, as the Secured Party may designate.
Section 1.5 Pledgor Remains Obligated; Secured Party Not Obligated.
------------------------------------------------------
The grant by the Pledgor to the Secured Party of the Security Interest shall
not (a) relieve the Pledgor of any Liability to any Person under or in respect
of any of the Collateral or (b) impose on the Secured Party any such Liability
or any Liability for any act or omission on the part of the Pledgor relative
thereto.
ARTICLE 2
DISPOSITION OF COLLATERAL PROCEEDS
----------------------------------
Section 2.1 General. (a) Rights of Pledgor. Except during an Event
------- -----------------
of Default, and subject to any applicable Lockbox Agreement and the applicable
provisions of Schedule 1.3, (i) the Pledgor shall be entitled to (A) receive
------------
and retain all Account Proceeds and Ordinary Distributions and (B) make
withdrawals from all Bank Accounts, and (ii) all instruments, chattel paper,
securities, letters of credit and documents constituting part of the Collateral
and not constituting Account Proceeds shall be made available to the Pledgor
upon request for purposes of presentation, collection or renewal (any such
arrangement to be effected to the extent deemed appropriate by the Secured
Party
-3-
<PAGE>
against a trust receipt or like document). Each withdrawal under clause (i)(B)
and request under clause (ii) of the preceding sentence shall constitute a
Representation and Warranty by the Pledgor that no Event of Default is
continuing. No delivery of any Collateral pursuant to clause (ii) of the
preceding sentence shall terminate the Security Interest therein and the Pledgor
shall, within 18 days of its receipt of any such Collateral, either return such
Collateral or its proceeds to the Secured Party or such other Person as the
Secured Party may designate or, should the Security Interest in any such
proceeds not be perfectible by possession, take such other action as may be
required by Section 1.3(a) to continue the perfection of the Security Interest
therein.
(b) Rights of Secured Party. Subject to the Pledgor's rights
-----------------------
under Section 2.1(a) and except in the case of proceeds of Collateral as to
which a different disposition is expressly provided for herein, the Secured
Party shall be entitled to receive and retain all proceeds of Collateral and
all Distribution Collateral. Subject to its rights under Section 2.1(a), the
Pledgor shall, should it receive any such proceeds or Distribution Collateral,
hold all such proceeds and Distribution Collateral in trust for the Secured
Party, not commingle the same with other property or funds of the Pledgor and,
unless the Secured Party shall have otherwise instructed the Pledgor, deliver
the same or cause the same to be delivered in the exact form received, together
with any necessary endorsements, to the
-4-
<PAGE>
Secured Party or to such Person or Persons as the Secured Party may designate.
The Secured Party is hereby irrevocably authorized, either in the name and on
behalf of the Pledgor or in its own name, to endorse and deposit, or cause to be
deposited, for collection, present, draw upon or under, or otherwise take action
to realize upon, all instruments, chattel paper, securities, letters of credit
and documents constituting part of the Collateral for the purpose of holding and
disposing of the proceeds thereof in accordance with the terms hereof.
Section 2.2 Interest on Collateral. No Collateral, including any such
----------------------
that constituted the proceeds of property insurance subject to Section
4.4(a)(ii), shall bear interest, except to the extent specifically agreed to
in writing by the Secured Party and, unless otherwise so agreed, any such
interest shall constitute Collateral.
ARTICLE 3
CERTAIN REPRESENTATIONS AND WARRANTIES
--------------------------------------
The Pledgor represents and warrants as follows:
Section 3.1 Accuracy of Information. (a) Questionnaire. The
----------------------- -------------
Questionnaire is, as of the Agreement Date, complete and correct in all
respects.
-5-
<PAGE>
(b) All Information. All Information furnished to the Secured
---------------
Party by or on behalf of the Pledgor in connection with or pursuant to the
Collateral Documents or in connection with or pursuant to any amendment to, or
waiver of rights under, the Collateral Documents (i) in the case of any
Information furnished prior to the Agreement Date, was, and, in the case of any
Information furnished on or after the Agreement Date, will be, at the time the
same was or is so furnished (but, in the case of Information dated as of a
prior date, as of such date) (A) in the case of any Information prepared in the
ordinary course of business, complete and correct in the light of the purpose
prepared, and (B) in the case of any Information required by the terms of the
Collateral Documents or the preparation of which was requested by the Secured
Party, complete and correct to the extent necessary to give the Secured Party
true and accurate knowledge of the subject matter thereof and (ii) in the case
of any Information furnished prior to the Agreement Date, did not, and, in the
case of any Information furnished on or after the Agreement Date, will not, at
the time the same was or is so furnished (but, in the case of Information dated
as of a prior date, as of such date) (A) contain any untrue statement of a
material fact or (B) omit to state a material fact necessary in order to make
the statements contained therein not misleading in the light of the
circumstances under which they were made. The furnishing of any such
Information to the Secured Party shall constitute a representation and warranty
by the Pledgor made on
-6-
<PAGE>
the date such Information is so furnished to the effect specified in clauses (i)
and (ii) of this Section 3.1(b).
Section 3.2 Balance Sheet Collateral. The Pledgor has, as of the
------------------------
Agreement Date, good title to each of the assets other than as disclosed on
Schedule 3.8 to the Credit Agreement, to the extent the same constitute
- ------------
Collateral, reflected on the Balance Sheet, except those that have been
disposed of subsequent to the date thereof in the ordinary course of the
Pledgor's business.
ARTICLE 4
CERTAIN COVENANTS
-----------------
A. General.
-------
Section 4.1 Certain Matters Relating to Preservation of Status of
-----------------------------------------------------
Security Interest. (a) Chief Executive Office. The Pledgor shall maintain
- ----------------- ----------------------
its chief executive office and, if different from its chief executive office,
each office where the books and records relating to any Receivables or General
Intangibles are kept only at, and shall keep all of its books and records only
at or in transit to, (i) a location specified therefor in the Questionnaire or
(ii) any other location provided that (A) the Secured Party has approved such
location in writing, (B) such location is within one of the 50 States of the
United States or the District of Columbia and (C)(1) the Security Interest,
with respect to any Collateral at such location, or affected by the situs of
such location, conforms to the requirements of Section 1.2 and (2) the Secured
Party shall have
-7-
<PAGE>
received such evidence satisfactory to it to that effect that it may request,
including acknowledgment copies of financing statements and opinions of counsel.
(b) Change of Name, Identity, etc. The Pledgor shall not
-----------------------------
change its name, identity or corporate structure without giving the Secured
Party 10 days' prior notice thereof.
(c) Trade Names; Invoices. Without giving 45 days' prior
---------------------
notice to the Secured Party (which, in the case of an invoice subject to clause
(B), shall include a copy of such invoice), the Pledgor shall not (A) do
business under any name, trade name or trade style not listed on the
Questionnaire or (B) use any invoice other than one that is attached to the
Questionnaire.
(d) Commingling. Without the prior written consent of the
-----------
Secured Party, the Pledgor shall not commingle, and shall not permit
commingling of, any Collateral with any other property or assets, whether
belonging to the Pledgor or any other Person.
(e) Other Financing Statements. Except with respect to
--------------------------
Permitted Liens, the Pledgor shall not file or suffer to be on file, or
authorize or permit to be filed or to be on file, in any jurisdiction, any
financing statement or like instrument with respect to the Collateral in which
the Secured Party is not named as the sole secured party.
Section 4.2 Ownership and Defense of Collateral. The Pledgor shall at
-----------------------------------
all times (a) be the owner of the Collateral free from any right, title or
interest of any third Person and
-8-
<PAGE>
(b) defend the Collateral against the claims and demands of all third Persons,
except that this Section 4.2 shall not apply to (x) the interest in the
Collateral and the claims and demands of a holder of a Permitted Lien (but for
only so long as such Lien is a Permitted Lien) or (y) Collateral to which
Section 1.2 does not apply.
Section 4.3 Taxes; Compliance. The Pledgor shall (a) pay or cause to
-----------------
be paid when due all taxes, assessments and governmental charges levied or
assessed or imposed upon or with respect to the Collateral or its use or sale
or other disposition and (b) comply with (i) all Applicable Law relating to the
Collateral, (ii) the terms and provisions of all deeds and Contracts relating
to premises where Collateral is located and (iii) all license and franchise
agreements pertaining to the Collateral.
Section 4.4 Insurance. (a) Property Insurance. (i) The Pledgor
--------- ------------------
shall, at its own expense, insure the Inventory and Machinery and Equipment
against loss or damage by fire, theft, burglary, pilferage, loss in transit and
such other risks as the Secured Party shall from time to time specify, in
amounts, with insurers and under policies, acceptable to the Secured Party.
Each such policy shall provide for all losses occurring or paid during the
continuation of this Agreement (except for losses of less than $10,000 per
occurrence) to be paid jointly to the Secured Party and the Pledgor.
-9-
<PAGE>
(ii) Proceeds of such insurance paid to the Secured
Party shall, except during an Event of Default, be held by the Secured
Party as Collateral and, during an Event of Default, at the election of
the Secured Party, continue to be held by the Secured Party as
Collateral or be applied as provided in Section 5.1.
(iii) The Pledgor shall not use, or permit the use of,
the Inventory or the Machinery and Equipment unlawfully or outside of
any insurance coverage.
(b) Products Liability Insurance. The Pledgor shall, at its
----------------------------
own expense, maintain products liability insurance in amounts, with insurers
and under policies, acceptable to the Secured Party. Each such policy shall
provide that (i) amounts payable thereunder to the Pledgor may be paid directly
to the Secured Party and (ii) after such notice, amounts otherwise payable to
the Pledgor shall be paid to the Secured Party. The Secured Party shall not be
entitled to give such notice except during an Event of Default. All payments
received by the Secured Party pursuant to clause (ii) shall, prior to an Event
of Default, be delivered to the Pledgor upon request and may, during an Event
of Default, at the election of the Secured Party, be held as Collateral or
applied as provided in Section 5.1. Each request by the Pledgor for any such
payment shall constitute a Representation and Warranty by the Pledgor that no
Event of Default is continuing.
-10-
<PAGE>
(c) All Insurance. (i) All insurance policies required under
-------------
this Section 4.4 or under any of the other Collateral Documents shall contain
loss payable clauses that shall (A) name the Secured Party as insured party and
sole loss payee thereunder (without any representation or warranty by or
obligation of the Secured Party) as its interest may appear, (B) contain the
agreement by the insurer that any loss thereunder shall be payable jointly to
the Pledgor and the Secured Party notwithstanding (1) any action, inaction or
breach of representation or warranty by the Pledgor or any other Person, (2)
any change in the title, ownership or possession of the insured property or (3)
the use of the insured property for purposes more hazardous than is permitted
by the policy, (C) provide that there shall be no recourse against the Secured
Party for payment of premium or other amounts with respect thereto, (D) contain
a waiver of all rights of setoff, counterclaim, deduction or subrogation
against the Borrower and (E) provide that at least 30 days' prior written
notice of any modification, cancellation or lapse thereof shall be given to the
Secured Party by the insurers. A loss payable endorsement in form and
substance satisfactory to the Bank shall, in the case of property insurance be
deemed to comply with the requirements of this Section 4.4(c).
(ii) The Pledgor shall, upon request of the Secured
Party, (A) deliver to the Secured Party original or duplicate policies
of all insurance required by this Section 4.4 and, as often as the
Secured Party may reasonably
-11-
<PAGE>
request, a report of an insurance broker acceptable to the Secured Party
with respect to such insurance and (B) deliver instruments of assignment
of such insurance policies and cause the respective insurers to
acknowledge notice of such assignments.
Section 4.5 Visits and Inspections. The Secured Party shall have the
----------------------
right, and the Pledgor shall permit, or, in the case of premises, property,
records, files or Persons not within its immediate control, promptly take such
actions as are necessary or desirable so as to permit, and hereby authorizes,
representatives (whether or not officers or employees) of the Secured Party,
from time to time, to (a) visit and inspect any premises where any Collateral,
or any records and files related thereto, is located, (b) inspect, and verify
the amount, quantity, value and condition of and any other matter relating to,
the Collateral and inspect, review, audit and make extracts from all records
and files related thereto, (c) discuss with any Person, including the principal
officers and the independent certified public accountants of the Pledgor
(and each such Person is hereby authorized to discuss with such representatives
of the Secured Party) the business, assets, Liabilities, financial condition,
results of operations and business prospects of the Pledgor and the amount,
quantity, value and condition of, or any other matter relating to, the
Collateral. The Secured Party will endeavor to keep all financial information
regarding the Pledgor confidential and not to release any such information to
any third
-12-
<PAGE>
party not affiliated with the Secured Party or the Pledgor other than the
Authority, provided, however, that the Secured Party's noncompliance with this
-------- -------
sentence will not affect its rights under this Agreement. The Secured Party will
request that any representative of the Secured Party (other than an officer or
employee of the Secured Party or any of its Affiliates) execute a
confidentiality agreement between such representative and the Pledgor relating
to information obtained by such representative regarding the Pledgor, provided,
--------
however, that any failure of such representative to execute such confidentiality
- -------
agreement shall not preclude the Secured Party from using the services of such
representative. The Pledgor hereby authorizes the Secured Party to obtain all
records and files relating to the Collateral from any Person (including any
service bureau or the like) maintaining the same on behalf of the Pledgor and
hereby authorizes each such Person to deliver the same to the Secured Party.
Section 4.6 Maintenance of Physical Property. The Pledgor shall
--------------------------------
maintain all physical property that constitutes Collateral in good condition,
with reasonable allowance for wear and tear, and shall exercise proper custody
over all such property.
Section 4.7 Notice of Materially Adverse Effect. The Pledgor shall
-----------------------------------
give prompt notice to the Secured Party of any matter or event that has had, or
may have, a Materially Adverse Effect upon any Collateral.
-13-
<PAGE>
Section 4.8 Requested Information. In addition to such other
---------------------
Information as shall be specifically provided for herein, the Pledgor shall
furnish to the Secured Party such other Information with respect to the
Collateral as the Secured Party may request from time to time, in each case in
form and substance and certified in a manner satisfactory to the Secured Party.
Section 4.9 Collection of Collateral Obligations. Subject to the
------------------------------------
rights of the Secured Party hereunder, the Pledgor shall endeavor to collect
from the Collateral Debtor of each Collateral Obligation, when due, all amounts
owing thereunder, and shall apply all amounts so collected to the outstanding
balance of such Collateral Obligation, except that, unless the Secured Party
shall have notified the Pledgor to the contrary or an Event of Default shall
exist, this Section 4.9 shall not require the Pledgor to take any action not in
accordance with sound business judgment and its customary collection practices
as in effect on the Agreement Date or as approved in writing by the Secured
Party.
B. Receivables.
-----------
Section 4.10 Status of Receivables. (a) Accounts. The Pledgor
--------------------- --------
agrees that each Receivable that is an Account (i) shall at all times represent
the legal, valid and binding obligation of its Collateral Debtor and, subject
to clause (ii)(A), be enforceable in accordance with its terms, (ii) shall at
no time be subject to (A) any discount, defense, set-off or counterclaim, other
than in the ordinary course of business, (B) any agreement
-14-
<PAGE>
prohibiting assignment or requiring notice of or consent to assignment, or (C)
any stamp or other Tax, (iii) shall be genuine and in all respects what it
purports to be and arise out of a bona fide transaction, (iv) shall require no
further act on the part of the Pledgor or any other Person to make it payable by
the Collateral Debtor (other than (y) Current Key Master Receivables or Long-
term Key Master Receivables or (z) Accounts as to which payment will be made
prior to shipment), and (v) shall comply with all Applicable Law.
(b) Borrowing Base Receivables. The Pledgor agrees that each
--------------------------
Receivable included in the Borrowing Base as calculated in any Borrowing Base
Certificate shall, to the extent so included, comply, as of the date of such
Borrowing Base Certificate, with the criteria of eligibility specified in the
definition of Eligible Receivable.
Section 4.11 Maintenance of Records. The Pledgor shall, for not less
----------------------
than three years from the date on which any Receivable arose, maintain (a)
complete records of such Receivable, including records of all payments received,
credits granted and merchandise returned and (b) all other documentation
relating thereto.
Section 4.12 Performance of Terms. The Pledgor shall duly fulfill all
--------------------
obligations on its part to be fulfilled under or in connection with the
Receivables and shall do nothing to impair the rights of the Secured Party
therein.
-15-
<PAGE>
Section 4.13 Modification of Terms. (i) The Pledgor shall not enter
---------------------
into any agreement providing for any deduction from any Receivable that is an
Account except for agreements that are made in the ordinary course of business.
(ii) The Pledgor shall not rescind or cancel any obligation
evidenced by any Receivable or modify any term thereof or make any
adjustment with respect thereto, or extend or renew the same, or
compromise or settle any dispute, claim, suit or legal proceeding
relating thereto, without the prior written consent of the Secured
Party, except that, unless an Event of Default shall exist, the Pledgor
may, with respect to any Receivable, but only in the ordinary course of
its business and in accordance with sound business judgment and its
customary collection practices as in effect on the Agreement Date or as
approved in writing by the Secured Party (A) extend the time of payment
thereof, (B) in the case of an Account, grant a refund or credit with
respect thereto for returned, damaged or non-complying merchandise and
(C) settle the same for an amount less than the then unpaid balance
thereof.
Section 4.14 No Dispositions of Receivables. The Pledgor shall not
------------------------------
sell or otherwise dispose of any Receivable or any interest therein.
Section 4.15 Verification. The Secured Party shall have the right at
------------
any time and from time to time, in the name of the Secured Party, in the name
and on the stationery of the Pledgor
-16-
<PAGE>
or in such name as the Secured Party may select, to verify the validity, amount
or any other matter relating to any Receivable by mail, telegram, telephone or
any other means.
Section 4.16 Schedule of Receivables. The Pledgor shall deliver to
-----------------------
the Secured Party, within ten (10) Business Days after the end of each month,
commencing with the month of July 1994, a schedule of Receivables that (i) shall
be as of the last Business Day of such month and (ii) shall set forth the amount
and aging of such Receivables and the identity of the debtors on such
Receivables.
C. General Intangibles.
-------------------
Section 4.17 Status of Intellectual Property. The Pledgor agrees that
-------------------------------
all Intellectual Property shall, except to the extent otherwise disclosed in
writing by the Pledgor to the Secured Party prior to the Agreement Date, at all
times be subsisting, valid and enforceable against third Persons.
Section 4.18 Performance of Terms. The Pledgor shall duly fulfill all
--------------------
obligations on its part to be fulfilled under or in connection with all General
Intangibles and shall do nothing to impair the rights of the Secured Party
therein, except that the Pledgor may choose not to renew trademarks or
copyrights which are no longer material to the Pledgor's business or operations.
Section 4.19 Modification of Terms. The Pledgor shall not rescind or
---------------------
cancel any obligation due to it evidenced by any General Intangible or modify
any term thereof or make any adjustment with respect thereto, or extend or renew
the same, or
-17-
<PAGE>
compromise or settle any dispute, claim, suit or legal proceeding relating
thereto, without the prior written consent of the Secured Party, except that,
unless the Secured Party shall have notified the Pledgor to the contrary or an
Event of Default shall exist, the Pledgor may, with respect to any General
Intangible, but only in the ordinary course of its business and in accordance
with sound business judgment and its customary collection practices as in effect
on the Agreement Date or as approved in writing by the Secured Party (i) extend
the time of payment thereof, (ii) settle the same for an amount less than the
then unpaid balance thereof and (iii) amend or otherwise modify the terms
thereof.
Section 4.20 No Dispositions of General Intangibles. The Pledgor shall
--------------------------------------
not sell or otherwise dispose of any General Intangible or any interest therein,
or grant any license or sub-license thereunder, except that, prior to an Event
of Default and its continuance or notice from the Secured Party to the contrary,
this Section 4.20 shall not apply to the grant of any license or sub-license in,
and upon terms customary in, the ordinary course of its business.
Section 4.21 Verification. The Secured Party shall have the right at
------------
any time and from time to time, in the name of the Secured Party, in the name
and on the stationery of the Pledgor or in such name as the Secured Party may
select, to verify the validity, amount or any other matter relating to any
General Intangible by mail, telegram, telephone or any other means.
-18-
<PAGE>
Section 4.22 Schedule of Certain General Intangibles. The Pledgor
---------------------------------------
shall deliver to the Secured Party, (a) annually or, with such greater frequency
as the Secured Party may specify, (i) a schedule showing, as to each General
Intangible that is a Collateral Obligation, (A) the name and address of the
Collateral Debtor, (B) the nature of such Collateral Obligation, (C) whether it
is (y) fixed or contingent or (z) liquidated or unliquidated and (D) if
liquidated, the amount thereof and (ii) a schedule showing the identity (in the
case of patents, by registered patent number and issue date, in the case of
patent applications, by serial number, in the case of trademarks, by
registration number and brief description of property covered, in the case of
copyrights by registration number and title or brief description of material
covered and, in the case of pending copyrights, date of application and title or
brief description of material covered) of each patent, patent application,
service mark, trademark, trademark registration and copyright issued to, applied
for or pending by the Pledgor and not previously so identified to the Secured
Party in writing, and (b) promptly after granting or acquiring the same, copies,
not previously delivered to the Secured Party, of all licenses and sub-licenses
relating to any of the foregoing granted by or issued to the Pledgor.
D. Inventory.
---------
Section 4.23 Status of Inventory. The Pledgor agrees that all
-------------------
Inventory shall at all times (i) be in good condition,
-19-
<PAGE>
(ii) meet all requirements of Applicable Law applicable thereto or to its
manufacture, use or sale and (iii) be currently either usable or salable in the
ordinary course of the Pledgor's business.
Section 4.24 Maintenance of Records. The Pledgor shall keep correct
----------------------
and accurate records of Inventory, itemizing and describing the kind, type and
quantity of Inventory, the Pledgor's cost therefor and a current price list for
such Inventory.
Section 4.25 Location of Inventory. The Pledgor shall keep its
---------------------
Inventory only at, or in transit to, (a) a location specified in the
Questionnaire as a current location for Inventory or (b) any other location
provided that (i) the Secured Party has approved such location in writing, (ii)
(A) the Security Interest in Inventory at such location conforms to the
requirements of Section 1.2 and (B) the Secured Party shall have received such
evidence satisfactory to it to that effect that it may request, including, if
so requested, acknowledgement copies of financing statements and opinions of
counsel and (iii) the Inventory at such location shall be subject to warehousing
or other custodial arrangements satisfactory in all respect to the Secured
Party.
Section 4.26 No Dispositions of Inventory. The Pledgor shall not sell,
----------------------------
lease, transfer or otherwise dispose of any Inventory or any interest therein,
except that this Section 4.26 shall not apply to sales of Inventory in the
ordinary course of business.
-20-
<PAGE>
Section 4.27 Manufacture and Sales in Compliance with Applicable Law.
-------------------------------------------------------
All Inventory shall be manufactured, and all sales of Inventory shall be made,
in full compliance with all requirements of Applicable Law, including those
specifying minimum wage and working conditions.
Section 4.28 Information. (a) Schedule of Inventory. The Pledgor
----------- ---------------------
shall deliver to the Secured Party, upon the request of the Secured Party, a
schedule of Inventory that (i) shall be as of the last Business Day of such
quarterly period, (ii) shall indicate the amount thereof that constitutes (A)
finished goods, (B) work in process and (C) raw materials, and (iii) shall
itemize and describe the amount, type and quantity of Inventory included within
each such category and the Pledgor's respective costs thereof.
(b) Price List. The Pledgor shall from time to time, upon
----------
request, deliver to the Secured Party a current price list for so much of its
Inventory as constitutes finished goods.
(c) Physical Listings. A physical listing of all Inventory,
-----------------
wherever located, shall be taken at least annually and, during an Event of
Default, at any time requested by the Secured Party, and a copy of each such
physical listing shall be delivered to the Secured Party within five days of
its completion.
E. Machinery and Equipment.
-----------------------
Section 4.29 Status of Machinery and Equipment. The Pledgor agrees
---------------------------------
that all Machinery and Equipment shall at all
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times (a) be in good operating condition and repair (normal wear and tear
excepted) and (b) comply and be operated in compliance with all Applicable Law.
Section 4.30 Maintenance. The Pledgor (a) shall, subject to the terms
-----------
of the Credit Agreement, (i) make all necessary replacements of and additions to
Machinery and Equipment from time to time so that the value and operating
efficiency of the Machinery and Equipment shall at all times be maintained and
preserved at a level sufficient to properly operate the business of the Borrower
and (ii) promptly inform the Secured Party of all additions to and deletions
from Machinery and Equipment having a book value in excess of $50,000 and (b)
shall not, without the prior written consent of the Secured Party, permit any
Machinery and Equipment acquired after the Agreement Date to become a fixture
to any real estate, or an accession to any other personal property, in either
case not constituting part of the Collateral, if the greater of the depreciated
book or fair market value thereof.
Section 4.31 No Dispositions of Machinery and Equipment. The Pledgor
------------------------------------------
shall not sell, lease, transfer or otherwise dispose of any Machinery and
Equipment or any interest therein, except for sales of any thereof no longer
useful in the operation of the Pledgor's business.
Section 4.32 Evidence of Ownership of Machinery and Equipment. The
------------------------------------------------
Pledgor shall, upon request by the Secured Party, deliver to the Secured Party
evidence of ownership of any of the
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Machinery and Equipment, including certificates of title and bills of sale.
F. Securities and Instruments.
--------------------------
Section 4.33 Status of Securities and Instrument Collateral. (a) The
----------------------------------------------
Pledgor represents and warrants that (i) so long as any Securities and
Instrument Collateral is subject to the Security Interest, such Securities and
Instrument Collateral shall be duly authorized, validly issued, fully paid and
non-assessable and (ii) as of the Agreement Date, the Pledgor owns no Securities
and Instrument Collateral.
(b) The Pledgor agrees that it will take all steps necessary,
including the purchase of shares of capital stock and other units of ownership
interests, so that the respective percentages that the shares of capital stock
or other units of ownership interests that constitute Securities and Instrument
Collateral are of the outstanding shares or other units of such capital stock
or ownership interests shall not at any time be less than the respective
percentages of Pledgor's ownership at the time it acquires such Securities and
Instrument Collateral.
Section 4.34 Certain Rights of Secured Party and Pledgor. (a) At any
-------------------------------------------
time and from time to time, the Secured Party may, and is hereby authorized to,
transfer into or register in its name or the name of its nominee any or all of
the Securities and Instrument Collateral. The Pledgor shall promptly give the
Secured Party copies of all notices and other communications
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<PAGE>
received by the Pledgor with respect to any Securities and Instrument Collateral
registered in the name of the Pledgor.
(b) During an Event of Default, the Secured Party, after a
notice to the Pledgor that it intends to exercise its rights under this Section
4.34(b), may, from time to time, in its own or the Pledgor's name, exercise any
and all rights, powers and privileges with respect to the Securities and
Instrument Collateral, and with the same force and effect, as could the Pledgor.
(c) Unless and until the Secured Party exercises its rights
under Section 4.34(b), the Pledgor may, with respect to any of the Securities
and Instrument Collateral, if the Pledgor shall have given the Secured Party not
less than five Business Days' written notice of the particular action to be
taken, vote and give consents, ratifications and waivers with respect thereto,
except to the extent that any such would (i) be for a purpose that would
constitute or result in a Default or (ii) in the sole judgment of the Secured
Party, detract from the value thereof as Collateral, and from time to time, upon
request from the Pledgor, the Secured Party shall deliver to the Pledgor
suitable proxies so that the Pledgor may cast such votes, consents,
ratifications and waivers. Each such request from the Pledgor shall constitute
a Representation and Warranty by the Pledgor hereunder that no Default exists
or would result therefrom.
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<PAGE>
Section 4.35 No Amendments, etc., of Securities and Instrument
-------------------------------------------------
Collateral. Subject to Section 4.34(c), the Pledgor shall not make or consent
- ----------
to any amendment or other modification or waiver with respect to the Securities
and Instrument Collateral or enter into or permit to exist any restriction with
respect to any rights under the Securities and Instrument Collateral other than
restrictions arising under the Loan Documents.
Section 4.36 No Disposition of Securities and Instrument Collateral.
------------------------------------------------------
The Pledgor shall not, sell, lease, transfer or otherwise dispose of any
Securities and Instruments Collateral or any interest therein.
ARTICLE 5
EVENT OF DEFAULT
----------------
During an Event of Default, and in each such case:
A. Proceeds.
--------
Section 5.1 Application of Proceeds. All cash proceeds received by the
-----------------------
Secured Party upon any sale of, collection of, or other realization upon, all or
any part of the Collateral and all cash held by the Secured Party as Collateral
shall, subject to the Secured Party's right to continue to hold the same as cash
Collateral, be applied as follows or as the Secured Party may decide, in its
sole discretion:
First: To the payment of all out-of-pocket costs and expenses
incurred in connection with the sale of or other
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<PAGE>
realization upon Collateral, including attorneys' fees and
disbursements;
Second: To the payment of the Secured Obligations in such order
as the Secured Party may elect (with the Pledgor remaining liable for
any deficiency to the extent such deficiency represents an unpaid or
otherwise unsatisfied Liability of the Pledgor under the Collateral
Documents); and
Third: To the extent of the balance (if any) of such proceeds,
to the payment to the Pledgor, subject to Applicable Law and to any duty
to pay such balance to the holder of any subordinate Lien in the
Collateral.
B. Remedies.
--------
Section 5.2 General. (a) Use of Premises and Intellectual Property.
------- -----------------------------------------
The Secured Party may (i) enter the Pledgor's premises and, until the Secured
Party completes the enforcement of its rights in the Collateral, take exclusive
possession of such premises or place custodians in exclusive control thereof,
remain on such premises and use the same and the Machinery and Equipment for the
purpose of (A) completing any work in process, preparing Collateral for
disposition and disposing thereof and (B) collecting Collateral Obligations, and
(ii) in the exercise of its rights under this Agreement, use the Pledgor's
Intellectual Property to the extent of the rights of the Pledgor therein, and
the Pledgor hereby grants a license to the Secured Party for such purpose,
subject to the consent, if required, of any licensor, franchisor or other third
Person.
(b) Directors, Officers and Employees. The Secured Party may
---------------------------------
retain the Pledgor's directors, officers and employees, in each case upon such
terms as the Secured Party and any such
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<PAGE>
Person may agree, notwithstanding the provisions of any employment,
confidentiality or non-disclosure agreement between any such Person and the
Pledgor and the Pledgor hereby waives its rights under any such agreement and
consents to each such retention.
(c) Power of Sale. The Secured Party (i) may sell the
-------------
Collateral in one or more parcels at public or private sale, at any of its
offices or elsewhere, for cash, on credit or for future delivery, and at such
price or prices and upon such other terms as it may deem commercially
reasonable, (ii) shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given, and (iii) may adjourn any public
or private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time and
place to which it was so adjourned.
(d) Foreclosure. The Secured Party, instead of exercising the
-----------
power of sale conferred upon it by Section 5.2(c) and Applicable Law, may
proceed by a suit or suits at law or in equity to foreclose the Security
Interest and sell the Collateral, or any portion thereof, under a judgment or a
decree of a court or courts of competent jurisdiction.
(e) Receiver. The Secured Party may obtain the appointment of
--------
a receiver of the Collateral and the Pledgor consents to and waives any right
to notice of such appointment.
(f) Bank Accounts. The Secured Party may, with respect to
-------------
Bank Accounts, do either or both of the following:
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<PAGE>
(i) exercise dominion and control over, and refuse to permit further withdrawals
and transfers (including withdrawals and transfers of cash, securities,
instruments and other property) from such accounts and continue to hold them as
part of the Collateral and (ii) exercise all other rights hereunder with respect
thereto and with respect to the property that is credited to such accounts that
the Secured Party could exercise with respect to any other Collateral.
Section 5.3 Collateral Proceeds. (a) Collections by Pledgor. The
------------------- ----------------------
Secured Party may, by notice to the Pledgor, direct it to, and thereupon the
Pledgor shall, receive all proceeds of Collateral in trust for the Secured
Party, not commingle the same with any other property or funds of the Pledgor
and, unless the Secured Party shall have otherwise instructed the Pledgor,
deliver or cause to be delivered all such proceeds in the exact form received,
together with any necessary endorsements, to the Secured Party or to such Person
or Persons as the Secured Party may designate.
(b) Notification. The Secured Party may notify, or request
------------
the Pledgor to notify, in writing or otherwise, (i) each Collateral Debtor to
make payment directly to the Secured Party and (ii) each Lockbox Bank and each
other Person maintaining any similar arrangement to hold or otherwise dispose of
all amounts then or thereafter credited to, deposited in or made subject to the
applicable Lockbox Account or other arrangement as the Secured Party may direct.
If, notwithstanding the giving of any
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<PAGE>
notice, any such Person shall make payments to the Pledgor, the Pledgor shall
hold all such payments it receives in trust for the Secured Party, without
commingling the same with other funds or property of the Pledgor or any other
Person, and shall deliver the same to the Secured Party immediately upon receipt
by the Pledgor in the identical form received, together with any necessary
endorsements.
(c) Secured Party's Rights with Respect to Proceeds and Other
---------------------------------------------------------
Collateral. All payments and other deliveries received by or for the account of
- ----------
the Secured Party from time to time pursuant to Section 5.3(a) or (b), together
with the proceeds of all other Collateral from time to time held by or for the
account of the Secured Party (whether as a result of the exercise by the Secured
Party of its rights under Section 5.6 or Section 5.2(c) or (d), pursuant to a
Lockbox Agreement or otherwise) and all Bank Accounts (including all amounts
credited from time to time thereto and all cash, securities, instruments and
other property represented by such credits) may, at the election of the Secured
Party, (i) be or continue to be held by the Secured Party, or any Person
designated by the Secured Party to receive or hold the same, as Collateral,
(ii) be applied as provided in Section 5.1 or (iii) be disposed of as provided
in Section 5.6 and Section 5.2(c) and (d).
(d) Enforcement by Secured Party. The Secured Party may,
----------------------------
without notice to the Pledgor and at such time or times as the Secured Party in
its sole discretion may determine, exercise
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<PAGE>
any or all of the Pledgor's rights in, to and under, or in any way connected
with or related to, any or all of the Collateral, including (i) demanding and
enforcing payment and performance of, and exercising any or all of the Pledgor's
rights and remedies with respect to the collection, enforcement or prosecution
of, any or all of the Collateral Obligations, in each case by legal proceedings
or otherwise, (ii) settling, adjusting, compromising, extending, renewing,
discharging and releasing any or all of, and any legal proceedings brought to
collect or enforce any or all of, the Collateral Obligations, (iii) preparing,
filing and signing the name of the Pledgor on (A) any proof of claim or similar
document to be filed in any bankruptcy or similar proceeding involving any
Collateral Debtor and (B) any notice of lien, assignment or satisfaction of
lien, or similar document in connection with any Collateral Obligation, and (iv)
using the information recorded on or contained in any data processing equipment
and computer hardware and software relating to the Collateral Obligations to
which the Pledgor has access.
(e) Adjustments. The Secured Party may settle or adjust
-----------
disputes and claims directly with Collateral Debtors for amounts and on terms
that the Secured Party considers advisable and in all such cases only the net
amounts received by the Secured Party in payment of such amounts, after
deduction of out-of-pocket costs and expenses of collection, including
reasonable attorney's fees, shall be subject to the other provisions of this
Agreement. The Pledgor shall have no further right under Section
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<PAGE>
4.13, Section 4.19 or otherwise to make any such settlements or adjustments or
to accept any returns of merchandise.
Section 5.4 Inventory; Machinery and Equipment. (a) Entry. The
---------------------------------- -----
Secured Party may enter upon any premises in which any Inventory or Machinery
and Equipment may be located and take, or place custodians in, exclusive,
physical possession of any or all thereof and maintain such possession on such
premises or move the same or any part thereof to such other place or places as
the Secured Party shall choose.
(b) Assembly. Upon the request of the Secured Party, the
--------
Pledgor shall assemble the Inventory and the Machinery and Equipment and
maintain or deliver it into the possession of the Secured Party or of any other
Person designated by the Secured Party at such place or places as the Secured
Party or such other Person may designate and as are reasonably convenient to
both the Secured Party or such other Person and the Pledgor.
(c) Warehousing. The Secured Party may cause any or all of the
-----------
Inventory and the Machinery and Equipment to be placed in a public or field
warehouse.
Section 5.5 Intellectual Property. The Secured Party may exercise any
---------------------
or all of the Pledgor's rights in, to and under, or in any way connected with or
related to, any or all Intellectual Property, including (a) pursuing any or all
pending Intellectual Property applications and (b) on a worldwide or such other
basis as the Secured Party may determine, granting or issuing exclusive
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<PAGE>
and non-exclusive licenses relating to any or all of the Intellectual Property.
Section 5.6 Securities and Instrument Collateral. (a) Registration
------------------------------------ ------------
and Indemnification. If the Secured Party elects to sell or otherwise dispose
- -------------------
of any Securities and Instrument Collateral, the Pledgor shall, if it controls
the issuer or if it otherwise has the right to effect such registration, and if
the Secured Party deems such registration to be desirable, (i) cause the same
to be registered under the Securities Act of 1933, as amended and take all other
action, including complying with the "blue sky" or securities laws of the
several States and delivering to the Secured Party appropriate quantities of
prospectuses, necessary or appropriate so as to permit the public sale or other
disposition thereof by the Secured Party in such jurisdictions as the Secured
Party may select, and (ii) indemnify, in the form then customary, all Persons
that are underwriters (whether statutory or otherwise) and all Affiliates of all
such Persons, in connection with such sale or disposition, such indemnity, to
the extent applicable to the Secured Party, to be in addition to and
supplementary of (and not to be construed as being in derogation of) that
afforded the Secured Party under Section 8.2 of the Credit Agreement.
(b) Restricted Offering Dispositions. Whether or not the
--------------------------------
Pledgor controls the issuer or otherwise has the right to effect the
registrations and compliances referred to in Section 5.6(a) and as an
alternative to its rights thereunder, in
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<PAGE>
connection with any sale of any of the Securities and Instrument Collateral, the
Secured Party may, at its election, comply with any limitation or restriction
(including any restrictions on the number of prospective bidders and purchasers
or any requirement that they have certain qualifications or that they represent
and agree that they are purchasing for their own account for investment and not
with a view to the distribution or resale of such Securities and Instrument
Collateral) as it may be advised by counsel is necessary in order to avoid any
violation of Applicable Law or to obtain any Governmental Approval, and such
compliance shall not result in such sale being considered or deemed not to have
been made in a commercially reasonable manner, nor shall the Secured Party be
liable nor accountable to the Pledgor for any discount allowed by reason of the
fact that such Securities and Instrument Collateral is sold in compliance with
any such limitation or restriction.
ARTICLE 6
MISCELLANEOUS
-------------
Section 6.1 Expenses of Pledgor's Agreements and Duties. The terms,
-------------------------------------------
conditions, covenants and agreements to be observed or performed by the Pledgor
under the Collateral Documents shall be observed or performed by it at its sole
cost and expense.
Section 6.2 Secured Party's Right to Perform on Pledgor's Behalf. If
----------------------------------------------------
the Pledgor shall fail to observe or perform any of the terms, conditions,
covenants and agreements to be observed or
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<PAGE>
performed by it under the Collateral Documents, the Secured Party may (but shall
not be obligated to) do the same or cause it to be done or performed or
observed, either in its name or in the name and on behalf of the Pledgor, and
the Pledgor hereby authorizes the Secured Party so to do.
Section 6.3 Secured Party's Right to Use Agents and to Act in Name of
---------------------------------------------------------
Pledgor. The Secured Party may exercise its rights and remedies under the
- -------
Collateral Documents through an agent or other designee and, in the exercise
thereof, the Secured Party or any such other Person may act in its own name or
in the name and on behalf of the Pledgor.
Section 6.4 No Interference, Compensation or Expense. The Secured
----------------------------------------
Party may exercise its rights and remedies under the Collateral Documents (a)
without resistance or interference by the Pledgor, (b) without payment of any
rent, license fee or compensation of any kind to the Pledgor and (c) for the
account, and at the expense, of the Pledgor.
Section 6.5 Limitation of Secured Party's Obligations with Respect to
---------------------------------------------------------
Collateral. (a) The Secured Party shall have no obligation to protect or
- ----------
preserve any Collateral or to preserve rights pertaining thereto other than the
obligation to use reasonable care in the custody and preservation of any
Collateral in its actual possession. The Secured Party shall be deemed to have
exercised reasonable care in the custody and preservation of any Collateral in
its possession if such Collateral is accorded treatment substantially equal to
that which the Secured Party
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<PAGE>
accords its own property. The Secured Party shall be relieved of all
responsibility for any Collateral in its possession upon surrendering it, or
tendering surrender of it, to the Pledgor.
(b) Nothing contained in the Collateral Documents shall be
construed as requiring or obligating the Secured Party, and the Secured Party
shall not be required or obligated, to (i) make any demand, or to make any
inquiry as to the nature or sufficiency of any payment received by it, or to
present or file any claim or notice or take any action, with respect to any
Collateral Obligation or any other Collateral or the monies due or to become
due thereunder or in connection therewith, (ii) ascertain or take action with
respect to calls, conversions, exchanges, maturities, tenders, offers or other
matters relating to any Collateral, whether or not the Secured Party has or is
deemed to have knowledge or notice thereof, (iii) take any necessary steps to
preserve rights against any prior parties with respect to any Collateral or
(iv) notify the Pledgor of any decline in the value of any Collateral.
Section 6.6 Rights of Secured Party under Uniform Commercial Code and
---------------------------------------------------------
Applicable Law. The Secured Party shall have, with respect to the Collateral,
- --------------
in addition to all of its rights and remedies under the Collateral Documents,
(a) the rights and remedies of a secured party under the Uniform Commercial
Code, whether or not the Uniform Commercial Code would otherwise apply to the
Collateral in question, and (b) the rights and remedies of a secured party under
all other Applicable Law.
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<PAGE>
Section 6.7 Waivers of Rights Inhibiting Enforcement. The Pledgor
----------------------------------------
waives (a) any claim that, as to any part of the Collateral, a public sale,
should the Secured Party elect so to proceed, is, in and of itself, not a
commercially reasonable method of sale for such Collateral, (b) the right to
assert in any action or proceeding between it and the Secured Party any offsets
or counterclaims that it may have, (c) except as otherwise provided in any of
the Collateral Documents, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE OR
JUDICIAL HEARING IN CONNECTION WITH THE SECURED PARTY'S TAKING POSSESSION OR
DISPOSITION OF ANY OF THE COLLATERAL INCLUDING ANY AND ALL PRIOR NOTICE AND
HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT THAT THE
PLEDGOR WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED
STATES OR OF ANY STATE, AND ALL OTHER REQUIREMENTS AS TO THE TIME, PLACE AND
TERMS OF SALE OR OTHER REQUIREMENTS WITH RESPECT TO THE ENFORCEMENT OF THE
SECURED PARTY'S RIGHTS HEREUNDER, (d) all rights of redemption, appraisement,
valuation, stay and extension or moratorium and (e) all other rights the
exercise of which would, directly or indirectly, prevent, delay or inhibit the
enforcement of any of the rights or remedies under the Collateral Documents or
the absolute sale of the Collateral, now or hereafter in force under any
Applicable Law, and the Pledgor, for itself and all who may claim under it,
insofar as it or they now or hereafter lawfully may, hereby waive the benefit
of all such laws and rights.
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<PAGE>
Section 6.8 Power of Attorney. (a) In addition to the other powers
-----------------
granted the Secured Party by the Pledgor under the Collateral Documents, the
Pledgor hereby appoints the Secured Party, and any other Person that the Secured
Party may designate, as the Pledgor's attorney-in-fact to act, in the name,
place and stead of the Pledgor in any way in which the Pledgor itself could do,
with respect to each of the following: (i) during an Event of Default,
endorsing the Pledgor's name on (A) any checks, notes, acceptances, money
orders, drafts or other forms of payment, (B) any proxies, documents,
instruments, notices, freight bills, bills of lading or other documents or
agreements relating to the Collateral, (C) schedules and assignments of
Collateral Obligations and (D) notices of assignment, financing statements and
other public records; (ii) claiming for, adjusting, and instituting legal
proceedings to collect, any amounts payable under insurance, and applicable
loss payable endorsements, required to be maintained under any of the
Collateral Documents; (iii) taking any actions or exercising any rights, powers
or privileges that the Pledgor is entitled to take or exercise and that, under
the terms of any of the Collateral Documents, the Secured Party is authorized
to take or exercise; (iv) doing or causing to be done any or all things
necessary or, in the determination of the Secured Party, desirable to observe
or perform the terms, conditions, covenants and agreements to be observed or
performed by the Pledgor under the Collateral Documents and otherwise to carry
out the provisions of the
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<PAGE>
Collateral Documents; and (v) during an Event of Default, notifying the post
office authorities to change the address for delivery of the Pledgor's mail to
an address designated by the Secured Party, and receiving, opening and disposing
of all mail addressed to the Pledgor (with all mail not constituting, evidencing
or relating to the Collateral to be forwarded by the Secured Party to the
Pledgor). The Pledgor hereby ratifies and approves all acts of the attorney.
(b) To induce any third Person to act under this Section 6.8,
the Pledgor hereby agrees that any third Person receiving a duly executed copy
or facsimile of this Agreement may act under this Section 6.8, and that the
termination of this Section 6.8 shall be ineffective as to such third Person
unless and until actual notice or knowledge of such termination shall have been
received by such third Person, and the Pledgor, on behalf of itself and its
successors and assigns, hereby agrees to indemnify and hold harmless any such
third Person from and against any and all claims that may arise against such
third Person by reason of such third Person having relied on the provisions of
this Section 6.8.
Section 6.9 Termination of Security Interest. The Security Interest
--------------------------------
and all of the Pledgor's obligations under Articles 1, 4 and 5 shall terminate
upon (a) the occurrence of the Repayment Date and (b) (i) the execution and
delivery to the Secured Party of a release, in form and substance satisfactory
to it, of all Loan Document Related Claims that the Pledgor may have against
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<PAGE>
the Indemnified Persons under the facts existing at such time, whether or not
known or knowable, and (ii) the discharge, dismissal with prejudice, settlement,
release or other termination of any other Loan Document Related Claims that may
be pending or threatened against the Indemnified Persons.
Section 6.10 Notices and Deliveries. No notice shall be effective
----------------------
under Section 4.1(a), (b) or (c), Section 4.25(b)(i) or Section 4.30(a)(ii)
unless it is specifically designated, in the case of a notice under Section
4.1(a), "Notice of Change of Executive Office and Books and Records", in the
case of a notice under Section 4.1(b), "Notice of Change of Name, Identity or
Corporate Structure" and, in the case of a notice under Section 4.1(c), "Notice
of New Trade Name, Trade Style or Invoice", in the case of a notice under
Section 4.25(b)(i), unless it is specifically designated "Notice of Change of
Location of Inventory" and, in the case of a notice under Section 4.30(a)(ii),
unless it is specifically designated "Notice of Additions to or Deletions from
Machinery and Equipment".
Section 6.11 Payments by the Pledgor. (a) No Reductions. All
----------------------- -------------
payments due to the Secured Party under the Collateral Documents, and all other
terms, conditions, covenants and agreements to be observed and performed by the
Pledgor thereunder, shall be made, observed or performed by the Pledgor without
any reduction or deduction whatsoever, including any reduction or deduction for
any set-off, recoupment, counterclaim (whether, in any case, in respect of an
obligation owed by the
-39-
<PAGE>
Secured Party to the Pledgor, the Borrower or any guarantor and, in the case of
a counterclaim, whether sounding in tort, contract or otherwise) or Tax, except
for any withholding or deduction for Taxes required to be withheld or deducted
under Applicable Law.
(b) Taxes. (i) If any Tax is required to be withheld or
-----
deducted from, or is otherwise payable by the Pledgor in connection with, any
payment to the Secured Party under the Collateral Documents, the Pledgor (A)
shall, if required, withhold or deduct the amount of such Tax from such payment
and, in any case, pay such Tax to the appropriate taxing authority in accordance
with Applicable Law and (B) shall pay to the Secured Party such additional
amounts as may be necessary so that the net amount received by the Secured Party
with respect to such payment, after withholding or deducting all Taxes required
to be withheld or deducted, is equal to the full amount payable under the
Collateral Documents. If any Tax is withheld or deducted from, or is otherwise
payable by the Pledgor in connection with, any payment payable to the Secured
Party under the Collateral Documents, the Pledgor shall, as soon as possible
after the date of such payment, furnish to the Secured Party the original or a
certified copy of a receipt for such Tax from the applicable taxing authority.
If any payment due to the Secured Party under the Collateral Documents is or is
expected to be made without withholding or deducting therefrom, or otherwise
paying in connection therewith, any Tax payable to any taxing authority, the
Pledgor shall, within 30 days after any request from the
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<PAGE>
Secured Party, furnish to the Secured Party a certificate from such taxing
authority, or an opinion of counsel acceptable to the Secured Party, in either
case stating that no Tax payable to such taxing authority was or is, as the case
may be, required to be withheld or deducted from, or otherwise paid by the
Pledgor in connection with, such payment.
(ii) The Pledgor shall, promptly upon request by the
Secured Party for the payment thereof, pay to the Secured Party (A) all
Taxes (other than Bank Taxes) payable by the Secured Party with respect
to any payment due to the Secured Party under the Collateral Documents
and (B) all Taxes (including Bank Taxes) payable by the Secured Party
as a result of payments made by the Pledgor (whether made to a taxing
authority or to the Secured Party) pursuant to Section 6.11(c)(i) or
(ii).
(iii) Notwithstanding anything to the contrary
contained herein, the Pledgor shall not be required to pay any
additional amount in respect of withholding of United States income
taxes or United States backup withholding tax pursuant to Section
6.11(c)(i) or (ii) to the Secured Party (1) except to the extent United
States federal income taxes or United States backup withholding tax, as
the case may be, is required to be withheld as a result of a Regulatory
Change or (2) to the extent such withholding is required because the
Bank has failed to submit any form or
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<PAGE>
certificate that it is entitled to so submit under Applicable Law.
(c) Authorization to Charge Bank Accounts. The Pledgor hereby
-------------------------------------
authorizes the Secured Party, if and to the extent any amount payable by the
Pledgor under the Collateral Documents is not otherwise paid when due, to charge
such amount against any or all of the Bank Accounts, with the Pledgor remaining
liable for any deficiency.
(d) Extension of Payment Dates. Whenever any payment to the
--------------------------
Secured Party under the Collateral Documents would otherwise be due (except by
reason of acceleration) on a day that is not a Business Day, such payment shall
instead be due on the next succeeding Business Day. If the date any payment
under the Collateral Documents is due is extended (whether by operation of any
Collateral Document, Applicable Law or otherwise), such payment shall bear
interest for such extended time at the rate of interest applicable hereunder.
Section 6.12 Governing Law. The Collateral Documents shall be
-------------
construed in accordance with and governed by the laws of the State of New York.
Section 6.13 LIMITATION OF LIABILITY. NEITHER THE SECURED PARTY NOR
-----------------------
ANY OTHER INDEMNIFIED PERSON SHALL HAVE ANY LIABILITY WITH RESPECT TO, AND THE
PLEDGOR HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE FOR: ANY LOSS OR DAMAGE
SUSTAINED BY THE PLEDGOR, OR ANY LOSS, DAMAGE, DEPRECIATION OR OTHER DIMINUTION
IN THE VALUE OF ANY COLLATERAL, THAT MAY OCCUR AS A RESULT OF, IN
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<PAGE>
CONNECTION WITH, OR THAT IS IN ANY WAY RELATED TO ANY EXERCISE OF ANY RIGHT OR
REMEDY UNDER THE COLLATERAL DOCUMENTS, EXCEPT FOR ANY SUCH LOSS, DAMAGE,
DEPRECIATION OR DIMINUTION TO THE EXTENT THAT THE SAME IS DETERMINED BY A
JUDGMENT OF A COURT THAT IS BINDING ON THE PLEDGOR AND THE SECURED PARTY OR SUCH
OTHER INDEMNIFIED PERSON, AS APPLICABLE, FINAL AND NOT SUBJECT TO REVIEW ON
APPEAL, TO BE THE RESULT OF ACTS OR OMISSIONS ON THE PART OF THE SECURED PARTY
OR SUCH OTHER INDEMNIFIED PERSON CONSTITUTING (x) WILLFUL MISCONDUCT, (y)
KNOWING VIOLATIONS OF LAW OR (z) SUCH PERSON'S FAILURE TO OBSERVE ANY OTHER
STANDARD APPLICABLE TO IT UNDER ANY OF THE OTHER PROVISIONS OF THE COLLATERAL
DOCUMENTS OR, BUT ONLY TO THE EXTENT NOT WAIVABLE THEREUNDER, APPLICABLE LAW.
Section 6.14 Counterparts. Each Collateral Document may be signed in
------------
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto were upon the same instrument.
Section 6.15 Entire Agreement. This Agreement embodies the entire
----------------
agreement between the Pledgor and the Secured Party relating to the subject
matter hereof and supersedes all prior agreements, representations and
understandings, if any, relating to the subject matter hereof.
Section 6.16 Successors and Assigns. All of the provisions of each
----------------------
Collateral Document shall be binding upon and inure to the benefit of the
parties thereto and their respective successors and assigns.
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<PAGE>
Section 6.17 Delivery of Opinions Authorized. The Pledgor hereby
-------------------------------
acknowledges and agrees that each Person that has rendered or may render an
opinion, report or similar communication, including legal opinions and
accountant's reports, to any Person in connection with the Collateral Documents,
has been and is hereby authorized and directed to so deliver such opinion,
report or communication.
ARTICLE 7
INTERPRETATION
--------------
Section 7.1 Definitional Provisions. (a) Certain Terms Defined by
----------------------- ------------------------
Reference. (i) Except where the context clearly indicates a different meaning,
- ---------
all terms defined in Article 1, 8 or 9 of the Uniform Commercial Code, as in
effect on the date of this Agreement, are used herein with the meanings therein
ascribed to them; such terms include "account", "chattel paper", "deposit
account", "document", "equipment", "general intangibles", "goods", "instrument",
"inventory", "money", "proceeds" and "security interest". In addition, the
terms "account", "collateral" and "security interest", when capitalized, have
the meanings specified in subsection (b) below and the term "deposit account"
includes an account evidenced by a certificate of deposit.
(ii) Except in the case of "Agreement", "Agreement
Date", "Collateral", "Permitted Lien", "Representation and Warranty"
and "Security Interest" and as
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<PAGE>
otherwise specified herein, all terms defined in the Credit Agreement
are used herein with the meanings therein ascribed to them.
(b) Other Defined Terms. For purposes of this Agreement:
-------------------
"Account" means a Receivable that represents the present right
-------
to payment for goods sold or leased or for services rendered, in each case in
the ordinary course of business, but does not include Current Key Master
Receivables or Long-term Key Master Receivables.
"Account Proceeds" means proceeds of an Account other than an
----------------
Account representing the sale or other disposition of Machinery and Equipment
pursuant to Section 4.31.
"Agreement" means this Agreement, including all schedules,
---------
annexes and exhibits hereto.
"Agreement Date" means the date set forth as such on the last
--------------
signature page hereof.
"Balance Sheet" means the balance sheet of the Pledgor attached
-------------
hereto as Schedule 3.2.
------------
"Bank Account" means (i) a deposit, custody, or other account
------------
(whether, in any case, time or demand or interest or non-interest bearing and
whether maintained at a branch or office located within or without the United
States) of the Pledgor with the Secured Party or any Affiliate of the Secured
Party, (ii) all amounts from time to time credited to such account, (iii) all
cash, securities, instruments, documents, chattel paper, general intangibles,
accounts and other property from time to time credited to such account or
representing investments and reinvestments of amounts from time to time credited
to such account and (iv) all interest, principal payments, dividends and other
distributions payable on or with respect to, and all proceeds of, (A) all
property so credited or representing such investments and reinvestments and
(B) such account.
"Collateral" means the Pledgor's interest (WHATEVER IT MAY BE)
----------
in each of the following, IN EACH CASE WHETHER NOW OR HEREAFTER EXISTING OR NOW
OWNED OR HEREAFTER ACQUIRED BY THE PLEDGOR AND WHETHER OR NOT THE SAME IS NOW
CONTEMPLATED, ANTICIPATED OR FORESEEABLE, is subject to Article 8 or 9 of the
Uniform Commercial Code or constitutes Collateral by reason of
-45-
<PAGE>
one or more than one of the following clauses, AND WHEREVER THE SAME MAY BE
LOCATED:
(i) all Receivables;
(ii) all General Intangibles;
(iii) all Inventory;
(iv) all Machinery and Equipment;
(v) all Securities and Instrument Collateral;
(vi) all Bank Accounts;
(vii) all Lockbox Accounts;
(viii) all books, records, ledgercards, files,
correspondence, computer programs, tapes, disks and related data processing
software (owned by the Pledgor or in which it has an interest) that at any time
evidence or contain information relating to any Collateral or are otherwise
necessary or helpful in the collection thereof or realization thereupon;
(ix) all goods and other property, whether or not
delivered, (A) the sale, lease or furnishing of which gives or purports to give
rise to any Receivable, including all merchandise returned or rejected by or
repossessed from customers, or (B) securing any Receivable, including all of the
Pledgor's rights as an unpaid vendor or lienor, including stoppage in transit,
replevin and reclamation with respect to such goods and other properties;
(x) all documents of title, policies and
certificates of insurance, securities, chattel paper and other documents or
instruments evidencing or pertaining to any Collateral;
(xi) all guaranties, Liens on real or personal
property, leases and other agreements and property that in any way secure or
relate to any Collateral, or are acquired for the purpose of securing and
enforcing any item thereof;
(xii) all claims (including the right to sue or
otherwise recover on such claims) (A) to items referred to in the definition of
Collateral, (B) under warranties relating to any Collateral and (C) against
third parties for (1) (aa) loss, destruction, requisition, confiscation,
condemnation, seizure, forfeiture or infringement of, or damage to, any
Collateral, (bb) payments due or to become due under leases, rentals and hires
of any Collateral, and (cc) proceeds payable under or unearned premiums with
respect to policies of insurance relating to, any
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<PAGE>
Collateral and (2) breach of any Contract constituting Collateral; and
(xiii) all products and proceeds of Collateral in
whatever form. The inclusion of "proceeds" of Collateral in the definition of
"Collateral" shall not be deemed a consent by the Secured Party to any sale or
other disposition of any Collateral not otherwise specifically permitted by the
terms hereof.
"Collateral Debtor" means a Person (including an issuer of any
-----------------
share of capital stock or other unit of ownership interest constituting
Securities and Instrument Collateral) obligated on, bound by, or subject to, a
Collateral Obligation.
"Collateral Document Related Claim" means any claim (whether
---------------------------------
civil, criminal or administrative and whether arising under any Applicable Law,
including any "environmental" or similar law, or sounding in tort, contract or
otherwise) in any way arising out of, related to, or connected with, (i) the
Collateral Documents, (ii) the relationships established thereunder, (iii) or
the exercise of any right or remedy available thereunder or under Applicable
Law or (iv) the Collateral, whether such claim arises or is asserted before or
after the Agreement Date or before or after the release of the Security
Interest.
"Collateral Documents" means (i) this Agreement and (ii) all
--------------------
other agreements, documents and instruments related to, arising out of, or in
any way connected with, (A) this Agreement, (B) any other agreement, document
or instrument referred to in this clause (ii), or (C) any of the transactions
contemplated by this Agreement or any such other agreement, document or
instrument, in each case whether now or hereafter executed.
"Collateral Obligation" means a Liability constituting part of
---------------------
the Collateral and includes any such constituting or arising under any
Receivable, General Intangible or Securities and Instrument Collateral.
"Credit Agreement" means the Credit Agreement, dated as of the
----------------
date hereof, between the Secured Party and the Pledgor.
"Distribution Collateral" means (i) all Distributions on or in
-----------------------
respect of (A) the instruments and securities listed on Schedule 4.33(a) or (B)
----------------
any instruments, securities or property that constitute Distribution Collateral
by virtue of any provision of this definition, including this clause (i)(B) and
(ii) all other instruments or securities and other property issued with respect
to or in exchange for (A) the instruments or securities listed on Schedule
--------
4.33(a) or (B) any instruments, securities or other property that constitute
- -------
Distribution Collateral by virtue of any provision of this definition,
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<PAGE>
including this clause (ii)(B) (whether, in either case, upon conversion of
convertible securities included therein or through stock split, spin-off,
reclassification, merger, consolidation, sale of assets, combination of shares
or otherwise).
"General Intangibles" means (i) all intangible, personal
-------------------
property of every kind, nature and description including (A) rights to the
payment or receipt of money or other forms of consideration of any kind at any
time now or hereafter owing, (B) claims for tax refunds, (C) causes of action,
whether sounding in tort, contract, patent infringement or otherwise and whether
or not currently in litigation, (D) judgments, (E) Intellectual Property, (F)
inventions, (G) trade secrets, (H) designs, (I) goodwill, (J) licenses, (K)
franchises, (L) customer lists and (M) corporate and other business records, and
(ii) all tangible, personal property in the nature of documents, records and the
like, constituting, evidencing or otherwise relating to any such intangible
personal property, but excluding any property that otherwise constitutes
Collateral.
"Intellectual Property" means (i) (A) patents and patent rights,
---------------------
(B) trademarks, trademark rights, trade names, trade name rights, corporate
names, business names, trade styles, service marks, logos and general
intangibles of like nature, together with, in the case of each item referred to
in or contemplated by clauses (A), (B) or (C), the goodwill of the business
connected with the use of or symbolized by the same, and (C) copyrights, in
each case whether registered, unregistered or under pending registration and,
in the case of any such that are registered or under pending registration,
whether registered or under pending registration under the laws of the United
States or any other country, (ii) reissues, continuations, continuations-in-part
and extensions of any Intellectual Property referred to in clause (i), and
(iii) rights relating to any Intellectual Property referred to in clause (i) or
(ii), including rights under applications (whether pending under the laws of
the United States or any other country) or licenses relating thereto.
"Inventory" means (i) all inventory, including (A) all goods
---------
held for sale or lease or to be furnished under contracts of service or
furnished under such contracts, (B) all work in process and (C) all raw
materials and other materials and supplies of every nature and description used
or that might be used in connection with the manufacture, packing, shipping,
advertising, selling, leasing or furnishing of such inventory or otherwise used
or consumed in the Pledgor's business, and (ii) all documents evidencing and
general intangibles relating to any of the foregoing.
"Lockbox Account" means a deposit account maintained pursuant
---------------
to a Lockbox Agreement.
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<PAGE>
"Lockbox Agreement" means a lockbox agreement in form and
-----------------
substance satisfactory to the Bank in its sole and absolute discretion.
"Machinery and Equipment" means (i) all machinery, equipment,
-----------------------
spare parts, tools, furniture, furnishings and instruments of conveyance,
including aircraft, vessels and automotive vehicles, (ii) all other goods
except goods that constitute General Intangibles by virtue of clause (ii) of
the definition thereof or Inventory and (iii) all replacements and substitutions
for, and all accessions to, the foregoing, in each case wherever located and
whether or not the same constitutes a "fixture".
"Ordinary Distributions" means cash dividends to the extent paid
----------------------
out of retained earnings, and interest paid in cash, in each case with respect
to Securities and Instrument Collateral, except to the extent that any such
dividend is made in connection with partial or total liquidation or a reduction
of capital, or any such interest is penalty interest, or, in each case, to the
extent the same is not in the ordinary course.
"Pledgor" means TSI International Software Ltd., a Delaware
-------
corporation.
"Questionnaire" means the Questionnaire in the form attached
-------------
hereto as Schedule 7.1 executed and delivered by the Pledgor to the Secured
------------
Party in connection with this Agreement.
"Receivables" means all rights and claims to the payment or
-----------
receipt of money or other forms of consideration or compensation of any kind at
any time now or hereafter owing or to be owing or claimed or that could be
claimed to be owing (whether, if subject to the Uniform Commercial Code,
classified thereunder as accounts, contract rights, chattel paper, general
intangibles, instruments, securities or otherwise) including all such rights
and claims in, to and under (i) (A) accounts, (B) contracts, including
guaranties and contracts of insurance of all kinds, including credit and key-man
life insurance, (C) letters of credit, (D) chattel paper, (E) notes, (F) drafts,
(G) instruments, (H) documents, (I) acceptances, (J) tax refunds, (K) judgments
and (L) all other debts, obligations and liabilities in whatever form now or
hereafter owing, and (ii) all causes of action, whether sounding in tort,
contract or otherwise and whether or not currently in litigation.
"Representation and Warranty" means each representation or
---------------------------
warranty made pursuant to or under (i) Article 2, Article 3 or any other
provision of this Agreement, (ii) any of the other Collateral Documents or (iii)
any amendment to, or waiver of rights under, this Agreement or any of the other
Collateral Documents, WHETHER OR NOT, IN THE CASE OF ANY REPRESENTATION OR
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<PAGE>
WARRANTY REFERRED TO IN CLAUSE (i), (ii) OR (iii) OF THIS DEFINITION (EXCEPT,
IN EACH CASE, TO THE EXTENT OTHERWISE EXPRESSLY PROVIDED), THE INFORMATION THAT
IS THE SUBJECT MATTER THEREOF IS WITHIN THE KNOWLEDGE OF THE PLEDGOR.
"Secured Obligations" means all Liabilities of the Pledgor
-------------------
owing to, or in favor or for the benefit of, or purporting to be owing to, or
in favor or for the benefit of, the Secured Party under the Loan Documents to
which the Pledgor is a party or otherwise, in each case (i) WHETHER NOW
EXISTING OR HEREAFTER ARISING OR ACQUIRED and (ii) whether owing to, or in
favor or for the benefit of, or purporting to be owing to, or in favor or for
the benefit of, the Person that is the Secured Party as of the Agreement Date
or that becomes the Secured Party by reason of any succession or assignment at
any time thereafter.
"Secured Party" means the Bank.
-------------
"Securities and Instrument Collateral" means (i) all securities
------------------------------------
and instruments listed on Schedule 4.33(a), (ii) all Distribution Collateral,
----------------
(iii) all replacements and substitutions for any Collateral that constitutes
(whether by virtue of clause (i) or (ii) or this clause (iii)) Securities and
Instrument Collateral and (iv) the certificates, if any, representing the
foregoing.
"Security Interest" means the mortgages, pledges and assignments
-----------------
to the Secured Party of, the continuing security interest of the Secured Party
in, and the continuing lien of the Secured Party upon, the Collateral intended
to be effected by the terms of this Agreement or any of the other Collateral
Documents.
"Uniform Commercial Code" means the Uniform Commercial Code as
-----------------------
in effect from time to time in the State of New York.
Section 7.2 Other Interpretative Provisions. (a) Except as otherwise
-------------------------------
specified herein, all references herein (i) to any Person shall be deemed to
include such Person's successors and assigns, (ii) to any Applicable Law defined
or referred to herein shall be deemed references to such Applicable Law or any
successor Applicable Law as the same may have been or may be amended or
supplemented from time to time and (iii) to any Loan Document or Contract
defined or referred to herein shall be deemed references to such Loan Document
or Contract (and, in the
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<PAGE>
case of any instrument, any other instrument issued in substitution therefor) as
the terms thereof may have been or may be amended, supplemented, waived or
otherwise modified from time to time.
(b) When used in this Agreement, the words "herein", "hereof"
and "hereunder" and words of similar import shall refer to this Agreement as a
whole and not to any provision of this Agreement, and the words "Article",
"Section", "Annex", "Schedule" and "Exhibit" shall refer to Articles and
Sections of, and Annexes, Schedules and Exhibits to, this Agreement unless
otherwise specified.
(c) Whenever the context so requires, the neuter gender
includes the masculine or feminine, the masculine gender includes the feminine,
and the singular number includes the plural, and vice versa.
(d) Any item or list of items set forth following the word
"including", "include" or "includes" is set forth only for the purpose of
indicating that, regardless of whatever other items are in the category in which
such item or items are "included", such item or items are in such category, and
shall not be construed as indicating that the items in the category in which
such item or items are "included" are limited to such items or to items similar
to such items.
(e) Each power of attorney, license and other authorization in
favor of the Secured Party or any other Person
-51-
<PAGE>
granted by or pursuant to this Agreement shall be deemed to be irrevocable and
coupled with an interest.
(f) Except as otherwise indicated, any reference herein to the
"Collateral", the "Secured Obligations", the "Loan Documents", the "Collateral
Documents" or any other collective or plural term shall be deemed a reference
to each and every item included within the category described by such collective
or plural term, so that (i) a reference to the "Collateral" or the "Secured
Obligations" shall be deemed a reference to any or all of the Collateral or the
Secured Obligations, as the case may be, and (ii) a reference to the
"obligations" of the Pledgor under the "Loan Documents" or the "Collateral
Documents" shall be deemed a reference to each and every obligation under each
and every Loan Document or Collateral Document, as the case may be, whether any
such obligation is incurred under one, some or all of the Loan Documents or the
Collateral Documents, as the case may be.
(g) Except where the context clearly indicates a different
meaning, references in this Agreement to Receivables, General Intangibles,
Inventory, Machinery and Equipment and Intellectual Property means the same to
the extent they constitute Collateral.
(h) Except as otherwise specified therein, all terms defined in
this Agreement shall have the meanings herein ascribed to them when used in the
other Collateral Documents or any certificate, opinion or other document
delivered pursuant hereto or thereto.
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Section 7.3 Representations and Warranties. All Representations and
------------------------------
Warranties shall be deemed made (a) in the case of any Representation and
Warranty contained in this Agreement at the time of its initial execution and
delivery, at and as of the Agreement Date, (b) in the case of any Representation
and Warranty contained in this Agreement or any other document at the time any
Loan is made, at and as of such time and (c) in the case of any particular
Representation and Warranty, wherever contained, at such other time or times as
such Representation and Warranty is made or deemed made in accordance with the
provisions of this Agreement or the document pursuant to, under or in connection
with which such Representation and Warranty is made or deemed made.
Section 7.4 Captions. Captions to Articles, Sections and subsections
--------
of, and Annexes, Schedules and Exhibits to, the Collateral Documents are
included for convenience of reference only and shall not constitute a part of
the Collateral Documents for any other purpose or in any way affect the meaning
or construction of any provision of the Collateral Documents.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized officers all as of the
Agreement Date.
TSI INTERNATIONAL SOFTWARE LTD.
By /s/ Richard Bankosky
-----------------------------
Name: Richard Bankosky
Title: Vice President, Finance and
Administration,
Chief Financial Officer
THE BANK OF NEW YORK
By /s/ David Duffy
-----------------------------
Name:
Title: Vice President
Agreement Date: August 22, 1994
-----------------
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<PAGE>
Schedule 1.3
------------
SCHEDULE OF REQUIRED ACTION
Pursuant to, and without thereby limiting, its obligations under
Section 1.3, the Pledgor hereby agrees that it will:
(a) file UCC-1 financing statements in the form of Schedule
--------
1.3(a);
- -------
(b) subject to the right of the Pledgor to receive from the
Secured Party and temporarily retain the same for certain purposes pursuant to
Section 2.1(a)(ii), within five Business Days (or, during an Event of Default,
such shorter period as the Secured Party may specify) after receipt by the
Pledgor or any of its agents, deliver or caused to be delivered to the Secured
Party, stamped, marked, endorsed or accompanied by such instruments of
assignment as the Secured Party may specify, all instruments, chattel paper,
certificated securities, letters of credit and documents evidencing or forming
a part of the Collateral and not constituting Account Proceeds;
(c) not permit any Collateral constituting securities to be
credited to or held for its account with any financial intermediary unless the
books of such
-1-
<PAGE>
financial intermediary on which such securities are credited are maintained
within one of the 50 States of the United States or the District of Columbia and
such financial intermediary has received notice from the Pledgor that all
securities at any time credited to or held in such account are subject to the
Security Interest;
(d) not permit any Collateral to be deposited in or credited
to a deposit, custody or other account, (whether, in any case, time or demand,
or interest or non-interest bearing and whether maintained at a branch or office
located within or without the United States) other than a deposit account that
constitutes a Bank Account maintained with a principal that is a bank;
(e) (i) (A) hold all money, checks, notes, drafts and other
payments received by the Pledgor or any of its agents that constitute
Collateral, including payments constituting Account Proceeds, in Bank Accounts
containing only proceeds of Collateral and (B) cause all amounts so deposited
to be maintained only in such accounts until expended;
(f) in the case of any Collateral constituting Intellectual
Property, cause a duly executed copy of Schedule 1.3(g)-A, - B or - C, as
----------------- ---- ---
appropriate, with respect thereto to be filed in the appropriate filing office;
-2-
<PAGE>
(g) at all times (i) mark its books and records as may be
necessary or appropriate to evidence, protect and perfect the Security Interest
and (ii) cause its financial statements to reflect the Security Interest in
Collateral with respect to which perfection is not effected by public filing or
recording.
-3-
<PAGE>
Schedule 1.3(a)
---------------
STANDARD FORM UCC-1
FINANCING STATEMENT
1. Debtor: TSI International Software Ltd.
45 Danbury Road
Wilton, Connecticut 06897
2. Secured Party: The Bank of New York
123 Main Street
White Plains, New York 10602
3. "Collateral" as defined in Annex A attached hereto, whether now or
hereafter existing or now owned or hereafter acquired, including
Receivables (including all accounts, contract rights and other rights
to payment); Inventory (including all finished goods, work-in-process
and raw materials); General Intangibles; Machinery and Equipment
(including all machinery, fixtures and attachments, accessories,
components and parts installed therein or affixed thereto); Securities
and Instrument Collateral (including all certificated and uncertificated
securities and instruments); and proceeds of the foregoing (including,
in the case of Securities and Instrument Collateral, all payments and
distributions on or with respect thereto, whether constituting
principal, interest or dividends).
Signature Lines:
Debtor: TSI International Software Ltd.
Secured Party: The Bank of New York
-1-
<PAGE>
ANNEX A TO UCC-1 FINANCING STATEMENT
DEBTOR: TSI International Software Ltd.
SECURED PARTY: The Bank of New York
COLLATERAL DESCRIPTION
----------------------
"Collateral" means the Debtor's interest (whatever it may be)
----------
in each of the following, in each case whether now or hereafter existing or now
owned or hereafter acquired by the Debtor and whether or not the same is now
contemplated, anticipated or foreseeable, or constitutes Collateral by reason
of one or more than one of the following clauses, and wherever the same may be
located:
(a) all Receivables;
(b) all General Intangibles;
(c) all Inventory;
(d) all Machinery and Equipment;
(e) all Securities and Instrument Collateral;
(f) all Lockbox Accounts;
(g) all books, records, ledgercards, files, correspondence,
computer programs, tapes, disks and related data processing software (owned by
the Debtor or in which it has an interest) that at any time evidence or contain
information relating to any Collateral or are otherwise necessary or helpful in
the collection thereof or realization thereupon;
(h) all goods and other property, whether or not delivered,
(i) the sale, lease or furnishing of which gives or purports to give rise to
any Receivable, including all merchandise returned or rejected by or repossessed
from customers, or (ii) securing any Receivable, including all
-1-
<PAGE>
of the Debtor's rights as an unpaid vendor or lienor, including stoppage in
transit, replevin and reclamation with respect to such goods and other
properties;
(i) all documents of title, policies and certificates of
insurance, securities, chattel paper and other documents or instruments
evidencing or pertaining to any Collateral;
(j) all guaranties, liens on real or personal property,
leases and other agreements and property that in any way secure or relate to any
Collateral, or are acquired for the purpose of securing and enforcing any item
thereof;
(k) all Bank Accounts;
(l) all claims (including the right to sue or otherwise
recover on such claims) (i) to items referred to in the definition of
Collateral, (ii) under warranties relating to any Collateral, (iii) against
third parties for (A) (1) loss, destruction, requisition, confiscation,
condemnation, seizure, forfeiture or infringement of, damage to, (2) payments
due or to become due under leases, rentals or hires of, and (3) proceeds payable
under or unearned premiums with respect to policies of insurance relating to,
any Collateral and (B) breach of any Contract constituting Collateral; and
(m) all products and proceeds of Collateral in whatever
form.
-2-
<PAGE>
ADDITIONAL DEFINITIONS
----------------------
For purposes of this Annex A:
"Agreement" means the Security Agreement, dated as of July 31, 1994,
---------
between the Debtor and the Secured Party, as amended from time to time.
"Bank Account" means (a) a deposit, custody, or other account (whether,
------------
in any case, time or demand or interest or non-interest bearing and whether
maintained at a branch or office located within or without the United States) of
the Pledgor with the Secured Party or any Affiliate of the Secured Party, (b)
all cash, securities, instruments, documents, chattel paper, general
intangibles, accounts and other property from time to time credited to such
account or representing investments and reinvestments of amounts from time to
time credited to such account and (c) all interest, principal payments,
dividends and other distributions payable on or with respect to, and all
proceeds of, (i) all property so credited or representing such investments and
reinvestments and (ii) such account.
"Distributions" means Ordinary Distributions and Extraordinary
-------------
Distributions; "Ordinary Distributions" means cash dividends to the extent paid
----------------------
out of retained earnings, and interest paid in cash, in each case with respect
to Securities and Instrument Collateral, except to the extent that any such
dividend is made in connection with partial or total liquidation or a reduction
of capital, or any such interest is penalty interest, or, in each case, to the
extent the same is not in the ordinary course; and "Extraordinary Distributions"
---------------------------
means (in each case whether or not in cash) all dividends, interest, principal
payments and other distributions (including cash and securities payable in
connection with calls, conversions, redemptions and the like) on or in respect
of, and all proceeds (including cash and securities receivable in connection
with tender or other offers) of, Securities and Instrument Collateral other than
Ordinary Distributions.
"Distribution Collateral" means (a) all Distributions on or in respect
-----------------------
of (i) the instruments and securities listed on Schedule 4.33(a) attached hereto
----------------
or to the Agreement or (ii) any instruments, securities or property that
constitute Distribution Collateral by virtue of any provision of this
definition, including this clause (a)(ii) and (b) all other instruments or
securities and other property issued with respect to or in exchange for (i) the
instruments or securities listed on Schedule
--------
-3-
<PAGE>
4.33(a) attached hereto or to the Agreement or (ii) any instruments, securities
- -------
or other property that constitute Distribution Collateral by virtue of any
provision of this definition, including this clause (b)(ii) (whether, in either
case, upon conversion of convertible securities included therein or through
stock split, spin-off, reclassification, merger, consolidation, sale of assets,
combination of shares or otherwise).
"General Intangibles" means (a) any and all intangible, personal
-------------------
property of the Debtor of every kind, nature and description including (i)
rights to the payment or receipt of money or other forms of consideration of any
kind at any time now or hereafter owing or to be owed to the Debtor, (ii) claims
for tax refunds, (iii) causes of action, whether sounding in tort, contract,
patent infringement or otherwise and whether or not currently in litigation,
(iv) judgments, (v) Intellectual Property, (vi) inventions, (vii) trade secrets,
(viii) designs, (ix) goodwill, (x) licenses, (xi) franchises, (xii) customer
lists and (xiii) corporate and other business records, and (b) all tangible,
personal property in the nature of documents, records and the like,
constituting, evidencing or otherwise relating to any such intangible personal
property, but excluding any property that otherwise constitutes Collateral.
"Intellectual Property" means (a) (i) patents and patent rights, (ii)
---------------------
trademarks, trademark rights, trade names, trade name rights, corporate names,
business names, trade styles, service marks, logos and general intangibles of
like nature, in each case, together with the goodwill of the business connected
with the use of or symbolized by the same, and (iii) copyrights, in each case
whether registered, unregistered or under pending registration and, in the case
of any such that are registered or under pending registration, whether
registered or under pending registration under the laws of the United States or
any other country, (b) reissues, continuations, continuations-in-part and
extensions of any Intellectual Property referred to in clause (a), and (c)
rights relating to any Intellectual Property referred to in clause (a) or (b),
including rights under applications (whether pending under the laws of the
United States of America or any other country) or licenses relating thereto.
"Inventory" means (a) all inventory, including (i) all goods held by the
---------
Debtor for sale or lease or to be furnished under contracts of service or
furnished under such contracts; (ii) all work in process; and (iii) all raw
-4-
<PAGE>
materials and other materials and supplies of every nature and description used
or that might be used in connection with the manufacture, packing, shipping,
advertising, selling, leasing or furnishing of such inventory or otherwise used
or consumed in the Debtor's business; and (b) all documents evidencing and
general intangibles relating to any of the foregoing.
"Machinery and Equipment" means (a) all machinery, equipment, spare
-----------------------
parts, tools, furniture, furnishings and instruments of conveyance, including
aircraft, vessels and automotive vehicles, (b) all other goods except goods that
constitute General Intangibles by virtue of clause (b) of the definition thereof
or Inventory, and (c) all replacements and substitutions for, and all accessions
to, the foregoing, in each case wherever located and whether or not the same
constitutes a "fixture".
"Receivables" means all rights and claims to the payment or receipt of
-----------
money or other forms of consideration or compensation of any kind at any time
now or hereafter owing or to be owing or claimed or that could be claimed to be
owing to the Debtor (whether classified under the Uniform Commercial Code as
accounts, contract rights, chattel paper, general intangibles, instruments,
securities or otherwise) including all such rights and claims in, to and under
(a) (i) accounts, (ii) contracts, including guaranties and contracts of
insurance of all kinds, including credit and key-man life insurance, (iii)
letters of credit, (iv) chattel paper, (v) notes, (vi) drafts, (vii)
instruments, (viii) documents, (ix) acceptances, (x) tax refunds, (xi) judgment
s and (xii) all other debts, obligations and liabilities in whatever form now or
hereafter owing to the Debtor, and (b) all causes of action, whether sounding in
tort, contract or otherwise and whether or not currently in litigation.
"Securities and Instrument Collateral" means (a) all securities and
------------------------------------
instruments listed on Schedule 4.33(a) attached hereto or to the Agreement, (b)
----------------
all Distribution Collateral, (c) all replacements and substitutions for any
Collateral that constitutes (whether by virtue of clause (a) or (b) or this
clause (c)) Securities and Instrument Collateral and (d) the certificates, if
any, representing the foregoing.
"Uniform Commercial Code" means the Uniform Commercial Code as in effect
-----------------------
from time to time in the State of New York.
-5-
<PAGE>
Some of the Collateral may be located at:
45 Danbury Road
Wilton, Connecticut 06897
Bannockburn Lake Office Plaza
2345 Wankegan Road
Bannockburn, Illinois 60015-1501
-6-
<PAGE>
Schedule 1.3(g)-A
-----------------
MEMORANDUM OF SECURITY AGREEMENT
--------------------------------
PATENTS
-------
Pursuant to a Security Agreement dated as of July 31, 1994 (the
"Security Agreement"), TSI International Software Ltd., whose office is located
at 45 Danbury Road, Wilton, Connecticut 06897 (the "Pledgor"), has granted to
The Bank of New York, whose chief executive office is located at 123 Main
Street, White Plains, New York 10602, as agent (the "Secured Party"), a
continuing security interest in, and a continuing lien upon, all of Pledgor's
right, title and interest in and to the patents and patent applications listed
on the attached Schedule and all reissues, divisions, continuations,
continuations-in-part, extensions and renewals thereof. Such security interest
and lien can be terminated only in accordance with the terms of the Security
Agreement.
Dated: __________, 19__
TSI INTERNATIONAL SOFTWARE LTD.
By:_________________________
Name:
Title:
-1-
<PAGE>
SCHEDULE
Patent Registrations
--------------------
Expiration
Title Inventor(s) Patent No. Issue Date Date
- ----- ----------- ---------- ---------- ----------
Patent Applications
-------------------
Application Filing
Title Inventor(s) Serial No. Date
- ----- ----------- ----------- ------
-2-
<PAGE>
Schedule 1.3(g)-B
-----------------
MEMORANDUM OF SECURITY AGREEMENT
--------------------------------
TRADEMARKS
----------
Pursuant to a Security Agreement dated as of July 31, 1994 (the
"Security Agreement"), TSI International Software Ltd., whose chief executive
office is located at 45 Danbury Road, Wilton, Connecticut 06897 (the "Pledgor"),
has granted to The Bank of New York, whose chief executive office is located at
123 Main Street, White Plains, New York 10602, as agent (the "Secured Party"), a
continuing security interest in, and a continuing lien upon, all of Pledgor's
right, title and interest in and to the trademarks and trademark applications
listed on the attached Schedule, together with the goodwill connected with the
use of and symbolized by each of such trademarks, and all renewals thereof.
Such security interest and lien can be terminated only in accordance with the
terms of the Security Agreement.
Dated: ___________, 19__
TSI INTERNATIONAL SOFTWARE LTD.
By:___________________________
Name:
Title:
-2-
<PAGE>
SCHEDULE
Trademark Registrations
-----------------------
Trademark Registration No. Registration Date
- --------- ---------------- -----------------
Trademark Applications
----------------------
Trademark Application Serial No. Filing Date
- --------- ---------------------- -----------
-1-
<PAGE>
Schedule 1.3(g)-C
-----------------
MEMORANDUM OF SECURITY AGREEMENT
--------------------------------
COPYRIGHTS
----------
Pursuant to a Security Agreement dated as of July 31, 1994 (the
"Security Agreement"), TSI International Software Ltd., whose chief executive
office is located at 45 Danbury Road, Wilton, Connecticut 06897 (the "Pledgor"),
has granted to The Bank of New York, whose chief executive office is located at
123 Main Street, White Plains, New York 10602, as agent (the "Secured Party"),
a continuing security interest in, and a continuing lien upon, all of Pledgor's
right, title and interest in and to the copyrights and copyright applications
listed on the attached Schedule and all renewals and extensions thereof. Such
security interest and lien can be terminated only in accordance with the terms
of the Security Agreement.
Dated: __________, 19__
TSI INTERNATIONAL SOFTWARE LTD.
By:_________________________
Name:
Title:
-1-
<PAGE>
SCHEDULE
Copyright Registrations
-----------------------
Title Registration No. Registration Date
- ----- ---------------- -----------------
Copyright Applications
----------------------
Title Filing Date
- ----- -----------
-2-
<PAGE>
Schedule 3.2
------------
BALANCE SHEET OF PLEDGOR
-2-
<PAGE>
Schedule 4.10(a)
----------------
SCHEDULE OF RECEIVABLES DISCOUNT
AND ALLOWANCE AGREEMENTS
None
-1-
<PAGE>
Schedule 4.33(a)
----------------
SCHEDULE OF SECURITIES AND
INSTRUMENT COLLATERAL
----------------------
None
-1-
<PAGE>
Schedule 7.1
------------
SECURITY AGREEMENT QUESTIONNAIRE*
The undersigned (the "Pledgor") is entering into a Security Agreement
______________ with. In connection with the Security Agreement the Pledgor is
required to answer the following questions.
1. What is the Pledgor's exact corporate name as it appears in its
certificate of incorporation (or, if not a corporation, the Pledgor's
complete name)?
- -
- -
- -
2. Has the Pledgor ever changed its name? If so, state each other name the
Pledgor has had.
-
-
-
3a. Does the Pledgor do business under any other name? If so, state each
such name.
- -
- -
- -
- -------------------
-1-
<PAGE>
* If this Questionnaire is being completed in connection with loans to the
Pledgor that are to be used in connection with an acquisition, the
answers to each of the following questions that relates to the location
of an item, e.g., inventory, should include the locations of those items
----
that are being acquired in that acquisition.
-2-
<PAGE>
b. Does the Pledgor use or has the Pledgor used any trade names or trade
styles? If so, list each of them.
- -
- -
- -
c. If the Pledgor has at any time during the preceding five years done
business under any name or used any trade name or trade style not listed
under a. or b., list each such name or style.
- -
- -
- -
4. Attach hereto the forms of all invoices used by the Pledgor at any time
within the immediately preceding 5 years, and indicate which of such
forms are currently being used.
5. Has the Pledgor changed its identity or corporate structure in any way
within the past four months? Changes in corporate structure would
include incorporation of a partnership or sole proprietorship,
reincorporation in a different state, mergers, consolidations and
acquisitions. If any such change has taken place, indicate the nature
of such change and give the names of each corporation or other entity
that was incorporated, merged or consolidated with or acquired by the
Pledgor in such transaction (including each name under which each such
corporation or entity has done business) and the address of each place
of business of each such corporation or entity immediately prior to such
incorporation, merger, consolidation or acquisition and within four
months prior to the date of this Questionnaire.
-
-3-
<PAGE>
- -
- -
6a. State the complete address (including the county) of the Pledgor's chief
executive office and, if different from its chief executive office, of
the office where the Pledgor keeps its books and records relating to its
accounts or contract rights, specifying in each case whether such
location is owned or leased by Pledgor and, if leased, specifying the
name and address of the landlord.
- -
- -
- -
b. If the Pledgor maintains any records relating to any of the Collateral
with an independent computer service firm or the like specify the
address (including the county) of each such Person.
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
7. Has the Pledgor's chief executive office or office where the Pledgor
keeps its books and records relating to its accounts or contract rights
been located at any other address (including that of any independent
computer service firm or the like) during the past four months? If so,
specify each such address (including the county) and whether such
location was owned or leased by Pledgor and, if leased, specifying the
name and address of the landlord.
- -
-4-
<PAGE>
- -
- -
8. State the complete address (including the county) of each other place of
business that the Pledgor presently has, specifying in each case whether
such location is owned or leased by Pledgor and, if leased, specifying
the name and address of the landlord.
- -
- -
- -
9. State the complete address (including the county) of each place of
business that the Pledgor has had in the past four months, other than
those listed in the answers to questions 6, 7, and 8, specifying in each
case whether such location was owned or leased by Pledgor and, if
leased, specifying the name and address of the landlord.
- -
- -
- -
10. State the complete address (including the county) of each location where
the Pledgor keeps any inventory or machinery and equipment, specifying
(a) in each case whether such location is owned or leased by Pledgor
and, if leased, specifying the name and address of the landlord and (b)
the approximate book value of the (i) inventory and (ii) machinery and
equipment maintained at each such location.
- -
-5-
<PAGE>
- -
- -
11. Has any of the Pledgor's inventory or machinery and equipment been
located during the past four months at any location other than the
locations listed in the answers to question 6, 7, 8, 9 and 10? If so,
state the complete address (including the county) of each such location,
specifying in each case whether such location was owned or leased by
Pledgor and, if leased, specifying the name and address of the landlord.
- -
- -
- -
12. Does any person or entity other than the Pledgor have possession of any
of the Pledgor's inventory or machinery and equipment? If so, state the
name and address (including the county) of each such person or entity,
specifying in each case whether such location is owned or leased by
Pledgor and, if leased, specifying the name and address of the landlord.
- -
- -
- -
13. When the Pledgor purchases goods, are there any places in which such
goods might in the usual course of the purchase transaction be located,
even temporarily for purposes of transshipment? If so, state the
complete address (including the county) of each such location.
- -
-6-
<PAGE>
- -
- -
14. Has the Pledgor acquired any of its inventory or machinery and equipment
otherwise than in the ordinary course of business? (For this purpose,
acquisitions not in the ordinary course of business include, BUT ARE NOT
LIMITED TO, acquisitions from persons other than the manufacturer.) If
so, specify the nature of any such acquisition.
- -
- -
- -
15a. Does the Pledgor own or have an interest in any goods other than
inventory or machinery and equipment, such as crops, minerals or the
like? If so please describe such goods and state the complete address
(including the county) where such goods are located.
- -
- -
- -
b. State the respective aggregate book values of so much of the Pledgor's
machinery and equipment as consists of (i) airplanes, (ii) automotive
equipment, (iii) ships and other vessels and (iv) railroad locomotives
and rolling stock.
- -
- -
-7-
<PAGE>
- -
16a. Are any of the Pledgor's accounts receivables payable by United States
Government or any department or agency thereof? If so, please state the
aggregate amount thereof and the percentage that those accounts
receivables are of all of the Pledgor's accounts receivables, in each
case as of a recent, specified date.
- -
- -
- -
b. Is any of the Pledgor's inventory subject to a claim under any contract
with the United States Government or any department or agency thereof
that title to such inventory has vested in such person by virtue of
progress payments? If so, please state the aggregate amount thereof and
the percentage that that inventory is of all of the Pledgor's inventory,
in each case as of a recent, specified date.
- -
- -
- -
c. Does any of the Pledgor's inventory consist of perishable agricultural
commodities and products subject to the trust imposed by the Perishable
Agricultural Commodities Act? If so, please state the aggregate amount
thereof and the percentage that that inventory is of all of the
Pledgor's inventory, in each case as of a recent, specified date.
- -
-8-
<PAGE>
- -
- -
d. Does any of the Pledgor's inventory consist of livestock or meat, meat
food products or livestock products derived therefrom subject to the
trust imposed by the Packers and Stockyards Act? If so, please state
the aggregate amount thereof and the percentage that that inventory is
of all of the Pledgor's inventory, in each case as of a recent,
specified date.
- -
- -
- -
17a. Please supply the following information with respect to each patent and
patent application in which the Pledgor has any interest (whether as
owner, licensee or otherwise):
Patents
-------
Nature of Interest Registered Country of
(e.g., owner, licensee) Patent No. Issue Date Issue
- ----------------------- ---------- ---------- ----------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
Patent Applications
-------------------
Nature of Interest Serial Country of
-9-
<PAGE>
(e.g., owner, licensee) No. Filing Date Issue
- ----------------------- ------ ----------- ----------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
b. If the Pledgor's interest in any of the foregoing is otherwise than as
owner, please describe the nature of such interest.
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
18a. Please supply the following information with respect to each registered
trademark and trademark application in which the Pledgor has any
interest (whether as owner, licensee or otherwise):
<TABLE>
<CAPTION>
Registered Trademarks
---------------------
Nature of
Interest Int'l Goods or Country
(e.g., owner, Registered Registration Class Services Date of
licensee) Trademark No. Covered Covered Registered Registration
- ------------ ---------- ------------ ------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Trademark Applications
----------------------
Trademark
Nature of Application
Interest relates to Int'l Goods or
(e.g., owner, following Serial Class Services Country of
licensee) Trademark No. Covered Covered Application
- ------------- ----------- ------ ------- -------- -----------
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
</TABLE>
-10-
<PAGE>
- --------------------------------------------------------------------------------
b. If the Pledgor's interest in any of the foregoing is otherwise than as
owner, please describe the nature of such interest.
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
19a. Please supply the following information with respect to each copyright
and copyright application in which the Pledgor has any interest
(whether as owner, licensee or otherwise):
<TABLE>
<CAPTION>
Copyrights
----------
Nature of
Interest
(e.g., owner, Copyright Property Date of Docket Country of
licensee) Copyright No. Covered Copyright No. Registration
- ------------- --------- --------- -------- --------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
</TABLE>
Copyright Applications
----------------------
Copyright
Nature of Application
Interest relates to
(e.g., owner, following Property Country of
licensee) Copyright Covered Application
- ------------- ----------- -------- ------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
-11-
<PAGE>
b. If the Pledgor's interest in any of the foregoing is otherwise than as
owner, please describe the nature of such interest.
- -
- -
- -
20. Does the Pledgor have any existing lockbox arrangements? If so, please
identify each bank or other entity with which any such arrangement is
maintained.
---------------------------------------------------------------------
- -
---------------------------------------------------------------------
The Pledgor hereby certifies that its answers to the foregoing questions
are complete and correct and confirms that such answers constitute
representations and warranties under the Security Agreement.
Date:__________, 19__ Pledgor:
By:______________________
Name:
Title:
-12-
<PAGE>
EXHIBIT 10.13
GUARANTEE AGREEMENT
This Guarantee Agreement dated as of August 22, 1994 by and between the
Connecticut Development Authority, a body politic and corporate, constituting a
public instrumentality and political subdivision of the State of Connecticut,
with its principal office at 845 Brook Street, Building 2, Rocky Hill,
Connecticut 06067 (the "Authority") and The Bank of New York, a banking
corporation organized under the laws of New York with an office at 123 Main
Street, White Plains, New York 10602 ("Lender").
RECITALS
WHEREAS, the Authority wishes to stimulate additional lending by banks
and other institutional lenders to manufacturing and other businesses located in
the State of Connecticut (the "State") to preserve and promote development and
create and maintain employment in the State; and
WHEREAS, Section 32-261 et seq. of the Connecticut General Statutes, as
-- ---
amended by Connecticut Public Act 93-360 (as so amended, the "Act"), authorized
the Authority to issue to eligible institutions guarantees of loans and other
investments made by such institutions in order (i) to encourage the growth and
retention of manufacturing firms and other businesses in the State that are
unable to obtain financing on reasonable terms and conditions due to the
contraction in liquidity in the banking system, (ii) to stimulate the growth and
-1-
<PAGE>
retention of jobs, the development of all geographic regions in the State and
the increase in State and municipal tax revenue, and (iii) to address concerns
with the availability of financing which has been discontinued subsequent to a
merger, takeover or liquidation of a financial institution; and
WHEREAS, the Authority has established a loan guarantee program (the
"Guarantee Program"), whereby the Authority provides partial guarantees of loans
made by certain banks and other institutional lenders to businesses in the
State; and
WHEREAS, the Authority has issued its Guidelines, which set forth the
procedures by which guarantees can be obtained from the Authority under the
Guarantee Program and the criteria by which the Authority shall decide whether a
particular loan is eligible for such a guarantee; and
WHEREAS, TSI International Software Ltd. (the "Borrower") desires that
the Lender extend it a loan in an amount of up to $4,000,000 (the "Lender
Loan"); and
WHEREAS, Lender is willing to make the Lender Loan pursuant to a Credit
Agreement between the Borrower and the Lender of even date herewith (as amended,
modified or supplemented from time to time as permitted by the terms hereof the
"Lender Loan Agreement") , upon satisfaction of certain conditions; and
WHEREAS, the Borrower has entered into a Security Agreement with the
Lender of even date herewith (the "Lender Security Agreement") pursuant to which
the Borrower has granted a security
-2-
<PAGE>
interest in all of its property to the Lender to secure the repayment of its
obligations under the Lender Loan Agreement; and
WHEREAS, it is a condition to the Lender's providing the Lender Loan
that the Authority guarantee a portion of the Lender Loan.
NOW, THEREFORE, the parties hereto agree as follows:
Section 1. Definitions. Unless the context shall clearly
-----------
indicate some other meaning or may otherwise require, the terms defined in this
Section 1 shall, for all purposes hereof, have the meanings herein specified.
"Act" shall have the meaning provided in the recitals hereto.
"Authority" shall have the meaning provided in the first paragraph
hereof.
"Authority Cure Period" shall have the meaning provided in Section 9
hereof.
"Benefit Period" shall have the meaning provided in Section 18 hereof.
"Borrower" shall have the meaning provided in the recitals hereto.
"Business Day" shall mean each day, which is not a Saturday or Sunday,
on which banking institutions in the City of Hartford, Connecticut and New York,
New York are not authorized or obligated by law to close.
-3-
<PAGE>
"Commitment" shall mean the Authority's commitment letter dated July 18,
1994, setting forth the conditions to the issuance of its Guarantee of the
Lender Loan, and the terms of such Guarantee.
"Cure Termination Event" shall have the meaning provided in Section 9
hereof.
"Estimated Loss" shall have the meaning provided in Section ID hereof.
"Event of Default" shall have the meaning provided in Section 9 hereof.
"Fee Percentage" shall have the meaning provided in Section 14 hereof.
"Guarantee" shall mean this agreement of the Authority to guarantee a
portion of the Lender Loan under the Guarantee Program.
"Guarantee Amount" shall mean, with respect to the Lender Loan at any
time, an amount equal to that portion of the Lender Loan as to which the
Guarantee then is in effect, as determined in accordance with the provisions of
Section 8 hereof.
"Guarantee Program" shall have the meaning provided in the recitals
hereto.
"Guarantee Request" shall mean, with respect to the Lender Loan, the
documentation delivered by the Lender to the Authority pursuant to the
Guidelines, describing the terms of the Lender Loan and requesting the issuance
by the Authority of this Guarantee.
-4-
<PAGE>
"Guidelines" shall mean the Eligibility Guidelines, Participation
Guidelines, Loan Presentation Guidelines and Underwriting Guidelines by Loan
Size, all of which have been delivered by the Authority to the Lender.
"Lender" shall have the meaning provided in the first paragraph hereof.
"Lender Loan" shall mean the $4,000,000 revolving credit loan made to
the Borrower pursuant to the Lender Loan Agreement.
"Lender Loan Agreement" shall have the meaning provided in the recitals
hereto.
"Lender Loan Documents" shall mean the Lender Loan Agreement, the Lender
Security Agreement, and any other documents which create, evidence, secure or
guarantee the Lender Loan.
"Liquidation Costs" shall mean, with respect to the Lender Loan, all
costs and expenses, including reasonable attorneys' fees, incurred by Lender in
(i) collection of any sums owing under the Lender Loan Documents, (ii)
foreclosure against any collateral securing the Lender Loan or otherwise
enforcing its rights or remedies under the Lender Loan Documents, (iii) any act
to protect or sustain any lien created under any of the Lender Loan Documents
(other than any such act that may be required by reason of the gross negligence
of Lender with respect to the execution, delivery, filing or recording of any of
the Lender Loan Documents), or (iv) any suit, litigation, arbitration,
proceeding or controversy arising from or in connection with the enforcement of
the Lender Loan Documents or the exercise of
-5-
<PAGE>
Lender's rights thereunder; provided, however, that, except as provided below,
Liquidation Costs for the Lender Loan shall not, without the prior written
consent of the Authority (which consent will not be unreasonably withheld or
delayed), exceed, in the aggregate, the lesser of (i) ten percent (10%) of the
outstanding principal balance of the Lender Loan at the time of maturity or
acceleration, as the case may be, and (ii) $50,000. In the event that Lender
requests that the Authority consent to Lender's incurring Liquidation Costs in
excess of such amount, such consent shall not be unreasonably withheld or
delayed so long as the proposed expenditures are reasonable and consistent with
the usual practices of Lender in similar circumstances.
"Out-of-State Relocation" shall have the meaning provided in Section 18
hereof.
"Recoveries" shall have the meaning provided in Section 11 hereof.
"Scheduled Amortization Loan Balance" shall mean, for the Lender Loan,
initially, the maximum authorized principal amount of the Lender Loan and
thereafter to be reduced on each scheduled renewal date (if any) for the Lender
Loan by an amount equal to the product of (i) such maximum authorized principal
amount, multiplied by (ii) twenty percent (20%).
"Security Filings" shall have the meaning provided in Section 3 hereof.
"State" shall have the meaning provided in the recitals hereto.
-6-
<PAGE>
"Total Indebtedness" shall have the meaning provided in Section 11
hereof.
Section 2. The Authority Guarantee. Subject to the terms of this
-----------------------
Guarantee, the Authority hereby guarantees to Lender payment of a portion of the
principal of, interest on, and Liquidation Costs with respect to the Lender
Loan, which portion equals, at any given time, the Guarantee Amount at such
time. In no event shall the Authority be liable hereunder in an amount greater
than the Guarantee Amount as of the date Lender notifies the Authority of the
Event of Default under Section 9 hereof.
Notwithstanding any other provisions of this Guarantee, any payments
made by the Authority pursuant to this Guarantee shall not be deemed to
constitute payments made on the Lender Loan, but rather shall constitute a
purchase by the Authority of a junior and subordinate participation in the
Lender Loan equal to the amount of such payment, and the Borrower shall not be
discharged or released from any of its obligations under the Lender Loan
Documents by virtue of such payment by the Authority.
Section 3. Lender Loan Closing. Prior to closing the Lender Loan,
-------------------
Lender shall provide a fully executed copy of the Lender Loan Documents to
counsel for the Authority, in order for such counsel to confirm on behalf of the
Authority that the Lender Loan Documents are consistent with the Guarantee
Request and the Commitment and are adequate to fully protect and preserve
-7-
<PAGE>
the interests of the Authority with respect to the Lender Loan. Upon
satisfactory review of such Lender Loan Documents by counsel to the Authority,
the Lender Loan Documents shall be deemed to be in accordance with the terms and
conditions set forth in the Guarantee Request and Commitment for the Lender Loan
unless Lender (i) modifies any of the approved documents other than as permitted
elsewhere in this Guarantee, (ii) is grossly negligent in (A) closing the Lender
Loan in a manner inconsistent with the Guarantee Request and Commitment or (B)
acting in a manner which jeopardizes the enforceability of the Lender Loan
Documents, or (iii) fails to file or cause to be filed such financing
statements, mortgages and other security documents (collectively the "Security
Filings") as have been reviewed and approved by counsel to the Authority in the
offices or with the authorities noted on the Security Filings, or file such
continuation statements, mortgages and other security documents as are necessary
to perfect and preserve, with the requisite degree of priority, the liens or
security interests evidenced by the Security Filings. If (i), (ii) or (iii)
shall occur, the Authority may exercise its rights under Section 15 hereof.
Lender Loan Documents shall include an opinion of Borrower's counsel
satisfactory to Authority counsel, which shall provide that it may be relied
upon by any participant in or purchaser of the Lender Loan, including the
Authority. Execution and delivery by the Authority of this Guarantee shall be
deemed conclusive evidence of such satisfactory review by counsel to the
Authority
-8-
<PAGE>
and of the approval of the closing activities to the time of the delivery of
this Guarantee.
Promptly after closing, Lender shall deliver a copy of the Lender Loan
Documents to the Authority. The Authority shall be entitled at any time during
regular business hours, upon reasonable advance written notice to the Lender,
to inspect any of the Lender Loan Documents or other documents relating to the
Lender Loan which are in the Lender's possession, including without limitation,
repayment records.
Section 4. Lender Loan Servicing. Lender shall have the sole right
---------------------
to service the Lender Loan at all times except as provided in Section 12.
Lender shall exercise substantially the same care in administering, servicing
and managing the Lender Loan as it exercises with respect to similar loans made
or held by Lender, and will employ its customary practices to collect all
payments from the Lender Loan and will perform all customary servicing
responsibilities with respect to the Lender Loan. Lender's customary and usual
servicing practices include, without limitation, (i) the receipt and review of
financial statements; (ii) the receipt and review of insurance policies, reports
and certificates; (iii) inspection of plant, property and equipment; and (iv)
monitoring of assets taken as collateral.
Section 5. Reports to the Authority. Within fifteen days from the
------------------------
last day of each December, March, June and September,
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<PAGE>
Lender shall provide the Authority with a quarterly report for the quarter
ending on such day with respect to the Lender Loan, in the form attached hereto
as Exhibit A.
Lender shall deliver to the Authority, promptly after receipt of a
written request by the Authority, copies of all financial statements, insurance
policies and certificates, environmental reports, accounts receivable and
inventory reports, and other material documentation as shall have been delivered
by or on behalf of the Borrower, to the extent retained by the Lender. Lender
shall also provide the Authority with a copy of each and every written notice of
demand, acceleration or default, legal summons or process sent to or served upon
the Borrower by the Lender and every other written communication to or from the
Borrower which, in Lender's reasonable judgment, materially and adversely
affects any interest of the Authority. Nothing in this Section shall be deemed
to require Lender to disclose any information which it is prohibited by law from
disclosing.
Section 6. No Warranty by Lender. Lender shall not be deemed to
---------------------
have made any covenant, warranty or representation with respect to the ability
of the Borrower to repay the Lender Loan or the truth, accuracy or completeness
of any report, statement or certificate now or hereafter given by the Borrower
in connection with the Lender Loan. Lender will exercise substantially the same
care in administering the Lender Loan as
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<PAGE>
it exercises with respect to similar loans made or held by Lender.
Section 7. Changes to Lender Loan Documents. Lender shall not,
--------------------------------
without the prior written consent of the Authority, which consent shall be given
promptly, commensurate with the nature of the request, (i) enter into any
amendment, modification, supplement or replacement of any Lender Loan Document
which would materially and adversely affect the Authorities rights hereunder;
(ii) otherwise make or consent to any increase in the principal amount of the
Lender Loan, any change in interest rate on the Lender Loan not contemplated by
the Lender Loan Documents, any change in the maturity of the Lender Loan, or any
change in the principal amortization schedule for the Lender Loan, except as set
forth below; (iii) waive or release any claim against Borrower arising out of or
under any Lender Loan Document; or (iv) make or consent to releases of any
collateral securing the Lender Loan, unless (A) the sum of the fair market value
of such collateral, as reasonably determined by Lender, and the fair market
value, as reasonably determined by Lender, of all collateral previously released
does not exceed one percent (1%) of the original principal amount of the Lender
Loan, (B) the Borrower or any other entity pledges or grants to the Lender a
security interest and lien on substitute collateral of equal or greater fair
market value, as reasonably determined by Lender, than such released collateral,
or (C) the Lender receives payment
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<PAGE>
on the Lender Loan in connection with such release of an amount equal to or
greater than the fair market value, as reasonably determined by Lender, of such
released collateral.
Notwithstanding the foregoing, Lender shall have the right, without the
consent of the Authority, to extend the maturity of the Lender Loan or modify
the principal amortization of the Lender Loan so that the outstanding principal
balance of the Lender Loan is reduced more slowly than the Scheduled
Amortization Loan Balance; provided, however, that in the event Lender so
extends the maturity or modifies the principal amortization without the consent
of the Authority, the Guarantee Amount shall continue to be reduced in
proportion to the reduction in the Scheduled Amortization Loan Balance in
accordance with the terms of Section 8 hereof as if no such modification shall
have occurred.
The Lender shall promptly furnish to the Authority copies of each and
every written amendment, waiver or consent entered into or given with respect to
any Lender Loan Document, whether or not the Authority's consent thereto is
required hereunder.
Section 8. Guarantee Amount. The Guarantee Amount at any given
----------------
time shall be equal to (i) thirty percent (30%) of the lesser of (a) the then
outstanding principal balance of the Lender Loan or (b) the Scheduled
Amortization Loan Balance as of such date, minus (ii) the total of all payments
theretofore made by the Authority under this Guarantee. Upon any payment by the
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<PAGE>
Authority under its Guarantee (other than payments pursuant to the Authority's
cure rights described in Section 9 which are not allocated to principal on the
Lender Loan), the Guarantee Amount shall be immediately and automatically
reduced by the amount of such payment, except that the Guarantee Amount may be
reinstated as provided in Section 9 hereof. Notwithstanding the foregoing, the
Guarantee Amount shall automatically reduce to zero and this Guarantee shall
terminate on a date two years from the date hereof, unless a demand on this
Guarantee is outstanding on such date; provided, however, that in the event that
an Authority Cure Period is in effect on such date, the Guarantee Amount shall
not reduce to zero and this Guarantee shall not terminate until forty-five (45)
days after the end of such Authority Cure Period.
Section 9. Procedures upon Default. In the event that there shall
-----------------------
occur and continue any event of default as defined in the Lender Loan Documents
and such event of default shall have been declared by Lender (ar "Event of
Default"), Lender shall give written notice to the Authority of such Event of
Default prior to enforcing any of its rights or exercising any of its remedies
under the Lender Loan Documents with respect to such Event of Default,
including, without limitation, acceleration of the maturity of the indebtedness
evidenced thereby, and in any event no later than forty-five (45) days after the
Lender shall first have declared such Event of Default. After providing such
notice to the Authority, Lender shall, except as provided in the
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<PAGE>
next sentence below, further forbear from enforcing any of its rights or
exercising any of its remedies under the Lender Loan Documents (other than the
exercise of any right of set-off or garnishment), including, without limitation,
acceleration of the maturity of the indebtedness evidenced thereby, for an
additional period of thirty (30) days (the "Authority Cure Period"), commencing
on the date the Authority receives such notice, unless the Authority, by written
notice to Lender, elects to terminate the Authority Cure Period on an earlier
date. Notwithstanding the foregoing, there shall be no Authority Cure Period and
Lender shall be entitled to enforce its rights and exercise its remedies under
the Lender Loan Documents at any time after notifying the Authority of an Event
of Default if (i) Lender reasonably believes that there has been fraud,
conversion or other irregularities committed by the Borrower with respect to the
Lender Loan, (ii) Lender reasonably anticipates that its loss on the Lender
Loan, after foreclosure of the collateral securing the Lender Loan and
enforcement by Lender of its other rights and remedies under the Lender Loan
Documents with respect thereto, but not taking into account any payment by the
Authority on its Guarantee, will exceed ten percent (10%) of the outstanding
principal balance of the Lender Loan at the time Lender provides notice to the
Authority of such Event of Default or (iii) any insolvency or bankruptcy
relating to the Borrower or all or substantially all of its assets shall have
been commenced (each of (i), (ii) and (iii) above a "Cure Termination Event");
-14-
<PAGE>
provided, however, that in any such event Lender shall give written notice
- -------- -------
thereof to the Authority at the time it notifies the Authority of such Event of
Default.
During the Authority Cure Period, the Authority shall have the right,
but not the obligation, to cure any Event of Default which results from the
Borrower's failure to pay principal of or interest on the Lender Loan or any
other amount due under the Lender Loan Documents by making payment of such
amount. The portion of any such payment by the Authority applicable to
principal of the Lender Loan shall be deemed made under this Guarantee, and
shall reduce the Guarantee Amount by the amount of such principal payment. If
the Authority elects to make a payment or payments curing an Event of Default
during the Authority Cure Period, the Authority may, but shall be under no
obligation to, continue such payments for a period of up to six (6) consecutive
months from the date the Authority first received notice of such Event of
Default, and the Authority Cure Period shall, for all purposes hereunder,
continue while such payments are being made; provided, however, that if at any
time during such six month period a Cure Termination Event occurs or is
discovered by Lender, Lender may provide written notice thereof to the Authority
and the Authority's Cure Period shall terminate upon receipt of such notice.
The Authority shall be entitled to recover from the Borrower all sums paid with
respect to the Lender Loan by the Authority pursuant to its right to cure, so
long as no other Event of Default has occurred and so long as a
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<PAGE>
recovery would not result in another Event of Default, and further that such
right of recovery is subordinate to Lender's rights to payment in full of the
Lender Loan. In the event that the Authority recovers all such sums, plus
interest at the rate on the Lender Loan and all costs and expenses incurred in
connection therewith, then the Authority shall reinstate its Guarantee of the
Lender Loan to the amount that would otherwise have been in effect on the date
of such reinstatement if the Event of Default had not occurred.
In addition to the foregoing, the Authority shall have the right, but
not the obligation, at any time during the Authority Cure Period, to make
payment to Lender of all amounts outstanding under the Lender Loan Documents,
and thereupon the Authority shall be deemed to have purchased and shall succeed
to the rights and interests of Lender under the Lender Loan Documents. In the
event that the Authority so purchases the rights and interests of Lender under
the Lender Loan Documents, Lender shall execute and deliver such assignments and
other documents as the Authority shall reasonably request to reflect such
purchase by the Authority, such assignments to be without recourse,
representation or warranty to or by the Lender.
In the event that an Event of Default under such Lender Loan Documents
has occurred and the Authority Cure Period for such Event of Default is not
applicable, or has expired without such Event of Default being cured, then
Lender shall thereafter be free to enforce its rights and exercise its remedies
under the
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<PAGE>
Lender Loan Documents without the consent of the Authority and shall be free to
make demand upon the Authority under its Guarantee, on the terms and subject to
the conditions set forth in Section 10 hereof.
Section 10. Payment of Estimated Loss. In the event that (i) an
-------------------------
Event of Default has occurred, (ii) the Authority Cure Period for such Event of
Default has expired without cure of such Event of Default (or the Authority Cure
Period is not applicable) and (iii) either (A) Lender has accelerated the
maturity of the Lender Loan or (B) Lender cannot accelerate the maturity of the
Lender Loan because a proceeding under the Federal Bankruptcy laws is pending
with respect to the Borrower, then Lender shall be entitled to demand, and the
Authority shall be obligated to make, payment under the Guarantee, which payment
shall equal that portion of the Guarantee Amount or Estimated Loss as is
described below. Lender shall make such demand on the Authority by delivering
to the Authority a statement, which shall indicate Lender's estimated loss on
the Lender Loan based on a liquidation of the collateral securing the Lender
Loan and enforcement by Lender of its other rights and remedies under the Lender
Loan Documents (the "Estimated Loss"), shall contain such qualifications,
limitations, and assumptions as Lender shall reasonably deem necessary, and
shall include (i) the most recent appraisal in the Lender's possession of all
fixed asset collateral for the Lender Loan and (ii) a statement of the
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<PAGE>
methodology used by Lender in determining the value of all other collateral.
Upon delivery of such a statement, Lender shall be entitled to receive under
this Guarantee eighty percent (80%) of the lesser of (i) the Estimated Loss and
(ii) the Guarantee Amount as of the date that Lender notified the Authority of
the Event of Default, less any unreimbursed payments on this Guarantee since
such date. The Authority will make payment to Lender of such amount within
thirty (30) days of delivery of such statement. Any payment by the Authority of
all or any portion of the Guarantee Amount shall permanently and irrevocably
reduce the Guarantee Amount by the amount of such payment in accordance with the
provisions of Section 8, but subject to reinstatement pursuant to Section 9.
Section 11. Lender Recovery and Payment of Final Loss. In the event
-----------------------------------------
that the Authority has made a payment to Lender pursuant to this Guarantee,
Lender shall pursue enforcement of such rights and remedies of Lender under the
Lender Loan Documents in accordance with prudent and customary bank practices,
including, without limitation, foreclosure against collateral securing the
Lender Loan, as and to the extent that the enforcement of such rights and
remedies would be prudent and commercially reasonable for Lender to pursue if it
were acting solely for its own account in order to realize the maximum recovery
on the Lender Loan. After Lender reasonably believes there is no reasonable
prospect for any further material
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<PAGE>
recovery, Lender shall provide a written certification to the Authority stating
that there is no reasonable prospect for any further material recovery and
setting forth (i) the total principal, interest and Liquidation Costs then due
and owing under the Lender Loan Documents with respect to the Lender Loan (the
"Total Indebtedness"), and (ii) the aggregate amount recovered by the Lender
under the Lender Loan Documents which the Lender is entitled to retain (the
"Recoveries"). In the event that the sum of (i) the Recoveries and (ii) all
amounts previously paid by the Authority under this Guarantee exceed the Total
Indebtedness, then Lender shall promptly remit to the Authority the amount of
such excess, provided that the Authority shall not be entitled to receive from
Recoveries amounts in excess of all amounts paid by the Authority under this
Guarantee. In the event that the sum of (i) the Recoveries and (ii) all amounts
previously paid by the Authority under this Guarantee is less than the Total
Indebtedness, then the Authority shall promptly remit to Lender the lesser of
(x) such difference and (y) the Guarantee Amount as of the date Lender notified
the Authority of the Event of Default pursuant to Section 9 hereof, less all
unrecovered payments made by the Authority on this Guarantee since such date. If
at any time after such settlement, Lender realizes additional Recoveries such
that the sum of (i) all Recoveries realized by the Lender and (ii) all amounts
paid by the Authority under this Guarantee exceeds the Total Indebtedness,
Lender shall notify the Authority of such excess
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<PAGE>
and shall promptly remit to the Authority the same, provided that the Authority
shall not be entitled to receive from Recoveries amounts in excess of all
amounts paid by the Authority under this Guarantee. Similarly, if at any time
Lender receives any Recoveries which Recoveries or any part thereof are
subsequently invalidated, declared to be fraudulent or preferentially set aside
and/or required to be repaid to a trustee, receiver or any other party under any
bankruptcy laws, state or federal law, common law or equitable doctrine, to the
extent that the sum of (i) all Recoveries actually retained by the Lender and
(ii) all amounts paid by the Authority under this Guarantee is less than the
Total Indebtedness, Lender shall so notify the Authority and the Authority shall
promptly remit to Lender the lesser of (x) such difference and (y) the Guarantee
Amount as of the date Lender notified the Authority of the Event of Default
pursuant to Section 9 hereof, less all unreimbursed payments made by the
Authority on this Guarantee since such date.
Section 12. Sale of Lender Loan; Assignment of Rights. Lender shall
-----------------------------------------
be permitted at any time to sell participations or other interests in the Lender
Loan without cancelling, modifying or affecting in any way this Guarantee, so
long as Lender continues to service the Lender Loan and otherwise performs all
of its obligations to the Authority hereunder. In the event that Lender
transfers all or part of the Lender Loan and does not continue to service the
Lender Loan, then this Guarantee of such
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<PAGE>
Lender Loan shall automatically terminate and be of no force and effect, unless
the Authority has otherwise consented in writing, which consent shall not be
unreasonably withheld. For purposes of this Section, the term "transfer" shall
include, without limitation, any assignment, assumption, sale, participation or
other conveyance of the Lender Loan, including as part of a transfer of Lender's
loan portfolio; any merger or consolidation of Lender with another entity that
is not currently an affiliate of the Lender, unless Lender is the surviving
entity; and the administration of Lender by the Federal Deposit Insurance
Corporation or the Resolution Trust Corporation or any equivalent agency,
department or successor thereto, as receiver or otherwise.
Section 13. No Benefit to Borrower. In no event shall any provision
-----------------------
of this Guarantee be deemed to give any rights to the Borrower, this Guarantee
being solely for the purpose of defining the respective rights of Lender and the
Authority. No payment by the Authority on this Guarantee shall be deemed to
discharge or release the Borrower from any of its obligations under the Lender
Loan Documents.
Section 14. Fees and Expenses of Authority. Lender shall pay or
------------------------------
cause the Borrower to pay an annual guarantee fee to the Authority on the date
of closing of the Lender Loan and on each anniversary of such date, which
guarantee fee shall be equal to
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<PAGE>
the product of (i) the Scheduled Amortization Loan Balance on such date
multiplied by (ii) the applicable percentage for such date determined as
hereafter set forth (the "Fee Percentage"). The Fee Percentage on the closing
date shall be one-half of one percent (.5%). The Fee Percentage shall increase
each year by 37.5 basis points, up to a maximum of one and one-quarter percent
(1.25%). Such fees shall be in addition to any application or commitment fees.
If such annual guarantee fee is not paid within fifteen (15) days of the
date due, then the Authority shall be entitled to deliver to Tender a notice
providing that this Guarantee may be terminated if such annual guarantee fee is
not paid according to the provisions hereunder. Upon receipt of such notice,
Lender will have a period of thirty (30) days either to cause payment of the
guarantee fee by the Borrower or make such payment to the Authority itself.
Such payment by Lender will be deemed an event of default under the Lender Loan
Documents. In the event that such fee is not paid within such thirty (30) day
period, the Authority may terminate this Guarantee by providing written notice
of such termination to Lender, whereupon the Authority's obligations under this
Guarantee shall immediately be deemed terminated and of no further force or
effect. The Authority may not terminate this Guarantee for nonpayment of the
guarantee fee after demand has been made on this Guarantee.
The Borrower shall be liable to the Authority for all of the Authority's
costs and expenses relating to the Lender Loan,
-22-
<PAGE>
including, without limitation, reasonable attorneys' fees and expenses. It shall
be a condition to issuance of this Guarantee that all such costs and expenses of
the Authority incurred prior thereto shall have been paid in full by the
Borrower.
Section 15. Termination of Guarantee. If Lender shall be in default
------------------------
under the terms of this Guarantee with respect to the Lender Loan, the Authority
may notify Lender of such default in writing and Lender shall have sixty (60)
days from the date of receipt of such written notice to cure such default;
provided, however, that if such default cannot be reasonably cured in such sixty
(60) day period, Lender shall have an additional period of sixty (60) days to
cure such default so long as Lender is making a diligent attempt to cure during
the initial sixty (60) day period. The Authority shall not be required to make
any payments on this Guarantee during such 60 day periods if a default by Lender
hereunder has occurred and is continuing. If Lender does not cure such default
within the cure period set forth above, the Authority may terminate this
Guarantee by providing written notice to Lender to such effect. Notwithstanding
the foregoing, the Authority shall not be entitled to terminate this Guarantee
after the issuance thereof for any default of Lender which occurs prior to the
issuance of the Guarantee, except in the event of fraud by Lender, or as
provided in Section 3 hereof.
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<PAGE>
The rights of the Authority under this Section shall be in addition to
and not in lieu of any other rights or remedies the Authority may have upon
breach of this Agreement by Lender.
Section 16. Adequacy of Bank Capitalization. In the event that
-------------------------------
Lender's tier 1 capital to assets ratio shall at any time fall below three
percent (3%) Lender shall promptly notify the Authority. In such event, the
Authority may direct Lender to use its best efforts to transfer the Lender Loan
to another lender who is participating in the Guarantee program or is otherwise
acceptable to the Authority. The Authority may terminate this Guarantee if it
has not been so transferred within ninety (90) days of such direction by
providing written notice thereof to Lender; provided, however that if, prior to
the termination of this Guarantee, Lender's tier 1 capital to assets ratio is
once again above three percent (3%), then the Authority shall no longer be
entitled to direct Lender to transfer the Lender Loan or to terminate this
Guarantee. Lender and the Authority acknowledge that federal bank regulatory
agencies may formulate a new classification system for the capitalization of
banks which are subject to the authority of such agencIes. Upon implementation
of such classification system, Lender and the Authority will revise this Section
to employ such classification system in evaluating the adequacy of Lender's
capitalization.
Section 17. Miscellaneous.
--------------
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<PAGE>
17.1 This Guarantee may only be amended by an instrument in
writing executed by Lender and the Authority.
17.2 All of the provisions hereof shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, provided that any assignment by(Lender of its rights, duties or
obligations hereunder shall be subject to terms of Section 12 hereof.
17.3 All notices and other communications provided hereunder
shall be in writing and mailed by registered or certified mail (return receipt
requested), postage paid, or delivered by hand or by overnight courier or by
telecopier or telex (with prompt confirmation by telephone), addressed to the
respective parties hereto at their respective addresses set forth in the first
paragraph hereof, or to such other address as shall have been furnished in
writing to the party initiating the notice or communication. Any notice or
communication so addressed and mailed or delivered shall be deemed given when
actually received by addressee.
17.4 This Guarantee shall be governed by and construed in
accordance with the laws of the State.
17.5 The section headings hereof appear only as a matter of
convenience and shall not affect the construction of this Guarantee.
Section 18. Requirements of the Act. Pursuant to the terms of the
-----------------------
Act, the obligations of the Authority under this Guarantee
-25-
<PAGE>
shall first be paid from any amounts readily available in the Connecticut Works
Guarantee Fund (as defined in the Act) before any amounts available from the
bond authorization contained in Section 32-262 of the Connecticut General
Statutes are utilized. In accordance with and subject to the Act, the faith and
credit of the State of Connecticut is pledged, pursuant to such bond
authorization and in accordance with Section 3-20 of the Connecticut General
Statutes, to provide to the Connecticut Works Guarantee Fund moneys as and when
necessary to make timely payments of all amounts required to be paid under the
terms of this Guarantee, but not in excess of the amount of bonds so authorized
by the State of Connecticut Bond Commission for such purpose less the amounts
paid by the State of Connecticut for deposit to the Connecticut Works Guarantee
Fund. NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, THE OBLIGATION OF THE
AUTHORITY TO MANE PAYMENTS UNDER THIS GUARANTEE SHALL BE LIMITED SOLELY TO SUCH
SOURCES AND SHALL NOT CONSTITUTE A DEBT OR LIABILITY OF THE AUTHORITY OR THE
STATE OF CONNECTICUT.
The Lender and the Borrower each acknowledges that this Guarantee
Certificate has been issued subject to the terms of Section 32-5a of the
Connecticut General Statutes, as amended by Public Act 93-218 and Public Act
93-360. Section 32-5a:
(i) provides that a business organization receiving
financial assistance from the Authority shall not relocate
outside of the State of Connecticut for (A) ten (10) years after
receiving such assistance from the Authority or (B) during the
term that any loan or loan guarantee constituting such financial
assistance is outstanding, whichever is longer (such period
-26-
<PAGE>
being hereafter referred to as the "Benefit Period"), unless the
full amount of the assistance is repaid to the Authority and a
penalty equal to five percent (5%) of the total assistance
received is paid to the Authority; and
(ii) provides that if such business organization relocates
within the State of Connecticut during the Benefit Period, such
business organization shall offer employment at the new location
to its employees from the original location if such employment
is available.
Notwithstanding anything herein to the contrary, if at any time within
the Benefit Period the Borrower relocates (as such term is defined in Section
32-5a of the Connecticut General Statutes, and regulations related thereto, as
the same may be amended from time to time) outside of the State of Connecticut
(an "Out-of-State Relocation") or relocates within the State of Connecticut and
does not offer employment as provided above, then:
(1) such action shall constitute an immediate event of
default under the Lender Loan Documents and the Authority, at
its option, may terminate this Guarantee (if the same is still
in effect) by giving written notice thereof to the Lender
following such Out-of-State Relocation or failure to provide
employment, which termination shall be effective ninety (90)
days after the date of such notice unless the Lender makes
demand under this Guarantee prior to such date. In the event
that the Lender makes demand under this Guarantee as a result of
such notice and prior to the effective date of such termination,
this Guarantee shall remain in effect with respect to the
Authority's and the Lender's rights and obligations following a
demand hereon as provided in this Guarantee, except that the
Authority shall be deemed to have waived the Authority Cure
Period; and
(2) with respect to an Out-of-State Relocation, the Borrower
shall immediately upon demand pay to the Authority an amount
equal to the full amount paid by the Authority at any time on
account of
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<PAGE>
this Guarantee, if any, and a penalty equal to five percent (5%)
of the Guarantee Amount at the time this Guarantee was initially
issued, such penalty to be due and payable whether or not the
Authority has made any payment on account of this Guarantee;
provided that the Authority's right to receive payment of the
full amount paid on account of this Guarantee (but not its right
to receive payment of such penalty) shall be subordinate in
right of payment to repayment of the Lender Loan in accordance
with the terms of this Guarantee.
If the Borrower decides to relocate within or outside of the State of
Connecticut at any time within the Benefit Period, the Borrower agrees to
provide the Authority and the Lender with immediate written notice when such
decision is made, together with such other information concerning such
relocation as the Authority or the Lender may request.
The Borrower's obligations pursuant to this Section 18 shall survive the
repayment of the Lender Loan and the termination of this Guarantee.
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<PAGE>
IN WITNESS WHEREOF, the parties, by their duly authorized officers,
have executed this Guarantee as of the date first above written.
CONNECTICUT DEVELOPMENT AUTHORITY
By /s/ M. Bruand
------------------------------------
THE BANK OF NEW YORK
By /s/ David Duffy, VP
------------------------------------
-29-
<PAGE>
The undersigned acknowledges and agrees to the terms of this Guarantee
Agreement, including without limitation those provisions specifically binding
upon the undersigned. The undersigned acknowledges and agrees that any payment
by the Authority hereunder shall not be deemed to be a payment on the Lender
Loan, but rather shall constitute a purchase by the Authority of an interest in
the Lender Loan, and such payment shall not in any way discharge or release the
undersigned from any of its obligations on the Lender Loan. The undersigned
acknowledges and agrees that the Authority shall be entitled to receive and
review any and all financial information and other documentation relating to the
undersigned in possession of the Lender. The undersigned authorizes Lender to
make all such information available to the Authority, and waives any right it
may have to restrict or prohibit such disclosure.
TSI INTERNATIONAL SOFTWARE, LTD.
By /s/ Richard Bankosky
-----------------------------
-30-
<PAGE>
AMENDMENT NO. 1 TO
GUARANTEE AGREEMENT
-------------------
This AMENDMENT NO. 1 (this "Amendment") to the Guarantee Agreement (the
"Guarantee Agreement") dated as of August 22, 1994 between the CONNECTICUT
DEVELOPMENT AUTHORITY (the "Authority") and THE BANK OF NEW YORK (the "Bank"),
is made and entered into as of the 21st day of August, 1996.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Authority and the Bank wish to amend certain provisions of
the Credit Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Authority and the Bank agree
as follows:
1. The last sentence in Section 8 of the Guarantee Agreement is
hereby deleted in its entirety and replaced with the following:
Notwithstanding the foregoing, the Guarantee Amount shall
automatically reduce to zero and this Guarantee shall terminate on the
date two years and ninety days from the date hereof, unless a demand on
this Guarantee is outstanding on such date; provided, however, that in
the event that an Authority Cure Period is in effect on such date, the
Guarantee Amount shall not reduce to zero and this Guarantee shall not
terminate until forty-five (45) days after the end of such Authority
Cure Period.
2. All references in the Guarantee Agreement to "this Agreement,"
"herein," "hereof" and "hereunder" shall mean the Guarantee Agreement as amended
by this Amendment.
3. This Amendment shall be construed in accordance with and
governed by the laws of the State of Connecticut (without giving effect to its
choice of law principles).
4. This Amendment may be executed in one or more counterparts, each
of which shall be deemed an original instrument, and all such counterparts
together shall constitute but one agreement.
-1-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their duly authorized officers as of the date first above written.
CONNECTICUT DEVELOPMENT AUTHORITY
By: /s/Richard Graff
---------------------------
Name:
Title:
THE BANK OF NEW YORK
By: /s/David Duffy
---------------------------
Name:
Title:
Acknowledged and consented to as
of the 21st day of August, 1996:
TSI INTERNATIONAL SOFTWARE, LTD.
By: /s/Ira Gerard
--------------------------
Name:
Title:
-2-
<PAGE>
AMENDMENT NO. 2 TO
GUARANTEE AGREEMENT
-------------------
This AMENDMENT NO. 2 (this "Amendment") to the Guarantee Agreement (the
"Guarantee Agreement") dated as of August 22, 1994 between the CONNECTICUT
DEVELOPMENT AUTHORITY (the "Authority") and THE BANK OF NEW YORK (the "Bank"),
as amended by Amendment No. 1 thereto dated as of August 21, 1996 (as so
amended, the "Guarantee Agreement"), is made and entered into as of the 18th day
of November, 1996.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Authority and the Bank wish to amend certain provisions of
the Guarantee Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Authority and the Bank agree
as follows:
1. The following definitions in Section 1 of the Guarantee
Agreement are hereby deleted in their entirety and replaced with the following:
"Guarantee" shall mean this agreement of the Authority to
guarantee a portion of the Lender Loan under the Guarantee Program, as
amended, supplemented or modified from time to time.
"Fee Percentage" shall mean one and one-quarter percent (1.25%)
per annum.
2. The second paragraph of Section 7 of the Guarantee is hereby
amended by deleting the words "reduced in proportion to the reduction in" and
inserting in lieu thereof "determined in part based on".
3. Section 8 of the Guarantee is hereby deleted in its entirety and
replaced with the following:
Section 8. Guarantee Amount. The Guarantee Amount at any given
----------------
time shall be equal to (i) the lesser of (a) thirty percent (30%) of the
then outstanding principal balance of the Lender Loan, (b) thirty
percent (30%) of the Scheduled Amortization Loan Balance as of such date
and (c) $600,000, minus (ii) the total of all payments theretofore made
by the Authority under this Guarantee. Upon any payment by the
-1-
<PAGE>
Authority under this Guarantee (other than payments pursuant to the
Authority's cure rights described in Section 9 which are not allocated
to principal on the Lender Loan), the Guarantee Amount shall be
immediately and automatically reduced by the amount of such payment,
except that the Guarantee Amount may be reinstated as provided in
Section 9 hereof. Notwithstanding the foregoing, the Guarantee Amount
shall automatically reduce to zero and this Guarantee shall terminate on
November 18, 1998, unless a demand on this Guarantee is outstanding on
such date; provided, however, that in the event that an Authority Cure
Period is in effect on such date, the Guarantee Amount shall not reduce
to zero and this Guarantee shall not terminate until forty-five (45)
days after the end of such Authority Cure Period.
4. The first paragraph of Section 14 of the Guarantee is hereby
deleted in its entirety and replaced with the following:
Lender shall pay or cause the Borrower to pay an annual
guarantee fee to the Authority on the date of closing of the Lender Loan
and on each anniversary of such date, which guarantee fee shall be equal
to the product of (i) the lesser of (a) the Scheduled Amortization Loan
Balance on such date and (b) Two Million Dollars ($2,000,000), and (ii)
the Fee Percentage.
5. All references in the Guarantee Agreement to "this Agreement,"
"herein," "hereof" and "hereunder" shall mean the Guarantee Agreement as amended
by this Amendment.
6. This Amendment shall be construed in accordance with and
governed by the laws of the State of Connecticut (without giving effect to its
choice of law principles).
7. This Amendment may be executed in one or more counterparts, each
of which shall be deemed an original instrument, and all such counterparts
together shall constitute but one agreement.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their duly authorized officers as of the date first above written.
CONNECTICUT DEVELOPMENT AUTHORITY
By: /s/ Nancy A. Watt
----------------------------
Nancy A. Watt
Its Loan Closing Administrator
THE BANK OF NEW YORK
By: /s/ David Duffy
---------------------------
Name:
Title:
Acknowledged and consented to as
of the 18th day of November, 1996:
----
TSI INTERNATIONAL SOFTWARE, LTD.
By: /s/ Ira Gerard
----------------------------
Name:
Title:
-3-
<PAGE>
EXHIBIT 10.15
EMPLOYMENT AGREEMENT
--------------------
Employment Agreement ("Agreement") made and entered into effective no later than
December 5, 1995 by and between Eric A. Amster (the "Employee"), and TSI
--------------
International Software Ltd. ("TSI"), a Delaware corporation having its principal
place of business at 45 Danbury Road, Wilton, Connecticut 06897.
WHEREAS, TSI wishes to employ the Employee and the Employee wishes to be
employed under the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
1. Employment and Term.
--------------------
1.1 TSI agrees to employ the Employee as Vice President of Sales and the
Employee agrees to render his/her full-time services to TSI for a term of one
(1) year, which term shall commence as of the date of this Agreement and
terminates at the end of the first full fiscal year thereafter, subject to the
terms of Article 6 below and annual renewal for one (1) year increments as set
forth in Paragraph 1.2. The Employee agrees to devote his/her full business
time and the best of his/her abilities to the faithful and diligent performance
of his/her services to TSI under the direction of the President of TSI.
1.2 Unless either party shall have given written notice of non-renewal to
the other party no fewer than thirty (30) days before the expiration of the
initial or then current renewal term, this Agreement shall automatically renew
for successive periods of one (1) year.
2. Compensation.
-------------
2.1 TSI agrees to pay the Employee a salary at the annualized rate of One
Hundred Twenty-Five Thousand Dollars ($125,000.00), payable in accordance with
TSI's standard payroll practices. This salary is for the initial term of this
Agreement, and thereafter will be as determined by the President of TSI.
2.2 TSI will pay the Employee bonuses and commissions targeted at One
Hundred Forty-Five Thousand Dollars ($145,000.00) based upon meeting revenue
related goals (see offer letter attached).
1
<PAGE>
3. Benefits.
---------
3.1 The Employee shall be entitled to participate on the same basis,
subject to the same qualifications as other TSI employees and pursuant to TSI's
then prevailing policies, in any group medical, hospitalization, or other fringe
benefit plans in effect with respect to employees of TSI in general, but not
including any group profit sharing or other profit-based incentive program.
3.2 The Employee shall be entitled to the same number of paid holidays per
year as set forth by TSI for its employees in general plus twenty (20) paid
vacation days to be scheduled by the mutual agreement of the parties.
4. Stock Options. As soon as is practical after signing of this Agreement by
-------------
both parties, but no later than three (3) months after signing, TSI shall issue
24,000 options to the Employee as described in the TSI Stock Option Plan
attached hereto as Appendix A. There will be a change to Section 12.01 of the
Stock Option Plan as we have discussed.
5. Employment Guidelines. The Employee agrees to at all times be bound by and
---------------------
adhere to the Conditions of Employment attached hereto as Appendix B and
incorporated herein by reference, and to use his/her best efforts to protect the
proprietary and confidential materials and information of TSI and of TSI's
clients, including valuable trade secrets.
6. Termination.
------------
6.1 This Agreement shall terminate and all payments due hereunder shall
cease, except to the extent accrued, upon death of the Employee, without further
act of TSI. If, however, at the time of Employee's death, Employee is receiving
severance compensation per the terms of Paragraph 1.3, unpaid severance will be
paid to the Employee's estate in a lump sum.
6.2 TSI shall have the right to terminate this Agreement and any payments
due hereunder upon prior written notice to the Employee if a licensed physician
employed by the Board of Directors of TSI shall determine that the Employee, by
reason of physical or mental disability (excluding infrequent and temporary
absences due to ordinary transitory illness) shall be unable to perform the
services required of him/her hereunder for more than three (3) consecutive
months or an aggregate of six (6) months during any twelve (12) month period,
except as otherwise provided by law.
2
<PAGE>
6.3 TSI shall have the right to terminate this Agreement, without further
compensation, upon a breach of failure to fulfill and perform obligations and
duties hereunder, which condition, breach or failure Employee shall fail to
remedy within ten (10) days after written demand from TSI. Further, TSI shall
have the right to terminate this Agreement, without further compensation, if,
(i) in the opinion of the Board of Directors of TSI, the Employee is guilty of
insubordination, fraud, dishonesty, misconduct or negligence in connection with
the performance of duties hereunder, (ii) the Employee is convicted of a felony
or of a crime involving moral turpitude, (iii) the Employee causes TSI
disrepute, or (iv) otherwise for good cause.
6.4 TSI shall have the right to terminate this Agreement, for convenience,
at the discretion of the Board of Directors. If such termination occurs, the
Employee will receive a severance compensation of six (6) months of salary, as
outlined in paragraph 2.1, payable in accordance with TSI's standard payroll
practices, and six (6) months of continuance of eligible benefits as outlined in
Paragraph 3.1, and shall be entitled to no other payment or benefit from TSI.
6.5 Upon termination or expiration of this Agreement, irrespective of the
reason therefor, the Employee shall promptly turn over to TSI all proprietary
and confidential materials of the kind referred to in Section 5 and all tangible
forms of the Employee's work product (including work files) without retaining
any copies or duplicates thereof, except as to which TSI may in writing give
permission.
7. Negative Covenant.
------------------
7.1 The Employee agrees that during the term of this Agreement (including
any renewal terms hereunder) and for a period of one (1) year following the
termination of this Agreement, he/she will not, directly or indirectly, own,
operate, manage, join, control, or participate in the ownership, management,
operation or control of, or be connected with as a partner, stockholder,
director, officer, agent, employee, or consultant, any business, firm, or
corporation in any capacity that involves the development, production or sale of
any product that is directly competitive with TSI in the territories TSI serves;
provided, however, that nothing in this Section 7.1 shall bar the acquisition of
any publicly traded securities which do not confer upon the Employee the right
to control or influence the policy of the issuer.
7.2 The Employee further agrees that for a period of one (1) year following
the termination of this Agreement, he/she will not, without the prior written
consent of TSI, (a) solicit for employment any of the staff of TSI or of TSI's
customers, or (b) solicit the business of TSI's customers for products that are
directly competitive to TSI products.
3
<PAGE>
7.3 In the event a court of competent jurisdiction finds any part of this
Article 7 unenforceable, the parties agree that such finding shall not effect or
render invalid or unenforceable any other provision of this Article. The
parties further agree to execute any amendments necessary to accomplish the
intent of this Article to the fullest extent possible under the law.
8. Remedies. The parties hereto recognize that, in the event of any breach by
--------
the Employee of the provisions of Sections, 5, 6 or 7 hereof, damages may be
difficult, if not impossible, to ascertain and it is therefore agreed that TSI,
in addition to and without limiting any other remedy it might have under this
Employment Agreement, or at law or in equity, shall be entitled to an injunction
against the Employee issued by any court of competent jurisdiction enjoining any
such breach. The Employee agrees to reimburse TSI for all out-of-pocket costs
and expenses, including reasonable attorney's fees, incurred by TSI by reason of
any such breach; provided, however, that if a court of competent jurisdiction in
any action wherein TSI is the claimant with respect to such breach shall
determine that no such breach occurred or is likely, and if any appeal therefor
be taken by TSI where such determination shall be fully and finally upheld, TSI
shall reimburse the Employee for all out-of-pocket costs and expenses, including
reasonable attorney's fees, incurred by the Employee by reason of such action
and any appeal.
4
<PAGE>
9. Representation and Warranty. Employee represents and warrants that he/she
---------------------------
is not now and was not on the date of commencement of this Agreement, a party to
any Agreement, contract or understanding, whether of employment or otherwise,
which would in any way restrict or prohibit him/her from undertaking or
performing employment in accordance with the terms and conditions of this
Agreement.
10. Miscellaneous.
--------------
10.1 Should any provision or part of this Employment Agreement be declared
void or unenforceable by any court or administrative body of competent
jurisdiction, such provisions or part shall be deemed severable and, without
further action by the parties to this Agreement, shall be severed from the
remainder of this Agreement which shall continue in all respects valid and
enforceable.
10.2 Any notices or communications hereunder shall be in writing and shall
be personally delivered or sent by registered or certified mail to the addresses
specified herein or, after proper notice, to such addresses as the parties may
specify.
10.3 This Agreement shall be binding upon and inure to the benefit of TSI,
its successors or assigns, or any corporation which acquires all or
substantially all of its assets. This Agreement is personal as to the Employee
and shall not be assignable by the Employee.
10.4 This Agreement constitutes the entire understanding of the parties
hereto with respect to the Employee's employment and his/her compensation
therefor and supersedes any prior Agreements and understandings between the
parties concerning employment or compensation.
10.5 This Agreement shall be governed by and construed under the laws of
the State of Connecticut.
5
<PAGE>
10.6 The captions appearing in this Agreement appear as a matter of
convenience only and in no way define or limit the scope and intent of any of
the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first set forth above.
For TSI International Software Ltd. For the Employee:
45 Danbury Road
Wilton, CT 06897
By: /s/ Constance Galley By: /s/ Eric Amster
------------------------ -------------------------
Constance F. Galley Eric Amster
President and CEO Address: 8 Pebble Lane
New Milford, CT 06776
6
<PAGE>
EXHIBIT 10.16
EMPLOYMENT AGREEMENT
--------------------
Employment Agreement ("Agreement") made and entered into effective no later than
---------
October 5, 1995 by and between Ira Gerard (the "Employee"), and TSI
---------- --------
International Software Ltd. ("TSI"), a Delaware corporation having its principal
---
place of business at 45 Danbury Road, Wilton, Connecticut 06897.
WHEREAS, TSI wishes to employ the Employee and the Employee wishes to be
employed under the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
1. EMPLOYMENT AND TERM.
-------------------
1.1 TSI agrees to employ the Employee as Vice President of Finance and
Administration and Chief Financial Officer, and the Employee agrees to render
his full-time services to TSI for a term of one (1) year, which term shall
commence as of the date of this Agreement and terminates at the end of the first
full fiscal year thereafter, subject to the terms of Article 6, below, and
annual renewal for one (1) year increments as set forth in Paragraph 1.2. The
Employee agrees to devote his full business time and the best of his abilities
to the faithful and diligent performance of his services to TSI under the
direction of the President of TSI.
1.2 Unless either party shall have given written notice of non-renewal to
the other party no fewer than thirty (30) days before the expiration of the
initial or then current renewal term, this Agreement shall automatically renew
for successive periods of one (1) year.
1.3 In the event TSI is sold or recapitalized or substantially all of the
assets of TSI are sold (the "Sale of TSI"), the remaining term of this Agreement
-----------
shall be one (1) year from the date of such transaction unless otherwise agreed
between the parties. If termination should occur as a result of the Sale of
TSI, the Employee will receive a severance compensation of six (6) months salary
as outlined in Paragraph 2.1, payable in accordance with TSI's standard payroll
practices and six (6) months continuance of eligible benefits as outlined in
Paragraph 3.1.
2. COMPENSATION.
------------
2.1 TSI agrees to pay the Employee a salary at the annualized rate of One
Hundred Forty-Six Thousand Dollars ($146,000.00), payable in accordance with
TSI's standard payroll practices. This salary is for the initial term of this
Agreement, and thereafter will be as determined by the President of TSI.
2.2 A bonus plan of Twenty-Five Thousand Dollars ($25,000.00) per year for
meeting corporate objectives will be available.
<PAGE>
3. BENEFITS.
--------
3.1 The Employee shall be entitled to participate on the same basis,
subject to the same qualifications as other TSI employees and pursuant to TSI's
then prevailing policies, in any group medical, hospitalization, or other fringe
benefit plans in effect with respect to employees of TSI in general but not
including any group profit sharing or other profit-based incentive program.
3.2 The Employee shall be entitled to the same number of paid holidays per
year as set forth by TSI for its employees in general plus fifteen (15) paid
vacation days to be scheduled by the mutual agreement of the parties.
4. STOCK OPTIONS. As soon as is practical after signing of this Agreement by
-------------
both parties, but no later than three (3) months after signing, TSI shall issue
approximately 48,000 TSI stock options to the Employee as described in the TSI
Stock Option Plan attached hereto as Appendix A.
5. EMPLOYMENT GUIDELINES. The Employee agrees to at all times be bound by and
---------------------
adhere to the Conditions of Employment attached hereto as Appendix B and
incorporated herein by reference, and to use his best efforts to protect the
proprietary and confidential materials and information of TSI and of TSI's
clients, including valuable trade secrets.
6. TERMINATION.
-----------
6.1 This Agreement shall terminate and all payments due hereunder shall
cease, except to the extent accrued, upon death of the Employee, without further
act of TSI. If, however, at the time of Employee's death, Employee is receiving
severance compensation per the terms of Paragraph 1.3, unpaid severance will be
paid to the Employee's estate in a lump sum.
6.2 TSI shall have the right to terminate this Agreement and any payments
due hereunder upon prior written notice to the Employee if a licensed physician
employed by the Board of Directors of TSI shall determine that the Employee, by
reason of physical or mental disability (excluding infrequent and temporary
absences due to ordinary transitory illness) shall be unable to perform the
services required of him hereunder for more than three (3) consecutive months or
an aggregate of six (6) months during any twelve (12) month period, except as
otherwise provided by law.
6.3 TSI shall have the right to terminate this Agreement, without further
compensation, upon a breach or failure to fulfill and perform obligations and
duties hereunder, which condition, breach or failure Employee shall fail to
remedy within ten (10) days after written demand from TSI. Further, TSI shall
have the right to terminate this Agreement, without further compensation, if,
(i) in the opinion of the Board of Directors of TSI, the Employee is guilty of
insubordination, fraud, dishonesty, misconduct or negligence in connection with
the performance of duties hereunder, (ii) the Employee is convicted of a felony
or of a crime involving moral turpitude, (iii) the Employee causes TSI
disrepute, or (iv) otherwise for good cause.
2
<PAGE>
6.4 TSI shall have the right to terminate this Agreement, for convenience,
at the discretion of the Board of Directors. If such termination occurs, the
Employee will receive a severance compensation of six (6) months salary as
outlined in Paragraph 2.1, payable in accordance with TSI's standard payroll
practices, and six (6) months of continuance of eligible benefits as outlined in
Paragraph 3.1, and shall be entitled to no other payment or benefit from TSI.
6.5 Upon termination or expiration of this Agreement, irrespective of the
reason therefor, the Employee shall promptly turn over to TSI all proprietary
and confidential materials of the kind referred to in Section 5 and all tangible
forms of the Employee's work product (including work files) without retaining
any copies or duplicates thereof, except as to which TSI may in writing give
permission.
7. NEGATIVE COVENANT.
-----------------
7.1 The Employee agrees that during the term of this Agreement (including
any renewal terms hereunder) and for a period of one (1) year following the
termination of this Agreement, he will not, directly or indirectly, own,
operate, manage, join, control, or participate in the ownership, management,
operation or control of, or be connected with as a partner, stockholder,
director, officer, agent, employee, or consultant, any business, firm, or
corporation in any capacity that involves the development, production or sale of
any product that is directly competitive with TSI in the territories TSI serves;
provided, however, that nothing in this Section 7.1 shall bar the acquisition of
any publicly traded securities which do not confer upon the Employee the right
to control or influence the policy of the issuer.
7.2 The Employee further agrees that for a period of one (1) year
following the termination of this Agreement, he will not, without the prior
written consent of TSI, (a) solicit for employment any of the staff of TSI or of
TSI's customers, or (b) solicit the business of TSI's customers for products
that are directly competitive to TSI products.
7.3 In the event a court of competent jurisdiction finds any part of this
Article 7 unenforceable, the parties agree that such finding shall not effect or
render invalid or unenforceable any other provision of this Article. The
parties further agree to execute any amendments necessary to accomplish the
intent of this Article to the fullest extent possible under the law.
8. REMEDIES. The parties hereto recognize that, in the event of any breach by
--------
the Employee of the provisions of Sections 5, 6 or 7 hereof, damages may be
difficult, if not impossible, to ascertain and it is therefore agreed that TSI,
in addition to and without limiting any other remedy it might have under this
Employment Agreement, or at law or in equity, shall be entitled to an injunction
against the Employee issued by any court of competent jurisdiction enjoining any
such breach. The Employee agrees to reimburse TSI for all out-of-pocket costs
and expenses, including reasonable attorney's fees, incurred by TSI by reason of
any such breach; provided, however, that if a court of competent jurisdiction in
any action wherein TSI is the claimant with respect to such breach shall
determine that no such breach occurred or is likely, and if any appeal therefor
be taken by TSI where such determination shall be fully and finally upheld, TSI
shall reimburse the Employee for all out-of-pocket costs and expenses, including
reasonable attorney's fees, incurred by the Employee by reason of such action
and any appeal.
3
<PAGE>
9. REPRESENTATION AND WARRANTY. Employee represents and warrants that he is
---------------------------
not now and was not on the date of commencement of this Agreement, a party to
any Agreement, contract or understanding, whether of employment or otherwise,
which would in any way restrict or prohibit him from undertaking or performing
employment in accordance with the terms and conditions of this Agreement.
10. MISCELLANEOUS.
-------------
10.1 Should any provision or part of this Employment Agreement be
declared void or unenforceable by any court or administrative body of competent
jurisdiction, such provisions or part shall be deemed severable and, without
further action by the parties to this Agreement, shall be severed from the
remainder of this Agreement which shall continue in all respects valid and
enforceable.
10.2 Any notices or communications hereunder shall be in writing
and shall be personally delivered or sent by registered or certified mail to the
addresses specified herein or, after proper notice, to such addresses as the
parties may specify.
10.3 This Agreement shall be binding upon and inure to the benefit
of TSI, its successors or assigns, or any corporation which acquires all or
substantially all of its assets. This Agreement is personal as to the Employee
and shall not be assignable by the Employee.
10.4 This Agreement constitutes the entire understanding of the
parties hereto with respect to the Employee's employment and his compensation
therefor and supersedes any prior Agreements and understandings between the
parties concerning employment or compensation.
10.5 This Agreement shall be governed by and construed under the
laws of the State of Connecticut.
10.6 The captions appearing in this Agreement appear as a matter of
convenience only and in no way define or limit the scope and intent of any of
the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first set forth above.
For TSI International Software Ltd. For the Employee: Ira Gerard
45 Danbury Road 70 Holmes Road
Wilton, CT 06897 Ridgefield, CT 06877
By: /s/ Constance Galley By: /s/ Ira Gerard
---------------------- --------------------------
Constance F. Galley Ira Gerard
President and CEO
4
<PAGE>
EXHIBIT 10.17
EMPLOYMENT AGREEMENT
--------------------
Employment Agreement ("Agreement") made and entered into effective no later than
January 1, 1994 by and between Edward J. Watson (the "Employee"), and TSI
International Software Ltd. ("TSI"), a Delaware corporation having its principal
place of business at 45 Danbury Road, Wilton, Connecticut 06897.
WHEREAS, TSI wishes to employ the Employee and the Employee wishes to be
employed under the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
1. Employment and Term.
--------------------
1.1 TSI agrees to employ the Employee as President, PC Division and the
Employee agrees to render his full-time services to TSI for a term of one (1)
year, which term shall commence as of the date of this Agreement and terminates
at the end of the first full fiscal year thereafter, subject to annual renewal
for one (1) year increments as set forth below. The Employee agrees to devote
his full business time and the best of his abilities to the faithful and
diligent performance of his services to TSI under the direction of the President
of TSI.
1.2 Unless either party shall have given written notice of non-renewal to
the other party no fewer than thirty (30) days before the expiration of the
initial or then current renewal term, this Agreement shall automatically renew
for successive periods of one (1) year.
1.3 In the event TSI is sold or recapitalized or substantially all of the
assets of TSI are sold (the "Sale of TSI"), the remaining term of this Agreement
shall be one (1) year unless otherwise agreed between the parties. If
termination should occur as a result of the "Sale of TSI," the Employee will
receive a severance compensation of one (1) year's annual salary as outlined in
paragraph 2.1 and one (1) year's continuance of eligible benefits.
2. Compensation.
-------------
2.1 TSI agrees to pay the Employee an annual salary of One Hundred Fifty
Thousand Dollars ($150,000.00), payable in accordance with TSI's standard
payroll practices. This salary is for the initial term of this Agreement, and
thereafter will be as determined by the President of TSI.
2.2 TSI may pay the employee a bonus based upon performance as may be
determined from time-to-time.
1
<PAGE>
3. Benefits.
---------
3.1 The Employee shall be entitled to participate on the same basis,
subject to the same qualifications as other TSI employees and pursuant to TSI's
then prevailing policies, in any group medical, hospitalization, or other fringe
benefit plans in effect with respect to employees of TSI in general but not
including any group profit sharing or other profit-based incentive program.
3.2 The Employee shall be entitled to the same number of paid holidays per
year as set forth by TSI for its employees in general plus twenty (20) paid
vacation days to be scheduled by the mutual agreement of the parties.
4. Stock Options. Any stock options issued to the Employee shall be described
-------------
in the TSI Stock Option Plan attached as Appendix A.
5. Employment Guidelines. The Employee agrees to at all times be bound by and
---------------------
adhere to the Employment Guidelines attached hereto as Appendix B and
incorporated herein, and to use his best efforts to protect the proprietary and
confidential materials and information of TSI and of TSI's clients, including
valuable trade secrets.
6. Termination.
------------
6.1 This Agreement shall terminate and all payments due hereunder shall
cease, except to the extent accrued, upon death of the Employee, without further
act of TSI.
6.2 TSI shall have the right to terminate this Agreement and any payments
due hereunder upon prior written notice to the Employee if a licensed physician
employed by the Board of Directors of TSI shall determine that the Employee, by
reason of physical or mental disability (excluding infrequent and temporary
absences due to ordinary transitory illness) shall be unable to perform the
services required of him hereunder for more than three (3) consecutive months or
an aggregate of six (6) months during any twelve (12) month period.
6.3 TSI shall have the right to terminate this Agreement, without further
compensation, upon prior written notice to the Employee, in the event of a
breach of the terms hereof by the Employee or if, in the opinion of the Board of
Directors of TSI, the Employee is guilty of willful misconduct, gross
negligence, gross insubordination, or causes TSI disrepute, or otherwise for
good cause.
6.4 TSI shall have the right to terminate this Agreement, for convenience,
at the discretion of the President. If such termination occurs, the Employee
will receive a severance compensation of six (6) months annual salary, as
specified in paragraph 2.1, and six (6) months of continuance of eligible
benefits, and shall be entitled to no other payment or benefit from TSI.
2
<PAGE>
6.5 Upon termination or expiration of this Agreement, irrespective of the
reason therefor, the Employee shall promptly turn over to TSI all proprietary
and confidential materials of the kind referred to in Section 5 and all tangible
forms of the Employee's work product (including work files) without retaining
any copies or duplicates thereof, except as to which TSI may in writing give
permission.
7. Negative Covenant.
------------------
7.1 The Employee agrees that during the term of this Agreement (including
any renewal terms hereunder) and for a period of one (1) year following the
termination of this Agreement, he will not, directly or indirectly, own,
operate, manage, join, control, or participate in the ownership, management,
operation or control of, or be connected with as a partner, stockholder,
director, officer, agent, employee, or consultant, any business, firm, or
corporation which engages in the sale of products which are directly competitive
with TSI in the territories TSI serves; provided, however, that nothing in this
Section 7.1 shall bar the acquisition of any publicly traded securities which do
not confer upon the Employee the right to control or influence the policy of the
issuer.
7.2 The Employee further agrees that for a period of one (1) year
following the termination of this Agreement, he will not, without the prior
written consent of TSI, (a) solicit for employment any of the staff of TSI or of
TSI's customers, or (b) solicit the business of TSI's customers.
8. Remedies. The parties hereto recognize that, in the event of any breach by
--------
the Employee of the provisions of Sections, 5, 6 or 7 hereof, damages may be
difficult, if not impossible, to ascertain and it is therefore agreed that TSI,
in addition to and without limiting any other remedy it might have under this
Employment Agreement, or at law or in equity, shall be entitled to an injunction
against the Employee issued by any court of competent jurisdiction enjoining any
such breach. The Employee agrees to reimburse TSI for all out-of-pocket costs
and expenses, including reasonable attorney's fees, incurred by TSI by reason of
any such breach; provided, however, that if a court of competent jurisdiction in
any action wherein TSI is the claimant with respect to such breach shall
determine that no such breach occurred or is likely, and if any appeal therefor
be taken by TSI where such determination shall be fully and finally upheld, TSI
shall reimburse the Employee for all out-of-pocket costs and expenses, including
reasonable attorney's fees, incurred by the Employee by reason of such action
and any appeal.
9. Representation and Warranty. Employee represents and warrants that he is
---------------------------
not now and was not on the date of commencement of this Agreement, a party to
any Agreement, contract or understanding, whether of employment or otherwise,
which would in any way restrict or prohibit him from undertaking or performing
employment in accordance with the terms and conditions of this Agreement.
10. Miscellaneous.
--------------
10.1 Should any provision or part of this Employment Agreement be declared
void or unenforceable by any court or administrative body of competent
jurisdiction, such provisions or part shall be deemed severable and, without
further action by the parties to this Agreement, shall
3
<PAGE>
be severed from the remainder of this Agreement which shall continue in all
respects valid and enforceable.
10.2 Any notices or communications hereunder shall be in writing and shall
be personally delivered or sent by registered or certified mail to the addresses
specified herein or, after proper notice, to such addresses as the parties may
specify.
10.3 This Agreement shall be binding upon and inure to the benefit of TSI,
its successors or assigns, or any corporation which acquires all or
substantially all of its assets. This Agreement is personal as to the Employee
and shall not be assignable by the Employee.
10.4 This Agreement constitutes the entire understanding of the parties
hereto with respect to the Employee's employment and his compensation therefor
and supersedes any prior Agreements and understandings between the parties
concerning employment or compensation.
10.5 This Agreement shall be governed by and construed under the laws of
the State of Connecticut.
10.6 The captions appearing in this Agreement appear as a matter of
convenience only and in no way define or limit the scope and intent of any of
the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first set forth above.
For TSI International Software Ltd. For the Employee:
45 Danbury Road
Wilton, CT 06897
By: /s/ Constance Galley By: /s/ Ted Watson
--------------------------------- ---------------------------------
Constance F. Galley Edward J. Watson
President and CEO Address: 143 S. Deere Park
Highland Park, IL 60035
4
<PAGE>
EXHIBIT 10.18
EMPLOYMENT AGREEMENTERROR! BOOKMARK NOT DEFINED.
-----------------------------------------------
Employment Agreement ("Agreement") made and entered into effective no later than
October 1, 1994 by and between Saydean Zeldin (the "Employee"), and TSI
International Software Ltd. ("TSI"), a Delaware corporation having its principal
place of business at 45 Danbury Road, Wilton, Connecticut 06897.
WHEREAS, TSI wishes to employ the Employee and the Employee wishes to be
employed under the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
1. Employment and Term.
--------------------
1.1 TSI agrees to employ the Employee as Vice President and the Employee
agrees to render her full-time services to TSI for a term of one (1) year, which
term shall commence as of the date of this Agreement and terminates at the end
of the first full fiscal year thereafter, subject to annual renewal for one (1)
year increments as set forth below. The Employee agrees to devote her full
business time and the best of her abilities to the faithful and diligent
performance of her services to TSI under the direction of the President of TSI.
1.2 Unless either party shall have given written notice of non-renewal to
the other party no fewer than thirty (30) days before the expiration of the
initial or then current renewal term, this Agreement shall automatically renew
for successive periods of one (1) year.
1.3 In the event TSI is sold or recapitalized or substantially all of the
assets of TSI are sold (the "Sale of TSI"), the remaining term of this Agreement
shall be one (1) year unless otherwise agreed between the parties. If
termination should occur as a result of the "Sale of TSI," the Employee will
receive a severance compensation of one (1) year's annual salary as outlined in
paragraph 2.1 and one (1) year's continuance of eligible benefits.
2. Compensation. TSI agrees to pay the Employee an annual salary of One
-------------
Hundred Thirty Thousand Dollars ($130,000.00), payable in accordance with TSI's
standard payroll practices. This salary is for the initial term of this
Agreement, and thereafter will be as determined by the President of TSI.
<PAGE>
3. Benefits.
---------
3.1 The Employee shall be entitled to participate on the same basis,
subject to the same qualifications as other TSI employees and pursuant to TSI's
then prevailing policies, in any group medical, hospitalization, or other fringe
benefit plans in effect with respect to employees of TSI in general, including
any group profit sharing or other profit-based incentive program if not
otherwise covered by a personal bonus or incentive plan.
3.2 The Employee shall be entitled to the same number of paid holidays per
year as set forth by TSI for its employees in general plus fifteen (15) paid
vacation days to be scheduled by the mutual agreement of the parties. accrued in
accordance with TSI's vacation accrual policies.
4. Stock Options. From time to time, Employee may be eligible to receive
-------------
Employee TSI Stock Options described in the TSI Stock Option Plan attached
hereto as Appendix A.
5. Employment Guidelines. The Employee agrees to at all times be bound by and
---------------------
adhere to the Employment Guidelines attached hereto as Appendix B and
incorporated herein, and to use her best efforts to protect the proprietary and
confidential materials and information of TSI and of TSI's clients, including
valuable trade secrets.
6. Termination.
------------
6.1 This Agreement shall terminate and all payments due hereunder shall
cease, except to the extent accrued, upon death of the Employee, without further
act of TSI.
6.2 TSI shall have the right to terminate this Agreement and any payments
due hereunder upon prior written notice to the Employee if a licensed physician
employed by the Board of Directors of TSI shall determine that the Employee, by
reason of physical or mental disability (excluding infrequent and temporary
absences due to ordinary transitory illness) shall be unable to perform the
services required of her hereunder for more than three (3) consecutive months or
an aggregate of six (6) months during any twelve (12) month period.
6.3 TSI shall have the right to terminate this Agreement, without further
compensation, upon prior written notice to the Employee, in the event of a
breach of the terms hereof by the Employee or if, in the opinion of the Board of
Directors of TSI, the Employee is guilty of willful misconduct, gross
negligence, gross insubordination, or causes TSI disrepute, or otherwise for
good cause.
6.4 TSI shall have the right to terminate this Agreement, for convenience,
<PAGE>
at the discretion of the President/CEO. If such termination occurs, the Employee
will receive a severance compensation of six (6) months of annual salary, six
(6) months of continuance of eligible benefits, and shall be entitled to no
other payment or benefit from TSI.
<PAGE>
6.5 Upon termination or expiration of this Agreement, irrespective of the
reason therefor, the Employee shall promptly turn over to TSI all proprietary
and confidential materials of the kind referred to in Section 5 and all tangible
forms of the Employee's work product (including work files) without retaining
any copies or duplicates thereof, except as to which TSI may in writing give
permission.
7. Negative Covenant.
------------------
7.1 The Employee agrees that during the term of this Agreement (including
any renewal terms hereunder) and for a period of one (1) year following the
termination of this Agreement, she will not, directly or indirectly, own,
operate, manage, join, control, or participate in the ownership, management,
operation or control of, or be connected with as a partner, stockholder,
director, officer, agent, employee, or consultant, any business, firm, or
corporation which engages in the sale of products which are directly competitive
with TSI in the territories TSI serves; provided, however, that nothing in this
Section 7.1 shall bar the acquisition of any publicly traded securities which do
not confer upon the Employee the right to control or influence the policy of the
issuer.
7.2 The Employee further agrees that for a period of one (1) year following
the termination of this Agreement, she will not, without the prior written
consent of TSI, (a) solicit for employment any of the staff of TSI or of TSI's
customers, or (b) solicit the business of TSI's customers.
8. Remedies. The parties hereto recognize that, in the event of any breach by
--------
the Employee of the provisions of Sections, 5, 6 or 7 hereof, damages may be
difficult, if not impossible, to ascertain and it is therefore agreed that TSI,
in addition to and without limiting any other remedy it might have under this
Employment Agreement, or at law or in equity, shall be entitled to an injunction
against the Employee issued by any court of competent jurisdiction enjoining any
such breach. The Employee agrees to reimburse TSI for all out-of-pocket costs
and expenses, including reasonable attorney's fees, incurred by TSI by reason of
any such breach; provided, however, that if a court of competent jurisdiction in
any action wherein TSI is the claimant with respect to such breach shall
determine that no such breach occurred or is likely, and if any appeal therefor
be taken by TSI where such determination shall be fully and finally upheld, TSI
shall reimburse the Employee for all out-of-pocket costs and expenses, including
reasonable attorney's fees, incurred by the Employee by reason of such action
and any appeal.
9. Representation and Warranty. Employee represents and warrants that she is
---------------------------
not now and was not on the date of commencement of this Agreement, a party to
any Agreement, contract or understanding, whether of employment or otherwise,
which would in any way restrict or prohibit her from undertaking or performing
employment in accordance with the terms and conditions of this Agreement.
<PAGE>
10. Miscellaneous.
--------------
10.1 Should any provision or part of this Employment Agreement be declared
void or unenforceable by any court or administrative body of competent
jurisdiction, such provisions or part shall be deemed severable and, without
further action by the parties to this Agreement, shall be severed from the
remainder of this Agreement which shall continue in all respects valid and
enforceable.
10.2 Any notices or communications hereunder shall be in writing and shall
be personally delivered or sent by registered or certified mail to the addresses
specified herein or, after proper notice, to such addresses as the parties may
specify.
10.3 This Agreement shall be binding upon and inure to the benefit of TSI,
its successors or assigns, or any corporation which acquires all or
substantially all of its assets. This Agreement is personal as to the Employee
and shall not be assignable by the Employee.
10.4 This Agreement constitutes the entire understanding of the parties
hereto with respect to the Employee's employment and her compensation therefor
and supersedes any prior Agreements and understandings between the parties
concerning employment or compensation.
10.5 This Agreement shall be governed by and construed under the laws of
the State of Connecticut.
10.6 The captions appearing in this Agreement appear as a matter of
convenience only and in no way define or limit the scope and intent of any of
the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first set forth above.
For TSI International Software Ltd. For the Employee:
45 Danbury Road
Wilton, CT 06897
By: /s/ Constance F. Galley By: /s/ Saydean Zeldin
-------------------------------- ----------------------------------
Constance F. Galley Saydean Zeldin
President and CEO Address: 143 South Deere Park
Highland Park, IL 60035
<PAGE>
EXHIBIT 10.19
SERIES E PREFERRED STOCK PURCHASE AGREEMENT
This Agreement (the "Agreement"), dated as of the 15th day of May, 1997
---------
(the "Closing Date"), is entered into by and among TSI International Software
------------
Ltd., a Delaware corporation (the "Company"), and the investors listed on
-------
Exhibit 1 hereto (the "Investors"), each of which is herein referred to as an
---------
"Investor."
--------
W I T N E S S E T H:
-------------------
WHEREAS, the Company has amended its Certificate of Incorporation, as
provided in the Restated Certificate of Incorporation filed with the Delaware
Secretary of State on May 14th, 1997 attached hereto as Exhibit 2 ("Restated
--------- --------
Certificate"), to authorize the issuance of 50,000 shares of Series E
- -----------
Convertible Preferred Stock;
WHEREAS, the Company desires to issue and sell to the Investors 50,000
shares of Series E Convertible Preferred Stock of the Company (the "Series E
--------
Shares"), and the Investors desire to purchase the Series E Shares from the
- ------
Company;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the parties hereby agree as follows:
1. Purchase and Sale of Shares.
---------------------------
1.1. Sale of Series E Shares. Upon receipt by the
-----------------------
Company of the purchase price therefor, the Company hereby issues and sells to
each Investor, and each Investor hereby purchases from the Company that number
of shares of the Company's Series E Stock set forth opposite each Investor's
name on Exhibit 1.
1.2. Purchase Price. The purchase price being paid
--------------
by each Investor for the Series E Shares is $20.00 per share. Each Investor
will pay by noon Eastern Time, on the Closing Date, by wire transfer of same-day
funds to the accounts designated by the Company, or delivery to the Company of
cashier's check(s), payable to the Company, the amount of set forth opposite
each Investor's name on Exhibit 1 (the "Purchase Price").
--------------
<PAGE>
2. Representations and Warranties of the Company. The
---------------------------------------------
Company hereby represents and warrants to each Investor as follows effective as
of the Closing Date.
2.1. Organization. The Company is a corporation duly
------------
organized, validly existing and in good standing under the laws of the State of
Delaware. Except as set forth in Schedule 2.1, the Company has all requisite
corporate power and authority and holds all licenses, permits and other required
authorizations from governmental authorities necessary to conduct its business
as it is now being conducted or as proposed to be conducted and to own or lease
the properties and assets it now owns or holds under lease.
2.2. Charter Documents. The Company has heretofore
-----------------
delivered to the representative for the Investors true, correct and complete
copies of the Company's Certificate of Incorporation and By-Laws, each as in
full force and effect on the Closing Date.
2.3. Capitalization. As of the date hereof, the
--------------
Company's authorized capitalization consists of 3,888,166 shares of Common
Stock, par value $.01 per share, of which 962,274 shares are outstanding; and
1,638,166 shares of Preferred Stock, par value $.01 per share, of which 297,405
shares have been designated Series A Convertible Preferred Stock, all of which
are outstanding, 115,761 shares have been designated Series B Convertible
Preferred Stock, all of which are outstanding, 725,000 shares have been
designated Series C Convertible Preferred Stock, 447,703 of which are
outstanding, 364,469 shares have been designated as Series D Convertible
Preferred Stock, none of which are outstanding, 50,000 shares have been
designated as Series E Convertible Preferred Stock, none of which are
outstanding and 85,531 shares remain undesignated and unissued. The issuance of
the Series E Shares and the Common Stock issuable upon conversion of the Series
E Shares (collectively, the "Conversion Shares") pursuant to the provisions of
-----------------
this Agreement have been duly and validly authorized. No further approval or
authorization of the stockholders or the directors of the Company or of any
governmental authority or agency will be required for the issuance and sale of
the Series E Shares as contemplated by this Agreement. Schedule 2.3 attached
hereto is a list of the aggregate number of outstanding securities of the
Company. Except as set forth on Schedule 2.3 attached
-2-
<PAGE>
hereto, no stockholder of the Company or any other person is entitled to any
preemptive rights with respect to the purchase or sale of any securities by the
Company. When issued and sold to the Investors, the Series E Shares will be duly
and validly issued, fully paid and non-assessable, will be free and clear of any
liens, pledges or encumbrances and will have the designations, preferences and
relative, participating, optional and other special rights as set forth in the
Company's Certificate of Incorporation. The Conversion Shares, when issued and
delivered upon conversion of the Series E Shares, will be duly and validly
issued, fully paid and non-assessable. Except as set forth on Schedule 2.3
attached hereto, there are no outstanding options, warrants or other rights,
commitments or arrangements, written or oral, to which the Company is a party or
by which it is bound, to purchase or otherwise acquire any authorized but
unissued shares of capital stock of the Company or any security directly or
indirectly convertible into or exchangeable or exercisable for any capital stock
of the Company.
2.4. Compliance with Other Instruments. Except as
---------------------------------
set forth in Schedule 2.4, to the Company's knowledge, the Company is not in
material default in the performance of any material obligation, agreement,
instrument or undertaking to which it is a party or by which it is bound. The
Company is not in violation of its Certificate of Incorporation or By-Laws.
Neither the sale of the Series E Shares (or the issuance and delivery of the
Conversion Shares), will: (i) conflict with or constitute a breach of, or
constitute a default under or an event which, with or without notice or lapse of
time or each, would be a breach of or default under or violation of the
Certificate of Incorporation or By-Laws of the Company or would be a breach of
or default under or violation of any material agreement, document, indenture,
mortgage or other instrument or undertaking by which the Company is bound or to
which any of its properties are subject, or would be a material violation of any
law, administrative regulation, judgment, order or decree applicable to the
Company; (ii) result in the creation or imposition of any material lien, charge
or encumbrance upon any property or assets of the Company; (iii) result in the
loss of any material license, certificate, legal privilege or legal right
enjoyed or possessed by the Company; (iv) give any party to any material
agreement to
-3-
<PAGE>
which the Company is a party a right of termination; or (v) except as provided
for in this Agreement, require the consent of any other person or entity under
any agreement, indenture, mortgage, document or other instrument or undertaking
by which the Company is bound or to which any of its properties are subject.
2.5. Authorization. The Company has the full
-------------
corporate power and authority to enter into this Agreement and to perform all of
its obligations thereunder. The execution, delivery and performance of the
terms of this Agreement by the Company have been duly authorized by all
necessary corporate action. This Agreement constitutes a legal, valid and
binding obligation of the Company enforceable in accordance with its terms. The
Company, in light of its business or proposed business, does not require any
consent, approval, authorization or order of, or declaration, filing or
registration with, any court or governmental or regulatory agency or board in
connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated thereby.
2.6. Compliance with the Securities Act. Based upon
----------------------------------
the representations of each Investor set forth herein, and assuming the truth of
such representations, the offer, sale and issuance of the Series E Shares (and
the issuance and delivery of the Conversion Shares) are exempt from the
registration requirements of the Securities Act of 1933, as amended ("Securities
----------
Act of 1933").
- -----------
2.7. Reservation of Common Stock. The Company shall
---------------------------
reserve and keep available out of its authorized but unissued Common Stock the
number of shares of Common Stock required for issuance upon the conversion of
all of the Series E Shares.
2.8. Litigation. Except as set forth on Schedule 2.8
----------
attached hereto, there is not now pending, and to the knowledge of the Company
there is not threatened in writing, any litigation, action, suit or proceeding:
(i) to which the Company is or will be a party in or before or by any court or
governmental or regulatory agency or body; or (ii) to which any of the officers
or employees of the Company is or will be a party in or before or by any court
or governmental or regulatory agency or body, concerning termination by such
person of his or her
-4-
<PAGE>
employment with any of such person's former employers. In addition to the
foregoing, there is no judgment, decree, injunction, rule or order of any court,
governmental department, commission, agency, instrumentality or arbitrator
outstanding against the Company having any material adverse effect on the
business or proposed business or operations, properties, assets or condition,
financial or otherwise, of the Company.
2.9. Compliance with Law. To its knowledge, the
-------------------
Company is in compliance in all material respects with all applicable statutes
and regulations of the United States and of all states, municipalities and
agencies in respect of the conduct of its business.
2.10. Financial Statements. Attached hereto as
--------------------
Schedule 2.10 are the audited balance sheets of the Company at December 31,
1996, and the related statements of income and retained earnings and changes in
financial position, including the notes thereto, of the Company for the period
then ended, and the unaudited balance sheet of the Company at March 31, 1997 and
the related statements of income for the period then ended. The financial
statements referred to above have been prepared in conformity with generally
accepted accounting principles consistently applied subject in the case of the
interim statements to normal year-end audit adjustments, and each balance sheet
fairly presents the financial condition of the Company as of its date and each
statement of income fairly presents the results of operations of the Company for
the period covered thereby.
3. Representations, Warranties and Covenants of the
------------------------------------------------
Investor. Each Investor hereby represents and warrants to, and agrees with, the
- --------
Company as follows effective as of each Investor's delivery of the Purchase
Price:
3.1. Investment Intent and Restricted Securities.
-------------------------------------------
Each Investor understands that the Series E Shares (and any Conversion Shares)
have not been registered under the Securities Act of 1933 for the reason that
the sales provided for in this Agreement are exempt from registration pursuant
to Section 4(2) of the Securities Act of 1933, Regulation S and Rule 506 of
Regulation D as promulgated under the Securities Act of 1933 and that the
reliance of the Company on such exemptions is predicated in part on such
Investor's representations set forth
-5-
<PAGE>
herein. Each Investor represents that (i) it will acquire the Series E Shares
without being offered or furnished any offering literature or prospectus and
this transaction has not been approved or reviewed by the Securities and
Exchange Commission or by any administrative agency charged with the
administration of the securities law of any state; (ii) it is acquiring the
Series E Shares for its own account, not as a nominee or agent, and not with a
view to the public resale or distribution thereof within the meaning of the
Securities Act of 1933, and such Investor has no present intention of selling,
granting any participation in, or otherwise distributing the same; (iii) it is
experienced in evaluating companies such as the Company, is able to fend for
itself, has such knowledge and experience in financial and business matters as
to be capable of evaluating the merits and risks of its investment, and has the
ability to suffer the total loss of its investment; (iv) it was not formed
solely for the purpose of investing in the Company; (v) it has had access during
the course of the transaction and prior to its purchase of the Series E Shares
to such information relating to the Company as it has desired and that it has
had the opportunity to ask questions of and receive answers from the Company
concerning the terms and conditions of the offering and to obtain additional
information (to the extent the Company possessed such information or could
acquire it without unreasonable effort or expense and without breach of
confidentiality obligations) necessary to verify the accuracy of any information
furnished to it or to which it had access; (vi) it is an "accredited investor"
within the meaning of Regulation D promulgated under Securities Act of 1933; and
(vii) it is not a U.S. Person as defined in Rule 902(o) of Regulation S under
---
the Securities Act of 1933 and is not acquiring the Series E Shares (or the
Conversion Shares) for the account or benefit of any U.S. person, as so defined.
Each Investor understands that the Series E Shares (and any Conversion Shares)
may not be sold, transferred or otherwise disposed of without registration under
the Securities Act of 1933 or an exemption therefrom and that in the absence of
an effective registration statement covering the Series E Shares (or the
Conversion Shares) or an available exemption from registration under the 1933
Act, the Series E Shares (and any Conversion Shares) must be held indefinitely.
Each Investor also understands that the Company is under no obligation to
register any of the securities sold hereunder and that
-6-
<PAGE>
no public market now exists for any of the Series E Shares (or the Conversion
Shares) and that is uncertain whether a public market will ever exist for the
Series E Shares (or the Conversion Shares).
3.2. Legends. Each Investor understands that stop
-------
transfer instructions will be given to the Company's transfer agent with respect
to the certificates representing the Series E Shares and on each certificate
representing the Conversion Shares to assure compliance with the Securities Act
of 1933. Each Investor consents to the placement of the following legends, in
substantially the forms below, on each certificate representing the Series E
Shares and on each certificate representing the Conversion Shares:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED OR SOLD UNLESS (i) A
REGISTRATION STATEMENT UNDER SUCH ACT IS THEN IN EFFECT WITH RESPECT
THERETO, (ii) A WRITTEN OPINION FROM COUNSEL FOR THE HOLDER REASONABLY
ACCEPTABLE TO THE ISSUER HAS BEEN OBTAINED TO THE EFFECT THAT NO SUCH
REGISTRATION IS REQUIRED OR (iii) A 'NO ACTION' LETTER OR ITS THEN
EQUIVALENT HAS BEEN ISSUED BY THE STAFF OF THE SECURITIES AND EXCHANGE
COMMISSION WITH RESPECT TO SUCH TRANSFER OR SALE."
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE ACT WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION
AND THE COMPANY DOES NOT INTEND TO REGISTER THEM. PRIOR TO _________,
1998 [END OF 1-YEAR RESTRICTED PERIOD], THE SHARES MAY NOT BE OFFERED OR
SOLD (INCLUDING OPENING A SHORT POSITION IN SUCH SECURITIES) IN THE
UNITED STATES OR TO U.S. PERSONS AS DEFINED BY RULE 902(O) ADOPTED UNDER
THE SECURITIES ACT OF 1933, OTHER THAN TO DISTRIBUTORS, UNLESS THE
SHARES ARE REGISTERED UNDER THE SECURITIES ACT OF 1933, OR AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933 IS
AVAILABLE. PURCHASERS OF SHARES PRIOR TO __________, 1998 [END OF
1-YEAR RESTRICTED PERIOD], MAY RESELL SUCH SECURITIES ONLY PURSUANT TO
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, OR IN
TRANSACTIONS EFFECTED OUTSIDE OF THE UNITED STATES PROVIDED THEY DO NOT
SOLICIT (AND NO ONE ACTING ON THEIR BEHALF SOLICITS) PURCHASERS IN THE
UNITED STATES OR
-7-
<PAGE>
OTHERWISE ENGAGE(S) IN SELLING EFFORTS IN THE UNITED STATES. A HOLDER OF
THE SECURITIES WHO IS A DISTRIBUTOR, DEALER, SUB-UNDERWRITER OR OTHER
SECURITIES PROFESSIONAL, IN ADDITION, CANNOT PRIOR TO __________, 1997
[END OF 1-YEAR RESTRICTED PERIOD] RESELL THE SECURITIES TO A U.S. PERSON
AS DEFINED BY RULE 902(O) OF REGULATION S UNLESS THE SECURITIES ARE
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933 IS AVAILABLE."
3.3 Market Standback. Each Investor agrees in
----------------
connection with any registration of the Company's securities that, upon the
request of the Company or the underwriters managing any public offering of the
Company's securities or the Nasdaq Stock Market, Inc. or any other exchange on
which the Company's securities might be registered, such Investor will not sell
or otherwise dispose of any Series E Shares or Conversion Shares without the
prior written consent of the Company or such underwriters or such exchange, as
the case may be, for such period of time (not to exceed 180 days) after the
effective date of such registration requested by such managing underwriters or
such exchange, as the case may be, and subject to all restrictions as the
Company or the underwriters may specify.
4. Deliveries of the Company and the Investors.
-------------------------------------------
4.1 Company Deliverables. On the Closing Date, as a
--------------------
condition to each Investor's obligation to pay the Purchase Price for the Series
E Shares provided under Section 1.2 hereof, the Company will deliver to each
Investor or the representative of the Investors the following:
(a) an opinion of counsel to the Company,
Fenwick & West LLP, addressed to the Investors, in substantially the form
attached hereto as Exhibit 3;
---------
(b) copies of the resolutions adopted by the
Company's Board of Directors authorizing the execution, delivery and performance
of this Agreement and the transactions contemplated hereby;
(c) a certificate, dated as of a recent
date, of the Secretary of State of Delaware attesting as to the good standing
of the Company in such state;
-8-
<PAGE>
(d) a stock certificate registered in the
name of each Investor representing the Series E Shares purchased by such
Investor in consideration of the Purchase Price therefor;
(e) a certificate signed by the President or
Vice President of the Company that the representations and warranties in Section
2 are true and correct as of the Closing Date; and
(f) a copy of the Restated Certificate;
4.2 Investors' Deliverables. On the Closing Date,
-----------------------
as a condition to Company's obligations under Section 4.1 hereof, the Investors
will deliver to the Company the Purchase Price for the Series E Shares as
provided under Section 1.2 hereof.
5. Expenses.
--------
Each party will be responsible for its own costs and
expenses arising in connection with the negotiation, execution and consummation
of this Agreement and the transactions contemplated hereby.
6. No Brokers.
----------
The Company and each Investor represents and warrants to
the other that there was no broker or finder connected with this Agreement or
the transactions contemplated hereby. In the event of a claim by any broker or
finder based upon his representing or being retained by any Investor, each
Investor agrees to indemnify and save harmless the Company in respect of such
claim. In the event of a claim by any broker or finder based upon his
representing or being retained by the Company, the Company agrees to indemnify
and save harmless each Investor in respect of such claim.
7. Survival of Representations.
---------------------------
All representations, warranties, covenants and
agreements contained in this Agreement or in any document, exhibit, schedule or
certificate delivered in connection herewith shall survive the execution and
delivery of this Agreement and any investigation at any time made by the
Investor or on its behalf for a period of six months from the date hereof.
-9-
<PAGE>
8. Miscellaneous Provisions.
------------------------
8.1. Construction and Enforcement. This Agreement
----------------------------
shall be governed by, and construed and enforced in accordance with, the
internal laws of the State of Delaware without giving any effect to principles
of conflicts of laws.
8.2. Notices. All notices hereunder shall be in
-------
writing and shall be deemed to have been given at the time when mailed by
certified mail, addressed to the address below stated of the party to which
notice is given, or to such changed address as such party may have fixed by
notice, provided, however, that any notice of change of address shall be
effective only upon receipt:
To the Company:
TSI International Software Ltd.
45 Danbury Road
Wilton, Connecticut 06897
Attn: Constance Galley, President
-with a copy to
Fenwick & West LLP
Two Palo Alto Square
Palo Alto, California 94306
Attn: Mark C. Stevens
To the Investors:
At the addresses listed on Exhibit 1 attached hereto
8.3. Assignment. This Agreement shall be binding
----------
upon and inure to the benefit of the Company, the Investors and the respective
successors and permitted assigns of the Investors. Neither the Company nor any
Investor may assign any of its rights or obligations under this Agreement
without the prior written consent of the other party.
8.4. Amendments and Waivers. This Agreement and all
----------------------
exhibits and schedules hereto set forth the entire understanding of the parties
with respect to the transactions
-10-
<PAGE>
contemplated hereby. This Agreement may be amended, the Company may take any
action herein prohibited or omit to take action herein required to be performed
by it, and any breach of or compliance with any covenant, agreement, warranty or
representation may be waived, only if the Company has obtained the written
consent or waiver of the holders of not less than 50% of the issued and
outstanding Series E Shares and Conversion Shares.
8.5. Counterparts. This Agreement may be executed in
------------
one or more counterparts, each of which shall be deemed an original, and all of
which together shall constitute one and the same instrument.
8.6. Headings. The headings in this Agreement are
--------
for reference purposes only and shall not constitute a part hereof.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
-11-
<PAGE>
TSI International Software Ltd.
-------------------------------
By /s/ Constance Galley
Title - President and CEO
Investors:
---------
Mitsui & Co., Ltd.
By: /s/ Rentaro Kohama
Title: General Manager, Information
Business Development Division
Mitsui Knowledge Industry Co., Ltd.
By: /s/ Hideharu Manuyama
Title: President
NVCC No. 1 Investment Enterprise Partnership
By: Nippon Venture Capital Co., Ltd.
Its: Executive Partner
By: /s/ Kozo Nogom
Title: President
<PAGE>
EXHIBIT 23.02
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
TSI International Software Ltd.
We consent to the use of our reports included herein and to the reference to
our firm under "Experts" and "Selected Financial Data" in the Prospectus.
KPMG Peat Marwick LLP
Stamford, Connecticut
May 16, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TSI
INTERNATIONAL SOFTWARE LTD AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 MAR-31-1997
<CASH> 41 79
<SECURITIES> 0 0
<RECEIVABLES> 4,701 5,585
<ALLOWANCES> (320) (288)
<INVENTORY> 0 0
<CURRENT-ASSETS> 5,552 6,649
<PP&E> 3,721 3,919
<DEPRECIATION> (2,417) (2,568)
<TOTAL-ASSETS> 7,521 8,721
<CURRENT-LIABILITIES> 6,773 6,807
<BONDS> 0 0
0 0
9 9
<COMMON> 20 20
<OTHER-SE> (2,322) (2,060)
<TOTAL-LIABILITY-AND-EQUITY> 7,521 8,721
<SALES> 19,004 5,508
<TOTAL-REVENUES> 19,004 5,508
<CGS> 2,501 722
<TOTAL-COSTS> 2,501 722
<OTHER-EXPENSES> 15,089 4,434
<LOSS-PROVISION> 432 114
<INTEREST-EXPENSE> 286 63
<INCOME-PRETAX> 1,264 319
<INCOME-TAX> 36 6
<INCOME-CONTINUING> 1,228 313
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,228 313
<EPS-PRIMARY> 0.31 0.07
<EPS-DILUTED> 0.31 0.07
</TABLE>
