AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 25, 1997
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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OMEGA RESEARCH, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
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<S> <C> <C> <C>
FLORIDA 7372 59-2223464
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
8700 WEST FLAGLER STREET, MIAMI, FLORIDA 33174
(305) 551-9991
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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WILLIAM R. CRUZ AND RALPH L. CRUZ
CO-CHIEF EXECUTIVE OFFICERS
OMEGA RESEARCH, INC.
8700 WEST FLAGLER STREET
MIAMI, FLORIDA 33174
(305) 551-9991
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENTS FOR SERVICE)
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COPIES TO:
ALAN D. AXELROD, ESQ. PETER B. TARR, ESQ.
RUBIN BAUM LEVIN CONSTANT FRIEDMAN & BILZIN HALE AND DORR LLP
2500 FIRST UNION FINANCIAL CENTER 60 STATE STREET
MIAMI, FLORIDA 33131-2336 BOSTON, MASSACHUSETTS 02109
TELEPHONE: (305) 374-7580 TELEPHONE: (617) 526-6000
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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, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ] ____________.
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering: [ ] _____________.
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box: [ ]
CALCULATION OF REGISTRATION FEE
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====================================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE PER AGGREGATE OFFERING PRICE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED (1) SHARE(2) (2) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock, $0.01 par value........ 4,255,000 $12.00 $51,060,000 $17,607
====================================================================================================================================
<FN>
(1) Includes an aggregate of 555,000 shares which the Underwriters may purchase
to cover over-allotments, if any. See "Underwriting."
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) under the Securities Act of 1933, as amended.
</FN>
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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 SECTION 8(A), MAY
DETERMINE.
================================================================================
<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 JULY 25, 1997
3,700,000 SHARES
[OMEGA RESEARCH, INC. LOGO]
COMMON STOCK
Of the 3,700,000 shares of Common Stock offered hereby, 2,600,000 shares
are being sold by Omega Research, Inc. ("Omega Research" or the "Company") and
1,100,000 shares are being sold by the Selling Shareholders. See "Principal and
Selling Shareholders." The Company will not receive any of the proceeds from the
sale of the shares being sold by the Selling Shareholders. 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
$10.00 and $12.00 per share. See "Underwriting" for information relating to the
method of determining the initial public offering price. Application will be
made to list the Common Stock on the Nasdaq National Market under the symbol
"OMGA."
-------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 7.
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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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================================================================================================================
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS COMPANY(1) SHAREHOLDERS
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<S> <C> <C> <C> <C>
Per Share.......................... $ $ $ $
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Total(2)........................... $ $ $ $
================================================================================================================
<FN>
(1) Before deducting expenses payable by the Company, estimated at $650,000.
(2) The Company and the Selling Shareholders have granted the Underwriters a
30-day option to purchase an aggregate of up to an additional 555,000 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, Proceeds to Company and Proceeds to Selling
Shareholders will be $ , $ , $ and $ , respectively.
</FN>
</TABLE>
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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 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
LEHMAN BROTHERS
HAMBRECHT & QUIST
The date of this Prospectus is , 1997
<PAGE>
[PICTURES OF THE COMPANY'S PRODUCTS AND DEPICTIONS OF PRODUCT INTERFACES]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OF
THE COMPANY, INCLUDING ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING
TRANSACTIONS OR IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."
<PAGE>
NO DEALER, SALES REPRESENTATIVE OR ANY 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 SHAREHOLDER 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 A 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 ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
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 OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
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TABLE OF CONTENTS
PAGE
-----
Summary.................................................................... 4
Risk Factors............................................................... 7
Distribution of S Corporation Earnings..................................... 20
Use of Proceeds............................................................ 22
Dividend Policy............................................................ 22
Capitalization............................................................. 23
Dilution................................................................... 24
Selected Financial Data.................................................... 25
Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................... 26
Business................................................................... 35
Management................................................................. 46
Certain Transactions....................................................... 52
Principal and Selling Shareholders......................................... 53
Description of Capital Stock............................................... 54
Shares Eligible for Future Sale............................................ 57
Underwriting............................................................... 58
Legal Matters.............................................................. 60
Experts.................................................................... 60
Additional Information..................................................... 60
Index to Financial Statements.............................................. F-1
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The Company intends to mail to all of its shareholders an annual report
containing financial statements audited by its independent accountants for each
fiscal year and shall make available to all of its shareholders quarterly
reports containing unaudited financial information for each of the first three
quarters of each fiscal year.
TRADESTATION(R), OPTIONSTATION(R) and SUPERCHARTS(R) are registered
trademarks, and OMEGA RESEARCH(TM), EASYLANGUAGE(TM) and POWEREDITOR(TM) are
trademarks, of the Company. This Prospectus also contains trademarks and
tradenames of other companies.
The Company was incorporated in Florida in 1982 and its principal executive
offices are located at 8700 West Flagler Street, Miami, Florida 33174. Its
telephone number is (305) 551-9991.
3
<PAGE>
SUMMARY
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. THIS PROSPECTUS CONTAINS
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S
ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THE RESULTS SUGGESTED BY THE
FORWARD-LOOKING STATEMENTS AND FROM THE RESULTS HISTORICALLY EXPERIENCED.
FACTORS THAT MAY CAUSE OR CONTRIBUTE TO SUCH DIFFERENCE INCLUDE, BUT ARE NOT
LIMITED TO, THOSE DISCUSSED UNDER "RISK FACTORS" AND ELSEWHERE IN THIS
PROSPECTUS.
THE COMPANY
Omega Research is a leading provider of real-time investment analysis
software for the Microsoft Windows operating system. The Company's principal
products are TRADESTATION, OPTIONSTATION and SUPERCHARTS. With the 1991 release
of its flagship product, TRADESTATION, Omega Research pioneered the concept of
utilizing the power of the personal computer to enable investors to historically
test the profitability of their own investment and trading strategies and then
computer-automate those strategies to generate real-time buy and sell signals.
OPTIONSTATION enables investors who are not options experts or mathematicians to
benefit from advanced stock, index and futures options trading strategies, and
SUPERCHARTS provides investors with state-of-the-art technical analysis
capabilities. The Company designs its products as PLATFORM APPLICATIONS: unique
software applications that also serve as platforms for independent third-party
solutions. Over 150 independent developers have developed software products for
the Omega Research Platform.
In the last 25 years there has been unprecedented growth in the financial
markets as increasing amounts of capital have been actively invested in an
effort to generate superior returns. As investment and trading activity have
increased, investors are seeking to make use of the increased amounts of
financial market data available to support their investment decisions. While the
data have been available for some time, typically only large institutional
investors were able to manipulate, organize and analyze such data through the
use of mainframe or minicomputer-based software applications. With the advanced
processing capabilities of today's personal computers, both individual and
institutional investors are demanding powerful investment analysis software to
improve their investment decision-making. The Omega Research solution addresses
this demand through superior investment analysis products, an industry-leading
open and extendible software platform, comprehensive support for a wide variety
of financial instruments and markets, and, through the Company's proprietary
EASYLANGUAGE technology, the ability to design and historically test investment
strategies without having computer programming experience.
Omega Research's objective is to be the leading worldwide provider of
real-time investment analysis software to both individual and institutional
investors. The Company's product strategy is to expand the Omega Research
Platform by enhancing and developing its own suites of integrated, complementary
products, and by facilitating the development of additional compatible
third-party products and services. The Company's marketing strategy is to
continue to penetrate the expanding individual investor market, increase its
focus on institutional investors and expand its international distribution. The
Company will also seek to strengthen and expand its relationships with data
vendors and to leverage its installed base of customers by marketing to its
customer base product upgrades and existing and new complementary products.
4
<PAGE>
As of June 30, 1997 the Company had licensed its products to over 30,000
investors worldwide. The Company markets its products to individual investors
primarily through its dedicated, professional, team-oriented telesales force. As
a result of its strategic relationship with Dow Jones Markets, Inc., the
Company's products are marketed to institutional investors. Dow Jones Markets
offers the Company's TRADESTATION product as DOW JONES TRADESTATION under an
agreement that extends until 2002 and includes minimum annual royalty payments
to the Company which escalate each year of the agreement. In 1997, the Company
entered into an additional agreement to permit Dow Jones Markets to offer the
Company's SUPERCHARTS product as DOW JONES SUPERCHARTS.
THE OFFERING
Common Stock offered by the Company...... 2,600,000 shares
Common Stock offered by the Selling
Shareholders........................... 1,100,000 shares
Common Stock to be outstanding after
the Offering........................... 22,080,000 shares(1)
Use of Proceeds.......................... To repay a short-term bank loan used
to fund payment of a distribution of
S corporation earnings to the
Company's current shareholders;
working capital and other general
corporate purposes. See "Use of
Proceeds."
Proposed Nasdaq National Market symbol... OMGA
- ---------------
(1) Based on shares outstanding as of July 21, 1997. Excludes (i) 891,250 shares
of Common Stock issuable upon exercise of stock options granted under the
Omega Research, Inc. 1996 Incentive Stock Plan (the "Incentive Stock Plan")
as of July 21, 1997, with a weighted average exercise price of $1.84 per
share; (ii) 2,108,750 additional shares of Common Stock reserved for future
issuance under the Incentive Stock Plan (including up to 150,000 shares
which the Company intends to issue to certain employees (other than
executive officers) on or prior to the date of this Prospectus, of which
approximately 100,000 shares will be issued at an exercise price equal to
the initial public offering price); (iii) 175,000 shares of Common Stock
reserved for issuance under the Omega Research, Inc. 1997 Nonemployee
Director Stock Option Plan (the "Director Stock Plan"); and (iv) 500,000
shares of Common Stock reserved for issuance under the Omega Research, Inc.
1997 Employee Stock Purchase Plan (the "Purchase Plan"). See "Management --
Other Compensation Arrangements" and Note 4 of Notes to Financial
Statements.
5
<PAGE>
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SUMMARY FINANCIAL DATA
(In thousands, except per share data)
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------- -----------------
1992 1993 1994 1995 1996 1996 1997
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<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Licensing fees $ 3,040 $ 5,593 $ 7,853 $ 7,913 $13,943 $ 6,322 $12,092
Other revenues -- -- 707 1,502 3,877 1,787 2,527
------- ------- ------- ------- ------- ------- -------
Total revenues 3,040 5,593 8,560 9,415 17,820 8,109 14,619
Income from operations 1,035 2,407 3,727 3,288 7,022 3,250 5,379
Net income(1) 1,060 2,438 3,745 3,312 7,082 3,259 5,397
Pro forma net income(1) 641 1,475 2,266 2,004 4,285 1,972 3,265
Pro forma net income per
share(1)(2) $ 0.21 $ 0.15
Pro forma weighted average
number of shares
outstanding(2) 20,541 21,186
</TABLE>
JUNE 30, 1997
---------------------------------------
PRO PRO FORMA
ACTUAL FORMA(3) AS ADJUSTED (4)
-------- --------- ---------------
BALANCE SHEET DATA:
Cash and cash equivalents............. $ 264 $ 264 $15,590
Working capital (deficit)............. 6,828 (2,794) 23,154
Total assets.......................... 9,257 12,081 27,407
Short-term obligations................ -- 10,622 --
Shareholders' equity (deficit)........ 7,807 (1,815) 24,133
- ---------------
(1) The statement of income data reflects a pro forma provision for income
taxes as if the Company were a C corporation subject to federal and state
corporate income taxes for all periods. See "Distribution of S Corporation
Earnings" and Note 1 of Notes to Financial Statements.
(2) Pro forma weighted average number of shares outstanding includes 321,000
and 966,000 shares for the year ended December 31, 1996 and the six-month
period ended June 30, 1997, respectively, at an assumed initial public
offering price of $11.00 per share, the proceeds of which would fund
undistributed S corporation earnings. See "Distribution of S Corporation
Earnings" and Note 1 of Notes to Financial Statements.
(3) Reflects the effect of the dividend to current shareholders and other pro
forma adjustments described in "Distribution of S Corporation Earnings" and
Note 7 of Notes to Financial Statements.
(4) Adjusted to give effect to the sale of the Common Stock offered by the
Company hereby and the application of the estimated net proceeds therefrom.
See "Use of Proceeds" and "Capitalization."
---------------------
EXCEPT AS OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS (I) HAS
BEEN ADJUSTED TO REFLECT A 97,400-FOR-1 STOCK SPLIT OF THE COMPANY'S COMMON
STOCK BY WAY OF A SHARE DIVIDEND DECLARED IN JANUARY 1997 AND (II) ASSUMES NO
EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION. SEE NOTE 7 OF NOTES TO
FINANCIAL STATEMENTS AND "UNDERWRITING."
6
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION SET FORTH IN THIS PROSPECTUS, THE
FOLLOWING RISK FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING THE COMPANY
AND ITS BUSINESS BEFORE PURCHASING ANY OF THE SHARES OF COMMON STOCK OFFERED
HEREBY. THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS
AND UNCERTAINTIES. WHEN USED IN THIS PROSPECTUS, THE WORDS "ANTICIPATE,"
"BELIEVE," "ESTIMATE," "INTEND" AND "EXPECT" AND SIMILAR EXPRESSIONS ARE
INTENDED TO IDENTIFY SUCH FORWARD-LOOKING STATEMENTS. THE COMPANY'S ACTUAL
RESULTS MAY DIFFER MATERIALLY FROM THE RESULTS SUGGESTED BY THE FORWARD-LOOKING
STATEMENTS AND FROM THE RESULTS HISTORICALLY EXPERIENCED. FACTORS THAT MAY CAUSE
OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE
DISCUSSED IN THIS SECTION AND ELSEWHERE IN THIS PROSPECTUS.
POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
The Company's quarterly revenues and operating results have fluctuated
significantly in the past and will likely fluctuate in the future. Causes of
such significant fluctuations may include, but are not limited to, the following
factors: the ability of the Company to develop, introduce, market and ship
high-quality new and enhanced versions of the Company's products on a timely
basis; the number, timing and significance of new product introductions by the
Company and its competitors; the level of product and price competition; changes
in the Company's sales incentive or marketing strategy; demand for the Company's
products; changes in operating expenses; the volume and the timing of orders;
attempts by the Company to enter new markets or expand into related businesses
and the cost, timing and success thereof; the incurrence of significant costs in
one quarter related to revenues anticipated to be realized in a subsequent
quarter; and general economic factors. The occurrence of any one or more of
these or other factors could have a material adverse effect on the Company's
business, financial condition and results of operations. The potential
occurrence of any one or more of these factors makes the prediction of revenues
and results of operations on a quarterly basis difficult and performance
forecasts derived from such predictions unreliable. As a result, the Company
believes that period-to-period comparisons of its results of operations are not
necessarily meaningful and should not be relied upon as any indication of future
performance.
In general, revenues are difficult to forecast because the market for the
Company's products is evolving rapidly. Licensing fees in any quarter are
dependent substantially on orders received, booked and shipped in that quarter,
net of return reserves, all of which fluctuate from quarter to quarter.
Licensing fees from quarter to quarter are difficult to forecast, as no
significant order backlog exists at the end of any quarter, since the Company's
products typically are shipped shortly after receipt of orders. Additionally,
revenues are difficult to forecast because telesales, which, due to their
nature, are not easily forecast, have accounted to date for substantially all of
the Company's licensing fees from direct sales activities. Further, a
significant portion of the Company's revenues are derived from royalties and
marketing fees, the amounts of which depend upon the marketing and other
activities of independent third parties outside of the Company's control.
The Company has a 30-day return policy for its products. However, the
Company often permits returns beyond the 30-day period. Any significant increase
in the level of returns, in particular, returns beyond the 30-day period, could
result in an adjustment to the return reserves maintained by the Company in any
given quarter. There can be no assurance that any such adjustment would not have
a material adverse effect on the Company's business, financial condition and
quarterly results of operations.
7
<PAGE>
A substantial portion of the Company's operating expenses are related to
personnel, facilities and marketing programs. The level of spending for such
expenses cannot be adjusted quickly and is therefore fixed in the short term.
The Company's expense levels for personnel, facilities and marketing programs
are based, in significant part, on the Company's expectations of future revenues
on a quarterly basis. If actual revenue levels on a quarterly basis are below
management's expectations, results of operations are likely to be adversely
affected by a substantially similar amount because a relatively small amount of
the Company's expenses varies with its revenues in the short term. Software
companies frequently experience strong fourth quarters followed by weak first
quarters, in some cases with sequential declines in revenues or operating
profit. There can be no assurance that the Company will not experience this
fluctuation in future years.
Due to all of the foregoing factors, as well as the occurrence of other
events and conditions discussed in this Prospectus, it is possible that in some
future quarter the Company's results of operations will be below the
expectations of public market analysts and investors. In such event, the price
of the Company's Common Stock would likely be materially adversely affected. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Overview" and "-- Selected Quarterly Results of Operations."
DEPENDENCE ON KEY EMPLOYEES
The Company's success depends to a very significant extent on the continued
availability and performance of a number of senior management, engineering and
sales and marketing personnel, including the founders of the Company and its
Co-Chief Executive Officers, William R. Cruz and Ralph L. Cruz, and the
Company's Vice President of Product Development, Peter A. Parandjuk. Since the
Company's inception, William Cruz has been primarily responsible for the
conception and management of the Company's products and product strategies, and
Ralph Cruz has been primarily responsible for the Company's marketing
strategies. The Company does not have, or expect to obtain, key person life
insurance. The Company has entered into non-competition agreements with all of
its executive officers which provide that if their employment with the Company
is terminated they will not compete with the Company for a period of two years
following termination of employment. There is general uncertainty as to the
enforceability of non-competition agreements, and there can be no assurance that
such agreements will be enforceable against the Company's employees.
Additionally, the Company believes that its future success will depend in part
on its ability to attract and retain highly-skilled engineering, managerial and
sales and marketing personnel. Competition for such personnel in the software
industry is intense, and there can be no assurance that the Company will be
successful in attracting and retaining such personnel. Failure to attract or
retain key personnel, William Cruz or Ralph Cruz in particular, would likely
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Business -- Employees" and "Management --
Executive Officers and Directors."
COMPETITION
The market for investment analysis software is intensely competitive and
rapidly changing. The Company believes that due to anticipated growth of the
market for investment analysis software, and other factors, competition will
substantially increase and intensify in the future. The Company believes its
ability to compete will depend upon many factors both within and outside its
control, including the timing and market acceptance of new products and
enhancements developed by the Company and its competitors, product
functionality, data availability, ease of use, pricing, reliability, customer
service and support, sales and marketing efforts and product distribution
channels.
8
<PAGE>
The Company faces direct competition from several publicly-traded and
privately-held companies. The Company's principal competitors include AIQ, Aspen
Graphics, Equis International, Inc. (Metastock), a subsidiary of Reuters, Market
Arts, Inc. (Window on Wall Street) and TeleChart 2000. The Company also competes
with investment analysis solutions available on the Internet, some of which are
available for free. In addition, the Company faces competition from data
vendors, all of which offer investment analysis software products, and which are
the Company's existing and potentially future strategic partners. As a result,
the Company must educate prospective customers as to the potential advantages of
the Company's products, and continue to offer solutions not offered by major
data vendors. There can be no assurance that the Company will be able to compete
effectively with its competitors, adequately educate potential customers to the
benefits that the Company's products provide, or continue to offer such software
solutions.
Many of the Company's existing and potential competitors, which include
large, established software companies which do not currently focus on the
investment analysis software market, have longer operating histories,
significantly greater financial, technical and marketing resources, greater name
recognition and a larger installed customer base than has the Company. One or
more of these competitors may be able to respond more quickly to new or emerging
technologies or changes in customer requirements, or to devote greater resources
to the development, promotion and sale of their products than may the Company.
There can be no assurance that the Company's existing or potential competitors
will not develop products comparable or superior to those developed by the
Company or adapt more quickly than the Company to new technologies, evolving
industry trends or changing customer requirements. Increased competition could
result in price reductions, reduced margins or loss of market share, any of
which could materially adversely affect the Company's business, financial
condition and results of operations. There can be no assurance that the Company
will be able to compete successfully against current or future competitors, or
that competitive pressures faced by the Company will not have a material adverse
effect on its business, financial condition and results of operations. See
"Business -- Competition."
PRODUCT CONCENTRATION
Since its introduction in 1991, sales of TRADESTATION have accounted for a
majority of the Company's total revenues and are expected to continue to account
for a substantial portion of such revenues for the foreseeable future. As a
result, any factor resulting in price reductions of, or declines in demand for,
TRADESTATION would have a material adverse effect on the Company's business,
financial condition and results of operations. There can be no assurance that
the Company will continue to be successful in marketing TRADESTATION or any new
or enhanced version thereof. Competitive pressures or other factors may result
in significant price erosion that would have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Overview," "Business -- Products" and "-- Competition."
MANAGEMENT OF CHANGE
The Company's business has grown rapidly in recent years. This growth has
placed, and will continue to place, a significant strain on the Company's
management and operations. The Company has ambitious plans for future growth,
including entry into new markets, that will place additional significant strain
on the Company's management and operations. The Company's future operating
results will depend, in part, on its ability to continue to broaden the
Company's senior management group and administrative infrastructure, and its
ability to attract, hire and retain skilled employees,
9
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particularly in the product management and product development areas. The
Company's success will also depend on the ability of its officers and key
employees to continue to implement and improve the Company's operational and
financial control systems and to expand, train and manage its employee base. The
Company's future operating results will also depend on its ability to expand its
sales and marketing organizations and expand its customer support operations
commensurate with its growth, should such growth occur. The Company's inability
to effectively manage growth, should such growth occur, could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business -- Employees."
The Company is in the process of implementing a new accounting, customer
tracking and management system at its corporate headquarters to address certain
limitations in its information resources. The Company is in the process of
learning the full capabilities of the new system, and realization of all the
benefits of the new system will take an undetermined length of time. There can
be no assurance that the Company will not experience difficulties in
transitioning to the new system. The failure to receive adequate, accurate and
timely financial information could impair management's ability to make effective
and timely business decisions, which could have a material adverse effect upon
the Company's business, financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- Sales and Marketing."
RISKS OF RETURNS AND COLLECTION OF ACCOUNTS RECEIVABLE
Revenues are recognized by the Company at the time product is shipped, and
the Company maintains a reserve to account for anticipated returns of its
products based on the Company's evaluation of historical experience and other
relevant information. The Company's return rate has increased over the last
several quarters and there can be no assurance that this trend will not
continue. In the event that returns materially increase over historical rates as
a result of changes in technology, shifts in consumer demand or other reasons,
the reserves maintained by the Company will not be sufficient to cover such
returns and, in such event, the Company's business, financial condition and
results of operations would be materially adversely affected. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Overview."
The Company has an unusually high level of accounts receivable, based
primarily on its policy of permitting customers to pay for many of its products
by automatic monthly charges to the customer's credit card over a 12-month
period. While the Company believes that it maintains adequate reserves to
account for the non-collection of its accounts receivable, there can be no
assurance that the rate of non-collection of accounts receivable will not
increase over historical levels. Such an increase could materially adversely
affect the Company's business, financial condition and results of operations.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Overview."
RISKS ASSOCIATED WITH ENTRY INTO INSTITUTIONAL MARKET
The Company has historically sold its products to individuals and has no
experience in marketing its products directly to institutions. The Company
believes its future success will depend in part on its ability to move beyond
its traditional customer base and market its products to institutions, including
brokerage firms. The Company's ability to enter the institutional market will
depend, in part, upon its ability to successfully develop network versions of
its products. There can be no assurance that the Company will be successful in
developing a network version and marketing, on a timely and cost-effective
basis, if at all, products that respond to current and emerging
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institutional market conditions or that will be accepted by institutional
investors, any of which could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business -- The
Omega Research Strategy."
RISKS ASSOCIATED WITH FLUCTUATIONS IN THE SECURITIES AND FINANCIAL MARKETS
The Company's products are marketed to customers who invest or trade in the
securities and financial markets. To the extent that interest in investing or
trading decreases due to volatility in the securities or financial markets, tax
law changes, recession, depression, or otherwise, the Company's business,
financial condition and results of operations could be materially adversely
affected. See "Business -- Industry Background."
RELATIONSHIPS WITH DATA VENDORS
The Company's viability depends on the ability of its customers to obtain
access to a breadth of quality real-time and historical financial market data
from services that are technically compatible with the Company's products. The
Company currently depends nearly entirely upon relationships with third-party
data vendors to ensure such access. Most of the data vendors with whom the
Company has developed technical compatibility have developed and are currently
marketing their own versions of investment analysis software and, in some cases,
have established alliances with the Company's competitors. Such data vendors may
decide to increase the focus of their efforts and resources on their own
development efforts, develop products highly competitive with the Company's
products, strengthen their alliances with the Company's competitors, discontinue
their relationships with the Company, or develop strategic initiatives which
involve eliminating or limiting compatibility between the Company's products and
the data vendors' services. If this occurred, the Company would be required to
find alternate sources for such data in order to remain viable and there can be
no assurance that such alternate sources would be available on commercially
reasonable terms, if at all. There is also the risk that such data vendors will
not pay the fees, commissions or royalties due to the Company under their
contractual agreements or that such contractual relationships will not be
renewed on terms favorable to the Company, if at all. There can be no assurance
that the Company will be able to increase the number of compatible data sources
available, or that its existing data sources will continue to exist or cooperate
in maintaining technical compatibility with the Company's products. If the
Company were unable to secure additional key data sources or were to lose access
to significant amounts of data, the Company's ability to obtain and retain
customers, and therefore the Company's business, financial condition and results
of operations, would be materially adversely affected. The Company's business,
financial condition and results of operations would also be materially adversely
affected if a significant number of its data vendors failed to make their fee,
commission or royalty payments to the Company when due.
The loss by data vendors of subscribers who use the Company's products may
also adversely affect the Company if such subscribers switch to a data vendor
whose services are not technically compatible with the Company's products, or a
data vendor who has an exclusive or more favorable relationship with a
competitor of the Company. The use of such other data vendor may reduce
marketing fees and commissions to the Company. The resultant loss of fees and
commissions, if significant, would have a material adverse effect on the
Company's business, financial condition and results of operations. See "Business
- -- Competition" and "-- Strategic Relationships."
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RAPID TECHNOLOGICAL CHANGE AND DEPENDENCE ON NEW PRODUCTS
The market for investment analysis software is characterized by rapidly
changing technology, evolving industry standards in computer hardware,
programming tools, programming languages, operating systems, database technology
and information delivery systems, changes in customer requirements and frequent
new product introductions and enhancements. The Company's future success will
depend upon its ability to maintain and develop competitive technologies, to
continue to enhance its current products and to develop and introduce new
products in a timely and cost-effective manner that meets changing conditions
such as evolving customer needs, new competitive product offerings, emerging
industry standards and changing technology. Any failure by the Company to
anticipate or to respond quickly to changing market conditions, or any
significant delays in product development or introduction, could cause customers
to delay or decide against purchases of the Company's products and would have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business -- The Omega Research Strategy" and
"-- Product Development."
RISKS ASSOCIATED WITH FUTURE RELIANCE ON THE INTERNET
The Company believes that future sales of its products and the future
growth of the Company, particularly outside of the United States and Canada,
will depend upon the adoption of the Internet as a widely used medium for
commerce and communication, and the Internet becoming a significant means of
delivery of high-quality financial market data, marketing materials and customer
support. If the Internet becomes viable in such manner, the Company will have to
develop extensive Internet product technical compatibility and adjust its
marketing and customer support approaches accordingly. There can be no assurance
that the Company will accomplish any of such tasks on a timely, cost-effective
basis, if at all. Conversely, the Internet may not prove to be a viable
commercial marketplace because of failure to develop the necessary
infrastructure, such as reliable network backbones and adequate band-widths, or
failure to develop complementary services, such as high-speed modems. The
Internet has experienced, and is expected to continue to experience, significant
growth in the number of users and amount of traffic. There can be no assurance
that the Internet infrastructure will continue to be able to support the demands
placed on it by this continued growth. In addition, the Internet could lose its
viability due to delays in the development or adoption of new standards and
protocols to handle increased levels of Internet activity, or due to increased
governmental regulation. Because global commerce and online exchange of
information on the Internet and other similar open wide area networks are new
and evolving, it is difficult to predict whether the Internet will prove to be a
viable commercial marketplace. There can be no assurance that the infrastructure
or complementary services necessary to make the Internet a viable commercial
marketplace will develop, or, if developed, that the Internet will become a
viable commercial marketplace for financial market data or products such as
those offered by the Company. If the necessary infrastructure or complementary
services are not developed, or if the Internet does not become a viable
commercial marketplace, or if the Internet becomes viable and the Company does
not adequately and timely develop the necessary technical compatibility and
adjust its marketing and customer support approaches accordingly, the Company's
business, financial condition and results of operations could be materially
adversely affected. See "Business -- Industry Background" and "-- The Omega
Research Strategy."
RISKS OF PRODUCT DEFECTS; PRODUCT LIABILITY
As a result of their complexity, all software products, including the
Company's products, contain errors. Despite testing by the Company and initial
use by customers, when new products are
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introduced or new versions of products are released there can be no assurance
that errors will not be found and persist after commencement of commercial
shipments, resulting in loss of revenues, delay in market acceptance or damage
to the Company's reputation, any of which could have a material adverse effect
upon the Company's business, financial condition and results of operations. All
investment analysis software products are inherently limited by the accuracy of
the data utilized by such products. Because the monitoring, collection, storage
and delivery of financial market data by data vendors and by the Company's
software is inherently difficult, the data frequently contain errors. The
effectiveness of the Company's products is therefore limited by the accuracy of
such data. Moreover, the financial market data often used by investors with the
Company's products to perform historical testing are based upon discrete data
points (such as open, high, low and close prices for a user-specified time
period) rather than on a trade-by-trade continuum. This requires the Company's
products to incorporate certain assumptions as to the movement from one data
point to the next. To the extent that such assumptions are incorrect, the
results of the historical testing will be inaccurate. See "Business --
Products."
The Company's products are used by investors in the financial markets, and,
as a result, an investor might claim that investment losses or lost profits
resulted from use of a flawed version of one of the Company's products or
inaccurate assumptions made by the product regarding data. Liability imposed on
the Company as a result of any such losses by its customers could have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company's license agreements with its customers
typically contain provisions designed to limit the Company's exposure for
potential claims based on use, errors or malfunctions of its products. It is
possible, however, that the limitation of liability provisions contained in the
Company's license agreements may not be effective under the laws of certain
jurisdictions. Although the Company has not experienced any product liability
claims to date, the sale and support of the Company's products entail the risk
of such claims. Although the Company has a limited amount of product liability
insurance, there can be no assurance that such insurance would be adequate to
cover the amount of such liabilities, if imposed on the Company, or that such
insurance would cover the types of claims which might be asserted against the
Company. A product liability claim brought against the Company could have a
material adverse effect on the Company's business, financial condition and
results of operations.
RISK OF LITIGATION
There has been substantial litigation in the software industry involving
intellectual property rights. Although the Company does not believe that it is
infringing the intellectual property rights of others, there can be no assurance
that infringement claims, if asserted, would not have a material adverse effect
on the Company's business, financial condition and results of operations. In
addition, as part of its marketing strategy, the Company licenses to its
solution providers the Omega Research Solution Provider logo. Several solution
provider products recommend specific trading systems or strategies to investors,
which, if used by investors unsuccessfully, could result in claims by them. The
association of the Company's name and logo with a solution provider's products
or services may therefore subject the Company to claims brought by third parties
with respect to such products or services. Such claims, if asserted, could have
a material adverse effect on the Company's business, financial condition and
results of operations.
As the Company's products are designed to enable investors to make improved
investment and trading decisions, an investor who uses the Company's products
and sustains losses or fails to make profits in the securities or financial
markets may allege that the Company's products contributed to or resulted in
such losses or lost profits and that the Company should be held liable to the
investor
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for such losses. While the Company's user manuals contain certain warnings and
disclaimers, they may not be effective in certain jurisdictions or under certain
circumstances. The Company currently has a limited amount of errors and
omissions insurance which may cover such liability risks, but there can be no
assurance that such insurance would be adequate to cover the amount of such
liabilities, if imposed on the Company, or that such insurance would cover the
types of claims which might be asserted against the Company. While the Company
has never had such a claim asserted against it, there can be no assurance that
such claims will never be asserted and that, if asserted, such claims would not
have a material adverse effect on the Company's business, financial condition
and results of operation. See "Business -- Products."
DEPENDENCE ON RELATIONSHIP WITH DOW JONES MARKETS
The Company has entered into two Software License, Maintenance and
Development Agreements with Dow Jones Markets, Inc., formerly known as Dow Jones
Telerate, Inc. ("Dow Jones Markets"), which the Company expects will provide a
substantial royalty stream over the next five years. While the agreements are
non-cancelable and, in the case of one of the agreements, provide for certain
guaranteed minimum annual royalty payments to the Company, there can be no
assurance that circumstances will not arise under which Dow Jones Markets will
seek to avoid continued payment of the royalties. Should Dow Jones Markets not
make the payments to the Company as and when due, the Company's business,
financial condition and results of operations would be materially adversely
affected. Further, under such agreements, Dow Jones Markets has complete
discretion as to how it markets the Company's TRADESTATION and SUPERCHARTS
products to Dow Jones Markets' existing and potential subscribers, most of which
are institutions, worldwide. If Dow Jones Markets, in the exercise of such
discretion, markets such products in a manner detrimental to the Company,
whether due to Dow Jones Markets having a different marketing focus which
emphasizes its other products or a competing software product, poor conception
or execution, or otherwise, the Company's entry into the institutional investor
market, its reputation and its business, financial condition and results of
operations could be materially adversely affected. To date, minimum royalties
under the Dow Jones Markets agreements have exceeded actual royalties. In the
event that the Dow Jones Markets agreements are not extended or renewed beyond
their expiration in the year 2002, there may be a decline in the Company's
revenues for the quarter in which the agreements terminate and thereafter, which
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Overview" and "Business
- -- Strategic Relationships."
RISKS ASSOCIATED WITH INTERNATIONAL EXPANSION
A key component of the Company's strategy is its planned expansion into
international markets. This strategy is dependent, in part, on international
customers having access to the appropriate financial market data. There is no
practical and affordable access to such data in many countries and there can be
no assurance that the required financial market data will ever be readily
available in the countries in which the Company's products could be sold or that
such data, if available, will be reliable or affordable. To date, the Company
has only limited experience in marketing, selling and delivering its products
internationally. There can be no assurance that the Company will be able to
successfully market, sell and deliver its products in international markets. In
addition, there are certain risks inherent in doing business on an international
level, such as unexpected changes in regulatory requirements, export
restrictions, tariffs and other trade barriers, difficulties in staffing and
managing foreign operations, dependence upon and problems with foreign
distributors or strategic partners needed to succeed in certain countries,
difficulties in protecting intellectual
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property rights, longer payment cycles, problems in collecting accounts
receivable, political instability, unfamiliarity with local laws and customs,
fluctuations in currency exchange rates, and potentially adverse tax
consequences. There can be no assurance that one or more of such or other
factors will not have a material adverse effect on the Company's future
international operations and, consequently, on the Company's business, financial
condition and results of operations. See "Business -- Sales and Marketing."
DEPENDENCE UPON MICROSOFT'S WINDOWS OPERATING SYSTEM
The Company's products are currently designed for use on computers using
Microsoft's Windows operating system. The Company currently intends to develop
future versions of its products for 32-bit Windows operating systems, and, as a
result, such versions will not be compatible with the Microsoft Windows 3.1
operating system and will require Windows 95, Windows NT 4.0 or later versions
of Windows. A decision by current users of the Windows 3.1 operating system not
to upgrade to a newer version of the Windows operating system would adversely
affect demand for the Company's products, causing a material adverse effect on
the Company's business, financial condition and results of operations. Any
factor adversely affecting the demand for, or use of, or the current trends of
increasing and expanding use of, the Windows operating system could have an
impact on demand for the Company's products causing a material adverse effect on
the Company's business, financial condition and results of operations.
Additionally, changes to the underlying components of the Windows operating
system may require changes to the Company's products. If the Company is not able
to successfully develop or implement appropriate modifications to its products
in a timely fashion, the Company's business, financial condition and results of
operations would be materially adversely affected. See "Business -- Industry
Background" and "-- Products."
EMERGING MARKET FOR INVESTMENT ANALYSIS SOFTWARE
The market for software products that enable investors to design,
historically test and computer-automate their own investment and trading
strategies on the personal computer is relatively new and will be subject to
frequent and continuing changes. Any future growth of this market depends upon
continued customer acceptance of the Company's products as valuable tools in
designing and implementing custom investment and trading strategies.
Historically, the Company has been required to educate prospective customers as
to the potential advantages of the Company's products. The Company expects that
the educational component of the sales process will continue for the foreseeable
future and will require significant resources. There can be no assurance that
the market for such software will grow, that the Company will be successful in
educating a sufficient number of customers as to the potential advantages of
such software or that the Company will be able to respond effectively to
changing customer preferences in this market. If the size of the market is
substantially smaller than the Company believes, or if the market for investment
analysis software fails to grow or grows more slowly than the Company currently
anticipates, or if the Company fails to respond effectively to the evolving
requirements of this market, the Company's business, financial condition and
results of operations would be materially adversely affected. See "Business
- -- Industry Background."
PROTECTION OF INTELLECTUAL PROPERTY
The Company's success is heavily dependent upon its proprietary technology.
The Company relies primarily on a combination of copyright, trade secret and
trademark laws, nondisclosure and other contractual provisions and technical
measures to protect its proprietary rights. The Company
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<PAGE>
seeks to protect its software, documentation and other written materials through
trade secret and copyright laws, which provide only limited protection. As part
of its confidentiality procedures, the Company generally enters into
nondisclosure agreements with its employees, consultants, distributors and
corporate partners. The Company uses a shrink-wrap license (typically on its
packaging and on-screen) directed to users of its products in order to protect
its copyrights and trade secrets and to prevent such users from commercially
exploiting such copyrights and trade secrets for their own gain. Since these
licenses are not signed by the licensees, many authorities believe that they may
not be enforceable under many state laws and the laws of many foreign
jurisdictions. The laws of Florida, which such licenses purport to make the
governing law, are unclear on this subject. Despite the Company's efforts to
protect its proprietary rights, unauthorized parties copy or otherwise obtain,
use or exploit the Company's products or technology independently. Policing
unauthorized use of the Company's products is difficult, and the Company is
unable to determine the extent to which unauthorized use of its software
products exists. Piracy can be expected to be a persistent problem, particularly
in international markets and as a result of the growing use of the Internet. In
addition, effective protection of intellectual property rights may be
unavailable or limited in certain countries, including some in which the Company
may attempt to expand its sales efforts. There can be no assurance that the
steps taken by the Company to protect its proprietary rights will be adequate or
that the Company's competitors will not independently develop technologies that
are substantially equivalent or superior to the Company's technologies or
products, either of which could result in a material adverse effect on the
Company's business, financial condition and results of operations.
There has been substantial litigation in the software industry involving
intellectual property rights. The Company does not believe that it is infringing
the intellectual property rights of others, although there exists a competing
trademark application for the name WALL STREET ANALYST which claims prior use.
There can be no assurance that infringement claims would not have a material
adverse effect on the Company's business, financial condition and results of
operations. In addition, to the extent that the Company acquires or licenses a
portion of the software or data included in its products from third parties, its
exposure to infringement actions may increase because the Company must rely upon
such third parties for information as to the origin and ownership of such
acquired or licensed software or data. In the future, litigation may be
necessary to establish, enforce and protect trade secrets, copyrights,
trademarks and other intellectual property rights of the Company. The Company
may also be subject to litigation to defend against claimed infringement of the
rights of others or to determine the scope and validity of the intellectual
property rights of others. Any such litigation could be costly and divert
management's attention, either of which could have a material adverse effect on
the Company's business, financial condition and results of operations. Adverse
determinations in such litigation could result in the loss of proprietary
rights, subject the Company to significant liabilities, require the Company to
seek licenses from third parties, which could be expensive, or prevent the
Company from selling its products or using its trademarks, any one of which
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business -- Intellectual Property."
FUTURE CAPITAL NEEDS
The Company believes that funds generated from operations and the net
proceeds of this offering will be sufficient to meet normal working capital
needs at least through 1998. The Company's ability to expand and grow its
business in accordance with its current plans, to make acquisitions and to meet
its long-term capital requirements beyond 1998 will depend on many factors,
including, but not limited to, the rate, if any, at which the Company's cash
flow increases, the ability and willingness of the Company to accomplish
acquisitions with its capital stock, and the availability
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<PAGE>
to the Company of public and private debt and equity financing. No assurance can
be given that additional financing will be available or that, if available, it
will be available on terms favorable to the Company. See "Use of Proceeds" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES
The Company is not currently subject to direct regulation by any government
agency, other than regulations applicable to businesses generally. While not
currently regulated as such, there is the possibility that, because of the use
of the Company's products as a tool for formulating and implementing investment
strategies, the Company may become subject to existing or future regulations
applicable to investment advisors or other securities professionals. Such
regulations are complex and compliance therewith would require the Company to
make significant expenditures in the resources necessary to ensure compliance
with those regulations. Such expenditures would render the Company's business or
operations more costly or burdensome, less efficient or even impossible, any of
which could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business -- Products."
RISKS ASSOCIATED WITH POSSIBLE ACQUISITIONS
The Company may acquire businesses, assets, products and technologies that
the Company believes could complement or expand the Company's business. The
Company currently has no specific plans, commitments or agreements with respect
to any acquisitions and there can be no assurance that the Company will be able
to identify any appropriate acquisition candidates. If the Company identifies an
acquisition candidate, there can be no assurance that the Company will be able
to successfully negotiate the terms of any such acquisition, finance such
acquisition or integrate such acquired business, assets, products or
technologies into the Company's existing business. Furthermore, the negotiation
of potential acquisitions as well as the integration of an acquired business
could cause diversion of management's time and resources, and require the
Company to use proceeds from this offering to consummate a potential
acquisition. Further, acquisitions by the Company could result in potentially
dilutive issuances of equity securities, the incurrence of debt and contingent
liabilities and the amortization of goodwill and other acquired assets. There
can be no assurance that any acquisition would not have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Use of Proceeds."
BROAD MANAGEMENT DISCRETION IN USE OF PROCEEDS
Other than with respect to the payment of S corporation undistributed and
retained earnings to the Company's current shareholders, the Company currently
has no specific plan for using the proceeds of this offering. As a consequence,
the Company will have broad discretion to allocate a large percentage of such
proceeds to uses which the public shareholders may not deem desirable, and there
can be no assurance that the proceeds can or will yield a significant return.
See "Use of Proceeds."
NO PRIOR MARKET FOR THE COMMON STOCK; POSSIBLE VOLATILITY OF SHARE PRICE
Prior to this offering, there has been no public market for the Common
Stock of the Company, and there can be no assurance that an active trading
market will develop upon completion of this offering or, if it does develop,
that such market will be sustained. The initial public offering price of the
Common Stock will be determined by negotiation among the Company, the Selling
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<PAGE>
Shareholders and the representatives of the Underwriters, and may not be
representative of the price that will prevail in the public market. See
"Underwriting" for a discussion of the factors to be considered in determining
the initial public offering price.
The market price of the Common Stock after this offering may be
significantly affected by factors such as quarterly variations in the Company's
results of operations, the announcement of new products or product enhancements
by the Company or its competitors, technological innovation by the Company or
its competitors and general market conditions specific to particular industries.
In particular, the stock prices for many companies in the technology and
emerging growth sectors have experienced wide fluctuations which have often been
unrelated to the operating performance of such companies. Such fluctuations may
materially adversely affect the market price of the Common Stock. See
"Underwriting."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of Common Stock in the public market after
this offering could materially adversely affect the market price of the Common
Stock. Upon closing of this offering, the Company will have a total of
22,080,000 shares of Common Stock outstanding, of which 3,700,000 shares will be
freely tradeable without restriction under the Securities Act of 1933, as
amended (the "Securities Act"). All of the remaining 18,380,000 shares are
"restricted securities" as defined by Rule 144 promulgated under the Securities
Act. Beginning 180 days after the date of this Prospectus, upon the expiration
of lock-up agreements with the Underwriters, all of such restricted securities
will be available for sale in the public market subject to compliance with Rule
144 volume and other requirements. The Company intends to register for issuance
or resale the 3,000,000 shares of Common Stock reserved for issuance under the
Incentive Stock Plan, the 175,000 shares of Common Stock reserved for issuance
under the Director Stock Plan and the 500,000 shares of Common Stock reserved
for issuance under the Purchase Plan. As of July 21, 1997, options to purchase
891,250 shares were outstanding under the Incentive Stock Plan, all of which
become exercisable at varying times after November 30, 1997, and no shares had
been issued under the Director Stock Plan or the Purchase Plan. Further, should
either or both of the Company's principal shareholders die, a substantial
portion of their shares of the Company's Common Stock may need to be sold in
order to pay estate taxes. Such sales could materially adversely affect the
market price of the Common Stock. See "Management -- Other Compensation
Arrangements," "Shares Eligible for Future Sale" and "Underwriting."
CONTROL BY PRINCIPAL SHAREHOLDERS, OFFICERS AND DIRECTORS
Upon completion of this offering, the Company's Co-Chief Executive
Officers, William Cruz and Ralph Cruz, and their affiliates will, in the
aggregate, beneficially own approximately 83.2% of the Company's outstanding
Common Stock, assuming no exercise of options outstanding (81.1% if the
Underwriters' over-allotment option is exercised in full). As a result, such
persons, acting together, will have the ability to control the vote on all
matters submitted to shareholders of the Company for approval (including
election of directors and any merger, consolidation or sale of all or
substantially all of the Company's assets) and to control the management and
affairs of the Company. Such concentration of ownership may have the effect of
delaying, deferring or preventing a change in control of the Company or a
merger, consolidation, takeover or other business combination involving the
Company or discouraging a potential acquirer from making a tender offer or
otherwise attempting to obtain control of the Company. See "Management" and
"Principal and Selling Shareholders."
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CERTAIN FLORIDA STATUTORY PROVISIONS
Florida has enacted legislation that may deter or frustrate takeovers of
Florida corporations. The Florida Control Share Act generally provides that
shares acquired in excess of certain specified thresholds will not possess any
voting rights unless such voting rights are approved by a majority vote of a
corporation's disinterested shareholders. The Florida Affiliated Transactions
Act generally requires supermajority approval by disinterested shareholders of
certain specified transactions between a public corporation and holders of more
than 10% of the outstanding voting shares of the corporation (or their
affiliates). Florida law also authorizes the Company to indemnify the Company's
directors, officers, employees and agents. The Company has adopted the Second
Amended and Restated Articles of Incorporation (the "Articles") and the Second
Amended and Restated Bylaws (the "Bylaws") with such an indemnity provision and
intends to enter into indemnification agreements with all of its executive
officers and directors. See "Description of Capital Stock -- Certain Provisions
of Florida Law" and "-- Limitation of Liability and Indemnification Matters."
EFFECT OF CERTAIN CHARTER AND BYLAW PROVISIONS
The Articles and Bylaws contain certain provisions that could discourage
potential takeover attempts and make attempts by the Company's shareholders to
change management more difficult. Such provisions include the requirement that
the Company's shareholders follow an advance notification procedure for certain
shareholder nominations of candidates for the Board of Directors and for new
business to be conducted at any meeting of the shareholders. The Articles also
provide that special meetings of the shareholders may only be called by the
Board of Directors or the holders of shares representing not less than 50% of
all votes entitled to be cast on any issue to be considered at the special
meeting. The Articles require that, upon completion of this offering, any
actions by the shareholders of the Company may be taken only upon the vote of
the shareholders at a meeting and may not be taken by written consent. In
addition, the Articles allow the Board of Directors to issue up to 25,000,000
shares of preferred stock and to fix the rights, privileges and preferences of
those shares without any further vote or action by the shareholders. The rights
of the holders of Common Stock will be subject to, and may be adversely affected
by, the rights of the holders of any preferred stock that may be issued by the
Company in the future. While the Company has no present intention to issue
preferred stock, any such issuance could have the effect of making it more
difficult for a third party to acquire a majority of the outstanding voting
stock of the Company. See "Description of Capital Stock -- Certain Charter and
Bylaw Provisions."
DILUTION
Investors purchasing Common Stock in this offering will experience
immediate and substantial dilution of $9.91 in the net tangible book value per
share of Common Stock (based on an assumed initial public offering price of
$11.00 per share). See "Dilution."
19
<PAGE>
DISTRIBUTION OF S CORPORATION EARNINGS
The Company is currently treated for federal and state income tax purposes
as an S Corporation under the Internal Revenue Code of 1986, as amended (the
"Code"), and comparable state tax laws. As a result, the earnings of the Company
are taxed for federal income tax purposes directly to the shareholders of the
Company, rather than to the Company (the state of Florida currently does not
impose an income tax on an individual's income, including his or her share of an
S corporation's earnings). Immediately prior to the completion of this offering
the Company will terminate its S Corporation status (the "Termination Date") and
the Company will become a C corporation making it subject to federal and state
income taxes on its earnings.
The Company's Board of Directors intends to declare a cash dividend (the
"Dividend") payable to the Company's existing shareholders equal to the
Company's accumulated earnings during the period it is an S corporation, to the
extent such income has not been previously distributed (the "S Corporation
Earnings"). The estimated amount of the Dividend will be paid on or about the
Termination Date. The Company intends to finance the payment of the estimated
Dividend with a short-term bank loan and use a portion of the proceeds of this
offering to repay the bank loan. The estimated S Corporation Earnings through
June 30, 1997 is approximately $10.6 million. The actual S Corporation Earnings
through the Termination Date and, accordingly, the Dividend, is expected to be
materially higher than $10.6 million. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Overview" and Notes 1 and 7
of the Notes to Financial Statements.
Prior to the consummation of this offering, the Company and its current
shareholders will enter into a S Corporation Tax Allocation and Indemnification
Agreement (the "Tax Agreement") relating to the Dividend and their respective
income tax liabilities. The Tax Agreement will provide that to the extent the S
Corporation Earnings, as subsequently established by the filing of the Company's
tax return for the Company's short S corporation tax year, are less than the
estimated Dividend paid prior to the consummation of this offering, the existing
shareholders will make a payment equal to such difference to the Company, and if
the S Corporation Earnings are greater than the estimated Dividend, the Company
will make an additional distribution equal to such difference to the current
shareholders, in either case, with interest thereon. Subject to certain
limitations, the Tax Agreement also provides for the cross-indemnification of
the current shareholders and the Company for any federal and state income taxes,
including interest and penalties, if any, as a result of a final determination
of a taxing authority that increases or decreases the taxable income of the
Company for an S corporation taxable year (resulting in a change in the income
taxes due by the current shareholders for such year) and causes a corresponding
increase or decrease in the taxable income of the Company for a C corporation
taxable year. Each party's obligation under the Tax Agreement is limited to the
amount of any reduction in their tax liability as a result of any such
determination.
In July 1997, the Company voluntarily filed a request on Form 3115 with the
Internal Revenue Service (the "IRS") to change its method of accounting from the
cash method to the accrual method effective on January 1, 1997 (the "Form
3115"). As the result of the filing of the Form 3115, the Company is required to
include in its income over three taxable years an amount equal to the excess of
the income it should have reported as taxable income under the accrual method
for years prior to 1997 and the amount it did report as taxable income under the
cash method for such years. Pursuant to the Tax Agreement, the Company's
liability for federal and state income taxes on such additional income is
limited to $1.8 million. If the IRS determines that some or all of this
additional income should be included in an S corporation taxable year of the
Company, pursuant to the Tax Agreement,
20
<PAGE>
the Company will make a payment to the existing shareholders equal to any
increase in their income taxes on such additional income, up to $1.8 million.
To the extent a payment is made pursuant to the Tax Agreement by the
Company to the current shareholders after the one year anniversary of the
Termination Date, except to the extent it relates to the Form 3115, the Company
will be required to make an additional payment to the current shareholders equal
to any income taxes payable by such shareholders on such payments. The Company
will not receive a tax deduction for any payments made to the current
shareholders pursuant to the Tax Agreement. The current shareholders have not
provided security for their obligations under the Tax Agreement; accordingly,
the Company's ability to collect any such payments will be dependent upon the
current shareholders financial condition at the time such payments are to be
made. The Company is not aware of any tax adjustments which might require
payments under the Tax Agreement, other than related to the Form 3115. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Overview" and Notes 1 and 7 of the Notes to Financial Statements.
21
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,600,000 shares of
Common Stock offered by the Company pursuant to this offering are estimated to
be $25,948,000 ($29,937,700 if the Underwriters' over-allotment option is
exercised in full), based on an assumed initial public offering price of $11.00
per share, after deducting underwriting discounts and commissions and estimated
offering expenses payable by the Company. The Company will not receive any
proceeds from the sale of Common Stock by the Selling Shareholders. See
"Principal and Selling Shareholders."
The principal purposes of this offering are to establish a public market
for the Company's stock, to provide enhanced equity incentives to attract and
retain key employees, to increase the Company's visibility in its markets, to
facilitate future access to public capital markets and to obtain additional
working capital. The Company will use a portion of the net proceeds of this
offering to repay a short-term bank loan which the Company intends to obtain in
order to pay the Dividend prior to completion of this offering. A portion of the
net proceeds may also be used for the acquisition of businesses, assets,
services and technologies that the Company believes would be complementary to
those of the Company. The Company presently has no commitments or understandings
for any acquisitions and is not presently engaged in any discussions or
negotiations for any acquisitions. Pending such uses, the Company intends to
invest the balance of the net proceeds of this offering in short-term,
interest-bearing instruments. See "Risk Factors -- Broad Management Discretion
in Use of Proceeds."
DIVIDEND POLICY
The Company currently intends to retain future earnings to finance its
growth and development and therefore does not anticipate paying any cash
dividends in the foreseeable future. Payment of any future dividends will depend
upon the future earnings and capital requirements of the Company and other
factors which the Board of Directors considers appropriate. During 1994, 1995,
1996 and the first six months of 1997, the Company declared cash dividends in
the aggregate amounts of $3,468,000, $2,153,000, $5,222,000 and $1,960,000,
respectively, to the then current shareholders of the Company. Additionally,
during the second quarter of 1997, the Company declared a dividend to the then
current shareholders of the Company, William Cruz and Ralph Cruz, of the
Company's former office facilities located at 9200 Sunset Drive, Miami, Florida
33173. The carrying value of the facility on the Company's books was
approximately $507,000, which the Company believes is not substantially less
than the fair market value of the facility. For certain information regarding
the Dividend to be paid by the Company in 1997 prior to consummation of this
offering, see "Distribution of S Corporation Earnings" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations
- -- Overview."
22
<PAGE>
CAPITALIZATION
The following table sets forth as of June 30, 1997 (i) the actual
capitalization of the Company, (ii) the capitalization of the Company on a pro
forma basis to give effect to the items referred to in footnote (2) below and
(iii) such pro forma capitalization as adjusted to give effect to the sale by
the Company of the 2,600,000 shares of Common Stock offered hereby at an assumed
initial public offering price of $11.00 per share and the application of the net
proceeds therefrom. See "Use of Proceeds." This table should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Company's Financial Statements and Notes
thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1997
-------------------------------------
PRO PRO FORMA
ACTUAL FORMA(2) AS ADJUSTED
----------- -------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Short-term obligations................................................. $ -- $10,622 $ --
====== ======= =======
Shareholders' equity:
Preferred Stock, $0.01 par value per share, 25,000,000 shares
authorized, none issued and outstanding, actual, pro forma
and pro forma as adjusted......................................... -- -- --
Common Stock, $0.01 par value per share, 100,000,000 shares
authorized; 19,480,000 shares issued and outstanding actual
and pro forma; and 22,080,000 shares issued and outstanding
pro forma as adjusted(1).......................................... 195 195 221
Additional paid-in capital (deficit)................................. 44 (2,010) 23,912
Retained earnings.................................................... 7,568 -- --
------ ------- -------
Total shareholders' equity (deficit)......................... 7,807 (1,815) 24,133
------ ------- -------
Total capitalization....................................... $7,807 $ 8,807 $24,133
====== ======= =======
<FN>
- ------------------
(1) Excludes (i) 891,250 shares of Common Stock issuable upon exercise of stock
options granted under the Incentive Stock Plan as of July 21, 1997, with a
weighted average exercise price of $1.84 per share; (ii) 2,108,750
additional shares of Common Stock reserved for future issuance under the
Incentive Stock Plan (including up to 150,000 shares which the Company
intends to issue to certain employees (other than executive officers) on or
prior to the date of this Prospectus, of which approximately 100,000 shares
will be issued at an exercise price equal to the initial public offering
price); (iii) 175,000 shares of Common Stock reserved for issuance under the
Director Stock Plan; and (iv) 500,000 shares of Common Stock reserved for
issuance under the Purchase Plan. See "Management -- Other Compensation
Arrangements" and Note 4 of Notes to Financial Statements.
(2) Reflects the pro forma effects of (i) the distribution of the Dividend
estimated at $10.6 million based on the Company's previously undistributed S
corporation earnings through June 30, 1997 (although the actual amount of
the Dividend will also include the taxable income of the Company for the
period from July 1, 1997 through the termination of the S corporation
election) funded by a short-term bank loan the Company intends to obtain
prior to the consummation of this offering, (ii) the recording of deferred
tax assets, net of tax liabilities, in the amount of $1.0 million arising
from termination of S corporation status and (iii) the reclassification of
remaining undistributed S corporation earnings to additional paid-in
capital. See "Distribution of S Corporation Earnings," "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Overview" and Note 7 of Notes to Financial Statements.
</FN>
</TABLE>
23
<PAGE>
DILUTION
The pro forma net tangible book value of the Company as of June 30, 1997
was $(1,815,000), or $(0.09) per share of Common Stock. Pro forma net tangible
book value per share represents the amount of total pro forma tangible assets
less total pro forma liabilities, divided by the number of shares of Common
Stock outstanding. Pro forma net tangible book value dilution per share
represents the difference between the amount paid by purchasers of Common Stock
in this offering and the pro forma net tangible book value per share of Common
Stock immediately after completion of this offering. After giving effect to the
sale of the 2,600,000 shares of Common Stock offered by the Company hereby at an
assumed initial public offering price of $11.00 per share, and the application
of the estimated net proceeds therefrom, the adjusted pro forma net tangible
book value of the Company as of June 30, 1997 would have been $24,133,000, or
$1.09 per share. This represents an immediate increase in pro forma net tangible
book value of $1.18 per share to existing shareholders and an immediate dilution
of $9.91 per share to new investors purchasing shares of Common Stock in this
offering. The following table illustrates the per share dilution:
<TABLE>
<CAPTION>
<S> <C> <C>
Assumed initial public offering price per share......................... $11.00
Pro forma net tangible book value per share at June 30, 1997(1) $(0.09)
Increase per share attributable to new investors.................... 1.18
------
Adjusted pro forma net tangible book value per share
after this offering(2).............................................. 1.09
------
Dilution per share to new investors..................................... $ 9.91
======
<FN>
- ---------------
(1) Reflects the effect of the Dividend and other pro forma adjustments
described in "Distribution of S Corporation Earnings" and Note 7 of Notes to
Financial Statements.
(2) Excludes 891,250 shares of Common Stock issuable upon exercise of stock
options granted under the Incentive Stock Plan as of July 21, 1997, with a
weighted average exercise price of $1.84 per share. See "Management -- Other
Compensation Arrangements."
</FN>
</TABLE>
The following table summarizes, on a pro forma basis, as of June 30, 1997,
the differences between number of shares of Common Stock purchased from the
Company, the total consideration paid and the average price paid per share by
existing shareholders and by new investors in this offering:
<TABLE>
<CAPTION>
AVERAGE
SHARES PURCHASED(1) TOTAL CONSIDERATION PRICE
------------------------------ ----------------------------- PER
NUMBER PERCENT AMOUNT PERCENT SHARE
----------- ------- ----------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Existing shareholders........ 19,480,000 88.2% $ 56,000 0.2% $0.003
New investors................ 2,600,000 11.8 28,600,000 99.8 11.00
----------- ----- ----------- -----
Total 22,080,000 100.0% $28,656,000 100.0%
========== ====== =========== ======
<FN>
- ---------------
(1) Sales by the Selling Shareholders in this offering will cause the number of
shares held by existing shareholders to be reduced to 18,380,000 shares, or
83.2% (18,215,000 shares, or 81.1%, if the underwriters' over-allotment
option is exercised in full) of the total number of shares of Common Stock
to be outstanding after this offering, and will increase the number of
shares held by the new investors to 3,700,000 shares, or 16.8% (4,255,000
shares, or 18.9%, if the Underwriters' over-allotment option is exercised
in full) of the total number of shares of Common Stock to be outstanding
after this offering. See "Principal and Selling Shareholders."
</FN>
</TABLE>
24
<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 Company's Financial
Statements and Notes thereto included elsewhere in this Prospectus. The
Statement of Income 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 have been derived from the Company's Financial Statements included
elsewhere in this Prospectus, which have been audited by Arthur Andersen LLP.
The Statement of Income Data presented below for the year ended December 31,
1993 and the Balance Sheet Data as of December 31, 1994 have been derived from
audited financial statements not included herein. The Balance Sheet Data as of
December 31, 1992 and 1993 and as of June 30, 1997, and the Statement of Income
Data for the year ended December 31, 1992, and for each of the six-month periods
ended June 30, 1996 and 1997 have been derived from the unaudited financial
statements of the Company. In the opinion of management, the unaudited financial
statements include all adjustments (consisting only of normal and recurring
adjustments) necessary for a fair presentation of its financial position and the
results of operations for such periods. The selected financial data for the six
months ended June 30, 1997 are not necessarily indicative of the results to be
expected for the year ending December 31, 1997 or any other future period.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------------- -----------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues:
Licensing fees....................... $ 3,040 $ 5,593 $ 7,853 $ 7,913 $13,943 $ 6,322 $12,092
Other revenues....................... - - 707 1,502 3,877 1,787 2,527
------- ------- ------- ------- ------- ------- -------
Total revenues........................... 3,040 5,593 8,560 9,415 17,820 8,109 14,619
------- ------- ------- ------- ------- ------- -------
Operating expenses:
Cost of licensing fees............... 243 377 831 876 1,717 881 856
Product development.................. 184 320 492 652 1,041 377 843
Sales and marketing.................. 1,174 1,832 2,712 3,561 5,618 2,603 4,946
General and administrative........... 404 657 798 1,038 2,422 998 2,595
------- ------- ------- ------- ------- ------- -------
Total operating expenses......... 2,005 3,186 4,833 6,127 10,798 4,859 9,240
------- ------- ------- ------- ------- ------- -------
Income from operations................... 1,035 2,407 3,727 3,288 7,022 3,250 5,379
Other income, net........................ 25 31 18 24 60 9 18
------- ------- ------- ------- ------- ------- -------
Income before pro forma income taxes..... 1,060 2,438 3,745 3,312 7,082 3,259 5,397
Pro forma income taxes(1)................ 419 963 1,479 1,308 2,797 1,287 2,132
------- ------- ------- ------- ------- ------- -------
Pro forma net income(1).................. $ 641 $ 1,475 $ 2,266 $ 2,004 $ 4,285 $ 1,972 $ 3,265
======= ======= ======= ======= ======= ======= ========
Pro forma net income per share(1)(2)..... $ 0.21 $ 0.15
======= ========
Pro forma weighted average number of
shares outstanding(2)................ 20,541 21,186
======= ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, 1997
--------------------------------------------------- --------------------------------------
PRO PRO FORMA AS
1992 1993 1994 1995 1996 ACTUAL FORMA(3) ADJUSTED(4)
------ ------- ------- ------- ------- ------- -------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............$1,129 $ 368 $ 129 $ 311 $ 142 $ 264 $ 264 $15,590
Working capital (deficit)............ 1,172 705 936 1,997 3,629 6,828 (2,794) 23,154
Total assets......................... 1,992 1,810 2,197 3,288 5,803 9,257 12,081 27,407
Short-term obligations............... -- -- -- -- -- -- 10,622 --
Shareholders' equity (deficit)....... 1,814 1,534 1,811 2,970 4,835 7,807 (1,815) 24,133
<FN>
- ---------------
(1) The statement of income data reflects a pro forma provision for income taxes
as if the Company were a C corporation subject to federal and state
corporate income taxes for all periods. See "Distribution of S Corporation
Earnings" and Note 1 of Notes to Financial Statements.
(2) Pro forma weighted average number of shares outstanding includes 321,000 and
966,000 shares for the year ended December 31, 1996 and the six-month period
ended June 30, 1997, respectively, at an assumed initial public offering
price of $11.00 per share, the proceeds of which would fund undistributed S
corporation earnings. See "Distribution of S Corporation Earnings" and Note
1 of Notes to Financial Statements.
(3) Reflects the effect of the dividend to current shareholders and other pro
forma adjustments described in "Distribution of S Corporation Earnings" and
Note 7 of Notes to Financial Statements.
(4) Adjusted to give effect to the sale of the Common Stock offered by the
Company hereby and the application of the estimated net proceeds therefrom.
See "Use of Proceeds" and "Capitalization."
</FN>
</TABLE>
25
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL
STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE IN THIS PROSPECTUS. THE
FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE
RESULTS SUGGESTED BY THE FORWARD-LOOKING STATEMENTS AND FROM THE RESULTS
HISTORICALLY EXPERIENCED. FACTORS THAT MAY CAUSE OR CONTRIBUTE TO SUCH
DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED UNDER "RISK
FACTORS" AND ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
Omega Research, founded in 1982, is a leading provider of real-time
investment analysis software to individual investors. In addition, the Company's
principal product has recently been introduced to institutional investors by Dow
Jones Markets.
The Company's revenues are derived principally from two sources: (i)
license fees for use of the Company's software products, and (ii) other revenues
consisting primarily of royalties, fees and commissions paid to the Company in
accordance with its agreements with third-party data vendors. Licensing fees are
recognized upon product shipment in accordance with Statement of Position 91-1,
SOFTWARE REVENUE RECOGNITION. While the Company has no obligation to perform
future services subsequent to shipment, the Company voluntarily provides
telephone, fax and electronic mail customer support to purchasers of its
products. The Company currently does not charge a fee for the use of customer
support. The costs associated with these services are insignificant in relation
to product value.
Substantially all of the Company's licensing fees have been derived from
the sale of products to individual investors. TRADESTATION, OPTIONSTATION and
SUPERCHARTS are sold primarily by the Company's telesales force. To date, a
majority of the licensing fees have been generated through sales of
TRADESTATION. For sales of most of the Company's products, customers typically
provide the Company with a credit card number and are billed for the product
automatically and on a monthly basis over the course of twelve months. The
Company's WALL STREET ANALYST product, which does not represent a material
portion of the Company's revenues, is sold through the retail channel by
distributors and to a lesser extent through third-party mail order catalogs.
The majority of the Company's other revenues for the year ended December
31, 1996 was derived from royalties associated with a licensing agreement with
Dow Jones Markets. Under existing agreements with Dow Jones Markets, Dow Jones
Markets has the right to sell TRADESTATION and SUPERCHARTS to its customers. Dow
Jones Markets pays a per unit royalty to the Company, subject to a minimum
annual royalty commitment with respect to TRADESTATION sales. The majority of
the remaining other revenues is comprised of fees and commissions paid to the
Company pursuant to cross-marketing agreements with data service vendors. Other
revenues are recognized as earned in accordance with the terms of the applicable
contract.
The Company provides customers with a 30-day right of return and, as a
result, records a provision for estimated returns at the time of sale. Depending
on the circumstances, the Company often allows customers to return products
after the 30-day period. The reserve for returns and the provision for bad
debts, in accordance with generally accepted accounting principles, are
estimated based on historical experience and other relevant factors and there is
no certainty that future returns or bad debts will not exceed established
estimates. The Company's rate of returns has increased over the last several
quarters and there can be no assurance that this trend will not continue. See
"Risk Factors -- Risks of Returns and Collection of Accounts Receivable."
26
<PAGE>
Approximately 9.5% of the Company's revenues for the year ended December
31, 1996 were derived from customers outside of the United States and Canada.
The Company markets its products outside the United States and Canada primarily
through resellers and, to a lesser extent, through its U.S.-based telesales
force in response to inbound inquiries from international customers. The Company
intends to focus increased resources on international sales efforts and
therefore believes that international revenues will increase as a percentage of
total revenues in the future.
In accordance with Statement of Financial Accounting Standards No. 86,
ACCOUNTING FOR THE COST OF CAPITALIZED SOFTWARE TO BE SOLD, LEASED OR OTHERWISE
MARKETED, the Company examines its software development costs after
technological feasibility has been established to determine the amount of
capitalization that is required. Based on the Company's product development
process, technological feasibility is established upon completion of a working
model. The costs that are capitalized are amortized on the straight-line basis
over a one-year period, the period of benefit of the related products.
Capitalized software development costs, net of amortization, were $61,000,
$71,000 and $0 at December 31, 1995 and 1996 and June 30, 1997, respectively. In
the future, the Company believes that the time between the technological
feasibility of the Company's products and the general release of such software
will be insignificant, and, as a result, software development costs qualifying
for capitalization are expected to be immaterial.
In 1988, the Company elected to be taxed under Subchapter S of the Code,
and, as a result, the Company's earnings have been taxed at the federal level
directly to the Company's shareholders (the state of Florida does not have a
personal income tax). Immediately prior to completion of this offering, the
Company will terminate its S corporation election and will be subject to
corporate-level federal and state income taxes. As a result of terminating this
election, the Company, during the quarter in which the offering is completed,
will be required to record a non-recurring credit (the "FAS 109 credit") in the
tax provision line of the statement of income. The credit to be recorded
represents the recognition of net deferred tax assets arising from the book and
tax basis differences that arise primarily as a result of accounts receivable
reserves. The FAS 109 credit, net of the provision for taxes payable described
below, would have been approximately $1.0 million as of June 30, 1997 if the S
corporation election had been terminated as of that date.
Since its inception, the Company has used for determining taxable income
the cash method of accounting rather than the accrual method of accounting. In
July 1997, the Company voluntarily filed with the IRS a Form 3115 to change to
the accrual method and to report income that should have been reported had the
accrual method been used. The effect of the change in method of accounting for
tax purposes permitted by the filing of Form 3115 is that the Company will, as
of the date the S corporation election is terminated, assuming no adjustments
are required, have additional taxable income in 1997 and 1998 aggregating
approximately $4.6 million, resulting in additional federal and state income tax
of approximately $1.8 million, payable one-half in each of 1997 and 1998.
Shortly after, though not as a result of, the filing of the Form 3115, the
Company received a notice that the IRS intends to perform an examination of the
Company's 1995 tax year (the "Examination").
Final acceptance of the Form 3115 is subject to review by the IRS. Should
the review of the Form 3115 or the Examination (or any other examinations)
result in the current shareholders being allocated taxable earnings for 1997 or
prior years in excess of the amounts contemplated by the Form 3115, the Dividend
(see "Distribution of S Corporation Earnings") shall be increased by an amount
equal to the current shareholders' tax liability attributable to such excess, up
to a maximum adjustment of $1.8 million. In that event, the expected approximate
$1.8 million tax liability of the Company would be reduced to the extent of such
increase.
27
<PAGE>
The pro forma income tax adjustment in the Company's historical financial
statements reflects the federal and state income taxes which would have been
recorded if the Company had been treated as a C corporation during the periods
presented. The Company has calculated these amounts based upon an estimated
combined effective tax rate of 39.5% for the respective periods.
RESULTS OF OPERATIONS
The following table presents, for the periods indicated, certain items in
the Company's statement of income reflected as a percentage of total revenues
and as a percentage of licensing fees:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------- ------------------
1994 1995 1996 1996 1997
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
AS A PERCENTAGE OF TOTAL REVENUES:
Revenues:
Licensing fees 91.7% 84.0% 78.2% 78.0% 82.7%
Other revenues 8.3 16.0 21.8 22.0 17.3
----- ----- ----- ----- -----
Total revenues 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- -----
Operating expenses:
Cost of licensing fees 9.7 9.3 9.6 10.9 5.9
Product development 5.7 6.9 5.9 4.6 5.8
Sales and marketing 31.7 37.8 31.5 32.1 33.8
General and administrative 9.3 11.0 13.6 12.3 17.7
----- ----- ----- ----- -----
Total operating expenses 56.4 65.0 60.6 59.9 63.2
----- ----- ----- ----- -----
Income from operations 43.6 35.0 39.4 40.1 36.8
Other income, net 0.2 0.2 0.3 0.1 0.1
----- ----- ----- ----- -----
Income before pro forma income taxes 43.8 35.2 39.7 40.2 36.9
Pro forma income taxes 17.3 13.9 15.7 15.9 14.6
----- ----- ----- ----- -----
Pro forma net income 26.5% 21.3% 24.0% 24.3% 22.3%
===== ===== ===== ===== =====
AS A PERCENTAGE OF LICENSING FEES:
Operating expenses:
Cost of licensing fees 10.6% 11.1% 12.3% 13.9% 7.1%
Product development 6.3 8.2 7.5 6.0 7.0
Sales and marketing 34.5 45.0 40.2 41.2 40.9
General and administrative 10.1 13.1 17.4 15.8 21.4
----- ----- ----- ----- -----
Total operating expenses 61.5% 77.4% 77.4% 76.9% 76.4%
===== ===== ===== ===== =====
</TABLE>
SIX MONTHS ENDED JUNE 30, 1996 AND 1997
REVENUES
TOTAL REVENUES. The Company's total revenues increased 80% from $8.1
million in the first six months of 1996 to $14.6 million in the comparable
period of 1997.
LICENSING FEES. Licensing fees increased 91% from $6.3 million in the first
six months of 1996 to $12.1 million in the comparable period of 1997, primarily
due to an increase in TRADESTATION sales (an approximate 56% increase in net
unit shipments and a 5% increase in list price in January 1997) and, to a lesser
extent, the introduction of OPTIONSTATION in September 1996. The Company
believes that the increased net unit shipments of TRADESTATION were due to new
marketing efforts, an emphasis on providing customers with the ability to pay
for products monthly over a 12-month period and growth in
28
<PAGE>
the Company's sales and marketing organization. The Company has increased its
returns reserves during the first six months of 1997 to provide for the impact
that its new marketing efforts may have on returns.
OTHER REVENUES. Other revenues increased 41% from $1.8 million in the first
six months of 1996 to $2.5 million in the comparable period of 1997, primarily
due to an increase in minimum royalties under the license agreement with Dow
Jones Markets and increased cross-marketing commissions from data vendors which
resulted from an increase in licensing fees.
OPERATING EXPENSES
COST OF LICENSING FEES. Cost of licensing fees consists primarily of
product media, packaging and storage and inventory costs. Cost of licensing fees
decreased 3% from $881,000 in the first six months of 1996 to $856,000 in the
comparable period of 1997, primarily due to increased sales of higher-priced
products as a percentage of total unit sales and the shipment of significant
product upgrades in the first six months of 1996 which did not recur in 1997.
The Company has no contractual obligation to provide upgrades, which are priced
separately from initially-licensed products. Cost of licensing fees as a
percentage of licensing fees declined from 14% in the first six months of 1996
to 7% in the comparable period of 1997, primarily due to increased unit sales of
higher-priced products as a percentage of total unit sales.
PRODUCT DEVELOPMENT. Product development expenses include expenses
associated with the development of new products, enhancements to existing
products, testing of products and the creation of training manuals, and consist
primarily of salaries, other personnel costs and depreciation of computer and
related equipment. Product development expenses increased 124% from $377,000 in
the first six months of 1996 to $843,000 in the comparable period of 1997,
primarily due to an increase in the number of individuals employed in product
development. Product development expenses as a percentage of licensing fees
increased from 6% in the first six months of 1996 to 7% in the comparable period
of 1997, primarily due to the increase in product development personnel. The
Company believes that a significant level of product development expenditures
will be required to remain competitive, particularly as it enters the
institutional investor market. Accordingly, the Company anticipates that the
dollar amount of product development expense will increase for the foreseeable
future.
SALES AND MARKETING. Sales and marketing expenses consist primarily of
salaries for the customer support center and marketing personnel, commissions
and other personnel costs, shipping costs, and marketing programs, including
advertising, brochures, direct mail programs and seminars to promote the
Company's products to investors. Sales and marketing expenses increased 90% from
$2.6 million in the first six months of 1996 to $4.9 million in the comparable
period of 1997, primarily due to increased print advertising, shipping costs,
telephone expenses, personnel costs for the customer support center, commissions
and the use of sales seminars and television advertising. Sales and marketing
expenses as a percentage of licensing fees did not change significantly in the
first six months of 1996 as compared to the comparable period of 1997. The
Company expects to continue hiring additional personnel and anticipates that
sales and marketing expenses will increase in absolute dollar amount at least
through the remainder of 1997.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of employee related costs for support functions such as executive,
human resources, finance, information systems and administrative personnel as
well as external professional fees, rent and other facilities expense and
provision for bad debts. General and administrative expenses increased 160% from
$998,000 in the first six months of 1996 to $2.6 million in the comparable
period of 1997, primarily due to increases in the provision for bad debts
associated with increased revenues, in personnel to manage the growth of the
Company and rent related to the Company's new corporate headquarters. The
Company believes that
29
<PAGE>
the dollar amount of its general and administrative expenses will increase as
the Company incurs additional costs (including directors' and officers'
liability insurance, investor relations costs and increased professional fees)
related to being a public company.
OTHER INCOME, NET
Other income, net consists primarily of interest income from cash and cash
equivalents. Other income, net increased from $9,000 in the first six months of
1996 to $18,000 in the comparable period of 1997. The Company generally invests
in interest-bearing accounts and overnight investments. The amount of interest
income fluctuates based on the amount of funds available for investment and the
prevailing interest rates.
YEARS ENDED DECEMBER 31, 1995 AND 1996
REVENUES
TOTAL REVENUES. The Company's total revenues increased 89% from $9.4
million in 1995 to $17.8 million in 1996.
LICENSING FEES. Licensing fees increased 76% from $7.9 million in 1995 to
$13.9 million in 1996, primarily due to an increase in TRADESTATION sales (an
approximate 51% increase in net unit shipments and a 20% increase in list price
in March 1996) and, to a lesser extent, increased sales of SUPERCHARTS and
add-on products and the introduction of OPTIONSTATION in September 1996. The
Company believes that the increased net unit shipments of TRADESTATION were due
to the release of version 4.0 and increased marketing efforts.
OTHER REVENUES. Other revenues increased 158% from $1.5 million in 1995 to
$3.9 million in 1996, primarily due to the commencement of royalties under the
Company's license agreement with Dow Jones Markets and, to a lesser extent,
increased cross-marketing commissions from data vendors which resulted from an
increase in licensing fees.
OPERATING EXPENSES
COST OF LICENSING FEES. Cost of licensing fees increased 96% from $876,000
in 1995 to $1.7 million in 1996, primarily due to increased product unit
shipments. Cost of licensing fees as a percentage of licensing fees increased
slightly from 11% in 1995 to 12% in 1996 due to a shift in product mix.
PRODUCT DEVELOPMENT. Product development expenses increased 60% from
$652,000 in 1995 to $1.0 million in 1996, primarily due to an increase in the
number of individuals employed in product development. Product development
expenses represented 8% and 7% of licensing fees in each of 1995 and 1996,
respectively.
SALES AND MARKETING. Sales and marketing expenses increased 58% from $3.6
million in 1995 to $5.6 million in 1996 primarily due to increased personnel
costs and commissions, shipping costs, telephone expenses and increased travel.
Sales and marketing expenses represented 45% and 40% of licensing fees in 1995
and 1996, respectively.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
133% from $1.0 million in 1995 to $2.4 million in 1996, primarily due to
increases in the provision for bad debts associated with increased revenues, in
personnel and related expenses to manage the growth of the Company, in insurance
expense and incremental expenses related to the move by the Company to a new
corporate
30
<PAGE>
headquarters. General and administrative expenses represented 13% and 17% of
licensing fees in 1995 and 1996, respectively.
OTHER INCOME, NET
Other income, net increased 151% from $24,000 in 1995 to $60,000 in 1996,
primarily due to increased interest income earned on cash balances.
YEARS ENDED DECEMBER 31, 1994 AND 1995
REVENUES
TOTAL REVENUES. The Company's total revenues increased 10% from $8.6
million in 1994 to $9.4 million in 1995.
LICENSING FEES. Licensing fees remained relatively flat in 1995 as compared
to 1994. Licensing fees did not change appreciatively in 1995 as the Company's
senior management and its then limited sales and marketing resources were
focused on developing its relationship with Dow Jones Markets and exploring the
establishment of a retail sales channel for WALL STREET ANALYST. This focus on
the Dow Jones Markets relationship and retail channel development temporarily
diverted resources away from sales and marketing efforts in support of the
Company's TRADESTATION and SUPERCHARTS products.
OTHER REVENUES. Other revenues increased 113% from $707,000 in 1994 to $1.5
million in 1995, primarily due to increased cross-marketing commissions from
data vendors.
OPERATING EXPENSES
COST OF LICENSING FEES. Cost of licensing fees increased 5% from $831,000
in 1994 to $876,000 in 1995, primarily due to slight increases in the cost of
product material. Cost of licensing fees as a percentage of licensing fees
represented 11% in each of 1994 and 1995.
PRODUCT DEVELOPMENT. Product development expenses increased 32% from
$492,000 in 1994 to $652,000 in 1995, primarily due to an increase in the number
of individuals employed in product development. Product development expenses
represented 6% and 8% of licensing fees in 1994 and 1995, respectively.
SALES AND MARKETING. Sales and marketing expenses increased 31% from $2.7
million in 1994 to $3.6 million in 1995 primarily due to increased advertising,
telephone expenses and commissions. Sales and marketing expenses represented 35%
and 45% of licensing fees in 1994 and 1995, respectively.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
30% from $798,000 in 1994 to $1.0 million in 1995, primarily due to increases in
personnel to manage the growth of the Company, professional fees and property
taxes. General and administrative expenses represented 10% and 13% of licensing
fees in 1994 and 1995, respectively.
OTHER INCOME, NET
Other income, net increased 30% from $18,000 in 1994 to $24,000 in 1995,
primarily due to increased interest income earned on cash balances.
31
<PAGE>
SELECTED QUARTERLY RESULTS OF OPERATIONS
The following tables present certain unaudited quarterly financial data for
each of the six quarters ended June 30, 1997. This information has been prepared
on the same basis as the audited Financial Statements and Notes thereto
appearing elsewhere in this Prospectus and includes, in the opinion of the
Company, all adjustments (consisting only of normal and recurring adjustments)
necessary to present fairly the quarterly results when read in conjunction with
the Financial Statements and Notes thereto appearing elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30,
1996 1996 1996 1996 1997 1997
-------- -------- --------- ------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues:
Licensing fees $2,926 $3,396 $3,870 $3,751 $5,550 $6,542
Other revenues 872 915 1,098 992 1,123 1,404
------ ------ ------ ------ ------ ------
Total revenues 3,798 4,311 4,968 4,743 6,673 7,946
------ ------ ------ ------ ------ ------
Operating expenses:
Cost of licensing fees 332 549 462 374 388 468
Product development 144 233 322 342 364 479
Sales and marketing 1,161 1,442 1,543 1,472 1,996 2,950
General and administrative 496 502 568 856 1,263 1,332
------ ------ ------ ------ ------ ------
Total operating expenses 2,133 2,726 2,895 3,044 4,011 5,229
------ ------ ------ ------ ------ ------
Income from operations 1,665 1,585 2,073 1,699 2,662 2,717
Other income, net 4 5 39 12 7 11
------ ------ ------ ------ ------ ------
Income before pro forma income taxes 1,669 1,590 2,112 1,711 2,669 2,728
Pro forma income taxes 659 628 834 676 1,054 1,078
------ ------ ------ ------ ------ ------
Pro forma net income $1,010 $ 962 $1,278 $1,035 $1,615 $1,650
====== ======= ======= ======= ======= =======
AS A PERCENTAGE OF TOTAL REVENUES:
Revenues:
Licensing fees 77.1% 78.8% 77.9% 79.1% 83.2% 82.3%
Other revenues 22.9 21.2 22.1 20.9 16.8 17.7
------ ------ ------ ------ ------ ------
Total revenues 100.0 100.0 100.0 100.0 100.0 100.0
------ ------ ------ ------ ------ ------
Operating expenses:
Cost of licensing fees 8.7 12.7 9.3 7.9 5.8 5.9
Product development 3.8 5.4 6.5 7.2 5.5 6.0
Sales and marketing 30.6 33.5 31.1 31.1 29.9 37.1
General and administrative 13.0 11.6 11.4 18.0 18.9 16.8
------ ------ ------ ------ ------ ------
Total operating expenses 56.1 63.2 58.3 64.2 60.1 65.8
------ ------ ------ ------ ------ ------
Income from operations 43.9 36.8 41.7 35.8 39.9 34.2
Other income, net 0.1 0.1 0.8 0.3 0.1 0.1
------ ------ ------ ------ ------ ------
Income before pro forma income taxes 44.0 36.9 42.5 36.1 40.0 34.3
Pro forma income taxes 17.4 14.6 16.8 14.3 15.8 13.5
------ ------ ------ ------ ------ ------
Pro forma net income 26.6% 22.3% 25.7% 21.8% 24.2% 20.8%
====== ====== ====== ====== ====== ======
AS A PERCENTAGE OF LICENSING FEES:
Operating expenses:
Cost of licensing fees 11.3% 16.2% 11.9% 10.0% 7.0% 7.1%
Product development 4.9 6.8 8.3 9.1 6.5 7.3
Sales and marketing 39.7 42.5 39.9 39.3 36.0 45.1
General and administrative 17.0 14.8 14.7 22.8 22.8 20.4
------ ------ ------ ------ ------ ------
Total operating expenses 72.9% 80.3% 74.8% 81.2% 72.3% 79.9%
====== ====== ====== ====== ====== ======
</TABLE>
32
<PAGE>
The Company's revenues and operating expenses by quarter increased
sequentially during 1996 and 1997, except for revenues in the fourth quarter of
1996. The Company believes that the sequential decrease in revenues during the
fourth quarter of 1996 was primarily due to the impact of the release of certain
product upgrades and the receipt of certain one-time payments from certain third
parties in the third quarter of 1996. Other revenues in the second quarter of
1997 also reflect an approximate $200,000 one-time payment from Dow Jones
Markets for the delivery of certain upgrades for DOW JONES TRADESTATION. It is
expected that, in the future, product upgrades and releases, or lump-sum
payments related to other revenues, will impact the Company's revenues and
results of operations on a quarterly basis.
The operating results for any quarter are not necessarily indicative of
results for any future period or for the full year. The Company's quarterly
revenues and operating results have varied in the past and are likely to vary
from quarter to quarter in the future. Such fluctuations may result in
volatility in the price of the Common Stock. As budgeted expenses are based upon
expected revenues, if actual revenues on a quarterly basis are below
management's expectations, then results of operations are likely to be adversely
affected because a relatively small amount of the Company's expenses varies with
its revenues in the short term. In addition, operating results may fluctuate
based upon the timing of product releases, increased competition, variations in
the mix of sales, and announcements of new products by the Company or its
competitors. Such fluctuations may result in volatility in the price of the
Common Stock. See "Risk Factors -- Potential Fluctuations in Quarterly Operating
Results."
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has funded operations and financed growth
and capital expenditures through cash provided by operations. The Company may
obtain a short-term loan prior to completion of this offering in order to pay
the Dividend. Such loan, if obtained, will be on commercially reasonable terms
and will be repaid with a portion of the net proceeds of this offering.
Cash provided by operating activities totaled $3.6 million, $2.4 million,
$5.6 million and $2.7 million in 1994, 1995, 1996 and the first six months of
1997, respectively. The decrease in cash provided by operations in 1995 was
primarily attributable to the decrease in net income for the year ended December
31, 1995 when compared to the same period of 1994. The increase in net cash
provided by operations in 1996 and 1997 was primarily attributable to increased
net income of the Company.
The Company's investing activities used cash of $300,000, $101,000,
$541,000 and $630,000 in 1994, 1995, 1996 and the first six months of 1997,
respectively. The principal use of cash in investing activities was for capital
expenditures related to the acquisition of computer and related equipment and
software required to support expansion of the Company's operations. Capital
expenditures in 1997 also include purchases of furniture and fixtures and
leasehold improvements related to the Company's move to a new corporate
headquarters in February 1997.
The Company's financing activities used cash of $3.5 million, $2.2 million,
$5.2 million and $2.0 million in 1994, 1995, 1996 and the first six months of
1997, respectively, principally as a result of distributions to the Company's
shareholders.
As of June 30, 1997, the Company had cash and cash equivalents of
approximately $264,000 and working capital of approximately $6.8 million. The
Company believes that the net proceeds from the sale of the Common Stock in this
offering, together with existing cash balances and cash flow from operations,
will be sufficient to meet its normal working capital and capital expenditure
requirements through 1998. Thereafter, if cash generated by operations is
insufficient to satisfy the Company's
33
<PAGE>
operating requirements, the Company will require additional debt or equity
financing. There can be no assurance that such financing will be available on
terms acceptable to the Company, or at all. The sale of additional equity or
debt securities could result in dilution to the Company's shareholders. See
"Risk Factors -- Future Capital Needs" and "Use of Proceeds."
RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards Number 128, EARNINGS PER SHARE ("SFAS 128")
which changes the method of calculating earnings per share. SFAS 128 requires
the presentation of "basic" earnings per share and "diluted" earnings per share
on the face of the income statement. Basic earnings per share is computed by
dividing the net income available to common shareholders by the weighted average
shares of outstanding common stock. The calculation of diluted earnings per
share is similar to basic earnings per share except that the denominator
includes dilutive common stock equivalents such as stock options and warrants.
The statement is effective for financial statements for periods ending after
December 15, 1997. The Company will adopt SFAS 128 in the fourth quarter of
1997, as early adoption is not permitted. The following table presents pro forma
earnings per share amounts calculated in accordance with SFAS 128.
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1996 JUNE 30, 1997
----------------- ----------------
Pro forma earnings per share:
Basic earnings per share $0.22 $0.17
Diluted earnings per share 0.21 0.15
34
<PAGE>
BUSINESS
OVERVIEW
Omega Research is a leading provider of real-time investment analysis
software for the Microsoft Windows operating system. The Company's principal
products are TRADESTATION, OPTIONSTATION and SUPERCHARTS. With the 1991 release
of its flagship product, TRADESTATION, Omega Research pioneered the concept of
utilizing the power of the personal computer to enable investors to historically
test the profitability of their own investment and trading strategies and then
computer-automate those strategies to generate real-time buy and sell signals.
OPTIONSTATION enables investors who are not options experts or mathematicians to
benefit from advanced stock, index and futures options trading strategies, and
SUPERCHARTS provides investors with state-of-the-art technical analysis
capabilities. The Company designs its products as PLATFORM APPLICATIONS: unique
software applications that also serve as platforms for independent third-party
solutions. Over 150 independent developers have developed software products for
the Omega Research Platform.
INDUSTRY BACKGROUND
In the last 25 years there has been unprecedented growth in the financial
markets as increasing amounts of capital have been actively invested in an
effort to generate superior returns. According to the Investment Company
Institute, total financial assets of U.S. households were $14.0 trillion at the
end of 1995, and are expected to grow to over $22.5 trillion by the year 2000.
Traditionally, financial instruments were held to maturity or for long
investment horizons, but in today's environment of abundant data flow and low
transaction costs, financial instruments are increasingly being actively traded.
Average daily trading volume on the New York Stock Exchange has grown from 18.6
million shares in 1975 to 503.5 million shares in 1997. Nasdaq daily trading
volume has grown even faster, from an average of 5.5 million shares in 1975 to
607.9 million shares in 1997.
Increased investment and trading activity is being driven by both
individual and institutional investors. Forrester Research, a market research
firm, estimates that by the year 2000 over $46 billion in financial assets will
be managed over the Internet by individuals. Through the advent of self-directed
401(k) plans and improved awareness and knowledge of the financial markets,
individual investors are increasingly seeking to self-manage their financial
assets. The broad availability of financial information online has enabled
individual investors to become more sophisticated and knowledgeable about
investing, having experienced greater access to stock quotes, financial market
data, investment advice and other investment information through the Internet or
through other online services. In addition to increased information flows, the
increased popularity and proliferation of discount brokerage and online trading
systems such as E-Schwab and E-Trade have resulted in reduced transaction costs
to the individual investor, thereby facilitating the increase in investment
activity.
Investment and trading activity has also increased significantly among
institutional investors, including mutual funds, pension funds, hedge funds,
savings institutions and brokerage firms. According to a report by Putnam,
Lovell & Thorton, a firm that conducts market research on the investment
management industry, total financial assets managed by the U.S. money management
industry grew from $1.4 trillion in 1980 to $10.3 trillion at the end of 1995.
In addition, the number of mutual funds in the United States has doubled from
3,105 in 1990 to 6,293 in 1996. This proliferation of funds, together with
increasing competitiveness among institutions seeking to deliver superior
investment returns to their customers, has contributed to increased investment
and trading activity by institutional investors.
Investors, both individual and institutional, require financial market data
to make their investment or trading decisions. Investors today have access to
large quantities of financial market data increasingly
35
<PAGE>
being offered on a real-time basis at substantially lower cost than ever before.
Data are readily available from a variety of data vendors, including companies
such as Dow Jones Markets, ADP, Bloomberg, Bridge Information Systems, Commodity
Quote Graphics, FutureSource, ILX, Reuters and S&P ComStock, all of which
generally serve the institutional market, and BMI, DTN, Dial/Data, Signal,
Telescan and TeleChart 2000, which generally serve the individual investor
market. In addition, the Internet is becoming an increasingly valuable conduit
of information for individual and institutional investors seeking to support
their investment decision-making.
While financial market data have been available for some time, typically
only large institutional investors with access to mainframe or
minicomputer-based systems have had the capability to manipulate, organize and
analyze such data to support their investment decisions. Historically, such
activities have been expensive and time consuming, and usually performed in the
"back office" of institutional investors through custom programming by
information technology professionals. The emergence of easy-to-use powerful
personal computers with standard operating systems has brought analytical
capability to "front office" decision makers of institutional investors, as well
as to individual investors who historically have not had access to such
technology or information.
With the advanced processing capabilities of today's personal computers,
both individual and institutional investors are demanding powerful investment
analysis software to improve their investment decision-making. Historically,
investment analysis software for the personal computer has generally been
limited to passive charting and analysis. However, as vast new quantities and
types of financial market data have become available, a need has arisen for
decision support software which enables investors to analyze market data in new
and powerful ways, including the design, testing and validation of custom
investment strategies and the implementation of those strategies in real time.
Investors are seeking to leverage quantitative data to make improved investment
decisions through the use of software solutions which provide powerful
investment analysis capabilities, open and extendible software platforms,
support for a wide variety of financial instruments and markets, and ease of
use.
THE OMEGA RESEARCH SOLUTION
The Omega Research product family addresses the growing need for powerful
software solutions which enable investors to thoroughly test the profitability
of their own investment and trading strategies. Key elements of the Omega
Research solution include:
SUPERIOR INVESTMENT ANALYSIS SOLUTIONS. The Company's products offer
state-of-the-art market analysis capabilities that empower the investor to make
improved investment decisions. The Company's flagship product, TRADESTATION,
enables investors to design and historically test their own investment
strategies against large quantities of historical data to assess the risk and
return of any given investment strategy. Using TRADESTATION, the investor can
then computer-automate a custom investment strategy to generate buy and sell
signals on a real-time basis. The Company's OPTIONSTATION product enables
investors who are not options analysis experts or mathematicians to explore
complex options trading strategies. The Company's SUPERCHARTS products provide
both end-of-day and real-time investors with powerful technical analysis
capabilities to enable improved investment decision-making.
INDUSTRY LEADING SOFTWARE PLATFORM. The Company develops its principal
products as "platform applications," unique and valuable software applications
that also serve as platforms for third-party solutions which add value to the
products (collectively, the "Omega Research Platform"). The Omega Research
Platform is designed to be open and extendible, encouraging the development of
as many complementary third-party solutions as possible. To date, more than 150
independent software developers ("Omega Research Solution Providers") have
developed specific trading systems or other investment applications for the
Omega Research Platform, which the Company believes makes it the
36
<PAGE>
industry leading software platform for quantitative investment analysis. In
addition to supporting such third party applications, the Omega Research
Platform has been architected to seamlessly integrate with the financial market
data services offered by various well-known data vendors.
SOLUTIONS FOR MULTIPLE FINANCIAL MARKETS. The Company designs its products
to benefit investors in a variety of financial markets, including investors in
equities, futures, foreign currencies and options. Within each of these
segments, investors can use the products to fit their special needs and levels
of experience. The Company believes that many of its customers are active in
multiple financial markets and, as a result, has designed different products to
address different markets which can be used independently or in combination. The
Company currently markets the TRADESTATION PRO SUITE, comprised of TRADESTATION
and OPTIONSTATION, and intends to develop and market additional product suites
in the future which the Company believes will enable investors to broaden their
investment activities to markets on which they have not previously focused.
PROPRIETARY EASYLANGUAGE. Historically, designing, testing and
computer-automating custom investment and trading strategies required complex
and time-consuming programming. To solve this problem, the Company developed
EASYLANGUAGE, the Company's proprietary computer language comprised of
English-like statements, which, once learned, empowers investors with no prior
programming skills to describe their own investment or trading strategies and
then test their profitability against large quantities of historical data.
EASYLANGUAGE is currently included in TRADESTATION and, to a more limited
degree, in SUPERCHARTS.
THE OMEGA RESEARCH STRATEGY
Omega Research's objective is to establish itself as the leading worldwide
provider of real-time investment analysis software to both individual and
institutional investors. The Omega Research strategy includes the following key
elements:
ENHANCE AND EXPAND THE OMEGA RESEARCH PLATFORM. The Company intends to
continue to develop new products which are not only high-quality, unique
software solutions, but which are themselves platforms for independent
third-party software solutions. Such products will be designed to be technically
compatible with, and to functionally complement, one another, to encourage
investors to own not just one, but a suite, of Omega Research products. The
Company believes that the rapid deployment of Internet capabilities will in the
near future result in the Internet being an important financial market data
delivery system for both domestic and international markets and therefore
intends to enhance the Omega Research Platform to support Internet data
delivery.
CONTINUE TO PENETRATE EXPANDING INDIVIDUAL INVESTOR MARKET. The Company
intends to devote considerable efforts to continue to penetrate the serious
individual investor market and to reach newcomers to this market as it expands.
The rapidity of technological advances in personal computing and information
delivery systems has made and is expected to continue to make the investment
industry more accessible to individuals using personal computers. More
individuals are interested in self-directing their investment decisions and,
with available technological advances, will be able to engage in financial
market transactions without the need of support systems and resources
historically provided only in an institutional setting.
FOCUS ON THE INSTITUTIONAL INVESTOR MARKET. In addition to its continued
focus on the individual investor market, the Company intends to devote
incremental resources to the institutional investor market. TRADESTATION was
introduced by Dow Jones Markets to institutional investors in 1996 as DOW JONES
TRADESTATION. Dow Jones Markets has also recently acquired from the Company the
right to market SUPERCHARTS as DOW JONES SUPERCHARTS to its data subscribers on
a worldwide basis. In addition,
37
<PAGE>
certain individual investors who use the Company's products are employees of
institutions, which the Company believes increases awareness of the Company's
products in the institutional market. The Company intends to develop the
necessary enhancements to its products, which includes development of a network
version of its products, to enable it to penetrate the institutional investor
market.
STRENGTHEN DATA VENDOR ALLIANCES. The Company intends to foster and grow
relationships with data vendors in order to enter new markets, expand the
Company's customer base, promote its products, and increase the number of
quality data services with which Omega Research products are technically
compatible. The Company believes that certain of these relationships, such as
the Dow Jones Markets relationship, will facilitate the Company's efforts to
penetrate the institutional investor market and the Company's expansion of its
international presence.
EXPAND INTERNATIONAL DISTRIBUTION. In addition to focusing on foreign
individual and institutional investors who are interested in North American
markets, the Company intends to focus on worldwide individual and institutional
interest in financial markets outside of North America where there are
increasing trading activity and numbers of investors, and growing availability
of financial market data. The Company intends to continue to enhance its
products to support additional foreign financial market data. The Company
expects to exploit the rapid deployment of the Internet, as both a data delivery
system and a sales and marketing and customer support channel, as part of its
expansion of its international presence and sales. The Company also intends to
continue to develop its network of international independent distributors of
Omega Research products.
LEVERAGE INSTALLED BASE OF CUSTOMERS. The Company believes one of its most
important assets and a key competitive advantage is its installed base of
TRADESTATION, OPTIONSTATION and SUPERCHARTS customers. The Company believes that
significant opportunity exists to leverage this customer base by (i) selling
product upgrades to customers who own the earlier version of the product, (ii)
selling additional existing products to customers who do not own those products,
and (iii) marketing future products to its entire installed customer base.
PRODUCTS
The Company's investment analysis software products, each of which operates
in a Microsoft Windows environment, are currently marketed to individual
investors and, through Dow Jones Markets, to institutional investors. Products
marketed directly by the Company are technically compatible with data feeds and
services offered by BMI, Dial/Data, FutureSource, Signal, S&P ComStock and
Telescan, and are currently offered with a historical financial market database
on CD-ROM containing up to 25 years of history on each security and index
included in the database. Each of the Company's principal products operates on
real-time, delayed and end-of-day data, except for the end-of-day version of
SUPERCHARTS.
38
<PAGE>
Omega Research's principal products are:
<TABLE>
<CAPTION>
INITIAL LATEST
OPERATING RELEASE RELEASE CURRENT
PRODUCT SYSTEM LIST PRICE DATE DATE VERSION
- ------- --------- ---------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
[TRADESTATION Microsoft $2,399 1991 1996 4.0
Logo] Windows
[OPTIONSTATION Microsoft $1,799 1996 1996 1.2
Logo] Windows
[SUPERCHARTS Real- Microsoft $ 839 1996 1996 4.0
Time Logo] Windows
[SUPERCHARTS Microsoft $ 200 1992 1996 4.0
Logo] Windows
</TABLE>
TRADESTATION. TRADESTATION is the flagship product of the Company, serving
as a platform for numerous third-party software solutions. TRADESTATION is
marketed to serious equities, futures and foreign currency investors.
TRADESTATION empowers the investor to design and develop custom trading systems
based upon the investor's own investment ideas and strategies, test the
profitability of such trading systems against historical data, and then
computer-automate a chosen trading system to monitor the applicable market and
alert the investor in real-time when the criteria of the trading system have
been met and an order should, therefore, be placed. If the investor is not at
the computer terminal when a buy or sell signal is generated, TRADESTATION can
automatically notify the investor via an alpha-numeric pager if the necessary
equipment and software have been installed. The principal features of
TRADESTATION which enable the investor to design and develop custom trading
strategies and systems are EASYLANGUAGE and the POWEREDITOR. EASYLANGUAGE is a
proprietary computer language developed by Omega Research consisting of
English-like statements which can be input by the investor to describe
particular trading ideas and strategies. The POWEREDITOR is a compiler of
EASYLANGUAGE statements and provides the investor with considerable flexibility
to modify and combine different trading rules and strategies which ultimately
result in the design of the investor's custom trading systems.
OPTIONSTATION. OPTIONSTATION is an options trading analysis product for
stock, index and futures options which enables investors who are not options
analysis experts or mathematicians to explore complex trading strategies.
Specifically, OPTIONSTATION is designed to sort through thousands of possible
options positions and identify the most favorable risk-reward profile based upon
user-defined assumptions. OPTIONSTATION is designed to perform two critical
tasks of options trading -- position search and position analysis.
OPTIONSTATION'S Position Search helps the investor find the best risk-reward
profile based upon the investor's market assumptions. The Power Spreadsheet and
Position Chart features enable investors to design and customize options
positions and then graphically view and analyze each position's profitability
and risk. If the investor is using OPTIONSTATION with a real-time data feed, the
program will alert the investor when the investor's specified criteria have been
met. Also, the investor can be notified of the alert via an alpha-numeric pager
if the necessary equipment and software have been installed.
SUPERCHARTS. SUPERCHARTS is Omega Research's technical analysis charting
product and is available in both real-time and end-of-day versions. SUPERCHARTS
has a built-in library of more than 80 popular technical indicators and 15
drawing tools that highlight significant market patterns. SUPERCHARTS provides
the investor with sophisticated charting and technical analysis capabilities,
including the ability
39
<PAGE>
to draw trend lines, identify chart patterns and chart historical fundamental
data. SUPERCHARTS can generate an alert on a real-time or end-of-day basis when
a simple user-defined criterion occurs with respect to a specific security.
SUPERCHARTS also contains certain trading system design and testing
capabilities, in order to introduce the less-experienced investor to such
functions and potentially generate interest in the Company's TRADESTATION
product.
ADDITIONAL PRODUCTS AND SERVICES. The Company offers additional products
and services, such as WALL STREET ANALYST, the Company's introductory charting
and analysis product for the individual investor, historical data subscription
CD-ROM clubs (monthly deliveries of historical financial data updates on
CD-ROM), and seminars, conferences, tutorials and instructional videotapes
designed to enhance investors' abilities to use fully and effectively the
Company's products. These additional products and services are intended to
complement the Company's principal investment analysis products and are expected
to remain an ancillary portion of revenues.
SALES AND MARKETING
The Company markets its products using a combination of methods, including
inbound telesales and the use of domestic and international distributors and
other resellers, including value added resellers. Marketing efforts in support
of sales include print media and television advertising, direct mail, seminars
and establishment of strategic marketing and other strategic partner
relationships with data vendors and software and service solution providers.
The majority of the Company's direct product sales is generated by
telesales. The Company has devoted considerable efforts and resources to
assemble and train a dedicated, professional, team-oriented sales force. The
telesales process consists of the generation of leads through media and direct
mail advertising, fulfillment of information packets to prospective purchasers,
and follow-up calls to the recipients of the information packets to attempt to
complete the sale. The Company is in the process of implementing a new system of
customer tracking and management at its corporate headquarters to improve its
lead management capability, enhance its customer satisfaction through increased
responsiveness and to improve its ability to market additional products to
existing customers. See "Risk Factors -- Management of Change."
The Company advertises its products in publications popular with investors
such as BARRON'S, FUTURES, INDIVIDUAL INVESTOR, INVESTORS BUSINESS DAILY and
STOCKS & COMMODITIES. The Company also advertises TRADESTATION and OPTIONSTATION
on a regular basis on the CNBC and CNN-FN television networks, and certain local
television stations. The Company undertakes periodic promotional mailings to its
customer base, as well as to mailing lists obtained by the Company by license
from, or agreement with, third parties. Such promotional mailings include
flyers, brochures, Omega Research Solution Provider catalogues or a combination
of the foregoing items.
The Company believes that significant opportunity exists to market its
products to international customers. The Company seeks to distribute its
products internationally through independent distributors. As of June 30, 1997,
Omega Research had arrangements with approximately 60 independent parties to
distribute one or more of the Company's products in Europe, Asia, Australia,
South Africa and Canada. The Company also sells directly to international
investors in response to direct inquiries received from abroad. The Company
believes its strategic relationships with data vendors, such as Dow Jones
Markets, will also provide significant benefit in its expansion into
international markets. The Company is in the early stages of its international
sales effort and intends to focus more resources on the establishment of a
comprehensive and effective international marketing and distribution network.
See "Risk Factors -- Risks Associated with International Expansion."
40
<PAGE>
STRATEGIC RELATIONSHIPS
Omega Research endeavors to establish and foster strategic marketing and
other strategic partner relationships with data vendors and with software and
service solution providers.
DOW JONES MARKETS AGREEMENTS. In August 1994, the Company entered into a
Software License, Maintenance and Development Agreement with Dow Jones Markets
(then known as Dow Jones Telerate, Inc.) under which Omega Research licensed to
Dow Jones Markets the right to market and distribute TRADESTATION to its data
subscribers worldwide, who are primarily institutional investors. The Company,
in March 1997, entered into a similar agreement with Dow Jones Markets regarding
SUPERCHARTS Real-Time. Following the execution of the TRADESTATION agreement,
Omega Research developed modifications to tightly integrate TRADESTATION with
Dow Jones Markets' data server. In January 1996, TELETRAC TRADESTATION (now
being marketed as DOW JONES TRADESTATION) was launched by Dow Jones Markets. The
Company believes the Dow Jones Markets relationship has begun to create an
institutional market awareness of the Company's products which should support
the Company's marketing efforts with respect to both the institutional and
international markets.
The Dow Jones Markets agreements expire in the year 2002. The TRADESTATION
agreement requires Dow Jones Markets to use commercially reasonable efforts to
market TRADESTATION, to market the product under the name "DOW JONES
TRADESTATION," and to pay to Omega Research a per-subscription royalty, subject
to minimum annual royalties which escalate each year of the agreement. The
Company has no technical support obligation under the agreement to the customers
of Dow Jones Markets, but is obligated to provide limited technical support to
Dow Jones Markets' managers. The SUPERCHARTS agreement is similar but does not
contain a minimum royalty payment provision.
During the term of the Dow Jones Markets agreements, Omega Research is not
permitted to enter into a similar licensing arrangement regarding TRADESTATION
or SUPERCHARTS with five enumerated competitors of Dow Jones Markets. Dow Jones
Markets is permitted under the agreements to offer to its data service
subscribers its own or another company's investment analysis software in
addition to offering TRADESTATION and SUPERCHARTS. However, should Dow Jones
Markets offer to its subscribers a technical analysis charting program
competitive with SUPERCHARTS, the prohibition on the Company entering into
similar arrangements regarding SUPERCHARTS with Dow Jones Markets' enumerated
competitors lapses. See "Risk Factors -- Dependence on Relationship with Dow
Jones Markets."
CROSS-MARKETING AGREEMENTS. The Company currently has written agreements
with other data vendors which generally provide for the data vendor to pay the
Company monthly fees or commissions as consideration for data subscribers who
use Omega Research products to access such data vendors' data services. Each of
these agreements contains provisions designed to make the data vendors'
subscribers more aware of Omega Research's products and to make Omega Research's
customers more aware of the data vendors' services.
OMEGA RESEARCH SOLUTION PROVIDER NETWORK. More than 150 independent
software and service providers have become Omega Research Solution Providers.
Omega Research Solution Providers add value to the Omega Research Platform by
either offering complementary software applications compatible with an Omega
Research product or by providing an educational or support service which
enhances a customer's use of a Company product. A number of the Omega Research
Solution Providers have developed products that operate only in conjunction with
an Omega Research product. The Company permits each Omega Research Solution
Provider to use an Omega Research Solution Provider logo on a royalty-free basis
so that the solution provider can advertise to potential customers that its
product or service is compatible with the applicable Omega Research product(s)
or useful to Omega Research customers.
41
<PAGE>
PRODUCT DEVELOPMENT
The Company believes that its future success depends in part on its ability
to maintain and improve its core software technologies, and enhance its existing
products and develop new products that meet an expanding range of customer
requirements. To date, the Company has relied primarily on internal development
of its products, all of which are currently 16-bit Windows applications. The
Company performs all quality assurance and develops documentation and other
training materials internally. In 1996 and the six-month period ended June 30,
1997, product development expenses were approximately $1.0 million and
approximately $843,000, respectively.
The Company views its product development cycle as a four-step process to
achieve technical feasibility. The first step is to conceptualize in detail the
defining features and functions that the targeted investor group requires from
the product, and to undertake a cost-benefit analysis to determine the proper
scope and integration of such features and functions. Once the functional
requirements of the product have been determined, the second step is to
technically design the product. The third step is the detailed implementation,
or software engineering, of this technical design. The fourth step is rigorous
quality assurance testing to ensure that the final product generally meets the
functional requirements determined in the first step. Several product
refinements are typically added in the quality assurance phase of development.
Once this process is completed, technological feasibility has been achieved and
the working model is available for final testing.
The Company is currently developing the next version of TRADESTATION. This
version will be a 32-bit version which is intended ultimately to support a
network environment, which would technically enable the marketing of
TRADESTATION by the Company directly to the institutional investor market. The
Company is also working to develop 32-bit versions of its other principal
products. The Company is currently considering additional enhancements to its
product line, including increased interactivity between TRADESTATION and
OPTIONSTATION, historical data enhancement products and services, and a software
solution which offers additional trading system design, testing and automation
capabilities for the equities investor.
The market for investment analysis software is characterized by rapidly
changing technology, evolving industry standards in computer hardware,
programming tools, programming languages, operating systems, database technology
and information delivery systems, changes in customer requirements and frequent
new product introductions and enhancements. The Company's future success will
depend upon its ability to maintain and develop competitive technologies, to
continue to enhance its current products and to develop and introduce new
products in a timely and cost-effective manner that meet changing conditions
such as evolving customer needs, new competitive product offerings, emerging
industry standards and changing technology. There can be no assurance that the
Company will be able to develop and market, on a timely basis, if at all,
product enhancements or new products that respond to changing market conditions
or that will be accepted by investors. Any failure by the Company to anticipate
or to respond quickly to changing market conditions, or any significant delays
in product development or introduction, could cause customers to delay or decide
against purchases of the Company's products and would have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Risk Factors -- Rapid Technological Change and Dependence on New Products"
and "-- Dependence Upon Microsoft's Windows Operating System."
42
<PAGE>
CUSTOMER SUPPORT AND TRAINING
The Company believes that customer support and product-use training is
critical to creating, maintaining and increasing customer satisfaction with the
Company's products. The Company provides customer support and product-use
training in the following ways:
CUSTOMER SUPPORT. The Company provides technical support to its customers
by telephone, fax and electronic mail. Although the majority of these services
are provided during the first sixty days of ownership of a Company product,
Omega Research voluntarily provides technical support for each product,
free-of-charge, generally until the product's next version is released. The
Company has substantially increased its technical support staff, which has grown
approximately 70% since December 31, 1995 and approximately 50% since December
31, 1996. The Company has also recently increased available hours of telephone
and electronic mail customer support.
PRODUCT-USE TRAINING. The Company considers product-use training important
in trying to ensure that its customers develop the ability to use Omega
Research's products as fully and effectively as is possible. The Company has
devoted considerable efforts to improve the user-education manuals and videos
generally included with its products. In addition, the Company has recently
embarked on a training seminar program to better educate its customers, which
consists of fee-based seminars to be conducted in various U.S. cities.
COMPETITION
The market for investment analysis software is intensely competitive and
rapidly changing. The Company believes that due to anticipated growth of the
market for investment analysis software, and other factors, competition will
substantially increase and intensify in the future. The Company believes its
ability to compete will depend upon many factors both within and outside its
control, including the timing and market acceptance of new products and
enhancements developed by the Company and its competitors, product
functionality, data availability, ease of use, pricing, reliability, customer
service and support, sales and marketing efforts and product distribution
channels. The Company believes that it currently competes favorably overall with
respect to these factors.
The Company faces direct competition from several publicly-traded and
privately-held companies. The Company's principal competitors include AIQ, Aspen
Graphics, Equis International, Inc. (Metastock), a subsidiary of Reuters, Market
Arts, Inc. (Window on Wall Street) and TeleChart 2000. The Company also competes
with investment analysis solutions available on the Internet, some of which are
available for free. In addition, the Company faces competition from data
vendors, all of which offer investment analysis software products, and which are
the Company's existing and potentially future strategic partners. As a result,
the Company must educate prospective customers as to the potential advantages of
the Company's products, and continue to offer solutions not offered by major
data vendors. There can be no assurance that the Company will be able to compete
effectively with its competitors, adequately educate potential customers to the
benefits that the Company's products provide, or continue to offer such software
solutions.
Many of the Company's existing and potential competitors, which include
large, established software companies which do not currently focus on the
investment analysis software market, have longer operating histories,
significantly greater financial, technical and marketing resources, greater name
recognition and a larger installed customer base than has the Company. One or
more of these competitors may be able to respond more quickly to new or emerging
technologies or changes in customer requirements, or to devote greater resources
to the development, promotion and sale of their products than may the Company.
There can be no assurance that the Company's existing or potential competitors
will not develop products comparable or superior to those developed by the
Company or
43
<PAGE>
adapt more quickly than the Company to new technologies, evolving industry
trends or changing customer requirements. Increased competition could result in
price reductions, reduced margins or loss of market share, any of which could
materially adversely affect the Company's business, results of operations and
financial condition. There can be no assurance that the Company will be able to
compete successfully against current or future competitors, or that competitive
pressures faced by the Company will not have a material adverse effect on its
business, results of operations and financial condition. See "Risk Factors --
Competition."
INTELLECTUAL PROPERTY
The Company's success is heavily dependent on its proprietary technology.
The Company views its software as proprietary, and relies on a combination of
copyright, trade secret and trademark laws, nondisclosure agreements and other
contractual provisions and technical measures to establish and protect its
proprietary rights. The Company has no patents or patents pending, and has not
to date registered any of its copyrights. The Company has obtained registrations
in the United States and Canada for the trademark TRADESTATION, and
registrations in the United States for the trademarks OPTIONSTATION and
SUPERCHARTS, and is seeking registrations in the United States for the
trademarks Omega Research and certain Omega Research designs and logos. The
Company uses a shrink-wrap license (typically on its packaging and on-screen)
directed to users of its products in order to protect its copyrights and trade
secrets and to prevent such users from commercially exploiting such copyrights
and trade secrets for their own gain. Since these licenses are not signed by the
licensees, many authorities believe that they may not be enforceable under many
state laws and the laws of many foreign jurisdictions. The laws of Florida,
which such licenses purport to make the governing law, are unclear on this
subject.
Despite the Company's efforts to protect its proprietary rights,
unauthorized parties copy or otherwise obtain, use or exploit the Company's
products or technology independently. Policing unauthorized use of the Company's
products is difficult, and the Company is unable to determine the extent to
which piracy of its software products exists. Piracy can be expected to be a
persistent problem, particularly in international markets and as a result of the
growing use of the Internet. In addition, effective protection of intellectual
property rights may be unavailable or limited in certain countries, including
some in which the Company may attempt to expand its sales efforts. There can be
no assurance that the steps taken by the Company to protect its proprietary
rights will be adequate or that the Company's competitors will not independently
develop technologies that are substantially equivalent or superior to the
Company's technologies or products.
There has been substantial litigation in the software industry involving
intellectual property rights. The Company does not believe that it is infringing
the intellectual property rights of others, although there exists a competing
trademark application for the name WALL STREET ANALYST which claims prior use.
There can be no assurance that infringement claims would not have a material
adverse effect on the Company's business, financial condition and results of
operations. In addition, to the extent that the Company acquires or licenses a
portion of the software or data included in its products from third parties, its
exposure to infringement actions may increase because the Company must rely upon
such third parties for information as to the origin and ownership of such
acquired or licensed software or data. In the future, litigation may be
necessary to establish, enforce and protect trade secrets, copyrights,
trademarks and other intellectual property rights of the Company. The Company
may also be subject to litigation to defend against claimed infringement of the
rights of others or to determine the scope and validity of the intellectual
property rights of others. Any such litigation could be costly and divert
management's attention, either of which could have a material adverse effect on
the Company's business, financial condition and results of operations. Adverse
determinations in such litigation could result in the loss of proprietary
rights, subject the Company to significant liabilities, require the Company to
seek licenses from third parties, which could be expensive, or prevent the
Company from
44
<PAGE>
selling its products or using its trademarks, any one of which could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Risk Factors -- Protection of Intellectual
Property."
EMPLOYEES
As of June 30, 1997, the Company had 122 full-time employees consisting of
25 in product development (including product development, management,
documentation and quality assurance), 77 in sales and marketing (including
sales, marketing, customer support and order fulfillment), and 20 in general
administration (including executive management, finance and administration). The
Company's employees are not represented by any collective bargaining
organization, and the Company has never experienced a work stoppage and
considers its relations with its employees to be good.
The Company's future success depends, in significant part, upon the
continued service of its key senior management, technical and sales and
marketing personnel. The loss of the services of one or more of these key
employees, including William Cruz or Ralph Cruz, the Company's Co-Chief
Executive Officers, or Peter A. Parandjuk, the Company's Vice President of
Product Development, would have a material adverse effect on the Company. There
can be no assurance that the Company will be able to retain its key personnel.
Departures and additions of personnel, to the extent disruptive, could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Risk Factors -- Dependence on Key Employees."
FACILITIES
The Company's corporate headquarters are located in Miami, Florida, in a
leased facility consisting of approximately 17,300 square feet of office space
occupied under a lease which commenced in February 1997 and which expires in
August 2002. The Company also leases warehouse space consisting of approximately
4,800 square feet, which is used for fulfillment of orders. The warehouse lease
expires in May 1998. The Company has also recently leased approximately 1,100
square feet of space in Boca Raton, Florida from which the Company intends to
conduct certain quality assurance operations relating to the historical database
included within its products. Such lease expires in June 1998, and the Company
has a one-year renewal option. The Company's corporate headquarters contain all
of the Company's facilities except for fulfillment and such quality assurance
operations. The Company believes that its existing facilities are adequate to
support its existing operations and that, if needed, it will be able to obtain
suitable additional facilities on commercially reasonable terms.
LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings.
45
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ---- --- -------------------------
<S> <C> <C>
William R. Cruz 36 Co-Chairman of the Board, Co-Chief Executive Officer and
President
Ralph L. Cruz 33 Co-Chairman of the Board and Co-Chief Executive Officer
Peter A. Parandjuk 35 Vice President of Product Development and Director
Salomon Sredni 30 Vice President of Operations, Chief Financial Officer, Treasurer
and Director
Marc J. Stone 36 Vice President of Corporate Planning and Development, General
Counsel, Secretary and Director
</TABLE>
WILLIAM R. CRUZ co-founded the Company in 1982 and has been its President
and a director since that time. Mr. Cruz was appointed Co-Chief Executive
Officer of the Company in 1996. Mr. Cruz studied classical violin at the
University of Miami, which he attended on a full scholarship, and Julliard
School of Music. Mr. Cruz left Julliard School of Music prior to graduation to
co-found the Company. Mr. Cruz has won numerous classical violin competitions.
Mr. Cruz has been primarily responsible for the conception and management of the
Company's products and product strategies.
RALPH L. CRUZ co-founded the Company in 1982 and has been a director since
that time. Mr. Cruz was Vice President of the Company from 1982 until 1996, at
which time he was appointed Co-Chief Executive Officer. Mr. Cruz studied
classical violin at the University of Miami, which he attended on a full
scholarship, and Indiana University. Mr. Cruz left Indiana University prior to
graduation to devote full time to the Company. Mr. Cruz has won numerous
classical violin competitions. Mr. Cruz has been primarily responsible for the
Company's marketing strategies.
PETER A. PARANDJUK joined the Company in 1988 as a software engineer,
became the Company's senior software engineer in 1991, was appointed Vice
President of Product Development in January 1995 and was named a director of the
Company in July 1997. Mr. Parandjuk received a bachelor's degree in Applied
Mathematics from the State University of New York at Buffalo.
SALOMON SREDNI joined the Company in December 1996 as its Vice President of
Operations and Chief Financial Officer and was named Treasurer and a director of
the Company in July 1997. From August 1994 to November 1996, Mr. Sredni was Vice
President of Accounting and Corporate Controller at IVAX Corporation, a
publicly-held pharmaceutical company. Prior to that time, from January 1988 to
August 1994, Mr. Sredni was with Arthur Andersen LLP, an international
accounting firm. Mr. Sredni is a Certified Public Accountant and a member of the
American Institute of Certified Public Accountants and the Florida Institute of
Certified Public Accountants. Mr. Sredni has a bachelor's degree in Accounting
from The Pennsylvania State University.
MARC J. STONE joined the Company in May 1997 as its Vice President of
Corporate Planning and Development, General Counsel and Secretary and was named
a director of the Company in July 1997. From January 1993 to May 1997, Mr. Stone
was a partner at the law firm of Rubin Baum Levin Constant Friedman & Bilzin
("Rubin Baum"), which serves as the Company's regular outside counsel. Prior to
that time, from 1985 to 1992, Mr. Stone was an associate with that law firm. Mr.
Stone remains of counsel to Rubin Baum. Mr. Stone has a bachelor's degree in
English and American Literature from
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<PAGE>
Brown University, and received his law degree from University of California
(Boalt Hall) School of Law at Berkeley.
INDEPENDENT DIRECTORS; COMMITTEES OF THE BOARD OF DIRECTORS
The Company intends to add two nonemployee, independent members to its
Board of Directors ("independent directors") within 90 days following the date
of this Prospectus.
At the time of the appointment of the independent directors, the Company's
Board of Directors will establish an Audit Committee, the majority of the
members of which will be independent directors, and a Compensation Committee,
all the members of which will be independent directors. The Audit Committee will
recommend the annual engagement of the Company's auditors, with whom the Audit
Committee will review the scope of audit and non-audit assignments, related
fees, the accounting principles used by the Company in financial reporting,
internal financial auditing procedures and the adequacy of the Company's
internal control procedures. The Compensation Committee will determine executive
officers' salaries and bonuses and administer the Incentive Stock Plan and the
Purchase Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company did not have a Compensation Committee during its last completed
year. The compensation of the Company's executive officers was determined by
William Cruz and Ralph Cruz, as the Company's sole members of its Board of
Directors, for this period.
For information concerning cash dividends paid by the Company to its
current shareholders in 1994, 1995, 1996 and the first six months of 1997, the
dividend of the Company's former office facilities declared in the second
quarter of 1997, and the Dividend to be paid by the Company in 1997 to its
current shareholders and the Tax Agreement to be entered into between the
Company and such shareholders, see "Dividend Policy," "Distribution of S
Corporation Earnings," and "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Overview."
DIRECTOR COMPENSATION
The Company currently expects that directors who are not employees or
officers of the Company will receive $750 for attendance at each meeting of the
Board of Directors. Each such director will also receive an option to purchase
12,000 shares of Common Stock upon initial election as a director of the
Company, and an option to purchase 3,000 shares of Common Stock upon each
re-election as a director at the Company's annual meeting of shareholders.
Directors may also be reimbursed for certain expenses in connection with
attendance at Board of Directors and committee meetings. Other than with respect
to reimbursement of expenses, directors who are employees or officers of the
Company will not receive additional compensation for service as a director. See
"Management -- Other Compensation Arrangements."
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<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information with respect to all compensation
paid or earned for services rendered to the Company in the year ended December
31, 1996 by the co-chief executive officers of the Company and the Company's two
other most highly compensated executive officers whose aggregate annual
compensation exceeded $100,000 (together, the "Named Executive Officers"). The
Company does not have a pension plan or a long-term incentive plan, has not
issued any restricted stock awards and has not granted any stock appreciation
rights prior to this offering. The value of all perquisites and other personal
benefits received by each Named Executive Officer did not exceed 10% of the
Named Executive Officer's total annual salary.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
--------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS COMPENSATION(1)
- --------------------------- ----------- ----------- ------------ ---------------
<S> <C> <C> <C> <C>
William R. Cruz ........ $ 90,000(2) $ -- -- $ 4,320
Co-Chief Executive
Officer and President
Ralph L. Cruz .......... 90,000(2) -- -- 4,320
Co-Chief Executive
Officer
Peter A. Parandjuk ..... 116,990 78,948(3) 250,000 5,700
Vice President of
Product Development
Salomon Sredni ......... 10,833(4) -- 140,000 --
Vice President of
Operations, Chief
Financial Officer and
Treasurer
<FN>
- ----------------------
(1) Represents 401(k) Plan Company contributions on behalf of the Named
Executive Officer.
(2) In December 1996, his annual base salary was increased to $150,000.
(3) $26,491 of this amount was earned in 1996 but paid in 1997.
(4) Mr. Sredni joined the Company in December 1996. His annual base salary for
1996 was $130,000.
</FN>
</TABLE>
48
<PAGE>
OPTION GRANTS. The following table summarizes the options which were granted
during the fiscal year ended December 31, 1996 to the Named Executive Officers.
<TABLE>
<CAPTION>
OPTION GRANTS IN 1996
INDIVIDUAL GRANTS
----------------------------------------------------------
% OF TOTAL POTENTIAL REALIZABLE VALUE AT
NUMBER OF OPTIONS MARKET VALUE AT ASSUMED ANNUAL RATES OF
SECURITIES GRANTED TO EXERCISE PRICE ON GRANT-DATE STOCK PRICE APPRECIATION
UNDERLYING EMPLOYEES OR BASE GRANT MARKET PRICE FOR OPTION TERM(1)
OPTIONS IN FISCAL PRICE DATE EXPIRATION ------------ -----------------------------
NAME GRANTED(2) YEAR ($)/(SH) ($)/(SH)(3) DATE 0%($) 5%($) 10%($)
- ---- ----------- ---------- -------- ----------- ---------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William R. Cruz...... --- --- --- --- --- --- --- ---
Ralph L. Cruz........ --- --- --- --- --- --- --- ---
Peter A. Parandjuk... 250,000 43.0% $1.25 $1.75 11/30/06 $ 125,000 $400,141 $822,262
Salomon Sredni....... 140,000 24.1 1.25 1.75 11/30/06 70,000 224,079 460,467
<FN>
- -------------------
(1) Potential realizable value is based on the assumption that the Common Stock
price appreciates at the annual rate shown (compounded annually) from the
date of grant until the end of the option term. The amounts have been
calculated based on the requirements promulgated by the Securities and
Exchange Commission. The actual value, if any, a Named Executive Officer may
realize will depend on the excess of the stock price over the exercise price
on the date the option is exercised (if the executive were to sell the
shares on the date of exercise), so there is no assurance that the value
realized will be at or near the potential realizable value as calculated in
this table.
(2) These options vest over five years and have a term of ten years from the
date of grant, subject to acceleration under certain circumstances.
(3) Prior to this offering, there has been no public market for the Common Stock
of the Company. The Market Price on Grant Date is based on the Board of
Director's determination of the fair market value of the Common Stock on the
date of grant of the option.
</FN>
</TABLE>
OPTION EXERCISES AND UNEXERCISED OPTION HOLDINGS. The following table provides
information regarding the value of all unexercised options held at December 31,
1996 by the Named Executive Officers. No Named Executive Officer exercised any
stock options during the fiscal year ended December 31, 1996.
AGGREGATE OPTION EXERCISES IN 1996 AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1996(#) DECEMBER 31, 1996 ($)(1)
-------------------------------- --------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
William R. Cruz............. --- --- --- ---
Ralph L. Cruz............... --- --- --- ---
Peter A. Parandjuk.......... --- 250,000 --- $187,500
Salomon Sredni.............. --- 140,000 --- 105,000
<FN>
- -------------------
(1) There was no public trading market for the Common Stock as of December 31,
1996. Accordingly, these values have been calculated based on a price of
$2.00 per share, the Board of Director's determination of the fair market
value of the Common Stock as of December 31, 1996, minus the applicable per
share exercise price.
</FN>
</TABLE>
49
<PAGE>
OTHER COMPENSATION ARRANGEMENTS
1996 INCENTIVE STOCK PLAN. The Incentive Stock Plan, pursuant to which
officers, employees and nonemployee consultants may be granted stock options,
stock appreciation rights, stock awards, performance shares and performance
units, was adopted by the Board of Directors and approved by the shareholders in
June 1996. The Company has reserved 3,000,000 shares of Common Stock for
issuance under the Incentive Stock Plan, subject to antidilution adjustments.
The Incentive Stock Plan has been administered by the Board of Directors of
the Company, but upon completion of this offering and establishment of the
Compensation Committee of the Board of Directors (the "Committee"), the
Incentive Stock Plan will be administered by the Committee, whose members must
qualify as "nonemployee directors" (as such term is defined in Rule 16b-3 under
the Securities Exchange Act of 1934, as amended). The Board of Directors or the
Committee is authorized to determine, among other things, the employees to whom,
and the times at which, options and other benefits are to be granted, the number
of shares subject to each option, the applicable vesting schedule and the
exercise price (provided that, for incentive stock options, the exercise price
shall not be less than 100% of the fair market value of the Common Stock on the
date of grant). The Committee will also determine the treatment to be afforded
to a participant in the Incentive Stock Plan in the event of termination of
employment for any reason, including death, disability or retirement. Under the
Incentive Stock Plan the maximum term of an incentive stock option is ten years
and the maximum term of a nonqualified stock option is fifteen years.
The Board of Directors has the power to amend the Incentive Stock Plan from
time to time. Shareholder approval of an amendment is only required to the
extent that it is necessary to maintain the Incentive Stock Plan's status as a
protected plan under applicable securities laws or as a qualified plan under
applicable tax laws.
As of July 21, 1997, options to purchase 891,250 shares were outstanding
under the Incentive Stock Plan, of which options to purchase 530,000 shares had
been granted to executive officers of the Company. The Company intends to issue
options to purchase up to an additional 150,000 shares on or prior to the date
of this Prospectus to certain employees (excluding executive officers), of which
approximately 100,000 shares will be granted at an exercise price equal to the
initial public offering price. Of the options granted to executive officers,
options to purchase 250,000 shares were granted to Peter A. Parandjuk, the
Company's Vice President of Product Development, at an exercise price of $1.25
per share; options to purchase 140,000 shares were granted to Salomon Sredni,
the Company's Vice President of Operations, Chief Financial Officer and
Treasurer, at an exercise price of $1.25 per share; and options to purchase
140,000 shares were granted to Marc J. Stone, the Company's Vice President of
Corporate Planning and Development, General Counsel and Secretary, at an
exercise price of $3.00 per share. All options granted under the Incentive Stock
Plan vest at the rate of 20% per year and have a total term of ten years. The
options granted to Messrs. Parandjuk, Sredni and Stone immediately vest and
become exercisable upon termination of employment due to death or permanent
disability, or upon a sale or a change in control of the Company, and, in the
case of Mr. Parandjuk, upon termination of employment by the Company without
cause. The options to purchase the shares granted under the Incentive Stock Plan
outstanding as of July 21, 1997 have a weighted average exercise price of $1.84
per share. See Note 4 of Notes to Financial Statements.
1997 NONEMPLOYEE DIRECTOR STOCK OPTION PLAN. The Director Stock Plan,
pursuant to which annual grants of a nonqualified stock option will be made to
each nonemployee director of the Company, was adopted by the Board of Directors
and approved by the shareholders in July 1997. Upon initial election to the
Board of Directors, each nonemployee director will be granted an option to
purchase 12,000 shares of Common Stock. Upon each re-election to the Board of
Directors at the annual meeting of shareholders, each nonemployee director will
be granted an additional option to
50
<PAGE>
purchase 3,000 shares of Common Stock. Each option will be granted at an
exercise price equal to the fair market value of the Common Stock on the date of
grant. These options will have a term of ten years and will vest in equal
installments over three years. The Company has reserved 175,000 shares of Common
Stock for issuance under the Director Stock Plan, subject to antidilution
adjustments. No options have yet been granted under the Director Stock Plan.
The Board of Directors has the power to amend the Director Stock Plan from
time to time. Shareholder approval of an amendment is only required to the
extent that it is necessary to maintain the Director Stock Plan's status as a
protected plan under applicable securities laws.
1997 EMPLOYEE STOCK PURCHASE PLAN. The Purchase Plan was adopted by the
Board of Directors and approved by the Company's shareholders in July 1997. The
Purchase Plan provides for the issuance of a maximum of 500,000 shares of Common
Stock pursuant to the exercise of nontransferable options granted to
participating employees.
The Purchase Plan will be administered by the Compensation Committee of the
Board of Directors. All employees of the Company whose customary employment is
more than 20 hours per week and for more than five months in any calendar year
and who have completed at least three months of employment are eligible to
participate in the Purchase Plan. Employees who would immediately after the
grant own 5% or more of the total combined voting power or value of the
Company's stock and all nonemployee directors of the Company may not participate
in the Purchase Plan. To participate in the Purchase Plan, an employee must
authorize the Company to deduct an amount (not less than one percent nor more
than ten percent of a participant's total cash compensation) from his or her pay
during six-month periods (each a "Plan Period"). The maximum number of shares of
Common Stock an employee may purchase in any Plan Period is 500 shares. The
exercise price for the option for each Plan Period is 85% of the lesser of the
market price of the Common Stock on the first or last business day of the Plan
Period. If an employee is not a participant on the last day of the Plan Period,
such employee is not entitled to exercise his or her option, and the amount of
his or her accumulated payroll deductions will be refunded. An employee's rights
under the Purchase Plan terminate upon his or her voluntary withdrawal from the
plan at any time or upon termination of employment. No options have been granted
to date under the Purchase Plan.
The Board of Directors has the power to amend or terminate the Purchase
Plan. Shareholder approval of an amendment is only required to the extent that
it is necessary to maintain the Purchase Plan's status as a protected plan under
applicable securities laws or as a qualified plan under applicable tax laws.
401(K) PLAN. The Company has a defined contribution retirement plan which
complies with Section 401(k) of the Code. All employees with at least one year
of continuous service (the Company intends to change this requirement from one
year to three months) are eligible to participate and may contribute up to 15%
of their compensation. Company contributions vest over a five-year period.
Company contributions charged against income were $23,000, $16,000 and $62,000
in 1994, 1995 and 1996, respectively.
EMPLOYEE BONUS PROGRAMS. The Company had an informal profit-sharing
incentive program (the "Profit-Sharing Program"), which was discontinued by the
Company effective July 1, 1997. Under the Profit-Sharing Program, the Company
made discretionary quarterly distributions to its employees based on the
Company's attainment of specified percentage increases in net sales. Company
payments to employees under the Profit-Sharing Program for the years ended
December
51
<PAGE>
31, 1994, 1995, 1996, and the six months ended June 30, 1997, amounted to
$81,000, $20,000, $423,000 and $277,000, respectively. Prior to the end of the
fiscal quarter ending September 30, 1997, the Company intends to institute an
informal quarterly performance bonus incentive program, pursuant to which cash
bonuses may be paid to employees (including executive officers) based on the
attainment of certain pre-set objectives tied to individual and departmental
performance. Such bonuses will ultimately be payable solely at the discretion of
the Company.
NON-COMPETITION AGREEMENTS
All executive officers have entered into agreements with the Company which
generally contain certain non-competition, non-disclosure and non-solicitation
restrictions and covenants, including a provision prohibiting such officers from
competing with the Company during their employment with the Company and for a
period of two years thereafter.
CERTAIN TRANSACTIONS
For information concerning cash dividends paid by the Company to its
shareholders in 1994, 1995, 1996 and the first six months of 1997, the dividend
of the Company's former office facilities to William Cruz and Ralph Cruz
declared in the second quarter of 1997, and the Dividend to be paid by the
Company in 1997 to its current shareholders and the Tax Agreement to be entered
into between the Company and such shareholders, see "Dividend Policy" and
"Distribution of S Corporation Earnings."
Marc J. Stone, the Company's Vice President of Corporate Planning and
Development, General Counsel and Secretary and a director, was a partner in the
law firm of Rubin Baum Levin Constant Friedman & Bilzin until immediately prior
to joining the Company in May 1997 and remains of counsel to that firm. Rubin
Baum has acted as the Company's regular outside legal counsel since 1994. The
total fees and costs paid by the Company to Rubin Baum in 1994, 1995, 1996 and
the first six months of 1997 were approximately $35,000, $63,000, $34,000 and
$50,000, respectively. The Company believes that the fees paid to Rubin Baum are
no less favorable to the Company than could be obtained from other comparable
law firms in the Miami area.
52
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of July 21, 1997, and as adjusted for the sale of
the shares offered hereby, by (i) each shareholder of the Company who
beneficially owns more than 5% of the Common Stock, (ii) each director of the
Company, (iii) each Named Executive Officer, and (iv) all directors and
executive officers of the Company as a group. Except as otherwise described in
the footnotes below, the Company believes that the beneficial owners of the
Common Stock listed below, based on information provided by such owners, have
sole investment and voting power with respect to such shares. The address of
each person who beneficially owns more than 5% of the Common Stock is the
Company's principal executive office.
<TABLE>
<CAPTION>
SHARES SHARES
BENEFICIALLY OWNED BENEFICIALLY OWNED
EXECUTIVE OFFICERS, PRIOR TO OFFERING(1) AFTER OFFERING (1) (2)
DIRECTORS AND ---------------------- NUMBER OF ----------------------------
5% SHAREHOLDERS NUMBER PERCENT SHARES OFFERED(2) NUMBER PERCENT
- ---------------------------- ------------ ------- ----------------- ---------- -------
<S> <C> <C> <C> <C> <C>
William R. Cruz 9,740,000(3) 50.0% 550,000 9,190,000 41.6%
Ralph L. Cruz 9,740,000(4) 50.0 550,000 9,190,000 41.6
Peter A. Parandjuk -- -- -- -- --
Salomon Sredni -- -- -- -- --
Marc J. Stone -- -- -- -- --
All executive officers and
directors as a group
(5 persons)(5) 19,480,000 100% 1,100,000 18,380,000 83.2%
<FN>
- --------------------
(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.
(2) Assumes no exercise of the Underwriters' over-allotment option to purchase
on a pro rata basis up to an aggregate of 555,000 additional shares of
Common Stock, 390,000 additional shares from the Company and 165,000
additional shares from the Selling Shareholders. If the over-allotment
option is exercised in full, each of William R. Cruz and Ralph L. Cruz could
sell an additional 82,500 shares beneficially owned by him, reducing the
percentage of shares beneficially owned by each of William R. Cruz and Ralph
L. Cruz to 40.5%. Any shares sold by the Selling Shareholders pursuant to
the over-allotment option will be sold equally by William R. Cruz and Ralph
L. Cruz.
(3) Includes 1,950,000 shares held by the Ralph L. Cruz 1997 Grantor Retained
Annuity Trust #1 as to which William R. Cruz possesses voting and
dispositive powers as trustee under the trust. Such trust provides for
annual distributions of principal and income to Ralph L. Cruz for five
years, and thereafter any remainder interest is payable to the Ralph L. Cruz
1997 Family Trust for the benefit of certain family members and/or
charitable organizations.
(4) Includes 1,950,000 shares held by the William R. Cruz Grantor Retained
Annuity Trust #1 as to which Ralph L. Cruz possesses voting and dispositive
powers as trustee under the trust. Such trust provides for annual
distributions of principal and income to William R. Cruz for five years, and
thereafter any remainder interest is payable to the William R. Cruz 1997
Family Trust for the benefit of certain family members and/or charitable
organizations. Also includes 389,600 shares owned beneficially and of record
by Michelle Cruz, the spouse of Ralph L. Cruz, with respect to which Ralph
L. Cruz has no investment or voting power and disclaims beneficial
ownership.
(5) See other footnotes above. Does not include options held by officers and
directors which are not exercisable within 60 days of the date of this
Prospectus.
</FN>
</TABLE>
53
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 125 million shares,
of which 100 million shares are Common Stock, par value $0.01 per share, and 25
million shares are preferred stock, par value $0.01 per share. As of July 21,
1997, there were 19,480,000 shares of Common Stock outstanding held of record by
five shareholders, and no shares of preferred stock outstanding. See "Principal
and Selling Shareholders." After completion of this offering, 22,080,000 shares
of Common Stock will be issued and outstanding.
The following description of the capital stock of the Company and certain
provisions of the Company's Articles and Bylaws is a summary and is qualified in
its entirety by the provisions of the Articles and Bylaws, which have been filed
as exhibits to the Company's Registration Statement, of which this Prospectus is
a part.
COMMON STOCK
The issued and outstanding shares of Common Stock are, and the Common Stock
to be sold by the Company and the Selling Shareholders in this offering will be,
validly issued, fully paid and nonassessable. Subject to the rights of holders
of preferred stock which may be issued in the future, the holders of outstanding
Common Stock are entitled to receive dividends out of assets legally available
therefor at such times and in such amounts as the Board of Directors may from
time to time determine. See "Dividend Policy." The shares of Common Stock are
neither redeemable nor convertible, and the holders thereof have no preemptive
or subscription rights to purchase any securities of the Company. Upon
liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to receive, pro rata, the assets of the Company which are
legally available for distribution, after payment of all debts and other
liabilities and subject to the prior rights of any holders of preferred stock
then outstanding. Each outstanding share of Common Stock is entitled to one vote
on all matters submitted to a vote of shareholders. There is no cumulative
voting in the election of directors.
PREFERRED STOCK
The Company's Articles authorize the Board of Directors to issue the
preferred stock in classes or series and to establish the designations,
preferences, qualifications, limitations or restrictions of any class or series
with respect to the rate and nature of dividends, the amounts payable upon
liquidation, the price and terms and conditions on which shares may be redeemed,
the terms and conditions for conversion or exchange into any other class or
series of shares, voting and preemptive rights and other terms. The Company may
issue, without approval of the holders of Common Stock, preferred stock which
has voting, dividend or liquidation rights superior to the Common Stock and
which may adversely affect the rights of holders of Common Stock. The issuance
of preferred stock, while providing flexibility in connection with possible
acquisitions and other corporate purposes, could, among other things, adversely
affect the voting power of the holders of Common Stock and could have the effect
of discouraging, delaying, deferring or preventing a change in control of the
Company. The Company has no present intention to issue any preferred stock.
CERTAIN PROVISIONS OF FLORIDA LAW
The Company is subject to Sections 607.0901 and 607.0902 of the Florida
Business Corporation Act. In general, Section 607.0901 restricts the ability of
a greater than 10% shareholder of a company to engage in a wide range of
specified transactions between such company and such shareholder or a person or
entity controlled by or controlling such shareholder. The statute provides that
such a transaction must be approved by the affirmative vote of the holders of
two-thirds of such company's voting shares, other than the shares beneficially
owned by the interested shareholder, unless it is
54
<PAGE>
approved by a majority of the disinterested directors. Section 607.0902
restricts the ability of a third party to effect an unsolicited change in
control of a company. In general, the statute provides that, unless approved by
the board of directors of the company, shares acquired in a transaction which
effects a certain threshold change in the ownership of a company's voting shares
(a "control share acquisition") have the same voting rights as shares held by
the acquiring person prior to the acquisition only to the extent granted by a
resolution adopted by shareholders in a prescribed manner. These statutory
provisions have an anti-takeover effect by deterring unsolicited offers or
delaying changes in control or management of the Company.
CERTAIN CHARTER AND BYLAW PROVISIONS
The Company's Articles and Bylaws contain a number of provisions related to
corporate governance and to the rights of shareholders. In particular, the
Bylaws provide that shareholders are required to follow an advance notification
procedure for certain shareholder nominations of candidates for the Board of
Directors and for certain other shareholder business to be conducted at any
meeting of the shareholders. The Articles provide that special meetings of the
shareholders may only be called by the Board of Directors or by holders of not
less than 50% of the outstanding voting shares of the Company. The Articles
require that, upon completion of this offering, any actions to be taken by the
shareholders of the Company may be taken only upon the vote of the shareholders
at a meeting and may not be taken by written consent. The existence of these
provisions in the Company's Articles and Bylaws may have the effect of
discouraging a change in control of the Company and limiting shareholder
participation in certain transactions or circumstances by limiting shareholders'
participation to annual and special meetings of shareholders and making such
participation contingent upon adherence to certain prescribed procedures. The
affirmative vote of the holders of shares equal to at least 66 2/3% of the
outstanding capital stock is required to amend or repeal these provisions.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Articles contain a provision eliminating the personal
liability of its directors for monetary damages resulting from breaches of their
fiduciary duty to the extent permitted by the Florida Business Corporation Act.
This provision in the Articles does not eliminate the duty of care and, in
appropriate circumstances, equitable remedies such as an injunction or other
forms of non-monetary relief would remain available under Florida law. Each
director will continue to be subject to liability for breach of a director's
duty of loyalty to the Company or its shareholders, for acts or omissions not in
good faith or involving intentional misconduct, for knowing violations of law,
and for any transaction from which the director derived an improper personal
benefit. This provision also does not affect a director's responsibilities under
any other laws, such as the federal securities laws or state or federal
environmental laws.
The Company's Articles and Bylaws provide that the Company will indemnify
its directors and officers, and may indemnify its employees and other agents, to
the fullest extent permitted by law. The Company's Bylaws also permit it to
secure insurance on behalf of any person it is required or permitted to
indemnify for any liability arising out of his or her actions in such capacity,
regardless of whether the Articles or Bylaws would permit indemnification. The
Company intends to obtain liability insurance for its directors and officers.
In addition to the indemnification provided for in the Company's Articles
and Bylaws, the Company will enter into agreements to indemnify its directors
and its executive officers. These agreements will, among other things, indemnify
the Company's directors and executive officers for all direct and indirect
expenses and costs (including, without limitation, all reasonable attorneys'
fees and related disbursements, other out-of-pocket costs and reasonable
compensation for time spent by such persons for which they are not otherwise
compensated by the Company or any third person) and liabilities of any type
whatsoever (including, but not limited to, judgments, fines and amounts paid
55
<PAGE>
in settlement) actually and reasonably incurred by such persons in connection
with either the investigation, defense, settlement or appeal of any threatened,
pending or completed action, suit or other proceeding, including any action by
or in the right of the Company, arising out of such persons' services as a
director, officer, employee or other agent of the Company, any subsidiary of the
Company or any other company or enterprise to which such persons provide
services at the request of the Company. The Company believes that these
provisions and agreements are necessary to attract and retain talented and
experienced directors and officers.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent of the Company where indemnification will
be required or permitted. The Company is not aware of any threatened litigation
or proceeding that might result in a claim for such indemnification.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock will be American
Stock Transfer & Trust Company, New York, New York.
56
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon the closing of this offering, the Company will have 22,080,000 shares
of Common Stock outstanding, of which 3,700,000 (4,255,000 if the Underwriters'
over-allotment option is exercised in full) will be freely tradable without
restriction or registration under the Securities Act, except for any shares
purchased by an affiliate of the Company (in general, a person who has a control
relationship with the Company), which will be subject to the limitations of Rule
144 promulgated under the Securities Act ("Rule 144"). All of the remaining
18,380,000 outstanding shares of Common Stock are deemed to be "restricted
securities," as that term is defined in Rule 144. Beginning 180 days after the
date of this Prospectus, upon the expiration of lock-up agreements with the
Underwriters (described below), all of such restricted securities will be
available for sale subject to compliance with Rule 144 volume and other
requirements.
The current shareholders, officers and directors of the Company have agreed
for a period of 180 days after the date of this Prospectus that they will not,
subject to certain exceptions, directly or indirectly offer, sell, contract to
sell, grant any option to purchase, pledge, or otherwise dispose of or transfer,
any shares of Common Stock, or any securities convertible into or exchangeable
for, or any rights to purchase or acquire, shares of Common Stock, now owned or
hereafter acquired directly by such holders or with respect to which they now
have or hereafter acquire the power of disposition, without the prior written
consent of Robertson, Stephens & Company LLC, which may, in its sole discretion
and at any time without notice, release all or any portion of the securities
subject to lock-up agreements. See "Underwriting."
In general, under Rule 144, as currently in effect, any person (or persons
whose shares are aggregated) who owns shares that were last acquired from the
issuer or an affiliate of the issuer at least one year prior to a proposed sale
is entitled to sell, within any three-month period, a number of shares which
does not exceed the greater of 1% of the then-outstanding shares of the
Company's Common Stock (220,800 shares immediately after this offering) or the
average weekly trading volume of the Company's Common Stock in the
over-the-counter market during the four calendar weeks preceding the date on
which notice of the sale is filed with the Securities and Exchange Commission
(the "Commission"). Sales under Rule 144 may also be subject to certain manner
of sale provisions, notice requirements and the availability of current public
information about the Company. Any person (or persons whose shares are
aggregated) who is not deemed to have been an affiliate of the Company at any
time during the three months preceding a proposed sale, and who owns restricted
securities that were last acquired from the issuer or an affiliate of the issuer
at least two years prior to a proposed sale, is entitled to sell such shares
under Rule 144(k) without regard to the volume limitation, manner of sale
provisions, public information requirements or notice requirements.
The Company is authorized to issue up to 3,000,000 shares of Common Stock
under the Incentive Stock Plan, up to 175,000 shares under the Director Stock
Plan and up to 500,000 shares under the Purchase Plan. As of July 21, 1997,
options to purchase 891,250 shares were outstanding under the Incentive Stock
Plan, none of which is currently exercisable, and no shares had been issued
under the Director Stock Plan or the Purchase Plan. The Company intends to issue
options to purchase up to an additional 150,000 shares under the Incentive Stock
Plan on or prior to the date of this Prospectus. See "Management -- Other
Compensation Arrangements." The Company intends to file one or more registration
statements under the Securities Act covering the issuance or resale of these
shares of Common Stock promptly following the closing of this offering. Shares
registered under such registration statement will, subject to Rule 144 volume
limitations applicable to affiliates, be available for sale in the open market,
subject to vesting restrictions and the lock-up arrangements described above.
No predictions can be made of the effect, if any, that the availability of
shares for sale or the actual sale of shares will have on market prices
prevailing from time to time. See "Risk Factors -- Shares Eligible for Future
Sale."
57
<PAGE>
UNDERWRITING
The Underwriters named below, acting through their representatives,
Robertson, Stephens & Company LLC, Lehman Brothers Inc. and Hambrecht & Quist
LLC (the "Representatives"), have severally agreed, subject to the terms and
conditions of the Underwriting Agreement, to purchase from the Company and the
Selling Shareholders 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.
NUMBER
UNDERWRITER OF SHARES
----------- ---------
Robertson, Stephens & Company LLC................................
Lehman Brothers Inc..............................................
Hambrecht & Quist LLC............................................
---------
Total............................................................ 3,700,000
=========
The Company has been advised by the Representatives 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 more than $ per
share, of which $ per share 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.
The Company and the Selling Shareholders have granted to the Underwriters
an option, exercisable during the 30-day period after the date of this
Prospectus, to purchase up to an additional 555,000 shares of Common Stock at
the same price per share as the Company and the Selling Shareholders receive for
the 3,700,000 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 3,700,000 shares
offered hereby. If purchased, such additional shares will be sold by the
Underwriters on the same terms as those on which the 3,700,000 shares are being
sold. The Company and the shareholders subject to such over-allotment option
will be obligated, pursuant to the option, to sell shares to the Underwriters to
the extent the option is exercised. The Underwriters may exercise such option
only to cover over-allotments made in connection with the sale of shares of
Common Stock offered hereby.
58
<PAGE>
The Underwriting Agreement contains covenants of indemnity among the
Underwriters, the Company and the Selling Shareholders against certain civil
liabilities, including liabilities under the Securities Act of 1933, as amended,
and liability arising from breaches of representations and warranties contained
in the Underwriting Agreement.
All current shareholders, officers and directors of the Company have agreed
with the Representatives that, until 180 days from the date of this Prospectus,
subject to certain limited exceptions, they will not, directly or indirectly,
offer, sell, contract to sell, grant any option to purchase, pledge, or
otherwise dispose of or transfer, any shares of Common Stock, or any securities
convertible into or exchangeable for, or any rights to purchase or acquire,
shares of Common Stock, now owned or hereafter acquired directly by such holders
or with respect to which they have or hereafter acquire the power of
disposition, without the prior written consent of Robertson, Stephens & Company
LLC. Robertson, Stephens & Company LLC may, in its sole discretion, without
notice, release all or any portion of the securities subject to lock-up
agreements. See "Shares Eligible for Future Sale." All of such shares will be
eligible for immediate public sale following expiration of the lock-up period,
subject to Rule 144. In addition, the Company has agreed, until 180 days from
the date of this Prospectus, the Company will not, without the prior written
consent of Robertson, Stephens & Company LLC, subject to certain exceptions,
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 sale of shares in this offering, the issuance of Common Stock upon the
exercise of outstanding options, or the Company's grant of options and issuance
of stock under existing stock option or stock purchase plans. See "Shares
Eligible for Future Sale."
The Representatives have advised the Company and the Selling Shareholders
that the Underwriters do not intend to confirm sales to accounts over which they
exercise discretionary authority.
Certain persons participating in this offering may overallot or affect
transactions which stabilize, maintain or otherwise affect the market price of
the Common Stock at levels above those which might otherwise prevail in the open
market, including by entering stabilizing bids, affecting syndicate covering
transactions or imposing penalty bids. A stabilizing bid means the placing of
any bid or effecting of any purchase, for the purpose of pegging, fixing or
maintaining the price of the Common Stock. A syndicate covering transaction
means the placing of any bid on behalf of the underwriting syndicate or the
effecting of any purchase to reduce a short position created in connection with
the offering. A penalty bid means an arrangement that permits the Underwriters
to reclaim a selling concession from a syndicate member in connection with the
offering when shares of Common Stock sold by the syndicate member are purchased
in syndicate covering transactions. Such transactions may be effected, where
permitted, on the Nasdaq National Market, in the over-the-counter market, or
otherwise. Such stabilizing, if commenced, may be discontinued at any time.
The Underwriters have reserved for sale, at the initial public offering
price, up to 4.9% of the shares of Common Stock offered hereby for employees of
the Company and certain individuals who have expressed an interest in purchasing
shares of Common Stock in this offering. The number of shares available for sale
to the general public will be reduced to the extent such persons purchase such
reserved shares. Any reserved shares not so purchased will be offered by the
Underwriters to the general public on the same basis as other shares offered
hereby.
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 will be determined through negotiations among the Company, the
Selling Shareholders and the Representatives. The material factors to be
considered in such negotiations are prevailing market conditions, certain
financial information of the Company for recent periods, market valuations of
other companies that the
59
<PAGE>
Company, the Selling Shareholders 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, the Company's management and
other factors deemed relevant. The estimated initial public offering price range
set forth on the cover of this preliminary prospectus is subject to change as a
result of market conditions and other factors. There can be no assurance that an
active or orderly trading market will develop for the Common Stock or that the
Common Stock will trade in the public market subsequent to this offering at or
above the initial trading price. See "Risk Factors -- No Prior Market for the
Common Stock; Possible Volatility of Share Price" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
LEGAL MATTERS
Certain legal matters with respect to the validity of the shares of Common
Stock offered hereby are being passed upon for the Company by Rubin Baum Levin
Constant Friedman & Bilzin, Miami, Florida. Marc J. Stone, the Company's Vice
President of Corporate Planning and Development, General Counsel and Secretary
and a director, is currently of counsel to Rubin Baum and was previously a
partner at that firm. See "Certain Transactions." Certain legal matters in
connection with this offering will be passed upon for the Underwriters by Hale
and Dorr LLP, Boston, Massachusetts.
EXPERTS
The financial statements included in this Prospectus have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 (together with all amendments, schedules and exhibits thereto, the
"Registration Statement") under the Securities Act with respect to the shares of
Common Stock offered hereby. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information with
respect to the Company and the Common Stock offered hereby, reference is made to
the Registration Statement. Statements made in this Prospectus as to the
contents of any contract, agreement or other document are not necessarily
complete; with respect to each such contract, agreement or other document filed
as an exhibit to the Registration Statement, reference is made to the exhibit
for a more complete description of the matter involved, and each such statement
shall be deemed qualified in its entirety by such reference. The Registration
Statement and the exhibits thereto may be inspected, without charge, at the
public reference facilities maintained by the Commission at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional
offices at 500 West Madison Street, Chicago, IL 60661, and 7 World Trade Center,
New York, New York 10048. Copies of such material can also be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Registration Statement and the
exhibits thereto may also be accessed through the EDGAR terminals in the
Commission's public reference facilities in Washington, D.C. or through the
World Wide Web at http://www.sec.gov.
60
<PAGE>
OMEGA RESEARCH, INC.
--------------------
INDEX TO FINANCIAL STATEMENTS
-----------------------------
PAGE
----
Report of Independent Certified Public Accountants F-2
Balance Sheets as of December 31, 1995 and 1996 and
June 30, 1997 (unaudited) F-3
Statements of Income for the years ended December 31, 1994,
1995 and 1996 and the six months ended June 30, 1996 and
1997 (unaudited) F-4
Statements of Shareholders' Equity for the years ended
December 31, 1994, 1995 and 1996 and the six months ended
June 30, 1997 (unaudited) F-5
Statements of Cash Flows for the years ended December 31, 1994,
1995 and 1996 and the six months ended June 30, 1996 and 1997
(unaudited) F-6
Notes to Financial Statements F-8
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
To the Shareholders of
Omega Research, Inc.:
We have audited the accompanying balance sheets of Omega Research, Inc. (a
Florida corporation) as of December 31, 1995 and 1996, and the related
statements of income, shareholders' equity and cash flows for each of the three
years in the 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 Omega Research, Inc. as of
December 31, 1995 and 1996, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1996 in conformity
with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN
- --------------------------------
Arthur Andersen
Miami, Florida,
March 28, 1997 (except with respect to the
matters discussed in Note 7, as to which
the date is July 17, 1997).
F-2
<PAGE>
<TABLE>
<CAPTION>
OMEGA RESEARCH, INC.
--------------------
BALANCE SHEETS
--------------
DECEMBER 31, JUNE 30, 1997
---------------------------- ---------------------------
ASSETS 1995 1996 HISTORICAL PRO FORMA
------ ------------- ----------- ------------ ------------
(Unaudited) (Unaudited)
(Note 8)
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 311,468 $ 141,633 $ 263,595 $ 263,595
Accounts receivable, net 1,964,020 4,357,048 7,899,027 7,899,027
Inventories 34,723 92,188 96,432 96,432
Other current assets 5,132 5,690 18,836 18,836
Deferred income taxes -- -- -- 2,824,000
------------ ------------ ------------ ------------
Total current assets 2,315,343 4,596,559 8,277,890 11,101,890
PROPERTY AND EQUIPMENT, net 908,231 1,085,112 928,528 928,528
OTHER ASSETS 64,511 121,657 50,311 50,311
------------ ------------ ------------ ------------
Total assets $ 3,288,085 $ 5,803,328 $ 9,256,729 $ 12,080,729
============ ============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 203,923 $ 482,662 $ 868,289 $ 868,289
Accrued expenses 113,905 485,189 581,248 581,248
Income taxes payable -- -- -- 1,824,000
Note payable to bank -- -- -- 10,622,000
------------ ------------ ------------ ------------
Total current liabilities 317,828 967,851 1,449,537 13,895,537
------------ ------------ ------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 6)
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value; 25,000,000 shares authorized,
none issued and outstanding -- -- -- --
Common stock, $.01 par value; 100,000,000 shares authorized,
19,480,000 shares issued and outstanding 194,800 194,800 194,800 194,800
Additional paid-in capital -- 2,517 44,336 (2,009,608)
Retained earnings 2,777,707 4,638,160 7,568,056 --
Less- Treasury stock, at cost, 194,800 shares in 1995 (2,250) -- -- --
------------ ------------ ------------ ------------
Total shareholders' equity 2,970,257 4,835,477 7,807,192 (1,814,808)
------------ ------------ ------------ ------------
Total liabilities and shareholders' equity $ 3,288,085 $ 5,803,328 $ 9,256,729 $ 12,080,729
============ ============ ============ ============
</TABLE>
The accompanying notes to financial statements are an integral
part of these balance sheets.
F-3
<PAGE>
<TABLE>
<CAPTION>
OMEGA RESEARCH, INC.
--------------------
STATEMENTS OF INCOME
--------------------
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------------- -------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
REVENUES:
Licensing fees $ 7,853,349 $ 7,912,502 $13,943,234 $ 6,322,124 $12,092,426
Other revenues 706,720 1,501,911 3,876,928 1,786,478 2,526,560
----------- ----------- ----------- ----------- -----------
Total revenues 8,560,069 9,414,413 17,820,162 8,108,602 14,618,986
----------- ----------- ----------- ----------- -----------
OPERATING EXPENSES:
Cost of licensing fees 831,098 875,700 1,716,884 880,829 855,583
Product development 492,076 651,432 1,041,131 376,522 842,917
Sales and marketing 2,711,699 3,560,970 5,617,931 2,603,097 4,945,968
General and administrative 798,037 1,038,088 2,421,638 997,848 2,595,505
----------- ----------- ----------- ----------- -----------
Total operating expenses 4,832,910 6,126,190 10,797,584 4,858,296 9,239,973
----------- ----------- ----------- ----------- -----------
Income from operations 3,727,159 3,288,223 7,022,578 3,250,306 5,379,013
OTHER INCOME, net 18,232 23,724 59,436 8,513 17,664
----------- ----------- ----------- ----------- -----------
Net income 3,745,391 3,311,947 7,082,014 3,258,819 5,396,677
PRO FORMA ADJUSTMENT TO REFLECT
INCOME TAXES (Note 1) 1,479,429 1,308,219 2,797,396 1,287,234 2,131,687
----------- ----------- ----------- ----------- -----------
Pro forma net income $ 2,265,962 $ 2,003,728 $ 4,284,618 $ 1,971,585 $ 3,264,990
=========== =========== =========== =========== ===========
PRO FORMA NET INCOME PER SHARE $ 0.21 $ 0.15
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 20,541,000 21,186,000
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral
part of these statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
OMEGA RESEARCH, INC.
--------------------
STATEMENTS OF SHAREHOLDERS' EQUITY
----------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
----------------------------------------------------
COMMON STOCK ADDITIONAL
------------------------- PAID-IN RETAINED TREASURY
SHARES AMOUNT CAPITAL EARNINGS STOCK TOTAL
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1993 19,480,000 $ 194,800 $ -- $ 1,341,337 $ (2,250) $ 1,533,887
Cash distributions to shareholders -- -- -- (3,467,968) -- (3,467,968)
Net income -- -- -- 3,745,391 -- 3,745,391
----------- ----------- ----------- ----------- ----------- -----------
BALANCE, December 31, 1994 19,480,000 194,800 -- 1,618,760 (2,250) 1,811,310
Cash distributions to shareholders -- -- -- (2,153,000) -- (2,153,000)
Net income -- -- -- 3,311,947 -- 3,311,947
----------- ----------- ----------- ----------- ----------- -----------
BALANCE, December 31, 1995 19,480,000 194,800 -- 2,777,707 (2,250) 2,970,257
Retirement of treasury stock -- -- (2,250) -- 2,250 --
Compensation expense on stock
option grants -- -- 4,767 -- -- 4,767
Cash distributions to shareholders -- -- -- (5,221,561) -- (5,221,561)
Net income -- -- -- 7,082,014 -- 7,082,014
----------- ----------- ----------- ----------- ----------- -----------
BALANCE, December 31, 1996 19,480,000 194,800 2,517 4,638,160 -- 4,835,477
Compensation expense on stock
option grants (unaudited) -- -- 41,819 -- -- 41,819
Cash distributions to shareholders
(unaudited) -- -- -- (1,960,000) -- (1,960,000)
Noncash distributions to shareholders
(unaudited) -- -- -- (506,781) -- (506,781)
Net income (unaudited) -- -- -- 5,396,677 -- 5,396,677
----------- ----------- ----------- ----------- ----------- -----------
BALANCE, June 30, 1997 (unaudited) 19,480,000 $ 194,800 $ 44,336 $ 7,568,056 $ -- $ 7,807,192
=========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral
part of these statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
OMEGA RESEARCH, INC.
--------------------
STATEMENTS OF CASH FLOWS
------------------------
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------------------- --------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,745,391 $ 3,311,947 $ 7,082,014 $ 3,258,819 $ 5,396,677
Adjustments to reconcile net income to net cash
provided by operating activities-
Depreciation and amortization 153,676 205,753 353,852 114,787 351,081
Provision for doubtful accounts 117,000 134,000 830,430 485,726 1,231,684
Compensation expense on stock option grants -- -- 4,767 -- 41,819
(Increase) decrease in:
Accounts receivable (588,602) (1,158,223) (3,223,458) (1,825,229) (4,773,663)
Inventories (10,652) 8,082 (57,465) (42,670) (4,244)
Other current assets 1,954 4,919 (558) (2,360) (13,146)
Other assets -- (2,211) (46,800) -- --
Increase (decrease) in:
Accounts payable 69,083 (86,175) 278,739 462,250 385,627
Accrued expenses 79,604 18,472 371,284 80,740 96,059
----------- ----------- ----------- ----------- -----------
Net cash provided by operating activities 3,567,454 2,436,564 5,592,805 2,532,063 2,711,894
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (167,404) (240,310) (530,733) (141,978) (600,574)
Purchases of investments (100,325) -- -- -- --
Proceeds from maturities of investments -- 200,489 -- -- --
Capitalized software development costs (32,400) (61,000) (10,346) (150,151) (29,358)
----------- ----------- ----------- ----------- -----------
Net cash used in investing activities (300,129) (100,821) (541,079) (292,129) (629,932)
----------- ----------- ----------- ----------- -----------
(Continued)
F-6
<PAGE>
OMEGA RESEARCH, INC.
--------------------
STATEMENTS OF CASH FLOWS
------------------------
(Continued)
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------- --------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on note payable $ (39,093) $ -- $ -- $ -- $ --
Distributions to shareholders (3,467,968) (2,153,000) (5,221,561) (1,856,561) (1,960,000)
----------- ----------- ----------- ----------- -----------
Net cash used in financing activities (3,507,061) (2,153,000) (5,221,561) (1,856,561) (1,960,000)
----------- ----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (239,736) 182,743 (169,835) 383,373 121,962
CASH AND CASH EQUIVALENTS, beginning of period 368,461 128,725 311,468 311,468 141,633
----------- ----------- ----------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 128,725 $ 311,468 $ 141,633 $ 694,841 $ 263,595
=========== =========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for interest $ 1,641 $ 1,657 $ -- $ -- $ --
=========== =========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF NONCASH
TRANSACTIONS - See Note 7
</TABLE>
The accompanying notes to financial statements are an integral
part of these statements.
F-7
<PAGE>
OMEGA RESEARCH, INC.
--------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(1) DESCRIPTION OF BUSINESS AND SIGNIFICANT
ACCOUNTING POLICIES:
---------------------------------------
(A) DESCRIPTION OF BUSINESS-
------------------------
Omega Research, Inc. (the "Company"), a Florida corporation, was incorporated in
1982 to develop, market and sell investment analysis software to investors. The
Company's principal products allow investors to historically test and computer
automate trading strategies.
(B) SIGNIFICANT ACCOUNTING POLICIES-
--------------------------------
The following is a summary of significant accounting policies followed in the
preparation of these financial statements.
CASH AND CASH EQUIVALENTS
-------------------------
The Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents. As of December 31, 1995 and 1996,
cash and cash equivalents consisted primarily of interest-bearing deposits.
ACCOUNTS RECEIVABLE
-------------------
Accounts receivable are principally from individuals, distributors and retailers
of the Company's products. The Company performs periodic credit evaluations of
its customers and maintains allowances for potential credit losses of $134,000,
$830,430 and $2,010,114 (unaudited) at December 31, 1995 and 1996 and June 30,
1997, respectively, and allowances for potential returns of approximately
$252,000 and $1,796,859 and $4,875,000 (unaudited) at December 31, 1995 and 1996
and June 30, 1997, respectively.
The Company provides all customers with a 30-day right of return, and as a
result, records a provision for returns at the time of sale. The Company,
depending on the circumstances, permits customers to return products after the
30-day period in order to maintain as high a level of customer satisfaction as
possible. The reserve for returns and the provision for bad debts, in accordance
with generally accepted accounting principles, are estimated based on historical
experience and other relevant information. There is no certainty that future
returns or bad debts will not exceed established estimates. In addition, the
Company is subject to rapid changes in technology and shifts in consumer demand
which could result in product returns, in the near term, that are materially
different than the Company's reserves provided.
INVENTORIES
-----------
Inventories, which consist primarily of software media, manuals and related
packaging materials, are stated at the lower of cost or market with cost
determined on a first-in, first-out ("FIFO") basis.
F-8
<PAGE>
PROPERTY AND EQUIPMENT
----------------------
Property and equipment are stated at cost less accumulated depreciation.
Property and equipment are depreciated using the accelerated and straight-line
methods over the estimated useful lives of the assets.
Maintenance and repairs are charged to expense when incurred; betterments are
capitalized. Upon the sale or retirement of assets, the cost and accumulated
depreciation are removed from the accounts, and any gain or loss is recognized
currently.
REVENUE RECOGNITION
-------------------
LICENSING FEES
Sales are recognized at the time the product is shipped, in accordance with the
provisions of the AICPA Statement of Position 91-1, "Software Revenue
Recognition." While the Company has no obligation to perform future services
subsequent to shipment, the Company provides telephone customer support as an
accommodation to purchasers of its products as a means of fostering customer
satisfaction. The majority of such services are provided during the first 60
days of ownership of the Company's products. Costs associated with this effort
are generally insignificant in relation to product sales value.
OTHER REVENUES
--------------
The Company has entered into various agreements with entities that market and
sell financial market data feed subscriptions. Except for the agreements
described in Note 6, the Company receives, in general, monthly payments based on
the use by the Company's customers of financial market data feed subscriptions
which are accessed through one of the Company's products. The Company records
these revenues as they are earned in accordance with the terms of the applicable
contracts.
SOFTWARE DEVELOPMENT COSTS
--------------------------
In accordance with Statement of Financial Accounting Standards No. 86,
"Accounting for the Cost of Capitalized Software to be Sold, Leased or Otherwise
Marketed" ("SFAS 86"), the Company examines its software development costs after
technological feasibility has been established to determine the amount of
capitalization that is required. Based on the Company's product development
process, technological feasibility is established upon completion of a working
model. The costs that are capitalized are amortized on the straight-line basis
over a one-year period, the period of benefit, of the related products. For
certain periods, the technological feasibility of the Company's products and the
general release of such software substantially coincide, and, as a result,
software development costs qualifying for capitalization are immaterial.
Software development costs, net of amortization, were $61,000, $71,348 and $0
(unaudited) at December 31, 1995 and 1996 and June 30, 1997, respectively.
In March 1995, Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be disposed
of"("SFAS 121") was issued. SFAS 121 establishes accounting standards for
recording the impairment of long-lived assets, certain identifiable intangibles
and goodwill. The Company, as required, adopted the provisions of SFAS 121 for
the year ended December 31, 1996 which did not have an impact on its results of
operations and financial position.
F-9
<PAGE>
USE OF ESTIMATES
----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
STOCK-BASED COMPENSATION
------------------------
Beginning in 1996, the Company implemented the provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123") in accounting for stock-based transactions with
nonemployees and, accordingly, records compensation expense in the statements of
income when these type of options are issued. The Company continues to apply the
provisions of APB 25 for transactions with employees, as permitted by SFAS 123.
INTERIM FINANCIAL DATA
----------------------
In the opinion of the management of the Company, the accompanying unaudited
financial statements contain all adjustments (consisting of only normal and
recurring adjustments) necessary to present fairly the financial position of the
Company as of June 30, 1997, and the results of operations for the six months
ended June 30, 1996 and 1997. The results of operations and cash flows for the
six months ended June 30, 1997 are not necessarily indicative of the results of
operations or cash flows which may be reported for the remainder of 1997, or for
any subsequent period.
FAIR VALUE OF FINANCIAL INSTRUMENTS
-----------------------------------
The carrying amounts of cash and cash equivalents, accounts receivable, accounts
payable and accrued expenses approximate fair value as of December 31, 1995 and
1996.
INCOME TAX STATUS
-----------------
For income tax reporting purposes, the Company is an S Corporation. Accordingly,
net income and related timing differences which arise in the recording of income
and expense items for financial reporting and tax reporting purposes are
included in the individual tax returns of the shareholders.
The pro forma adjustment to reflect income taxes included in the accompanying
statements of income is for informational purposes only. Income taxes have been
provided at the estimated effective rate of 39.5%.
PRO FORMA NET INCOME PER SHARE
------------------------------
Pro forma net income per common share and common share equivalents have been
computed by dividing net income by the weighted average number of common shares
and common share equivalents outstanding as well as the impact of the following:
F-10
<PAGE>
Pursuant to Securities and Exchange Commission Staff Accounting Bulletin No. 83,
common share and common share equivalents issued at prices below the assumed
public offering price during the 12-month period prior to the proposed public
offering having been included in the calculation as if they were outstanding for
all periods presented (using the treasury stock method and an assumed initial
public offering price of $11.00 per share).
Pursuant to Securities and Exchange Commission Staff Accounting Bulletin No. 55,
common shares outstanding also include the estimated portion of the shares in
the proposed initial public offering (321,000 and 966,000 shares for the year
ended December 31, 1996 and for the six months ended June 30, 1997,
respectively, at an assumed initial offering price of $11 per share) whose
proceeds would fund undistributed S Corporation earnings at December 31, 1996
and June 30, 1997 of $3,526,000 and $10,622,000, respectively. See Note 7.
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
1996 1997
------------ --------------
Weighted average shares outstanding 19,480,000 19,480,000
Impact of stock options with exercise
prices below the initial offering price 740,000 740,000
Impact of shares required to settle
undistributed S Corporation earnings 321,000 966,000
---------- ----------
20,541,000 21,186,000
========== ==========
NEW ACCOUNTING PRONOUNCEMENT
----------------------------
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128")
which changes the method of calculating earnings per share. SFAS 128 requires
the presentation of "basic" earnings per share and "diluted" earnings per share
on the face of the income statement. Basic earnings per share is computed by
dividing the net income available to common shareholders by the weighted average
shares of outstanding common stock. The calculation of diluted earnings per
share is similar to basic earnings per share except that the denominator
includes dilutive common stock equivalents such as stock options and warrants.
The statement is effective for financial statements for periods ending after
December 15, 1997. The Company will adopt SFAS 128 in the fourth quarter of
1997, as early adoption is not permitted. The following table presents pro forma
earnings per share amounts calculated in accordance with SFAS 128:
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
1996 1997
------------ --------------
Pro forma earnings per share:
Basic earnings per share $ 0.22 $ 0.17
Diluted earnings per share $ 0.21 $ 0.15
F-11
<PAGE>
<TABLE>
<CAPTION>
(2) PROPERTY AND EQUIPMENT:
-----------------------
Property and equipment consists of the following:
DECEMBER 31,
USEFUL LIFE ----------------------------- JUNE 30,
IN YEARS 1995 1996 1997
----------- ----------- ------------ -----------
(Unaudited)
<S> <C> <C> <C> <C>
Land -- $ 47,034 $ 47,034 $ --
Building and improvements 35 556,778 559,119 --
Computers and software 3 432,594 913,052 1,270,921
Furniture and equipment 3-5 262,135 284,625 430,665
Leasehold improvements 5 -- -- 96,666
Autos 5 110,205 110,205 110,205
----------- ----------- -----------
1,408,746 1,914,035 1,908,457
Less - Accumulated depreciation
and amortization (500,515) (828,923) (979,929)
----------- ----------- -----------
$ 908,231 $ 1,085,112 $ 928,528
=========== =========== ===========
</TABLE>
(3) ACCRUED EXPENSES:
-----------------
Accrued expenses consist of the following:
<TABLE>
DECEMBER 31,
------------------------------- JUNE 30,
1995 1996 1997
------------ ------------ ------------
(Unaudited)
<S> <C> <C> <C>
Payroll and related accruals $ 68,761 $ 262,268 $ 377,395
Accrued technical support costs - 120,000 150,000
Other 45,144 102,921 53,853
------------ ------------ ------------
$ 113,905 $ 485,189 $ 581,248
============ ============ ============
</TABLE>
(4) STOCK OPTIONS:
--------------
The Company has reserved 3,000,000 shares of its common stock for issuance under
its 1996 Incentive Stock Plan (the "Plan"). Under the Plan, incentive and
nonqualified stock options, stock appreciation rights, stock awards, performance
shares and performance units are available to employees or consultants of the
Company. Currently, only options have been granted. The terms of each option
agreement are determined by the Board of Directors until a Compensation
Committee is established. The exercise price
F-12
<PAGE>
of incentive stock options may not be less than fair market value at the date of
grant and their terms may not exceed ten years. All options issued under the
Plan in 1996 had a five-year vesting period. A summary of stock option activity
is as follows:
NO. OF EXERCISE
SHARES PRICE
----------- --------------
Options outstanding at December 31, 1995 -
Granted 582,000 $ 1.25
----------
Outstanding, December 31, 1996 582,000 1.25
Granted (unaudited) 304,750 1.25 - 7.00
Cancelled (unaudited) (500) 2.00
----------
Outstanding, June 30, 1997 (unaudited) 886,250 $ 1.25 - 7.00
==========
All options issued during 1996 were issued to key employees at an exercise price
that was subsequently determined to be approximately $286,000 below fair market
value at the date of grant as determined by an independent appraisal. Several of
the options issued during 1997 were determined to be, in the aggregate, $629,000
(unaudited) below fair value as determined by an independent appraisal. These
differences will be amortized over the five-year vesting period of the related
stock options. For the year ended December 31, 1996 and the six months ended
June 30, 1997, the Company recorded compensation expense of $4,767 and $41,819
(unaudited), respectively. At December 31, 1996 and June 30, 1997, there were no
exercisable options.
The Company, as permitted by SFAS 123, applies APB opinion 25 for options
granted to employees. Accordingly, no compensation is recognized for such grants
to the extent their exercise price is equal to the fair market value of the
underlying stock at the date of grant. Had compensation cost for the Company's
stock options been based on fair value at the grant dates consistent with the
methodologies of SFAS 123, the Company's net income for the year ended December
31, 1996 and the six months ended June 30, 1997 would have been reduced by
$8,324 and $143,088 (unaudited), respectively. These amounts had no impact on
pro forma net income per share.
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes model with the following assumptions: expected volatility of 70%,
risk-free interest rate of 7.0%, expected dividends of $0 and expected terms of
7 years.
(5) EMPLOYEE BENEFIT PLANS:
-----------------------
The Company provides retirement benefits through a defined contribution 401(k)
plan (the "Plan") which was established during 1994. Company distributions under
the Plan amounted to $22,842, $16,350, $62,483 and $0 (unaudited) in 1994, 1995,
1996 and the six months ended June 30, 1997, respectively. The Company also
provides benefits through a Profit Sharing Bonus Program for eligible employees,
as defined, which was terminated effective June 30, 1997.
Distributions under the Profit Sharing Bonus Program are based on increases in
net sales levels and are made at the sole discretion of the Company. Company
distributions under this Profit Sharing Bonus Program amounted to $81,279,
$19,903, $422,878 and $277,000 (unaudited) in 1994, 1995, 1996 and the six
months ended June 30, 1997, respectively.
F-13
<PAGE>
(6) COMMITMENTS AND CONTINGENCIES:
------------------------------
OPERATING LEASES
----------------
During 1996, the Company entered into a noncancellable operating lease for new
office facilities. The term of the lease is five and one-half years and
commenced in February 1997. Future minimum lease payments as of December 31,
1996 under all operating leases are as follows:
1997 $ 262,140
1998 280,957
1999 265,638
2000 271,942
2001 280,586
Thereafter 178,293
------------
$ 1,539,556
============
Total rent expense for 1996 and the six months ended June 30, 1997 was $47,264
and $118,999 (unaudited), respectively.
ROYALTY AGREEMENT
-----------------
On August 26, 1994, and as amended on March 7, 1997, the Company entered into a
Software License, Maintenance and Development Agreement (the "Agreement") with
Dow Jones Markets, Inc. ("Dow Jones Markets"). Under the Agreement, the Company
modified one of its software products to create a Dow Jones Markets version.
Also, the Company granted Dow Jones Markets a license to promote, market,
sublicense and distribute the Dow Jones Markets version for six years. The
Company received no royalties under the Agreement in 1994 and 1995. During 1996
and the six months ended June 30, 1997, the Company earned approximately
$1,452,000 and $1,240,000 (unaudited), respectively, in royalties (based upon
minimum royalty requirements) under the terms of this Agreement. In March 1997,
the Company entered into a similar agreement (but without minimum royalty
requirements) with Dow Jones Markets concerning one of its other software
products. Marketing of such other products under that agreement has not yet
begun.
LITIGATION
----------
From time to time, the Company may become engaged in ordinary routine litigation
incidental to its business. The Company does not believe that such ordinary
routine litigation would have a material adverse effect on its financial
position or results of operations.
(7) SUBSEQUENT EVENTS:
------------------
SHARE SPLIT
-----------
Effective January 29, 1997, the Company authorized an increase in the amount of
its authorized common stock to 100,000,000 and changed the par value of each
share to $.01. In addition, on January 30, 1997, the Company declared a
97,400-for-1 split of its outstanding common stock. The split has been
retroactively reflected in the financial statements for all periods presented.
F-14
<PAGE>
INITIAL PUBLIC OFFERING
-----------------------
The Company is in the process of preparing an initial public offering (the
"Offering") of up to 4,255,000 shares of common stock of the Company. It is
currently contemplated that of the shares of common stock to be offered to the
public, 2,990,000 shares of common stock will be offered by the Company and up
to 1,265,000 shares of common stock will be offered by the Selling Shareholders.
On July 16, 1997, the Company authorized 25,000,000 shares of preferred stock
with a par value of $.01 per share. No specific preferences or rights have been
established to date with respect to any of these shares nor have any of these
shares been issued.
Additionally, just prior to consummation of the Offering the Company intends to
revoke its S Corporation status. As a result, deferred income taxes and related
tax liabilities will be recorded and will result in a benefit of approximately
$1.0 million to the provision for income taxes.
DISTRIBUTION
------------
Effective June 30, 1997, the Company declared a dividend distributing land and a
building to its shareholders. The carrying values of such assets was $506,781.
UNAUDITED PRO FORMA BALANCE SHEET
---------------------------------
The accompanying unaudited pro forma balance sheet at June 30, 1997, assumes the
effects, on a pro forma basis, of the following transactions: (a) the
distribution of undistributed S Corporation earnings through June 30, 1997 to
the current shareholders totaling $10,622,000 and financed through the issuance
of a note payable to a bank; (b) the recording of estimated deferred taxes and
related tax liabilities recognized in accordance with Financial Accounting
Standards Board Statement No. 109, which the Company will adopt upon termination
of S Corporation status, and (c) the reclassification of remaining undistributed
amounts to additional paid-in capital.
F-15
<PAGE>
[Graphic depiction of the Omega Research Platform and
strategic alliances with third-party vendors and solution providers.]
<PAGE>
[OMEGA RESEARCH LOGO]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following are the estimated expenses of the issuance and distribution
of the securities being registered, all of which will be paid by the Company.
SEC registration fee................................................. $17,607
NASD filing fee...................................................... 5,606
Nasdaq National Market listing fee................................... 50,000
Fees and expenses of counsel......................................... 225,000
Fees and expenses of accountants..................................... 125,000
Printing expenses.................................................... 125,000
Transfer agent and registrar fees.................................... 3,500
Blue sky fees and expenses........................................... 10,000
Miscellaneous........................................................ 88,287
--------
Total...................................................... $650,000
========
The Company intends to pay all expenses of registration, issuance and
distribution, excluding underwriters' discounts and commissions, with respect to
the shares being sold by the Selling Shareholders.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 607.0850 of the Florida Business Corporation Act (the "Statute")
sets forth conditions and limitations governing the indemnification of officers,
directors, and other persons.
Article TWELFTH of the Articles and Article IX of the Bylaws of the
Company, copies of which are filed as Exhibits 3.1 and 3.2, contain certain
indemnification provisions adopted pursuant to authority contained in the
Statute. The Articles contain a provision eliminating the personal liability of
its directors for monetary damages resulting from breaches of their fiduciary
duty to the extent permitted by the Statute. Under the Bylaws, the Company will
indemnify any person who is or was a director or officer of the Company, and may
indemnify a person who is or was an employee or agent of the Company or who is
or was serving at the request of the Company as a director, officer, employee,
or agent of another corporation, partnership, joint venture, trust, or other
enterprise against: (a) liability incurred in connection with any proceeding
(other than an action by or in the right of the Company) to which such person
was or is a party by reason of acting in any such capacity; and (b) expenses and
amounts paid in settlement (not exceeding, in the judgment of the Company's
Board of Directors, the estimated expense of litigating the proceeding to
conclusion) actually and reasonably incurred in connection with the defense or
settlement of any proceeding by or in the right of the Company to procure a
judgment in its favor to which such person was or is a party by reason of acting
in any such capacity, provided that: (i) such person acted in good faith and in
a manner he reasonably believed to be in, or not opposed to, the best interests
of the Company and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful; and (ii) no
indemnification shall be made in respect of any claim, issue, or matter in any
proceeding by or in the right of the Company as to which such person shall have
been adjudged to be liable unless, and only to the extent that, the court in
which such proceeding was brought, or any other court of competent jurisdiction,
shall determine upon application that, despite
II-1
<PAGE>
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses as
the court shall deem proper. For purposes of Article IX of the Bylaws: (A) the
term "expenses" includes counsel fees, including those for appeal; (B) the term
"liability" includes obligations to pay a judgment, settlement, penalty, fine
(including an excise tax assessed with respect to any employee benefit plan),
and expenses actually and reasonably incurred with respect to a proceeding; and
(C) the term "proceeding" includes any threatened, pending, or completed action,
suit, or other type of proceeding, whether civil, criminal, administrative, or
investigative, and whether formal or informal.
Under the Bylaws, to the extent a director or officer of the Company, or an
employee or agent of the Company which the Company has elected to indemnify, has
been successful on the merits or otherwise in defense of any proceeding
described above, or in the defense of any claim, issue, or matter therein, such
person shall be indemnified against expenses actually and reasonably incurred by
him in connection therewith. For all other indemnification which may be provided
under the Bylaws in connection with any proceeding, unless made pursuant to a
determination by a court, indemnification shall be made only as authorized in
the specific case upon a determination that indemnification is proper in the
circumstances because the director, officer, employee or agent has met the
applicable standard of conduct set forth in the Bylaws, which determination
shall be made: (a) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to such proceeding; (b) if such
quorum is not obtainable, or even if obtainable, by majority vote of a committee
duly designated by the Board of Directors consisting solely of two or more
directors not at the time parties to the proceeding; (c) by independent legal
counsel selected by the Board of Directors or a committee thereof as prescribed
by the Statute; or (d) by the shareholders by majority vote of a quorum
consisting of shareholders who were not parties to such proceeding or if such a
quorum is not obtainable, by a majority vote of shareholders who were not
parties to such proceeding. Evaluation as to reasonableness of expenses and
authorization of indemnification must be made in the same manner as the
determination that indemnification is permissible, except that if the
determination of permissibility is made by independent legal counsel, then the
Board of Directors or the committee thereof which appointed such legal counsel
must evaluate the reasonableness of expenses. The Bylaws also permit the Company
to pay expenses incurred by its officers, directors, employees, and agents in
advance of the final disposition of a proceeding, provided that the Company may
advance expenses to an officer or director only after receiving an undertaking
by or on behalf of such officer or director to repay such amount if he is
ultimately found not to be entitled to indemnification pursuant to the Bylaws.
The Company will enter into agreements to indemnify its directors and
executive officers, in addition to the indemnification provided for in the
Company's Articles and Bylaws. These agreements, among other things, will
indemnify the Company's directors and officers for all direct and indirect
expenses and costs (including, without limitation, all reasonable attorneys'
fees and related disbursements, other out-of-pocket costs and reasonable
compensation for time spent by such persons for which they are not otherwise
compensated by the Company or any third person) and liabilities of any type
whatsoever (including, but not limited to, judgments, fines and amounts paid in
settlement) actually and reasonably incurred by such person in connection with
the investigation, defense, settlement or appeal of any threatened, pending or
completed action, suit or other proceeding, including any action by or in the
right of the corporation, arising out of such person's services as a director,
officer, employee or other agent of the Company, any subsidiary of the Company
or any other company or enterprise to which the person provides services at the
request of the Company. The Company believes that these provisions and
agreements are necessary to attract and retain talented and experienced
directors and officers.
The Company intends to obtain liability insurance for the benefit of its
directors and officers.
II-2
<PAGE>
Under the terms of the Underwriting Agreement, the Underwriters have agreed
to indemnify, under certain conditions, the Company, its directors, certain of
its officers and persons who control the Company within the meaning of the
Securities Act against certain liabilities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The Company has not issued or sold any unregistered securities within the
past three years except for the granting of stock options pursuant to the
Incentive Stock Plan as described in "Management -- Other Compensation
Arrangements." All of the stock options were granted by the Company in reliance
upon the exemption from registration available under Section 4(2) of the
Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS:
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
1.1 -- Form of Underwriting Agreement.*
3.1 -- Second Amended and Restated Articles of Incorporation of Omega
Research, Inc.+
3.2 -- Second Amended and Restated Bylaws of Omega Research, Inc.+
5.1 -- Opinion of Rubin Baum Levin Constant Friedman & Bilzin regarding
legality of Common Stock.+
10.1 -- Omega Research, Inc. 1996 Incentive Stock Plan.+
10.2 -- Omega Research, Inc. 1997 Nonemployee Director Stock Option Plan.+
10.3 -- Software License, Maintenance and Development Agreement between Dow
Jones Markets, Inc. and the Company, as amended (TRADESTATION
Agreement).+**
10.4 -- Software License, Maintenance and Development Agreement between Dow
Jones Markets, Inc. and the Company (SUPERCHARTS Agreement).+**
10.5 -- Standard Office Building Lease between 8700 Flagler, Ltd. and the
Company, as amended by Memorandum of Commencement Date.+
10.6 -- S Corporation Tax Allocation and Indemnification Agreement.*
10.7 -- Form of Indemnification Agreement.+
10.8 -- Omega Research, Inc. 1997 Employee Stock Purchase Plan.*
10.9 -- Form of non-competition agreement.+
23.1 -- Consent of Arthur Andersen LLP.+
23.2 -- Consent of Rubin Baum Levin Constant Friedman & Bilzin (included in
Exhibit 5.1).
24.1 -- Power of Attorney (included with the signature page to the
Registration Statement).
27.1 -- Financial Data Schedule.+
- -------------------
+ Filed herewith.
* To be filed by amendment.
** Confidential treatment requested for portions of this exhibit.
II-3
<PAGE>
(b) FINANCIAL STATEMENT SCHEDULES:
Report of Independent Accountants -- Arthur Andersen LLP............S-1
Schedule II -- Valuation and Qualifying Accounts....................S-2
All other financial statement schedules have been omitted because they are
not applicable or because the information that would be included in such
schedules is included elsewhere in the Registration Statement.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes to provide to the
representatives of the Underwriters at the closings specified in the
Underwriting Agreement certificates in such denominations and registered in such
names as required by such representatives to permit prompt delivery to each
purchaser.
(b) 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 foregoing provisions, 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 hereunder, 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.
(c) The undersigned Registrant hereby undertakes that for purposes of
determining any liability under the Securities Act, (i) the information omitted
from the form of prospectus filed as part of this Registration Statement in
reliance upon Rule 430A and contained in a form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this Registration Statement as of the time it was
declared effective and (ii) 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 this offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Miami, Florida on the 25th day of
July, 1997.
OMEGA RESEARCH, INC.
By: /s/ WILLIAM R. CRUZ
-------------------
William R. Cruz
Co-Chairman of the Board of Directors and
Co-Chief Executive Officer
By: /s/ RALPH L. CRUZ
-----------------
Ralph L. Cruz
Co-Chairman of the Board of Directors and
Co-Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned officers and directors of Omega Research, Inc., do
hereby constitute and appoint William R. Cruz and Ralph L. Cruz, and each of
them, our true and lawful attorneys-in-fact and agents, each with full power of
substitution and resubstitution, for each of us and in our 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 file the same,
with all exhibits thereto, and other 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 connection therewith
and about the premises, as fully to all intents and purposes as each of us might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ WILLIAM R. CRUZ Co-Chairman of the Board and Co-Chief July 25, 1997
- --------------------------------- Executive Officer (Co-Principal Executive
William R. Cruz Officer)
/s/ RALPH L. CRUZ Co-Chairman of the Board and Co-Chief July 25, 1997
- --------------------------------- Executive Officer (Co-Principal Executive
Ralph L. Cruz Officer)
/s/ SALOMON SREDNI Vice President of Operations, Chief Financial July 25, 1997
- --------------------------------- Officer and Director (Principal Financial and
Salomon Sredni Accounting Officer)
/s/ PETER A. PARANDJUK Director July 25, 1997
- ---------------------------------
Peter A. Parandjuk
/s/ MARC J. STONE Director July 25, 1997
- ---------------------------------
Marc J. Stone
</TABLE>
II-5
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON SCHEDULE
--------------------------------------------------------------
To Shareholders of
Omega Research, Inc.
We have audited in accordance with generally accepted auditing standards, the
financial statements as of December 31, 1995 and 1996 and for the years ended
December 31, 1994, 1995, and 1996 included in this registration statement, and
have issued our report thereon dated March 28, 1997 (except with respect to
the matters discussed in Note 7, as to which the date is July 17, 1997). Our
audits were made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The accompanying Schedule II is the responsibility
of the Company's management and is presented for the purposes of complying with
the Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statments and, in our
opinion, fairly states, in all material respects, applied in the audits of the
basic financial statements and, in our opinion, fairly states, in all material
respects, the financial data required to be set forth therein in relation to
the basic financial statements taken as a whole.
/s/ Arthur Andersen LLP
- -----------------------
ARTHUR ANDERSEN LLP
Miami, Florida
March 28, 1997 (except with respect to
the matters discussed in Note 7, as to
which the date is July 17, 1997).
S-1
<PAGE>
<TABLE>
<CAPTION>
OMEGA RESEARCH, INC.
--------------------
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
-----------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1996, 1995 AND 1994
---------------------------------------------------
(IN THOUSANDS)
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END
OF PERIOD EXPENSES DEDUCTIONS OF PERIOD
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts and returns:
Fiscal year ended December 31, 1996 $ 386 $ 6,170 $ 3,929 $ 2,627
========== ========== ========== ==========
Fiscal year ended December 31, 1995 $ 271 $ 1,549 $ 1,434 $ 386
========== ========== ========== ==========
Fiscal year ended December 31, 1994 $ 360 $ 1,192 $ 1,281 $ 271
========== ========== ========== ==========
</TABLE>
S-2
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION PAGE
- -------- ----------- ----
1.1 --Form of Underwriting Agreement.*
3.1 --Second Amended and Restated Articles of Incorporation of
Omega Research.+
3.2 --Second Amended and Restated Bylaws of Omega Research, Inc.+
5.1 --Opinion of Rubin Baum Levin Constant Friedman & Bilzin
regarding legality of Common Stock.+
10.1 --Omega Research, Inc. 1996 Incentive Stock Plan.+
10.2 --Omega Research, Inc. 1997 Nonemployee Director Stock
Option Plan.+
10.3 --Software License, Maintenance and Development Agreement
between Dow Jones Markets, Inc. and the Company, as
amended (TRADESTATION Agreement).+**
10.4 --Software License, Maintenance and Development Agreement
between Dow Jones Markets, Inc. and the Company
(SUPERCHARTS Agreement).+**
10.5 --Standard Office Building Lease between 8700 Flagler, Ltd. and
the Company, as amended by Memorandum of Commencement
Date.+
10.6 --S Corporation Tax Allocation and Indemnification Agreement.*
10.7 --Form of Indemnification Agreement.+
10.8 --Omega Research, Inc. 1997 Employee Stock Purchase Plan.*
10.9 --Form of non-competition agreement.+
23.1 --Consent of Arthur Andersen LLP.+
23.2 --Consent of Rubin Baum Levin Constant Friedman & Bilzin
(included in Exhibit 5.1).
24.1 --Power of Attorney (included with the signature page to the
Registration Statement).
27.1 --Financial Data Schedule.+
- -----------
+ Filed herewith.
* To be filed by amendment.
** Confidential treatment reguested for portions of this exhibit.
EXHIBIT 3.1
Fax Audit No. H97-_______
SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
OMEGA RESEARCH, INC.
The undersigned, WILLIAM CRUZ, being the President of Omega Research, Inc.,
a Florida corporation (the "Corporation"), hereby states as follows on behalf of
the Corporation:
1. The Articles of Incorporation of the Corporation were filed with the
Florida Secretary of State on September 24, 1982, under Document Number F99932.
Amended and Restated Articles of Incorporation were filed with the Florida
Secretary of State on January 29, 1997.
2. Pursuant to the requirements of Sections 607.1006 and 607.1007 of the
Florida Business Corporation Act, the undersigned hereby certifies, attests and
serves notice that the Articles of Incorporation of the Corporation are hereby
amended and restated to read in their entirety as follows:
FIRST: The name of the Corporation is Omega Research, Inc.
SECOND: The address of the principal office and the mailing office of the
Corporation is 8700 West Flagler Street, Miami, Florida 33174.
THIRD: The purpose for which the Corporation is organized is to carry on
and transact and to engage in any and all lawful acts, activities and/or
businesses for which corporations may be organized under the Florida Business
Corporation Act, including any amendments thereto.
FOURTH: The street address of the registered office of the Corporation is:
8700 West Flagler Street
Miami, Florida 33174;
and the name and address of the registered agent of the Corporation is:
NAME ADDRESS
Marc J. Stone 8700 West Flagler Street
Miami, Florida 33174.
This instrument prepared by:
Sheida R. Sahandy, Esquire
Florida Bar No. 0059927
RUBIN BAUM LEVIN CONSTANT FRIEDMAN & BILZIN
2500 First Union Financial Center
P.O. Box 019109
Miami, Florida 33101-9109
Telephone: 305-374-7580
Fax Audit No. H97-_______
<PAGE>
Fax Audit No. H97-_______
FIFTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 125,000,000, consisting of (i)
100,000,000 shares of common stock, par value $0.01 per share (the "Common
Shares"), and (ii) 25,000,000 shares of preferred stock, par value $0.01 per
share (the "Preferred Shares").
SECTION A
COMMON SHARES
1. VOTING RIGHTS. Except as otherwise provided by law, each Common Share
shall entitle the holder thereof to one (1) vote in any matter submitted to a
vote of shareholders of the Corporation.
2. DIVIDENDS AND DISTRIBUTIONS. Subject to the express terms of the
Preferred Shares outstanding from time to time, the holders of Common Shares
shall be entitled to receive such dividends and distributions as may from time
to time be declared by the Board of Directors, including, upon liquidation,
dissolution or winding up of the affairs of the Corporation, the net assets of
the Corporation after payment or provision for payment of the debts and other
liabilities of the Corporation.
SECTION B
PREFERRED SHARES
Subject to the terms contained in any designation of a series of Preferred
Shares, the Board of Directors is expressly authorized, at any time and from
time to time, to issue Preferred Shares in one or more classes and/or series,
and for such consideration as the Board of Directors may determine and to fix,
by resolution or resolutions, the following provisions for shares of any class
or classes of Preferred Shares of the Corporation or any series of any class of
Preferred Shares:
1. the designation of such class or series, the number of shares to
constitute such class or series which may be increased or decreased (but not
below the number of shares of that class or series then outstanding) by
resolution of the Board of Directors, and the stated value thereof if different
from the par value thereof;
2. whether the shares of such class or series shall have voting rights, in
addition to any voting rights provided by law, and, if so, the terms of such
voting rights;
3. the dividends, if any, payable on such class or series, whether any such
dividends shall be cumulative and if interest thereon shall be payable, and, if
so, from what dates, the conditions and dates upon which such dividends shall be
payable, and the preference or relation such dividends shall bear to the
dividends payable on any shares of stock of any class or other series of the
same class;
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4. whether the shares of such class or series shall be subject to
redemption by the Corporation, and, if so, prices and other conditions of such
redemption;
5. the amount or amounts payable upon shares of such series upon, and the
rights of the holders of such class or series in, the voluntary or involuntary
liquidation, dissolution or winding up, or upon any distribution of the assets,
of the Corporation;
6. whether the shares of such class or series shall be subject to the
operation of a retirement or sinking fund and, if so, the extent to and manner
in which any such retirement or sinking fund shall be applied to the purchase or
redemption of the shares of such class or series for retirement or other
corporate purposes and the terms and provisions relative to the operation
thereof;
7. whether the shares of such class or series shall be convertible into, or
exchangeable for, shares of stock of any class or any other series of the same
class or any other securities and, if so, the price or prices or the rate or
rates of conversion or exchange and the method, if any, of adjusting the same,
and any other terms and conditions of conversion or exchange;
8. the limitations and restrictions, if any, to be effective while any
shares of such class or series are outstanding upon the payment of dividends or
the making of other distributions on, and upon purchase, redemption or other
acquisition by the Corporation of, the Common Shares or shares or stock of any
class or any other series of the same class;
9. the conditions or restrictions, if any, upon the creation of
indebtedness of the Corporation or upon the issue of any additional stock,
including additional shares of such class or series or of any other series of
the same class or of any other class;
10. the ranking (be it PARI PASSU, junior or senior) of each class or
series vis-a-vis any other class or series of any class of Preferred Shares as
to the payment of dividends, the distribution of assets and all other matters;
and
11. any other powers, preferences and relative, participating, optional and
other special rights, and any qualifications, limitations and restrictions
thereof, insofar as they are not inconsistent with the provisions of this Second
Amended and Restated Articles of Incorporation, to the full extent permitted in
accordance with the laws of the State of Florida.
The powers, preferences and relative, participating, optional and other
special rights of each class or series of Preferred Shares, and the
qualifications, limitations or restrictions thereof, if any, may differ from
those of any and all other series at any time outstanding.
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SIXTH: Advance notice of shareholder nominations for the election of
directors and of new business to be brought by shareholders before any meeting
of the shareholders of the Corporation shall be given in a manner provided by
the Bylaws of the Corporation.
SEVENTH: Special meetings of the shareholders, for any purpose or purposes
(except to the extent otherwise required by law or these Second Amended and
Restated Articles of Incorporation), may only be called by the Board of
Directors of the Corporation or by the holders of not less than fifty percent
(50%) of all votes entitled to be cast on any issue to be considered at the
proposed special meeting in the manner provided in the Bylaws of the
Corporation.
EIGHTH: No action required to be taken by the shareholders may be taken
without a meeting and without a vote if, and on or after the date that, a
registration statement on Form S-1 of the Corporation filed with the Securities
and Exchange Commission ("SEC") in connection with the Corporation's initial
public offering of Common Shares is declared effective by the SEC.
NINTH: Notwithstanding any provisions of these Second Amended and Restated
Articles of Incorporation to the contrary and any provisions of the Bylaws of
the Corporation, no amendment to these Second Amended and Restated Articles of
Incorporation shall amend, modify or repeal any or all of the provisions of this
Article NINTH, Article SIXTH, Article SEVENTH or Article EIGHTH of these Second
Amended and Restated Articles of Incorporation, unless so adopted by the
affirmative vote or consent of the holders of not less than two-thirds (66 2/3%)
of the total voting power of all then outstanding shares entitled to vote in the
election of directors of the Corporation, voting as a single class, provided,
however, that, in the event that the Board of Directors of the Corporation
shall, by resolution adopted by a majority of the directors then in office,
recommend to the shareholders the adoption of any such amendment, the
shareholders of record holding a majority of the total voting power of all then
outstanding shares entitled to vote in the election of directors of the
Corporation, voting as a single class, may amend, modify or repeal any or all of
such provisions.
TENTH: In furtherance and not in limitation of the powers conferred by the
laws of Florida, each of the Board of Directors and shareholders is expressly
authorized and empowered to make, alter, amend and repeal the Bylaws of the
Corporation in any respect not inconsistent with the laws of the State of
Florida or with these Second Amended and Restated Articles of Incorporation. The
shareholders of the Corporation may amend or adopt a bylaw that fixes a greater
quorum or voting requirement for shareholders (or voting groups of shareholders)
than is required by law.
ELEVENTH: The books of the Corporation may be kept at such place within or
without the State of Florida as the Bylaws of the Corporation may provide or as
may be designated from time to time by the Board of Directors of the
Corporation.
TWELFTH: A director of the Corporation shall not be personally liable to
the Corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability
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(i) for any breach of the director's duty of loyalty to the Corporation or its
shareholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section
607.0834 of the Florida Business Corporation Act, as the same exists or
hereafter may be amended, (iv) for violation of a criminal law, unless the
director had reasonable cause to believe his conduct was lawful or had no
reasonable cause to believe his conduct was unlawful, or (v) for any transaction
from which the director derived an improper personal benefit.
If the Florida Business Corporation Act hereafter is amended to authorize
the further elimination or limitation of the liability of directors, then the
liability of the Corporation's directors shall be eliminated or limited to the
full extent authorized by the Florida Business Corporation Act, as so amended.
The Corporation shall indemnify any officer or director, or any former
officer or director, of the Corporation to the fullest extent permitted by law.
Any repeal or modification of this Article shall not adversely affect any
right or protection of a director of the Corporation existing at the time of
such repeal or modification.
THIRTEENTH: The Corporation reserves the right to amend or repeal any
provision contained in these Second and Restated Articles of Incorporation, or
any amendment thereto, and any right conferred upon the shareholders is subject
to this reservation.
This Second Amended and Restated Articles of Incorporation have been duly
and unanimously authorized and directed by a Joint Written Consent of the
Shareholders and the Board of Directors of the Corporation dated as of July 16,
1997. Such Second Amended and Restated Articles of Incorporation supersede the
original Articles of Incorporation of the Corporation and all amendments and/or
restatements thereof.
IN WITNESS WHEREOF, these Second Amended and Restated Articles of
Incorporation have been executed by the undersigned in his capacity as
aforestated as of the 16th day of July, 1997 on behalf of the Corporation.
/S/ WILLIAM CRUZ
-------------------------
William Cruz, President
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5
EXHIBIT 3.2
SECOND AMENDED AND RESTATED BYLAWS
OF
OMEGA RESEARCH, INC.
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
NUMBER
------
ARTICLE I MEETINGS OF SHAREHOLDERS........................... 1
Section 1. Annual Meeting..................................... 1
Section 2. Special Meetings................................... 1
Section 3. Place.............................................. 1
Section 4. Notice............................................. 1
Section 5. Manner of Notice................................... 2
Section 6. Notice of Adjourned Meetings....................... 2
Section 7. Fixing of Record Date.............................. 2
Section 8. Shareholders' List For Meeting..................... 3
Section 9. Shareholder Quorum and Voting...................... 3
Section 10. Voting Entitlement of Shares....................... 3
Section 11. Proxies............................................ 4
Section 12. Voting Trusts...................................... 5
Section 13. Notice of Shareholder Business and Nominations..... 5
(a) Annual Meetings of Shareholders.................... 5
(b) Special Meetings of Shareholders................... 6
(c) General............................................ 7
Section 14. Shareholders' Agreements........................... 7
Section 15. Action by Shareholders Without a Meeting........... 7
ARTICLE II DIRECTORS.......................................... 8
Section 1. Function........................................... 8
Section 2. Qualification...................................... 8
Section 3. Compensation....................................... 8
Section 4. Duties of Directors................................ 8
Section 5. Presumption of Assent.............................. 9
Section 6. Number............................................. 9
Section 7. Election........................................... 9
Section 8. Term............................................... 9
Section 9. Resignation........................................ 10
Section 10. Vacancies.......................................... 10
Section 11. Removal of Directors............................... 10
Section 12. Quorum and Voting.................................. 10
Section 13. Conflicts of Interest.............................. 10
Section 14. Executive and Other Committees..................... 11
Section 15. Meetings........................................... 12
Section 16. Notice of Meetings................................. 12
Section 17. Waiver of Notice................................... 12
Section 18. Action Without a Meeting........................... 12
Section 19. Amendment by Board of Directors.................... 13
(i)
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ARTICLE III OFFICERS......................................... 13
Section 1. Officers......................................... 13
Section 2. Powers and Duties................................ 14
Section 3. Delegation....................................... 14
Section 4. Resignation and Removal of Officers.............. 14
Section 5. Contract Rights.................................. 15
ARTICLE IV STOCK CERTIFICATES............................... 15
Section 1. Form and Content of Certificates................. 15
Section 2. Transfer of Stock................................ 15
Section 3. Lost, Stolen or Destroyed Certificates........... 16
ARTICLE V BOOKS AND RECORDS................................ 16
Section 1. Corporate Records................................ 16
Section 2. Inspection of Records by Shareholders............ 17
Section 3. Scope of Inspection Right........................ 17
Section 4. Financial Statements for Shareholders............ 18
ARTICLE VI DIVIDENDS........................................ 18
Section 1. Distributions to Shareholders.................... 18
Section 2. Share Dividends.................................. 19
ARTICLE VII CORPORATE SEAL................................... 20
ARTICLE VIII EXECUTION OF DOCUMENTS........................... 20
ARTICLE IX INDEMNIFICATION.................................. 20
ARTICLE X AMENDMENT........................................ 23
(ii)
<PAGE>
SECOND AMENDED AND RESTATED BYLAWS
OF
OMEGA RESEARCH, INC.
ARTICLE I
MEETINGS OF SHAREHOLDERS
SECTION 1. ANNUAL MEETING.
The annual meeting of the shareholders of this corporation shall be
held at the time and place designated by the Board of Directors of the
corporation. The annual meeting of shareholders for any calendar year shall be
held no later than thirteen months after the last preceding annual meeting of
shareholders. Business transacted at the annual meeting shall include the
election of directors of the corporation and any proper business as may come
before the meeting.
SECTION 2. SPECIAL MEETINGS.
Special meetings of the shareholders shall be held when directed by the
Board of Directors, or when a signed and dated written demand is delivered to
the secretary of the corporation by the holders of not less than fifty (50%)
percent of all votes entitled to be cast on any issue to be considered at the
proposed special meeting, describing the purposes of the proposed special
meeting. At any special meeting only such business may be transacted which is
related to the purpose or purposes set forth in the notice of such special
meeting.
SECTION 3. PLACE.
Meetings of shareholders may be held within or without the State of
Florida.
SECTION 4. NOTICE.
The corporation shall notify shareholders of the date, time and place
of each annual and special shareholders' meeting no fewer than ten (10) or more
than sixty (60) days before the meeting date. Unless the Florida Business
Corporation Act, as amended (the "Act"), or the Articles of Incorporation, as
amended from time to time hereafter (the "Articles of Incorporation") require
otherwise, the corporation is required to give notice only to shareholders
entitled to vote at the meeting. Notice shall be given in the manner provided in
section 5 below, by or at the direction of the president, the secretary, or the
officer or persons calling the meeting. If the notice is mailed at least thirty
(30) days before the date of the meeting, it may be done by a class of United
States mail other than first class. Notwithstanding section 5 below, if mailed,
such notice shall be deemed to be delivered when deposited in the United States
mail addressed to the shareholder at his address as it appears on the stock
transfer books of the corporation, with postage thereon prepaid.
Unless the Act or the Articles of Incorporation require otherwise,
notice of an annual meeting need not include a description of the purpose or
purposes for which the meeting is called.
Notice of a special meeting must include a description of the purpose
or purposes for which the meeting is called.
Notwithstanding the foregoing, no notice of a shareholders' meeting
need be given to a shareholder if (a) an annual report and proxy statement for
two consecutive annual meetings of shareholders or (b) all,
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and at least two, checks in payment of dividends or interest on securities
during a twelve (12) month period have been sent by first-class United States
mail, addressed to the shareholder at his address as it appears on the share
transfer books of the corporation, and returned undeliverable. The obligation of
the corporation to give notice of a shareholders' meeting to any such
shareholder shall be reinstated once the corporation has received a new address
for such shareholder for entry on its share transfer books.
SECTION 5. MANNER OF NOTICE.
Any notice given under these Bylaws must be written and may be
communicated in person; telegraph, teletype or other form of electronic
communication; or by mail.
Written notice by the corporation to a shareholder shall be effective
when mailed, if mailed postpaid and correctly addressed to the shareholder's
address shown in the corporation's current record of shareholders.
Written notice to a domestic or foreign corporation authorized to
transact business in this state may be addressed to its registered agent at its
registered office or to the corporation or its secretary at its principal office
shown in its most recent annual report or, in the case of corporation that has
not yet delivered an annual report, in a domestic corporation's articles of
incorporation or in a foreign corporation's application for certificate of
authority.
Except as otherwise provided herein or in the Act, written notice shall
be effective at the earliest date of the following: (a) when received; (b) five
days after its deposit in the United States mail, as evidenced by the postmark,
if mailed postpaid and correctly addressed; or (c) on the date shown on the
return receipt, if sent by registered or certified mail return receipt
requested, and the receipt is signed by or on behalf of the addressee.
SECTION 6. NOTICE OF ADJOURNED MEETINGS.
If an annual or special shareholders' meeting is adjourned to a
different date, time or place, notice need not be given of the new date, time or
place if the new date, time or place is announced at the meeting before an
adjournment is taken, and any business may be transacted at the adjourned
meeting that might have been transacted on the original date of the meeting. If
a new record date for the adjourned meeting is or must be fixed, however, notice
of the adjourned meeting must be given as provided in section 5 above to persons
who are shareholders as of the new record date who are entitled to notice of the
meeting.
SECTION 7. FIXING OF RECORD DATE.
For the purpose of determining shareholders entitled to notice of a
shareholders' meeting, to demand a special meeting, to vote, or to take any
other action, the Board of Directors may fix the record date. In no event may a
record date fixed by the Board of Directors be a date preceding the date upon
which the resolution fixing the record date is adopted. The record date for
determining shareholders entitled to demand a special meeting is the date the
first shareholder delivers his demand to the corporation.
If not otherwise provided by or pursuant to these Bylaws, the record
date for determining shareholders entitled to notice of and to vote at an annual
or special shareholders' meeting is the close of business on the day before the
first notice is delivered to shareholders. A record date for purposes of this
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section may not be more than seventy (70) days before the meeting or action
requiring a determination of shareholders. A determination of shareholders
entitled to notice of or to vote at a shareholders' meeting is effective for any
adjournment of the meeting unless the Board of Directors fixes a new record
date, which it must do if the meeting is adjourned to a date more than the one
hundred twenty (120) days after the date fixed for the original meeting.
SECTION 8. SHAREHOLDERS' LIST FOR MEETING.
After fixing a record date for a meeting, the corporation shall prepare
an alphabetical list of the names of all its shareholders who are entitled to
notice of a shareholders' meeting, arranged by voting group with the address of,
and the number and class and series, if any, of shares held by, each. The
shareholders' list must be available for inspection by any shareholder for a
period of ten (10) days prior to the meeting or such shorter time as exists
between the record date and the meeting and continuing through the meeting at
the corporation's principal office, at a place identified in the meeting notice
in the city where the meeting will be held, or at the office of the
corporation's transfer agent or registrar. A shareholder or his agent or
attorney is entitled on written demand to inspect the list during regular
business hours and at his expense during the period it is available for
inspection. The corporation shall make the shareholders' list available at the
meeting, and any shareholder or his agent or attorney is entitled to inspect the
list at any time during the meeting or any adjournment.
If the requirements of this section have not been substantially
complied with or if the corporation refuses to allow a shareholder or his agent
or attorney to inspect the shareholders' list before or at the meeting, the
meeting shall be adjourned until such requirements are complied with on the
demand of any shareholder in person or by proxy who failed to get such access.
Refusal or failure to comply with the requirements of this section shall not
affect the validity of any action taken at such meeting.
SECTION 9. SHAREHOLDER QUORUM AND VOTING.
A majority of the shares entitled to vote, represented in person or by
proxy, shall constitute a quorum at a meeting of shareholders. When a specified
item of business is required to be voted on by a class or series of stock, a
majority of the shares of such class or series shall constitute a quorum for the
transaction of such item of business by that class or series.
If a quorum is present, the affirmative vote of the majority of the
shares represented at the meeting and entitled to vote on the subject matter
shall be the act of the shareholders unless otherwise provided by law or the
Articles of Incorporation.
After a quorum has been established at a shareholders' meeting, the
subsequent withdrawal of shareholders, so as to reduce the number of shares
entitled to vote at the meeting below the number required for a quorum, shall
not affect the validity of any action taken at the meeting or any adjournment
thereof.
SECTION 10. VOTING ENTITLEMENT OF SHARES.
Except as otherwise provided below, each outstanding share, regardless
of class, is entitled to one vote on each matter submitted to a vote at a
meeting of shareholders. Only shares are entitled to vote.
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The shares of the corporation are not entitled to vote if they are
owned, directly or indirectly, by a second corporation, domestic or foreign, and
the corporation owns, directly or indirectly, a majority of the shares entitled
to vote for directors of the second corporation. This paragraph does not limit
the power of the corporation to vote any shares, including its own shares, held
by it in a fiduciary capacity.
Redeemable shares are not entitled to vote on any matter, and shall not
be deemed to be outstanding, after notice of redemption is mailed to the holders
thereof and a sum sufficient to redeem such shares has been deposited with a
bank, trust company, or other financial institution upon an irrevocable
obligation to pay the holders the redemption price upon surrender of the shares.
Shares standing in the name of another corporation, domestic or
foreign, may be voted by such officer, agent or proxy as the Bylaws of the
corporate shareholder or, in the absence of any applicable provision, by such
person as the Board of Directors of the corporate shareholder may designate. In
the absence of any such designation, or in case of a conflicting designation by
the corporate shareholder, the chairman of the board, the president, any vice
president, the secretary and the treasurer of the corporate shareholder, in that
order, shall be presumed to be fully authorized to vote such shares.
Shares held by an administrator, executor, guardian, personal
representative or conservator may be voted by him, either in person or by proxy,
without a transfer of such shares into his name. Shares standing in the name of
a trustee may be voted by him, either in person or by proxy, but no trustee
shall be entitled to vote shares held by him without a transfer of such shares
into his name or the name of his nominee.
Shares held by or under the control of a receiver, a trustee in
bankruptcy proceedings or an assignee for the benefit of creditors may be voted
by him without the transfer thereof into his name.
If a share or shares stand of record in the names of two or more
persons, whether fiduciaries, members of a partnership, joint tenants, tenants
in common, tenants by the entirety, or otherwise, or if two or more persons have
the same fiduciary relationship respecting the same shares, unless the secretary
of the corporation is given notice to the contrary and is furnished with a copy
of the instrument or order appointing them or creating the relationship wherein
it is so provided, the acts with respect to voting have the following effect:
(a) if only one votes, in person or by proxy, his act binds all; (b) if more
than one votes, in person or by proxy, the act of the majority so voting binds
all; (c) if more than one votes, in person or by proxy, but the vote is evenly
split on any particular matter, each faction is entitled to vote the share or
shares in question proportionally; (d) if the instrument or order so filed shows
that any such tenancy is held in unequal interest, a majority or a vote evenly
split for purposes of this section shall be a majority or a vote evenly split in
interest; (e) the principles of this section shall apply, insofar as possible,
to execution of proxies, waivers, consents, or objections and for the purpose of
ascertaining the presence of a quorum.
Nothing herein contained shall prevent trustees or other fiduciaries
holding shares registered in the name of a nominee from causing such shares to
be voted by such nominee as the trustee or other fiduciary may direct. Such
nominee may vote shares as directed by a trustee or other fiduciary without the
necessity of transferring the shares to the name of the trustee or other
fiduciary.
SECTION 11. PROXIES.
A shareholder, other person entitled to vote on behalf of a shareholder
pursuant to section 10 above, or attorney-in-fact may vote the shareholders'
shares in person or by proxy.
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A shareholder may appoint a proxy to vote or otherwise act for him by
signing an appointment form, either personally or by his attorney-in-fact. An
executed telegram or cablegram appearing to have been transmitted by such
person, or a photographic, photostatic or equivalent reproduction of an
appointment form, is a sufficient appointment form.
An appointment of a proxy is effective when received by the secretary
or other officer or agent authorized to tabulate votes. An appointment is valid
for up to eleven (11) months unless a longer period is expressly provided in the
appointment form.
The death or incapacity of the shareholder appointing a proxy does not
affect the right of the corporation to accept the proxy's authority unless
notice of the death or incapacity is received by the secretary or other officer
or agent authorized to tabulate votes before the proxy exercises his authority
under the appointment.
If an appointment form expressly provides, any proxy holder may
appoint, in writing, a substitute to act in his place.
SECTION 12. VOTING TRUSTS.
One or more shareholders may create a voting trust, conferring on a
trustee the right to vote or otherwise act for them, by signing an agreement
setting out the provisions of the trust as provided by law and transferring
their shares to a trustee. The trustee shall thereafter prepare a list of names
and addresses of all owners of beneficial interests in the trust, together with
the number and class of shares of each transferred to the trust, and deliver
copies of the list and agreement to the corporation's principal office. After
filing a copy of the list and agreement in the corporation's principal office,
such copies shall be open to inspection by any shareholder of the corporation
(subject to the requirements of Article V herein) or any beneficiary of the
trust under the agreement during business hours.
SECTION 13. NOTICE OF SHAREHOLDER BUSINESS AND NOMINATIONS.
(a) ANNUAL MEETINGS OF SHAREHOLDERS.
(1) Nominations of persons for election to the Board of Directors
of the corporation and the proposal of business to be considered by the
shareholders may be made at an annual meeting of shareholders (a) by or at the
direction of the Board of Directors or (b) by any shareholder of the corporation
who was a shareholder of record at the time of giving of notice provided for in
this Bylaw, who is entitled to vote at the meeting and who complies with the
notice procedures set forth in this Bylaw.
(2) For nominations or other business to be properly brought
before an annual meeting by a shareholder pursuant to clause (b) of paragraph
(a)(1) of this Bylaw, the shareholder must have given timely notice thereof in
writing to the Secretary of the corporation and such other business must
otherwise be a proper matter for shareholder action. To be timely, a
shareholder's notice shall be delivered to the Secretary at the principal
executive offices of the corporation not later than the close of business on the
sixtieth (60th) day, nor earlier than the close of business on the ninetieth
(90th) day, prior to the first anniversary of the preceding year's annual
meeting; provided, however, that in the event that the date of the annual
meeting is more than thirty (30) days before or more than sixty (60) days after
such anniversary date, notice by the shareholder to be timely must be so
delivered not earlier than the close of business on the
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ninetieth (90th) day prior to such annual meeting and not later than the close
of business on the later of the sixtieth (60th) day prior to such annual meeting
or the tenth (10th) day following the day on which public announcement of the
date of such meeting is first made by the corporation. In no event shall the
public announcement of an adjournment of an annual meeting commence a new time
period for the giving of a shareholder's notice as described above. Such
shareholder's notice shall set forth (a) as to each person whom the shareholder
proposes to nominate for election or re-election as a director all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors in an election contest, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and Rule 14a-11 thereunder
(including such person's written consent to being named in the proxy statement
as a nominee and to serving as a director if elected); (b) as to any other
business that the shareholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest in
such business of such shareholder and the beneficial owner, if any, on whose
behalf the proposal is made; and (c) as to the shareholder giving the notice and
the beneficial owner, if any, on whose behalf the nomination or proposal is made
(i) the name and address of such shareholder, as they appear on the
corporation's books, and of such beneficial owner and (ii) the class and number
of shares of the corporation which are owned beneficially and of record by such
shareholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of paragraph
(a)(2) of this Bylaw to the contrary, in the event that the number of directors
to be elected to the Board of Directors of the corporation is increased and
there is no public announcement by the corporation naming all of the nominees
for director or specifying the size of the increased Board of Directors at least
seventy (70) days prior to the first anniversary of the preceding year's annual
meeting, a shareholder's notice required by this Bylaw shall also be considered
timely, but only with respect to nominees for any new positions created by such
increase, if it shall be delivered to the Secretary at the principal executive
offices of the corporation not later than the close of business on the tenth
(10th) day following the date on which such public announcement is first made by
the corporation.
(b) SPECIAL MEETINGS OF SHAREHOLDERS. Only such business shall be
conducted at a special meeting of shareholders as shall have been brought before
the meeting pursuant to the corporation's notice of meeting. Nominations of
persons for election to the Board of Directors may be made at a special meeting
of shareholders at which directors are to be elected pursuant to the
corporation's notice of meeting (a) by or at the direction of the Board of
Directors or (b) provided that the Board of Directors has determined that
directors shall be elected at such meeting, by any shareholder of the
corporation who is a shareholder of record at the time of giving of notice
provided for in this Bylaw, who shall be entitled to vote at the meeting and who
complies with the notice procedures set forth in this Bylaw. In the event the
corporation calls a special meeting of shareholders for the purposes of electing
one or more directors to the Board of Directors, any such shareholder may
nominate a person or persons (as the case may be), for election of such
position(s) as specified in the corporation's notice of meeting, if the
shareholder's notice required by paragraph (a)(2) of this Bylaw shall be
delivered to the Secretary at the principal executive offices of the corporation
not earlier than the close of business on the ninetieth (90th) day prior to such
special meeting and not later than the close of business on the later of the
sixtieth (60th) day prior to such special meeting or the tenth (10th) day
following the day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting. In no event shall the public announcement of an
adjournment of a special meeting commence a new time period for the giving of a
shareholder's notice as described above.
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(c) GENERAL.
(1) Only such persons who are nominated in accordance with the
procedures set forth in this Bylaw shall be eligible to serve as directors and
only such business shall be conducted at a meeting of shareholders as shall have
been brought before the meeting in accordance with the procedures set forth in
this Bylaw. Except as otherwise provided by law, the Chairman of the meeting
shall have the power and duty to determine whether a nomination or any business
proposed to be brought before the meeting was made or proposed, as the case may
be, in accordance with the procedures set forth in this Bylaw and, if any
proposed nomination or business is not in compliance with this Bylaw, to declare
that such defective proposal or nomination shall be disregarded.
(2) For purposes of this Bylaw, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Bylaw, a
shareholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this Bylaw. Nothing in this Bylaw shall be deemed to affect any rights
(i) of shareholders to request inclusion of proposals in the corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act or (ii) of the holders
of any series of preferred stock to elect directors under specified
circumstances.
SECTION 14. SHAREHOLDERS' AGREEMENTS.
Two or more shareholders of this corporation may provide for the
manner in which they vote their shares by signing an agreement for that purpose
as provided by law.
SECTION 15. ACTION BY SHAREHOLDERS WITHOUT A MEETING.
Until and only until such date that a registration statement on Form
S-1 of this corporation is filed with the Securities and Exchange Commission
("SEC") in connection with this corporation's initial public offering of Common
Shares and is declared effective by the SEC (the "Effective Date"), any action
required by law, these Bylaws or the Articles of Incorporation of this
corporation to be taken at any annual or special meeting of the shareholders of
the corporation, or any action which may be taken at any annual or special
meeting of the shareholders of this corporation, may be taken without a meeting,
without prior notice and without a vote, if the action is taken by the holders
of outstanding stock of each voting group entitled to vote thereon having not
less than the minimum number of votes with respect to each voting group that
would be necessary to authorize or take such action at a meeting at which all
voting groups and shares entitled to vote thereon were present and voted. In
order to be effective, the action must be evidenced by one or more written
consents describing the action taken, dated and signed by approving shareholders
having the requisite number of votes of each voting group entitled to vote
thereon, and delivered to this corporation by delivery to its principal office
in this state, its principal place of business, the corporate secretary, or
another officer or agent of this corporation having custody of the book in which
proceedings of meetings of shareholders are recorded. No written consent shall
be effective to take the corporate action referred to therein unless, within 60
days of the date of the earliest dated consent delivered in the manner required
herein, written
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consents signed by the number of holders required to take action are delivered
to the corporation by delivery as set forth herein.
Any written consent may be revoked prior to the date that the
corporation receives the required number of consents to authorize the proposed
action. No revocation is effective unless in writing and until received by the
corporation at its principal office in this state or its principal place of
business, or received by the corporate secretary or other officer or agent of
the corporation having custody of the book in which proceedings of meetings of
shareholders are recorded.
Within ten (10) days after obtaining such authorization by written
consent, notice must be given to those shareholders who have not consented in
writing or who are not entitled to vote on the action. The notice shall fairly
summarize the material features of the authorized action and, if the action be
such for which dissenters' rights are provided under the Act, the notice shall
contain a clear statement of the right of shareholders dissenting therefrom to
be paid the fair value of their shares upon compliance with further provisions
of the Act regarding the rights of dissenting shareholders.
A consent signed under this section has the effect of a meeting vote
and may be described as such in any document. Whenever action is taken pursuant
to this section, the written consent of the shareholders consenting thereto or
the written reports of inspectors appointed to tabulate such consents shall be
filed with the minutes of proceedings of shareholders.
On and after the Effective Date in this Section 15 of Article I of
these Bylaws, the shareholders may no longer permit or authorize an action
required to be taken by the shareholders of the corporation on or after the
Effective Date to be taken without a meeting and vote.
ARTICLE II
DIRECTORS
SECTION 1. FUNCTION.
All corporate powers shall be exercised by or under the authority of,
and the business and affairs of the corporation managed under the direction of,
its Board of Directors.
SECTION 2. QUALIFICATION.
Directors must be natural persons who are eighteen (18) years of age or
older but need not be residents of the State of Florida or shareholders of this
corporation.
SECTION 3. COMPENSATION.
The Board of Directors may fix the compensation of directors.
SECTION 4. DUTIES OF DIRECTORS.
A director shall discharge his duties as a director, including his
duties as a member of a committee: in good faith; with the care an ordinarily
prudent person in a like position would exercise under similar circumstances;
and in a manner he reasonably believes to be in the best interests of the
corporation.
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In discharging his duties, a director is entitled to rely on
information, opinions, reports or statements, including financial statements and
other financial data, if prepared or presented by:
(a) One or more officers or employees of the corporation whom the
director reasonably believes to be reliable and competent in the
matters presented;
(b) Legal counsel, public accountants or other persons as to matters
the director reasonably believes are within the persons'
professional or expert competence; or
(c) A committee of the Board of Directors of which he is not a member,
if the director reasonably believes the committee merits
confidence.
In discharging his duties, a director may consider such factors as the
director deems relevant, including the long-term prospects and interests of the
corporation and its shareholders, and the social, economic, legal, or other
effects of any action on the employees, suppliers, customers of the corporation
or its subsidiaries, the communities and society in which the corporation or its
subsidiaries operate, and the economy of the state and the nation.
A director is not acting in good faith if he has knowledge concerning
the matter in question that makes reliance otherwise permitted by this section
unwarranted. A director shall not be liable for any action taken as a director,
or any failure to take any action, if he performed the duties of his office in
compliance with this section.
SECTION 5. PRESUMPTION OF ASSENT.
A director of the corporation who is present at a meeting of its Board
of Directors or a committee of the Board of Directors when corporate action is
taken is deemed to have assented to the action taken unless: (a) he objects at
the beginning of the meeting (or promptly upon his arrival) to holding it or
transacting specified business at the meeting; or (b) he votes against or
abstains from the action taken.
SECTION 6. NUMBER.
The number of directors of this corporation shall be not less than two
(2). The number of directors of this corporation shall currently be set at five
(5), but may be increased or decreased from time to time as determined by a
majority of the entire Board of Directors of this corporation or by amendment to
these Bylaws.
SECTION 7. ELECTION.
Directors are elected at the first annual shareholders' meeting and at
each annual meeting thereafter.
SECTION 8. TERM.
The terms of the initial directors of the corporation expire at the
first shareholders' meeting at which directors are elected. The terms of all
other directors expire at the next annual shareholders' meeting following their
election. A decrease in the number of directors does not shorten an incumbent
director's
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term. The term of a director elected to fill a vacancy expires at the next
shareholders' meeting at which directors are elected. Despite the expiration of
a director's term, he or she continues to serve until his or her successor is
elected and qualifies or until there is a decrease in the number of directors.
SECTION 9. RESIGNATION.
A director may resign at any time by delivering written notice to the
Board of Directors or its chairman or to the corporation. A resignation is
effective when the notice is delivered unless the notice specifies a later
effective date. If a resignation is made effective at a later date, the Board of
Directors may fill the pending vacancy before the effective date if the Board of
Directors provides that the successor does not take office until the effective
date.
SECTION 10. VACANCIES.
Whenever a vacancy occurs on the Board of Directors, including a
vacancy resulting from an increase in the number of directors, it may be filled
by the affirmative vote of a majority of the remaining directors, though less
than a quorum of the Board of Directors or by the shareholders.
A vacancy that will occur at a specific later date (by reason of a
resignation effective at a later date or otherwise) may be filled before the
vacancy occurs but the new director may not take office until the vacancy
occurs.
SECTION 11. REMOVAL OF DIRECTORS.
The shareholders may remove one or more directors with or without cause
at a meeting of shareholders, provided the notice of the meeting states that the
purpose, or one of the purposes, of the meeting is removal of the director. If a
director is elected by a voting group of shareholders, only the shareholders of
that voting group may participate in the vote to remove him or her.
SECTION 12. QUORUM AND VOTING.
A quorum of the Board of Directors consists of a majority of the number
of directors. If a quorum is present when a vote is taken, the affirmative vote
of a majority of directors present is the act of the Board of Directors.
SECTION 13. CONFLICTS OF INTEREST.
No contract or other transaction between this corporation and one or
more of its directors or any other corporation, firm, association or entity in
which one or more of the directors are directors or officers or are financially
interested shall be either void or voidable because of such relationship or
interest or because such director or directors are present at the meeting of the
Board of Directors or a committee thereof which authorizes, approves or ratifies
such contract or transaction or because his or their votes are counted for such
purpose, if:
(a) the fact of such relationship or interest is disclosed or known to
the Board of Directors or committee which authorizes, approves or
ratifies the contract or transaction by a vote or
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consent sufficient for the purpose without counting the votes or
consents of such interested directors; or
(b) the fact of such relationship or interest is disclosed or known to
the shareholders entitled to vote and they authorize, approve or
ratify such contract or transaction by vote or written consent; or
(c) the contract or transaction is fair and reasonable as to the
corporation at the time it is authorized by the Board, committee
or the shareholders.
For purposes of subparagraph (a) above only, a conflict of interest
transaction is authorized, approved, or ratified if it receives the affirmative
vote of a majority of the directors on the Board of Directors, or on the
committee, who have no relationship or interest in the transaction described in
this section, but a transaction may not be authorized, approved, or ratified
under this section by a single director. If a majority of the directors who have
no such relationship or interest in the transaction vote to authorize, approve
or ratify the transaction, a quorum is present for the purposes for taking
action under subparagraph (a) above. The presence of, or a vote cast by, a
director with such relationship or interest in the transaction does not affect
the validity of any action taken under subparagraph (a) above if the transaction
is otherwise authorized, approved, or ratified as provided in that subparagraph,
but such presence or vote of those directors may be counted for purposes of
determining whether the transaction is approved under other sections of the Act.
For purposes of subparagraph (b) above, a conflict of interest
transaction is authorized, approved or ratified if it receives the vote of a
majority of the shares entitled to be counted under this section. Shares owned
by or voted under the control of a director who has a relationship or interest
in the transaction described in this section may not be counted in a vote of
shareholders to determine whether to authorize, approve or ratify a conflict of
interest transaction under subparagraph (b) above. The vote of those shares,
however, is counted in determining whether the transaction is approved under
other sections of the Act. A majority of the shares, whether or not present,
that are entitled to be counted in a vote on the transaction under this section
constitutes a quorum for the purpose of taking action under this section.
SECTION 14. EXECUTIVE AND OTHER COMMITTEES.
The Board of Directors, by resolution adopted by a majority of the full
Board of Directors, may designate from among its members an executive committee
and one or more other committees, consisting of a minimum of two (2) directors
who serve at the pleasure of the Board of Directors, each of which, to the
extent provided in such resolution, shall have and may exercise all the
authority of the Board of Directors, except that no committee shall have the
authority to:
(a) Approve or recommend to shareholders actions or proposals required
by law to be approved by shareholders;
(b) Fill vacancies on the Board of Directors or any committee thereof;
(c) Adopt, amend or repeal the Bylaws;
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(d) Authorize or approve the reacquisition of shares unless pursuant
to a general formula or method specified by the Board of
Directors; or
(e) Authorize or approve the issuance or sale or contract for the sale
of shares, or determine the designation and relative rights,
preferences and limitations of a voting group, except that the
Board of Directors may authorize a committee (or a senior
executive officer of the corporation) to do so within limits
specifically prescribed by the Board of Directors.
The provisions of section 12 above and sections 15, 16 and 17 below,
which govern meetings, notice and waiver of notice, and quorum and voting
requirements of the Board of Directors, shall apply to committees and their
members as well.
SECTION 15. MEETINGS.
The Board of Directors may hold regular or special meetings in or out
of the State of Florida. A majority of the directors present, whether or not a
quorum exists, may adjourn any meeting of the Board of Directors to another time
and place. Notice of any such adjourned meeting shall be given to the directors
who were not present at the time of the adjournment and, unless the time and
place of the adjourned meeting are announced at the time of the adjournment, to
the other directors. Meetings of the Board of Directors may be called by the
chairman of the Board or by the president of the corporation. The Board of
Directors may permit any or all directors to participate in a regular or special
meeting by, or conduct the meeting through the use of, any means of
communication by which all directors participating may simultaneously hear each
other during the meeting. A director participating in a meeting by this means is
deemed to be present in person at the meeting.
SECTION 16. NOTICE OF MEETINGS.
Regular meetings of the Board of Directors may be held without notice
of the date, time, place or purpose of the meeting. Special meetings of the
Board of Directors must be preceded by at least two (2) days' notice of the
date, time and place of the meeting. The notice need not describe the purpose of
the special meeting unless required by the articles of incorporation or these
Bylaws.
SECTION 17. WAIVER OF NOTICE.
Notice of a meeting of the Board of Directors need not be given to any
director who signs a waiver of notice either before or after the meeting.
Attendance of a director at a meeting shall constitute a waiver of notice of
such meeting and a waiver of any and all objections to the place of the meeting,
the time of the meeting, or the manner in which it has been called or convened,
except when a director states, at the beginning of the meeting or promptly upon
arrival at the meeting, any objection to the transaction of business because the
meeting is not lawfully called or convened.
SECTION 18. ACTION WITHOUT A MEETING.
Any action required or permitted to be taken at a Board of Directors'
meeting or committee meeting may be taken without a meeting if the action is
taken by all members of the Board of Directors or the committee. The actions
must be evidenced by one or more written consents describing the action taken
and signed by each director or committee member.
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Action taken under this section is effective when the last director
signs the consent, unless the consent specifies a different effective date. A
consent signed under this section has the effect of a meeting vote and may be
described as such in any document.
SECTION 19. AMENDMENT BY BOARD OF DIRECTORS.
The corporation's Board of Directors may adopt one or more amendments
to the corporation's Articles of Incorporation without shareholder action:
(1) To delete the names and addresses of the initial directors;
(2) To delete the name and address of the initial registered agent or
registered office, if a statement of change is on file with the
Department of State;
(3) To delete any other information contained in the Articles of
Incorporation that is solely of historical interest;
(4) To change each issued and unissued authorized share of an
outstanding class into a greater number of whole shares if the
corporation has only shares of that class outstanding;
(5) To delete the authorization for a class or series of shares
authorized as provided by law, if no shares of such class or
series have been issued;
(6) To change the corporate name by substituting the word
"corporation," "Incorporated," or "company," or the abbreviation
"corp.," "Inc.," or "Co.," for a similar word or abbreviation in
the name, or by adding, deleting, or changing a geographical
attribution for the name; or
(7) To make any other change expressly permitted by the Act to be made
without shareholder action.
ARTICLE III
OFFICERS
SECTION 1. OFFICERS.
The Board of Directors may elect from its own number a chairman or
co-chairmen of the Board and may elect a president, chief executive officer or
co-chief executive officers, chief operating officer, chief financial officer,
such vice presidents and a treasurer as in the opinion of the Board of Directors
the business of the corporation requires. The Board of Directors shall elect a
secretary and shall delegate to the secretary responsibility for preparing
minutes of the directors' and shareholders' meetings and for authenticating
records of the corporation. The Board of Directors or the president may appoint
one or more other officers or assistant officers. The same individual may
simultaneously hold more than one office in the corporation and the same office
may simultaneously be held by more than one individual.
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SECTION 2. POWERS AND DUTIES.
The officers of the corporation shall have the following duties:
(a) The chairman or co-chairmen of the Board, if elected, or failing
his, her or their election, the president, shall preside at all
meetings of the shareholders and Board of Directors and shall have
such other powers and perform such other duties as may be
prescribed from time to time by the Board of Directors.
(b) The president shall have general charge and supervision of its
business, affairs, administration and operations subject to the
direction of the Board of Directors, and shall, in the absence or
failing the election of a chairman of the Board, preside at all
meetings of the shareholders and the Board of Directors. The
president shall have such other powers and perform such other
duties as may from time to time be assigned to him by the Board of
Directors.
(c) Each of the chief executive officer(s), chief operating officer(s)
and vice president(s), if elected, shall have such powers and
shall perform such duties as may from time to time be assigned to
him, her or them by the Board of Directors.
(d) The secretary shall be the custodian of, and shall maintain, all
of the corporate records except the financial records, shall
authenticate all corporate records, shall prepare and record the
minutes of all meetings of the shareholders and Board of
Directors, send out all notices of meetings, and shall have such
other powers and shall perform such other duties as may be
prescribed by the Board of Directors or the president.
(e) The chief financial officer or treasurer shall be the custodian of
all corporate funds, securities and financial records, shall keep
full and accurate accounts of receipts and disbursements and
render accounts thereof at the annual meetings of shareholders and
whenever else required by the Board of Directors or the president,
and shall have such other powers and perform such other duties as
may be prescribed by the Board of Directors or the president.
SECTION 3. DELEGATION.
In the event of the absence of any officer of this corporation or for
any other reason that the Board of Directors may deem sufficient, the Board of
Directors may at any time and from time to time delegate all or any part of the
powers or duties of any officer to any other officer or officers or to any
director or directors.
SECTION 4. RESIGNATION AND REMOVAL OF OFFICERS.
An officer may resign at any time by delivering notice to the
corporation. A resignation is effective when the notice is delivered unless the
notice specifies a later effective date. If a resignation is made effective at a
later date and the corporation accepts the future effective date, the Board of
Directors may fill the pending vacancy before the effective date if the Board of
Directors provides that the successor does not take office until the effective
date.
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The Board of Directors may remove any officer at any time with or
without cause. Any officer or assistant officer, if appointed by the president,
may likewise be removed by the president.
SECTION 5. CONTRACT RIGHTS.
The appointment of an officer does not itself create contract rights.
An officer's removal does not affect the officer's contract rights, if any, with
the corporation. An officer's resignation does not affect the corporation's
contract rights, if any, with the officer.
ARTICLE IV
STOCK CERTIFICATES
SECTION 1. FORM AND CONTENT OF CERTIFICATES.
Shares may, but are not required to, be represented by certificates. At
a minimum each share certificate, if this corporation has share certificates,
must state on its face: the name of the corporation and that the corporation is
organized under the laws of the State of Florida; the name of the person to whom
issued; and the number and class of shares and the designation of the series, if
any, the certificate represents.
If the corporation is authorized to issue different classes of shares
or different series within a class, the designations, relative rights,
preferences, and limitations applicable to each class and the variations in
rights, preferences, and limitations determined for each series (and the
authority of the Board of Directors to determine variations for future series)
must be summarized on the front or back of each certificate if this corporation
has share certificates. Alternatively, each certificate, if this corporation has
share certificates, may state conspicuously on its front or back that the
corporation will furnish the shareholder a full statement of this information on
request and without charge.
Each share certificate must be signed (either manually or in facsimile)
by the president or a vice president and the secretary or an assistant secretary
of the corporation and shall bear the corporate seal or its facsimile.
If the person who signed (either manually or in facsimile) a share
certificate no longer holds office when the certificate is issued, the
certificate is nevertheless valid.
The Board of Directors may authorize the issuance of some or all of the
shares of any or all of its classes or series without certificates pursuant to
and to the extent permitted by applicable law.
SECTION 2. TRANSFER OF STOCK.
Subject to any restrictions on the transfer or registration of transfer
of the shares represented by a stock certificate which have been imposed or
adopted as authorized by the Act, the corporation shall register a stock
certificate presented to it for transfer if the certificate is properly endorsed
by the holder of record or by his duly authorized attorney and is accompanied
with any additional documents, instruments, certificates, signature guaranties
or other items required from time to time by the Board of Directors in its sole
discretion.
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SECTION 3. LOST, STOLEN OR DESTROYED CERTIFICATES.
The corporation shall issue a new stock certificate in the place of any
certificate previously issued if the holder of record of the certificate (a)
makes proof in affidavit form that it has been lost, destroyed or wrongfully
taken; (b) requests the issue of a new certificate before the corporation has
notice that the certificate has been acquired by a purchaser for value in good
faith and without notice of any adverse claim; (c) gives bond or other security
or indemnity in such form as the corporation may direct to indemnify the
corporation, the transfer agent, and registrar against any claim that may be
made on account of the alleged loss, destruction, or theft of a certificate; and
(d) satisfies any other reasonable requirements imposed by the corporation.
ARTICLE V
BOOKS AND RECORDS
SECTION 1. CORPORATE RECORDS.
The corporation shall keep as permanent records minutes of all meetings
of its shareholders and its Board of Directors, a record of all actions taken by
the shareholders or Board of Directors without a meeting, and a record of all
actions taken by a committee of the Board of Directors in place of the Board of
Directors on behalf of the corporation. The corporation shall maintain accurate
accounting records.
The corporation or its agent shall maintain a record of its
shareholders in a form that permits preparation of a list of the names and
addresses of all shareholders in alphabetical order by class of shares showing
the number and series of shares held by each. The corporation shall maintain its
records in written form or in another form capable of conversion into written
form within a reasonable time. The corporation shall keep a copy of the
following records:
(a) Its Articles or Restated Articles of Incorporation and all
amendments to them currently in effect;
(b) Its Bylaws or Restated Bylaws and all amendments to them currently
in effect;
(c) Resolutions adopted by its Board of Directors creating one or more
classes or series of shares and fixing their relative rights,
preferences, and limitations, if shares issued pursuant to those
resolutions are outstanding;
(d) The minutes of all shareholders' meetings and records of all
action taken by shareholders without a meeting for the past three
(3) years.
(e) Written communications to all shareholders generally or all
shareholders of a class or series within the past three (3) years,
including the financial statements required to be furnished for
the past three (3) years under section 4 of this Article V;
(f) A list of the names and business street addresses of its current
directors and officers; and
(g) Its most recent annual report delivered to the Department of
State.
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SECTION 2. INSPECTION OF RECORDS BY SHAREHOLDERS.
A shareholder of the corporation is entitled to inspect and copy,
during regular business hours at the corporation's principal office, any of the
records of the corporation described in subparagraphs (a) through (g) in section
1 above if he gives the corporation written notice of his demand at least five
(5) business days before the date on which he wishes to inspect and copy.
A shareholder of the corporation is entitled to inspect and copy,
during regular business hours at a reasonable location specified by the
corporation, any of the following records of the corporation if the shareholder
meets the requirements of this section and gives the corporation written notice
of his demand at least five (5) business days before the date on which he wishes
to inspect and copy:
(a) Excerpts from minutes of any meeting of the Board of Directors,
records of any action of a committee of the Board of Directors
while acting in place of the Board of Directors on behalf of the
corporation, minutes of any meeting of the shareholders, and
records of action taken by the shareholders or Board of Directors
without a meeting, to the extent not otherwise subject to
inspection under these Bylaws;
(b) Accounting records of the corporation;
(c) The record of shareholders; and
(d) Any other books and records.
A shareholder may inspect and copy the records described in subparagraphs (a)
through (d) in the preceding paragraph only if:
(a) His demand is made in good faith and for a proper purpose;
(b) He describes with reasonable particularity his purpose and the
records he desires to inspect; and
(c) The records are directly connected with his purpose.
This section does not affect the right of a shareholder to inspect and
copy records under Article I, section 8 of these Bylaws, or, if the shareholder
is in litigation with the corporation, to the same extent as any other litigant;
or the power of a court, independently of the Act, to compel the production of
corporate records for examination.
For purposes of this section, the term "shareholder" includes a
beneficial owner whose shares are held in a voting trust or by a nominee on his
behalf; and a "proper purpose" means a purpose reasonably related to such
person's interest as a shareholder.
SECTION 3. SCOPE OF INSPECTION RIGHT.
A shareholder's agent or attorney has the same inspection and copying
rights as the shareholder he represents. The right to copy and/or to have
converted unwritten records into written form and/or to
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otherwise inspect the corporate records, including expenses and charges
therefore, shall be the same as provided or permitted by law.
SECTION 4. FINANCIAL STATEMENTS FOR SHAREHOLDERS.
Unless modified by resolution of the shareholders within one hundred
twenty (120) days of the close of each fiscal year, the corporation shall
furnish its shareholders annual financial statements which may be consolidated
or combined statements of the corporation and one or more of its subsidiaries,
as appropriate, that include a balance sheet as of the end of the fiscal year,
an income statement for that year, and a statement of cash flows for that year.
If financial statements are prepared for the corporation on the basis of
generally accepted accounting principles, the annual financial statements must
also be prepared on that basis.
If the annual financial statements are reported upon by a public
accountant, his report must accompany them. If not, the statements must be
accompanied by a statement of the president or the person responsible for the
corporation's accounting records:
(a) Stating his reasonable belief whether the statements were prepared
on the basis of generally accepted accounting principles and, if
not, describing the basis of preparation; and
(b) Describing any respects in which the statements were not prepared
on a basis of accounting consistent with the statements prepared
for the preceding year.
The corporation shall mail the annual financial statements to each
shareholder within one hundred twenty (120) days after the close of each fiscal
year or within such additional time thereafter as is reasonably necessary to
enable the corporation to prepare its financial statements if, for reasons
beyond the corporation's control, it is unable to prepare its financial
statements within the prescribed period. Thereafter, on written request from a
shareholder who was not mailed the statements, the corporation shall mail him
the latest annual financial statements.
ARTICLE VI
DIVIDENDS
SECTION 1. DISTRIBUTIONS TO SHAREHOLDERS.
The Board of Directors may authorize and the corporation may make
distributions to its shareholders subject to restriction by its Articles of
Incorporation and/or the Act.
If the Board of Directors does not fix the record date for determining
shareholders entitled to a distribution (other than one involving a purchase,
redemption or other acquisition of the corporation's shares), it is the date the
Board of Directors authorizes the distribution. No distribution may be made if,
after giving it effect: the corporation would not be able to pay its debts as
they become due in the usual course of business; or the corporation's total
assets would be less than the sum of its total liabilities plus the amount that
would be needed, if the corporation were to be dissolved at the time of the
distribution, to satisfy the preferential rights upon dissolution of
shareholders whose preferential rights are superior to those receiving the
distribution. The Board of Directors may base a determination that a
distribution is not prohibited either on financial statements prepared on the
basis of accounting practices and principles that are reasonable in
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the circumstances or on a fair valuation or other method that is reasonable in
the circumstances. In the case of any distribution based upon such a valuation,
each such distribution shall be identified as a distribution based upon a
current valuation of assets, and the amount per share paid on the basis of such
valuation shall be disclosed to the shareholders concurrent with their receipt
of the distribution.
Except as otherwise provided herein, the effect of a distribution under
this section is measured:
(a) In the case of distribution by purchase, redemption or other
acquisition of the corporation's shares, as of the earlier of:
(1) The date money or other property is transferred or debt
incurred by the corporation; or
(2) The date the shareholder ceases to be a shareholder with
respect to the acquired shares;
(b) In the case of any other distribution of indebtedness, as of the
date the indebtedness is distributed;
(c) In all other cases, as of:
(1) The date the distribution is authorized if the payment occurs
within one hundred twenty (120) days after the date of
authorization; or
(2) The date the payment is made if it occurs more than one
hundred twenty (120) days after the date of authorization.
The corporation's indebtedness to a shareholder incurred by reason of a
distribution made in accordance with this section is at parity with the
corporation's indebtedness to its general unsecured creditors, except to the
extent subordinated by agreement.
Indebtedness of the corporation, including indebtedness issued as a
distribution, is not considered a liability for purposes of determinations under
this section if its terms provide that payment of principal and interest are
made only if and to the extent that payment of a distribution to shareholders
could then be made under this section. If the indebtedness is issued as a
distribution, each payment of principal or interest is treated as a
distribution, the effect of which is measured on the date the payment is
actually made.
SECTION 2. SHARE DIVIDENDS.
Shares may be issued pro rata and without consideration to the
corporation's shareholders or to the shareholders of one or more classes or
series. An issuance of shares under this subsection is a share dividend.
Shares of one class or series may not be issued as a share dividend in
respect of shares of another class or series unless a majority of the votes
entitled to be cast by the class or series to be issued approves the issue, or
there are no outstanding shares of the class or series to be issued. If the
Board of Directors does not fix the record date for determining shareholders
entitled to a share dividend, it is the date the Board of Directors authorizes
the share dividend.
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ARTICLE VII
CORPORATE SEAL
The Board of Directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the corporation,
the year of incorporation, the word "Florida" and the word "seal"; it may be a
facsimile, engraved, printed or an impression seal.
ARTICLE VIII
EXECUTION OF DOCUMENTS
All contracts, instruments, agreements, bills payable, notes, checks,
drafts, warrants or other obligations of this corporation shall be made in the
name of the corporation and shall be signed by such officer or officers as the
Board of Directors may from time to time designate.
ARTICLE IX
INDEMNIFICATION
(a) The corporation shall indemnify any person who was or is a party
to any proceeding (other than an action by, or in the right of, the
corporation), by reason of the fact that he is or was a director or officer of
the corporation and may so indemnify any employee or agent of the corporation or
any person who was serving at the request of the corporation as a director,
officer, employee, or agent of another corporation, partnership, joint venture,
trust, or other enterprise against liability incurred in connection with such
proceeding, including any appeal thereof, if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests of
the corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
proceeding by judgment, order, settlement, or conviction or upon a plea of nolo
contendere or its equivalent shall not, of itself, create a presumption that the
person did not act in good faith and in a manner which he reasonably believed to
be in, or not opposed to, the best interests of the corporation or, with respect
to any criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
(b) The corporation shall indemnify any person who was or is a party
to any proceeding by or in the right of the corporation to procure a judgment in
its favor by reason of the fact that he is or was a director or officer of the
corporation and may so indemnify any employee or agent of the corporation or any
person who was serving at the request of the corporation as a director, officer,
employee, or agent of another corporation, partnership, joint venture, trust, or
other enterprise, against expenses and amounts paid in settlement not exceeding,
in the judgment of the board of directors, the estimated expense of litigating
the proceeding to conclusion, actually and reasonably incurred in connection
with the defense or settlement of such proceeding, including any appeal thereof,
if such person acted in good faith and in a manner he reasonably believed to be
in, or not opposed to, the best interests of the corporation, except that no
indemnification shall be made under this subsection in respect of any claim,
issue, or matter as to which such person shall have been adjudged to be liable
unless, and only to the extent that, the court in which such proceeding was
brought, or any other court of competent jurisdiction, shall determine upon
application that, despite the adjudication of liability but in view of all
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which such court shall deem proper.
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(c) To the extent that a director or officer of the corporation,
or an employee or agent of the corporation which the corporation has agreed to
indemnify, has been successful on the merits or otherwise in defense of any
proceeding referred to in subsection (a) or subsection (b), or in defense of any
claim, issue, or matter therein, he shall be indemnified against expenses
actually and reasonably incurred by him in connection therewith.
(d) Any indemnification under subsection (a) or subsection (b), unless
pursuant to a determination by a court, shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee, or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in subsection (a) or
subsection (b). Such determination shall be made:
(1) By the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to such proceeding;
(2) If such a quorum is not obtainable or, even if obtainable, by
majority vote of a committee duly designated by the Board of Directors (in which
directors who are parties may participate) consisting solely of two or more
directors not at the time parties to the proceeding;
(3) By independent legal counsel:
1. Selected by the Board of Directors prescribed in
paragraph (1) or the committee prescribed in paragraph
(2); or
2. If a quorum of the directors cannot be obtained for
paragraph (1) and the committee cannot be designated
under paragraph (2), selected by majority vote of the
full Board of Directors (in which directors who are
parties may participate); or
(4) By the shareholders by a majority vote of a quorum consisting
of shareholders who were not parties to such proceeding or, if no such quorum is
obtainable, by a majority vote of shareholders who were not parties to such
proceeding.
(e) Evaluation of the reasonableness of expenses and authorization of
indemnification shall be made in the same manner as the determination that
indemnification is permissible. However, if the determination of permissibility
is made by independent legal counsel, persons specified by paragraph (d)(3)
shall evaluate the reasonableness of expenses and may authorize indemnification.
(f) Expenses incurred by an officer or director in defending a civil
or criminal proceeding shall be paid by the corporation in advance of the final
disposition of such proceeding upon receipt of an undertaking by or on behalf of
such director or officer to repay such amount if he is ultimately found not to
be entitled to indemnification by the corporation pursuant to this section.
Expenses incurred by other indemnified employees and agents shall be paid in
advance upon such terms or conditions that the Board of Directors deems
appropriate.
(g) The indemnification and advancement of expenses provided pursuant
to these Bylaws are not exclusive, and the corporation may make any other or
further indemnification or advancement of expenses of any of its directors,
officers, employees, or agents, under any bylaw, agreement, vote of share-
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holders or disinterested directors, or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office. However, indemnification or advancement of expenses shall not be made to
or on behalf of any director, officer, employee, or agent if a judgment or other
final adjudication establishes that his actions, or omissions to act, were
material to the cause of action so adjudicated and constitute:
(1) A violation of the criminal law, unless the director, officer,
employee, or agent had reasonable cause to believe his conduct was lawful or had
no reasonable cause to believe his conduct was unlawful;
(2) A transaction from which the director, officer, employee, or
agent derived an improper personal benefit;
(3) In the case of a director, a circumstance under which the
liability provisions of Section 607.0834 of the Florida Business Corporation Act
are applicable; or
(4) Willful misconduct or a conscious disregard for the best
interests of the corporation in a proceeding by or in the right of the
corporation to procure a judgment in its favor or in a proceeding by or in the
right of a shareholder.
(h) Indemnification and advancement of expenses as provided in these
Bylaws shall continue as, unless otherwise provided when authorized or ratified,
to a person who has ceased to be a director, officer, employee, or agent and
shall inure to the benefit of the heirs, executors, and administrators of such a
person, unless otherwise provided when authorized or ratified.
(i) For purposes of this Bylaw, the term "corporation" includes, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger, so that
any person who is or was a director, officer, employee, or agent of a
constituent corporation, or is or was serving at the request of a constituent
corporation as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise, is in the same position
under this section with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
(j) For purposes of this section:
(1) The term "other enterprises" includes employee benefit plans;
(2) The term "expenses" includes counsel and paralegal fees,
including those for appeal;
(3) The term "liability" includes obligations to pay a judgment,
settlement, penalty, fine (including an excise tax assessed
with respect to any employee benefit plan), and expenses
actually and reasonably incurred with respect to a
proceeding;
(4) The term "proceeding" includes any threatened, pending, or
completed action, suit, or other type of proceeding, whether
civil, criminal, administrative, or investigative and whether
formal or informal;
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(5) The term "agent" includes a volunteer;
(6) The term "serving at the request of the corporation" includes
any service as a director, officer, employee, or agent of the
corporation that imposes duties on such persons, including
duties relating to an employee benefit plan and its
participants or beneficiaries; and
(7) The term "not opposed to the best interest of the
corporation" also describes the actions of a person who acts
in good faith and in a manner he reasonably believes to be in
the best interests of the participants and beneficiaries of
an employee benefit plan.
(k) The corporation may purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee, or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise against any liability asserted against him
and incurred by him in any such capacity or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under the provisions of this section.
ARTICLE X
AMENDMENT
These Bylaws may be altered, amended or repealed by either the Board of
Directors or the shareholders, but the Board of Directors may not alter, amend
or repeal the Bylaws generally or a particular Bylaw provision adopted by the
shareholders if the shareholders expressly provide that the Bylaws generally or
a particular Bylaw provision is not subject to amendment, alteration or repeal
by the Board of Directors.
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EXHIBIT 5.1
RUBIN BAUM LEVIN CONSTANT FRIEDMAN & BILZIN
A PARTNERSHIP INCLUDING PROFESSIONAL ASSOCIATIONS
2500 FIRST UNION FINANCIAL CENTER
MIAMI, FLORIDA 33131-2336
TELEPHONE: (305) 374-7580
TELECOPIER: (305) 374-7593
July 25, 1997
Omega Research, Inc.
8700 West Flagler Street
Miami, Florida 33174
Re: REGISTRATION STATEMENT ON FORM S-1
Ladies and Gentlemen:
In connection with the Registration Statement on Form S-1, as the same may
be amended (the "Registration Statement"), initially filed on the date hereof,
by Omega Research, Inc., a Florida corporation (the "Company"), with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended (the "Act"), and the rules and regulations promulgated thereunder (the
"Rules"), you have requested us to furnish you our opinion as to the legality of
the 4,255,000 shares (including 555,000 shares subject to the over-allotment
option) of common stock, par value $.01 per share, of the Company (the "Shares")
being registered thereunder.
For the purpose of rendering our opinion, we have reviewed (a) the
Registration Statement and the exhibits thereto; (b) the Second Amended and
Restated Articles of Incorporation and the Second Amended and Restated Bylaws of
the Company; and (c) certain records of the Company's corporate proceedings as
reflected in its minute books. In our examination, we have assumed the
genuineness of signatures, the authenticity of all documents submitted to us as
originals and the conformity with the originals of all documents submitted to us
as copies thereof. In addition, we have made such other examinations of law and
fact as we considered necessary in order to form a basis for the opinion
hereinafter expressed.
Based on the foregoing, we are of the opinion that the Shares have been
duly and validly authorized and are (or, in the case of the 2,990,000 Shares
being registered for sale by the Company, when such Shares are issued and
delivered by the Company and paid for as contemplated in the Registration
Statement, will be) validly issued, fully paid and non-assessable.
<PAGE>
Omega Research, Inc.
Page 2
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement, and further consent to the use of our name wherever
appearing in the Registration Statement, including any Prospectus constituting a
part thereof, and any amendments thereto. In giving this consent we do not
thereby admit that we come within the category of persons whose consent is
required by the Act or the Rules.
Very truly yours,
/s/ Rubin Baum Levin Constant Friedman & Bilzin
-------------------------------------------
RUBIN BAUM LEVIN CONSTANT FRIEDMAN & BILZIN
EXHIBIT 10.1
OMEGA RESEARCH, INC.
1996 INCENTIVE STOCK PLAN
1. PURPOSE. The OMEGA RESEARCH, INC. 1996 Incentive Stock Plan (the "Plan")
is intended to provide incentives which will attract and retain highly competent
persons as officers and key employees of OMEGA RESEARCH, INC. and its
subsidiaries (the "Company"), as well as independent contractors providing
consulting or advisory services to the Company, by providing them opportunities
to acquire the Company's common stock ("Common Shares") or to receive monetary
payments based on the value of such shares pursuant to the Awards described in
Paragraph 4 below.
2. ADMINISTRATION. Prior to the date, if any, upon which the Company
becomes subject to the Securities Exchange Act of 1934 (the "Act"), the Plan
shall be administered by the Board of Directors of the Company (the "Board") or
a committee appointed by the Board. After the date, if any, upon which the
Company becomes subject to the Act, the Plan will be administered by the
Compensation Committee (the administrator of the Plan, initially the Board or
committee thereof and thereafter the Compensation Committee, if and when the
Company becomes subject to the Act, shall be referred to hereinafter as the
"Committee") appointed by the Board from among its members PROVIDED, however,
that as long as Common Shares are registered under the Act, members of the
Committee must qualify as "non-employee directors" within the meaning of
Securities and Exchange Commission Regulation /section/240.16b-3; provided
further, however, that, notwithstanding the foregoing, the Board can continue to
administer the Plan after the Company becomes subject to the Act until the Board
has a sufficient number of members who qualify as "non-employee directors" to
constitute the Committee. Once appointed, the Committee shall continue to serve
until otherwise directed by the Board. From time to time the Board may increase
the size of the Committee and appoint additional members thereof, remove members
(with or without cause), and appoint new members in substitution therefor, and
fill vacancies however caused; provided, however, that at no time shall a
Committee of less than two members of the Board administer the Plan, and
provided further, that, once the Company becomes subject to the Act, all members
of the Committee if it consists of only two members must be "non-employee
directors." The Committee is authorized, subject to the provisions of the Plan,
to establish such rules and regulations as it deems necessary for the proper
administration of the Plan and to make such determinations and interpretations
and to take such action in connection with the Plan and any Awards (as
hereinafter defined) granted hereunder as it deems necessary or advisable. All
determinations and interpretations made by the Board and Committee shall be
binding and conclusive on all participants and their legal representatives. No
member of the Board, no member of the Committee and no employee of the Company
shall be liable for any act or failure to act hereunder, by any other member or
employee or by any agent to whom duties in connection with the administration of
this Plan have been delegated or, except in circumstances involving such
person's bad faith, gross negligence or fraud, for any act or failure to act by
the member or employee.
<PAGE>
3. PARTICIPANTS. Participants will consist of such officers and key
employees or prospective key employees (conditioned upon, and effective not
earlier than his becoming an employee) of the Company, and independent
contractors providing consulting or advisory services to the Company, as the
Committee in its sole discretion determines to be significantly responsible for
the success and future growth and profitability of the Company and whom the
Committee may designate from time to time to receive Awards under the Plan.
Designation of a participant in any year shall not require the Committee to
designate such person to receive an Award in any other year or, once designated,
to receive the same type or amount of Awards as granted to the participant in
any year. The Committee shall consider such factors as it deems pertinent in
selecting participants and in determining the type and amount of their
respective Awards.
4. TYPES OF AWARDS. Awards under the Plan may be granted in any one or a
combination of (a) Stock Options, (b) Stock Appreciation Rights, (c) Stock
Awards, (d) Performance Shares, and (e) Performance Units, all as described
below (collectively "Awards").
5. SHARES RESERVED UNDER THE PLAN. Subject to the following provisions of
this Section 5, there is hereby reserved for issuance under the Plan an
aggregate of 3,000,000 Common Shares, which may be authorized but unissued
shares. Any shares subject to Stock Options or Stock Appreciation Rights or
issued under such options or rights or as Stock Awards may thereafter be subject
to new options, rights or awards under this Plan if there is a lapse, expiration
or termination of any such options or rights prior to issuance of the shares or
the payment of the equivalent or if shares are issued under such options or
rights or as such awards and thereafter are reacquired by the Company pursuant
to rights reserved by the Company upon issuance thereof. The reservation of
3,000,000 Common Shares gives effect to, and is based upon, (a) the
implementation by the Company of an amendment to its Articles of Incorporation
to increase the authorized Common Shares to 100,000,000, and (b) the declaration
and implementation of a stock dividend of an aggregate of 19,479,800 Common
Shares effectuating a 97,400 for 1 stock split, so that 19,480,000 Common Shares
are then issued and outstanding. The Company will effectuate all of the
foregoing prior to June 30, 1997. The occurrence of such two events shall be
conditions subsequent to any Awards granted under the Plan prior to the
occurrence of such events, provided that once such conditions subsequent are
satisfied any such Awards shall, subject to the terms thereof and the Plan, be
valid and binding obligations of the Company created on the date of grant
thereof.
6. STOCK OPTIONS. Stock Options will consist of awards from the Company, in
the form of agreements, which will enable the holder to purchase a specific
number of Common Shares, at set terms and at a fixed purchase price. Stock
Options may be "incentive stock options" ("Incentive Stock Options") within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code") or Stock Options which do not constitute Incentive Stock Options
("Nonqualified Stock Options"). The Committee will have the authority to grant
to any participant one or more Incentive Stock Options, Nonqualified Stock
Options, or both types of Stock Options (in each case with or without Stock
Appreciation Rights). Each Stock Option shall be subject to such terms and
conditions consistent with the Plan as the Committee may impose from time to
time, subject to the following limitations:
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(a) EXERCISE PRICE. Each Stock Option granted hereunder shall have such
per-share exercise price as the Committee may determine at the date of grant
provided, however, that the per-share exercise price for Incentive Stock Options
shall not be less than 100% of the Fair Market Value (as hereinafter defined) of
the Common Shares on the date the option is granted.
(b) PAYMENT OF EXERCISE PRICE. The option exercise price may be paid by
check or, in the discretion of the Committee, by the delivery of Common Shares
of the Company then owned by the participant or a combination of methods of
payment; provided, however, that option agreements may provide that payment of
the exercise price by delivery of Common Shares of the Company then owned by the
participant may be made only if such payment does not result in a charge to
earnings for financial accounting purposes as determined by the Committee. In
the discretion of the Committee, if Common Shares are readily tradeable on a
national securities exchange or other market system at the time of option
exercise, payment may also be made by delivering a properly executed exercise
notice to the Company together with a copy of irrevocable instructions to a
broker to deliver promptly to the Company the amount of sale or loan proceeds to
pay the exercise price. To facilitate the foregoing, the Company may enter into
agreements for coordinated procedures with one or more brokerage firms.
(c) EXERCISE PERIOD. Stock Options granted under the Plan will be
exercisable at such times and subject to such terms and conditions as shall be
determined by the Committee. In addition, Nonqualified Stock Options shall not
be exercisable later than fifteen years after the date they are granted and
Incentive Stock Options shall not be exercisable later than ten years after the
date they are granted. All Stock Options shall terminate at such earlier times
and upon such conditions or circumstances as the Committee shall in its
discretion set forth in such option at the date of grant.
(d) LIMITATIONS ON INCENTIVE STOCK OPTIONS. Incentive Stock Options may
be granted only to participants who are employees of the Company or one of its
subsidiaries (within the meaning of Section 424(f) of the Code) at the date of
grant. The aggregate Fair Market Value (determined as of the time the option is
granted) of the Common Shares with respect to which Incentive Stock Options are
exercisable for the first time by a participant during any calendar year (under
all option plans of the Company) shall not exceed $100,000. Incentive Stock
Options may not be granted to any participant who, at the time of grant, owns
stock possessing (after the application of the attribution rules of Section
424(d) of the Code) more than 10% of the total combined voting power of all
classes of stock of the Company, unless the option price is fixed at not less
than 110% of the Fair Market Value of the Common Shares on the date of grant and
the exercise of such option is prohibited by its terms after the expiration of
five years from the date of grant of such option.
(e) REDESIGNATION AS NONQUALIFIED STOCK OPTIONS. Options designated as
Incentive Stock Options that fail to continue to meet the requirements of
Section 422 of the Code shall be redesignated as Nonqualified Stock Options for
Federal income tax purposes automaticallywithout further action by the Committee
on the date of such failure to continue to meet the requirements of Section 422
of the Code.
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(f) LIMITATION OF RIGHTS IN SHARES. The recipient of a Stock Option
shall not be deemed for any purpose to be a shareholder of the Company with
respect to any of the shares subject thereto except to the extent that the Stock
Option shall have been exercised and, in addition, a certificate shall have been
issued and delivered to the participant.
7. STOCK APPRECIATION RIGHTS. The Committee may, in its discretion, grant
Stock Appreciation Rights to the holders of any Stock Options granted hereunder.
In addition, Stock Appreciation Rights may be granted independently of and
without relation to Stock Options. Each Stock Appreciation Right shall be
subject to such terms and conditions consistent with the Plan as the Committee
shall impose from time to time, including the following:
(a) A Stock Appreciation Right relating to a Nonqualified Stock Option
may be made part of such option at the time of its grant or at any time
thereafter up to six months prior to its expiration, and a Stock Appreciation
Right relating to an Incentive Stock Option may be made part of such option only
at the time of its grant.
(b) Each Stock Appreciation Right will entitle the holder to elect in
lieu of exercising the Stock Option to receive the appreciation in the Fair
Market Value of the shares subject thereto up to the date the right is
exercised. In the case of a right issued in relation to a Stock Option, such
appreciation shall be measured from not less than the option price and in the
case of a right issued independently of any Stock Option, such appreciation
shall be measured from not less than 85% of the Fair Market Value of the Common
Shares on the date the right is granted. Payment of such appreciation shall be
made in cash or in Common Shares, or a combination thereof, as set forth in the
Award, but no Stock Appreciation Right shall entitle the holder to receive, upon
exercise thereof, more than the number of Common Shares (or cash of equal value)
with respect to which the right is granted.
(c) Each Stock Appreciation Right will be exercisable at the times and
to the extent set forth therein, but no Stock Appreciation Right may be
exercisable earlier than six months after the date it was granted or later than
the earlier of (i) the term of the related Stock Option, if any, and (ii)
fifteen years after it was granted. Exercise of a Stock Appreciation Right shall
reduce the number of shares issuable under the Plan (and the related Stock
Option, if any) by the number of shares with respect to which the right is
exercised.
8. STOCK AWARDS. Stock Awards will consist of Common Shares transferred to
participants without other payment therefor or payment at less than Fair Market
Value as additional compensation for services to the Company. Stock Awards shall
be subject to such terms and conditions as the Committee determines appropriate,
including, without limitation, restrictions on the sale or other disposition of
such shares and rights of the Company to reacquire such shares for no
consideration upon termination of the participant's employment within specified
periods. The Committee may require the participant to deliver a duly signed
stock power, endorsed in blank, relating to the Common Shares covered by such an
Award. The Committee may also require that the stock certificates evidencing
such shares be held in custody until the restrictions thereon shall have lapsed.
The participant shall have, with respect to the Common Shares subject to a Stock
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<PAGE>
Award, all of the rights of a holder of Common Shares of the Company, including
the right to receive dividends and to vote the shares.
9. PERFORMANCE SHARES.
(a) Performance Shares may be awarded either alone or in addition to
other Awards granted under this Plan and shall consist of the right to receive
Common Shares or cash of an equivalent value at the end of a specified
Performance Period (defined below). The Committee shall determine the
participants to whom and the time or times at which Performance Shares shall be
awarded, the number of Performance Shares to be awarded to any person, the
duration of the period (the "Performance Period") during which, and the
conditions under which, receipt of the Common Shares will be deferred, and the
other terms and conditions of the Award in addition to those set forth in this
Section 9. The Committee may condition the grant of Performance Shares upon the
attainment of specified performance goals or such other factors or criteria as
the Committee shall determine.
(b) Performance Shares awarded pursuant to this Section 9 shall be
subject to the following terms and conditions:
(i) Unless otherwise determined by the Committee at the time of
the grant of the Award, amounts equal to any dividends declared during the
Performance Period with respect to the number of Common Shares covered by a
Performance Share Award will not be paid to the participant.
(ii) Subject to the provisions of the Performance Share Award and
this Plan, at the expiration of the Performance Period, share certificates
and/or cash of an equivalent value (as the Committee may determine) shall
be delivered to the participant, or his or her legal representative, in a
number equal to the vested shares covered by the Performance Share Award.
(iii) Subject to the applicable provisions of the Performance
Share Award and this Plan, upon termination of a participant's employment
with the Company for any reason during the Performance Period for a given
Performance Share Award, the Performance Shares in question will vest or be
forfeited in accordance with the terms and conditions established by the
Committee.
10. PERFORMANCE UNITS.
(a) Performance Units may be awarded either alone or in addition to
other Awards granted under this Plan and shall consist of the right to receive a
fixed dollar amount, payable in cash or Common Shares or a combination of both.
The Committee shall determine the participants to whom and the time or times at
which Performance Units shall be awarded, the duration of Performance Units to
be awarded to any person, the duration of the period (the "Performance Cycle")
during which, and the conditions under which, a participant's right to
Performance Units will be
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<PAGE>
vested, the ability of participants to defer the receipt of payment of such
Performance Units, and the other terms and conditions of the Award in addition
to those set forth in this Section 10. The Committee may condition the vesting
of Performance Units upon the attainment of specified performance goals or such
other factors or criteria as the Committee shall determine.
(b) The Performance Units awarded pursuant to this Section 10 shall be
subject to the following terms and conditions:
(i) At the expiration of the Performance Cycle, the Committee
shall determine the extent to which the performance goals have been
achieved, and the percentage of the Performance Units of each participant
that have vested.
(ii) Subject to the applicable provisions of the Performance Unit
Award and this Plan, at the expiration of the Performance Cycle, cash
and/or share certificates of an equivalent value (as the Committee may
determine) shall be delivered to the participant, or his or her legal
representative, in payment of the vested Performance Units covered by the
Performance Unit Award.
(iii) Subject to the applicable provisions of the Performance Unit
Award and this Plan, upon termination of a participant's employment with
the Company for any reason during the Performance Cycle for a given
Performance Unit Award, the Performance Units in question will vest or be
forfeited in accordance with the terms and conditions established by the
Committee.
11. ADJUSTMENT PROVISIONS.
(a) If the Company shall at any time change the number of issued Common
Shares without new consideration to the Company (such as by stock dividend,
stock split, recapitalization, reorganization, exchange of shares, liquidation,
combination or other change in corporate structure affecting the Common Shares
other than as contemplated under Section 5 hereof) or make a distribution of
cash or property which has a substantial impact on the value of issued Common
Shares, the total number of shares available for Awards under this Plan shall be
appropriately adjusted and the number of shares covered by each outstanding
Award and the reference price or Fair Market Value for each outstanding Award
shall be adjusted so that the net value of such Award shall not be changed.
(b) In the case of any sale of assets, merger, consolidation,
combination or other corporate reorganization or restructuring of the Company
with or into another corporation which results in the outstanding Common Shares
being converted into or exchanged for different securities, cash or other
property, or any combination thereof (an "Acquisition"), subject to the
provisions of this Plan and any limitation applicable to the Award:
(i) any participant to whom a Stock Option has been granted shall
have the right thereafter and during the term of the Stock Option to
receive upon exercise
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thereof the Acquisition Consideration (as defined below) receivable upon
the Acquisition by a holder of the number of Common Shares which might have
been obtained upon exercise of the Stock Option or portion thereof, as the
case may be, immediately prior to the Acquisition;
(ii) any participant to whom a Stock Appreciation Right has been
granted shall have the right thereafter and during the term of such right
to receive upon exercise thereof the difference on the exercise date
between the aggregate Fair Market Value of the Acquisition Consideration
receivable upon such acquisition by a holder of the number of Common Shares
which are covered by such right and the aggregate reference price of such
right; and
(iii) any participant to whom Performance Shares or Performance
Units have been awarded shall have the right thereafter and during the term
of the Award, upon fulfillment of the terms of the Award, to receive on the
date or dates set forth in the Award, the Acquisition Consideration
receivable upon the Acquisition by a holder of the number of Common Shares
which are covered by the Award.
The term "Acquisition Consideration" shall mean the kind and amount of
securities, cash or other property or any combination thereof receivable in
respect of one Common Share upon consummation of an Acquisition.
(c) Notwithstanding any other provision of this Plan, the Committee may
authorize the issuance, continuation or assumption of Awards or provide for
other equitable adjustments after changes in the Common Shares resulting from
any other merger, consolidation, sale of assets, acquisition of property or
stock, recapitalization, reorganization or similar occurrence upon such terms
and conditions as it may deem equitable and appropriate.
(d) In the event that another corporation or business entity is being
acquired by the Company, and the Company assumes outstanding employee stock
options and/or stock appreciation rights and/or the obligation to make future
grants of options or rights to employees ofthe acquired entity, the aggregate
number of Common Shares available for Awards under this Plan shall be increased
accordingly.
12. NONTRANSFERABILITY.
(a) Each Award granted under the Plan to a participant shall not be
transferable by him otherwise than as required by law or by will or the laws of
descent and distribution, and shall be exercisable, during his lifetime, only by
him. In the event of the death of a participant while the participant is
rendering services to the Company, each Stock Option or Stock Appreciation Right
theretofore granted to him shall be exercisable during such period after his
death as the Committee shall in its discretion set forth in such option or right
at the date of grant (but not beyond the stated duration of the option or right)
and then only:
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(i) By the executor or administrator of the estate of the deceased
participant or the person or persons to whom the deceased participant's
rights under the Stock Option or Stock Appreciation Right shall pass by
will or the laws of descent and distribution; and
(ii) To the extent that the deceased participant was entitled to
do so at the date of his death.
(b) Notwithstanding Section 12(a), in the discretion of the Committee,
Awards granted hereunder may be transferred to members of the participant's
immediate family (which for purposes of this Plan shall be limited to the
participant's children, grandchildren and spouse), or to one or more trusts for
the benefit of such immediate family members or partnerships in which such
immediate family members and/or trusts are the only partners, but only if the
Award expressly so provides.
13. OTHER PROVISIONS. Awards under the Plan may also be subject to such
other provisions (whether or not applicable to any other Awards under the Plan)
as the Committee determines appropriate, including without limitation,
provisions for the installment purchase of Common Shares under Stock Options,
provisions for the installment exercise of Stock Appreciation Rights, provisions
to assist the participant in financing the acquisition of Common Shares,
provisions for the forfeiture of, or restrictions on resale or other disposition
of, Shares acquired under any form of Award, provisions for the acceleration of
exercisability or vesting of Awards in the event of a change of control of the
Company or other reasons, provisions for the payment of the value of Awards to
participants in the event of a change of control of the Company or other
reasons, or provisions to comply with Federal and state securities laws, or
setting forth understandings or conditions as to the participant's employment in
addition to those specifically provided for under the Plan.
14. FAIR MARKET VALUE. For purposes of this Plan and any Awards hereunder,
Fair Market Value of Common Shares shall be the mean between the highest and
lowest sale prices for the Company's Common Shares as reported on the NASDAQ
National Market (or such other consolidated transaction reporting system on
which such Common Shares are primarily traded) on the date immediately preceding
the date of grant (or on the next preceding trading date if Common Shares were
not traded on the date immediately preceding the date of grant), provided,
however, that until the Company's Common Shares are readily tradeable on a
national securities exchange or market system, or if the Company's Common Shares
are not at the applicable time readily tradeable on a national securities
exchange or other market system, Fair Market Value shall mean the amount
determined in good faith by the Committee as the fair market value of the Common
Shares of the Company.
15. WITHHOLDING. All payments or distributions made pursuant to the Plan
shall be net of any amounts required to be withheld pursuant to applicable
federal, state and local tax withholding requirements. If the Company proposes
or is required to distribute Common Shares pursuant to the Plan, it may require
the recipient to remit to it an amount sufficient to satisfy such tax
withholding
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<PAGE>
requirements prior to the delivery of any certificates for such Common Shares.
The Committee may, in its discretion and subject to such rules as it may adopt,
permit an optionee or Award or right holder to pay all or a portion of the
federal, state and local withholding taxes arising in connection with (a) the
exercise of a Nonqualified Stock Option or a Stock Appreciation Right, (b) the
receipt or vesting of Stock Awards, or (c) the receipt of Common Shares upon the
expiration of the Performance Period or the Performance Cycle, respectively,
with respect to any Performance Shares or Performance Units, by electing to have
the Company withhold Common Shares having a Fair Market Value equal to the
amount to be withheld.
16. TENURE. A participant's right, if any, to continue to serve the Company
as an officer, employee, independent contractor, or otherwise, shall not be
enlarged or otherwise affected by such individual's designation as a participant
under the Plan, nor shall this Plan in any way interfere with the right of the
Company, subject to the terms of any separate employment agreement to the
contrary, at any time to terminate such employment or to increase or decrease
the compensation of the participant from the rate in existence at the time of
the grant of an Award.
17. DURATION, AMENDMENT AND TERMINATION. No Award shall be granted after
June 29, 2006 (the "Expiration Date"); provided, however, that the terms and
conditions applicable to any Award granted prior to such date may thereafter be
amended or modified by mutual agreement between the Company and the participant
or such other persons as may then have an interest therein. Also, by mutual
agreement between the Company and a participant hereunder, under this Plan or
under any other present or future plan of the Company, Awards may be granted to
such participant in substitution and exchange for, and in cancellation of, any
Awards previously granted such participant under this Plan, or any other present
or future plan of the Company. The Board may amend the Plan from time to time or
terminate the Plan at any time. However, no action authorized by this Section 17
shall reduce the amount of any existing Award or change the terms and conditions
thereof without the participant's consent. The approval of the Company's
shareholders will be required for any amendment to the Plan which (i) would
change the class of persons eligible for the grant of Stock Options as specified
in Section 3 or otherwise materially modify the requirements as to eligibility
for participation in the Plan, or (ii) would increase the maximum number of
shares subject to Stock Options, as specified in Section 5 (unless made pursuant
to the provisions of Section 11) or (iii) is required to be approved by the
shareholders pursuant to the Code, Section 16 of the Act or by any stock market
or exchange on which the Common Shares are listed. With respect to persons
subject to Section 16 of the Act, transactions under the Plan are intended to
comply with all applicable conditions of Rule 16b-3 or its successors under the
Act. To the extent any provision of the Plan or action by the Committee fails to
so comply, it shall be deemed null and void, to the extent permitted by law and
deemed advisable by the Committee. Moreover, in the event the Plan does not
include a provision required by Rule 16b-3 to be stated therein, such provision
(other than one relating to eligibility requirements, or the price and amount of
Awards) shall be deemed automatically to be incorporated by reference into the
Plan insofar as participants subject to Section 16 of the Act are concerned.
9
<PAGE>
18. GOVERNING LAW. This Plan and actions taken in connection herewith shall
be governed and construed in accordance with the laws of the State of Florida
(regardless of the law that might otherwise govern under applicable Florida
principles of conflict of laws).
19. SHAREHOLDER APPROVAL. The Plan was adopted by the Board of the Company
and approved by the Company's shareholders effective June 30, 1996.
10
EXHIBIT 10.2
OMEGA RESEARCH, INC.
1997 NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
1. PURPOSE. OMEGA RESEARCH, INC., a Florida corporation (the
"Company"), hereby adopts the 1997 Nonemployee Director Stock Option Plan (the
"Plan"). The purpose of the Plan is to attract and retain outstanding
individuals to serve as members of the Board of Directors of the Company by
providing such persons opportunities to acquire common stock, $.01 par value, of
the Company ("Common Shares"), thereby strengthening the mutuality of interest
between such persons and the Company's shareholders.
2. SHARES RESERVED UNDER THE PLAN. There is hereby reserved for
issuance under the Plan an aggregate of One Hundred Seventy-Five Thousand
(175,000) Common Shares, which shall be authorized but unissued shares. If there
is a lapse, expiration, termination or cancellation of any option granted under
the Plan, all unissued shares subject to or reserved for such option may again
be used for new options granted under the Plan.
3. PARTICIPATION. Participation in the Plan is limited to members of
the Board of Directors who are not salaried officers or employees of the Company
or any of its direct or indirect subsidiaries (a "Nonemployee Director" or
"Participant").
4. OPTIONS TO BE GRANTED UNDER THE PLAN. Effective on the date of a
Nonemployee Director's initial election to the Board of Directors, each
Nonemployee Director shall automatically be awarded a nonqualified stock option
to purchase Twelve Thousand (12,000) Common Shares (the "Initial Option"). Upon
each re-election of such Nonemployee Director to the Board of Directors at the
Company's annual meeting of shareholders ("Annual Meeting"), each Nonemployee
Director shall automatically be awarded an additional nonqualified stock option
(the "Additional Option") to purchase Three Thousand (3,000) Common Shares,
provided, however, that a Nonemployee Director shall not be granted such
Additional Option upon such re-election if such Nonemployee Director was granted
an Initial Option in the immediately preceding twelve (12)-month period upon his
or her initial election to the Board of Directors in accordance with this
Section 4. The Company is authorized to provide the Participant with a stock
option agreement consistent with the terms of the Plan.
5. OPTION EXERCISE PRICE. Each option granted under the Plan shall be
exercisable at an option price equal to 100% of the Fair Market Value (as
defined in Section 10 hereof) of the Common Shares on the date of grant
hereunder.
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6. LIMITATIONS ON EXERCISE. Any option granted under the Plan may be
exercised (in accordance with Section 7 hereof) in whole or in part, from time
to time after the date granted, subject to the following limitations:
(a) No option granted hereunder may be exercised during the
first year following the date such option was granted.
Thereafter, each option may be exercised:
(i) to a maximum cumulative extent of one-third (1/3)
of the total shares covered by the option on or after the first
anniversary of the date the option was granted;
(ii) to a maximum cumulative extent of two-thirds
(2/3) of the total shares covered by the option on or after the second
anniversary of the date the option was granted; and
(iii) to a maximum cumulative extent of 100% of the
total shares covered by the option on or after the third anniversary of
the date the option was granted.
(b) Notwithstanding the limitations of Section 6(a) above, any
option granted under the Plan shall become fully exercisable upon the death of
the Nonemployee Director while serving on the Board of Directors or upon the
Retirement (as hereinafter defined in this Section 6(b)) of the Nonemployee
Director if such death or Retirement occurs on or after the first anniversary of
the date such option was issued. For these purposes, "Retirement" means a
Nonemployee Director's termination of service as a member of the Board of
Directors after age 70 or at any time with the consent of the Board of
Directors.
(c) Any option granted under the Plan shall not be exercised
after the earliest to occur of any of the following events:
(i) more than ninety (90) days after termination of
any Nonemployee Director's service as a member of the Board of
Directors for any reason other than death or Retirement (and then only
to the extent that such Nonemployee Director could have exercised such
option on the date of termination);
(ii) more than one hundred eighty (180) days after a
Nonemployee Director's Retirement from the Board of Directors (and then
only to the extent that such Nonemployee Director could have exercised
such option on the date of Retirement, after giving effect to Section
6(b) above);
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(iii) more than twelve (12) months after death of a
Nonemployee Director (and then only to the extent that such Nonemployee
Director could have exercised such option on the date of death, after
giving effect to Section 6(b) above); or
(iv) more than ten (10) years from the date the
option is granted.
7. METHOD AND TIME OF EXERCISE: DELIVERY OF CERTIFICATES. Any option
granted under the Plan shall be deemed exercised on the date written notice of
exercise is received by the Secretary of the Company at the Company's corporate
headquarters. Such notice shall be accompanied by: (a) a check payable to the
Company for the purchase price of the shares to be purchased; or (b) delivery of
Common Shares owned by the Participant for at least six (6) months whose Fair
Market Value on the date of exercise equals the purchase price of the shares to
be purchased; or (c) any combination of the foregoing.
8. NONTRANSFERABILITY. Any option granted under this Plan shall not be
transferable other than as required by law or by will or the laws of descent and
distribution, and shall be exercisable, during the Participant's lifetime, only
by the Participant or the Participant's guardian or legal representative. If a
Nonemployee Director dies during the option period, any option granted to such
Participant may be exercised by his estate or the person to whom the option
passes by will or the laws of descent and distribution, but only in accordance
with Section 6 above. Notwithstanding the foregoing, an option shall
automatically become transferable to the Participant's "immediate family
members" or trusts or family partnerships for the benefit of such persons. For
purposes of this Section 8, "immediate family members" shall mean the
Participant's spouse and lineal descendants.
9. OTHER PROVISIONS; SECURITIES REGISTRATION. The grant of any option
under the Plan may also be subject to other provisions as counsel to the Company
deems appropriate, including, without limitation, such provisions as may be
appropriate to comply with federal or state securities laws and stock listing
requirements.
10. DEFINITION OF FAIR MARKET VALUE. The term "Fair Market Value" shall
mean, as of any date, the mean between the highest and lowest sale prices of the
Common Shares as reported on the NASDAQ National Market (or such other
consolidated transaction reporting system on which such Common Shares are
primarily traded) on the date immediately preceding the date of grant (or
exercise where applicable), or if such Common Shares were not traded on such
day, then the next preceding day on which the shares were traded, all as
reported by such source as the Board of Directors may determine.
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11. ADJUSTMENT PROVISIONS. If the Company shall at any time change the
number of issued Common Shares without new consideration to the Company (such as
by stock dividend or stock split), the total number of shares reserved for
issuance under the Plan and the number of shares covered by each outstanding
option and the exercise price thereunder shall be automatically adjusted so that
the aggregate consideration payable to the Company and the value of each option
shall not be changed. If, during the term of any option granted under the Plan,
the Common Shares shall be changed into another kind of stock, securities, cash
or other property, whether as a result of reorganization, sale, merger,
consolidation, or other similar transaction, the Board of Directors shall cause
adequate provision to be made whereby all Participants shall thereafter be
entitled to receive, upon the due exercise of any outstanding options, the
stock, securities, cash or other property such Participants would have been
entitled to receive immediately prior to the effective date of any such
transaction for Common Shares which could have been acquired through the
exercise of such options.
12. AMENDMENT OR DISCONTINUATION OF PLAN. The Board of Directors may
amend the Plan at any time or suspend or discontinue the Plan at any time, but
no such action shall adversely affect any outstanding option.
13. GOVERNING LAW. The Plan and any options granted hereunder shall be
governed and construed in accordance with the laws of the State of Florida
(regardless of the law that might otherwise govern under applicable Florida
principles of conflicts of laws).
14. SHAREHOLDER APPROVAL. The Plan was adopted by the Board of
Directors and approved by the shareholders of the Company on July 24, 1997.
4
CONFIDENTIAL MATERIAL OMITTED
AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS
EXHIBIT 10.3
SOFTWARE LICENSE, MAINTENANCE
AND DEVELOPMENT AGREEMENT
THIS SOFTWARE LICENSE, MAINTENANCE AND DEVELOPMENT AGREEMENT dated as of
August 26, 1994, between DOW JONES TELERATE, INC., a New York corporation, with
an office at One World Financial Center, 200 Liberty Street, New York, New York
10281 ("Telerate"), and OMEGA RESEARCH, INC., a Florida corporation with offices
at 9200 Sunset Drive, Miami, Florida 33173 ("Omega").
W I T N E S S E T H:
WHEREAS, Omega has previously developed the TradeStation software;
WHEREAS, Telerate has requested that Omega modify the TradeStation
software to create the Telerate Version of TradeStation;
WHEREAS, Telerate desires to obtain from Omega, and Omega is willing to
grant to Telerate, an exclusive license to promote, market, sell, sublicense and
distribute the Telerate Version of TradeStation;
WHEREAS, Telerate desires that Omega not, during the term of this
Agreement, modify TradeStation or any Real-Time product to be compatible with
the data feeds of the Telerate Competitors so as to enable the Telerate
Competitors to offer a TradeStation or other Real-Time product similar to, and
competitive with, the Telerate Version of TradeStation;
WHEREAS, Telerate desires that Omega develop, and Omega is willing to
develop, provided that Omega and Telerate mutually agree
<PAGE>
as herein provided, Enhancements to the Telerate Version of TradeStation at
Telerate's request from time to time pursuant hereto; and
WHEREAS, Telerate desires that Omega provide, and Omega is willing to
provide to Telerate, certain maintenance and support services for (including
required Modifications to) the Telerate Version of TradeStation.
NOW, THEREFORE, in consideration of the promises and consideration herein
contained, the parties hereby agree as follows:
A. DEFINITIONS.
Capitalized terms used herein and not otherwise defined shall have the
meanings set forth in Exhibit A.
B. DEVELOPMENT OF THE TELERATE VERSION OF TRADESTATION.
1. DEVELOPMENT. Omega shall, at Omega's sole cost and expense (except as
specifically otherwise provided in this Section B), use commercially reasonable
efforts to modify TradeStation to create the Telerate Version of TradeStation,
in accordance with the Specification, as promptly as is practicable. Omega will
be dedicating substantial amounts of time and effort to the development of the
Telerate Version of TradeStation, and will be incurring substantial costs in
connection with the development of the Telerate Version of TradeStation, and
Omega may be forgoing other business opportunities as a result of the time,
effort and expense that will be dedicated by Omega to the development of the
Telerate Version of TradeStation. Accordingly, although Omega will
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use commercially reasonable efforts to develop the Telerate Version of
TradeStation as quickly as is practicable, Omega shall, subject to the
provisions of Subsection 9 below, have as much time as is reasonably required by
Omega to complete the development of the Telerate Version of TradeStation and to
correct any Errors or non-conformities revealed by the Quality Assurance
Testing.
2. NOTICE OF COMPLETION. Upon completion of development of the Telerate
Version of TradeStation, Omega shall promptly notify Telerate thereof.
3. TESTING. Within sixty (60) days following the service of the notice of
completion, the initial Quality Assurance Testing shall be completed and the
Material Error List (defined in Subsection 4 below), if any, shall be prepared.
Telerate and Omega shall jointly conduct all Quality Assurance Testing.
4. ACCEPTANCE. If the initial Quality Assurance Testing objectively
demonstrates that the Telerate Version of TradeStation performs in accordance
with the Specification in all material respects, the Telerate Version of
TradeStation shall be deemed Accepted (the date of such demonstration being the
Acceptance Date), and either party shall at the request of the other execute and
deliver a confirmatory letter to the effect that the Telerate Version of
TradeStation has been Accepted. If the initial Quality Assurance Testing reveals
Errors which are not Material Errors, the Telerate Version of TradeStation shall
nevertheless be deemed Accepted and Omega shall commence making appropriate
Modifications to correct such Errors as required by this Agreement. If the
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initial Quality Assurance Testing reveals any Material Error(s), or objectively
demonstrates that the Telerate Version of TradeStation does not perform in
accordance with the Specification in all material respects, Telerate and Omega
shall, within the sixty (60) day period referred to in Subsection 3 above,
jointly prepare a written list describing all such Material Errors and failures
to conform in all material respects (the "Material Error List"). Omega shall
then commence to correct each of the items contained on the Material Error List.
Promptly following completion of such correction(s) by Omega, Omega shall send a
notice of correction to Telerate, within fifteen (15) days of which the Quality
Assurance Testing shall again be performed to the extent necessary to
demonstrate that the items on the Material Error List have been corrected in all
material respects. In connection with such second Quality Assurance Testing,
Telerate shall not be permitted to assert, for the purposes of preventing the
occurrence of Acceptance, any Material Errors or failures so to conform not
specified in the Material Error List, unless such additional Material Errors or
failures have resulted from the corrections effected by Omega. If, in connection
with such second Quality Assurance Testing, it is demonstrated that all of the
items on the Material Error List have been corrected in all material respects,
the Telerate Version of TradeStation shall be deemed Accepted (the date of such
demonstration being the Acceptance Date). If, in connection with such second
Quality Assurance Testing, it is demonstrated that all of the items on the
Material Error List have
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<PAGE>
not been corrected in all material respects or new Material Errors or failures
so to conform have arisen as a result of the correction(s) effected by Omega,
the parties shall jointly prepare a second Material Error List within the
fifteen (15) day period specified above, and the procedures for correction and
re-testing and determining Acceptance set forth above shall continue to be
followed until Acceptance occurs. Omega shall, in each instance, subject to the
provisions of Subsection 9 below, have as much time as is reasonably necessary
to make each set of corrections required. Telerate shall have no right to make
any use whatever of the Telerate Version of TradeStation prior to Acceptance and
unless Acceptance occurs, except as provided in Section C.1(b) below.
5. TELERATE-PROVIDED MATERIALS. To assist Omega in its development
efforts, Telerate shall, at Telerate's sole cost and expense, provide to Omega
the Telerate-Provided Materials. The Telerate-Provided Materials shall be used
solely to develop, maintain and support the Telerate Version of TradeStation as
provided in this Agreement. Omega acknowledges that any and all of the
Telerate-Provided Materials are, as between Telerate and Omega, the sole
property of Telerate and that all right, title and interest to such
Telerate-Provided Materials is and shall remain with Telerate. Omega further
acknowledges that the Telerate-Provided Materials may contain Confidential
Information (as defined in Section M) of Telerate as well as copyrights of
Telerate. Omega agrees that any Confidential Information included within the
Telerate-Provided Materials is subject to the provisions of Section
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<PAGE>
M, and Omega shall not create any lien or other encumbrance on the
Telerate-Provided Materials.
6. ASSISTANCE. Telerate shall, at Telerate's sole cost and expense,
provide all technical assistance reasonably requested by Omega in connection
with its use of the Telerate-Provided Materials. Omega shall not be deemed in
default hereunder as a result of the failure of Telerate to provide, or any
inadequacies in or of, the Telerate-Provided Materials or assistance of Telerate
in the use thereof. Telerate shall provide to Omega all Telerate-Provided
Materials necessary for Omega to commence development of the Telerate Version of
TradeStation as soon as is reasonably possible following the date of this
Agreement. Should the Telerate-Provided Materials prove to be inadequate,
Telerate shall promptly provide to Omega, at its reasonable request, and at
Telerate's expense, such other equipment, materials and information of or
concerning Telerate as Omega reasonably requires in order to develop the
Telerate Version of TradeStation.
7. EFFECT OF NON-ACCEPTANCE. In the event that the Telerate Version of
TradeStation is not Accepted because of resort by Telerate to the provisions of
Subsection 9 below (or Omega notifies Telerate in writing that, after expending
the efforts described in Subsection 1 above, Omega is unable to develop the
Telerate Version of TradeStation to be in conformance with the Specification in
all material respects and will therefore cease its efforts in respect thereof):
(i) neither party shall have any further obligation whatever to the other party;
(ii) no license of any kind shall be
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granted to Telerate (and Omega shall retain all rights to the Telerate Version
of TradeStation) and the Pre-Sales License (defined in Section C.1(b) below)
shall at such time be automatically terminated; (iii) each party shall bear its
own costs and expenses in connection with this Agreement; and (iv) Omega shall
return to Telerate, at Telerate's expense, all of the Telerate-Provided
Materials.
8. PREPARATION FOR OPERATIONS; DOCUMENTATION. Telerate shall have a period
of up to sixty (60) days following the Acceptance Date to prepare for the
commencement of selling subscriptions for the Telerate Version of TradeStation.
Accordingly, it is anticipated that the Royalty Commencement Date shall be
approximately sixty (60) days following the Acceptance Date. During such period,
Telerate shall prepare all necessary Documentation. Omega shall provide to
Telerate, promptly following Acceptance, on disk in Microsoft Word format, all
documentation currently available for TradeStation, which Telerate shall then
modify as appropriate to create the Documentation. Omega will provide assistance
as reasonably requested by Telerate in connection with Telerate's preparation of
the Documentation.
9. FAILURE OF ACCEPTANCE TO OCCUR BY DATE CERTAIN. Notwithstanding
anything to the contrary contained in Subsection 4 above, in the event that
Omega fails to deliver the notice of completion referred to in Subsection 2
above by December 31, 1995, and such failure is not due, to any material extent,
to acts, omission or delays on the part of Telerate, Telerate shall have the
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<PAGE>
right to terminate this Agreement at any time after December 31, 1995 and prior
to January 15, 1996, by giving Omega written notice to that effect within such
period. Further, notwithstanding anything to the contrary contained in
Subsection 4 above, in the event that Acceptance does not occur by March 31,
1996, and the failure of Acceptance to occur by such date is not due, to any
material extent, to acts, omissions or delays on the part of Telerate, Telerate
shall have the right to terminate this Agreement at any time after March 31,
1996 and prior to April 15, 1996, by giving Omega written notice to that effect
within such period.
C. LICENSE OF THE TELERATE VERSION OF TRADESTATION.
1. EXCLUSIVE LICENSE.
(a) Effective as of (but not before) the Royalty Commencement Date,
Omega hereby grants to Telerate and its Affiliates an exclusive worldwide
license to promote, market, sell, sublicense and distribute, either directly
and/or through the use of Independent Distributors, the Telerate Version of
TradeStation and all related Documentation (but not any other version of
TradeStation), on a subscription or similar basis requiring periodic payment by
the subscriber, customer or end user, for installation solely in Workstations
and Stand-Alone Units for use by customers such as those Telerate currently
serves. The Telerate Version of TradeStation may be promoted and sold by
Telerate, its Affiliates and Independent Distributors as part of packages
containing other products and services of Telerate. Omega shall provide a master
set of disks of the Telerate Version of
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TradeStation to Telerate and Telerate, its Affiliates and Independent
Distributors may, subject to the requirements of Section M, copy such disks.
Telerate, its Affiliates and Independent Distributors are not licensed,
authorized or permitted in any manner to use, promote, market, sell, sublicense
or distribute any version of TradeStation or any part thereof or any other
product of Omega or any part thereof other than the Telerate Version of
TradeStation ("Other Products"), and will not reproduce, prepare derivative
works from, modify or display publicly any Other Products. Telerate, its
Affiliates and Independent Distributors are prohibited from using the Telerate
Version of TradeStation with any data feeds other than the current data feeds
generated by Telerate or its Affiliates as specified in Exhibit A-2 to this
Agreement or, provided the necessary Enhancement is made as provided for herein,
any similar data feeds of Telerate or its Affiliates generated in the future, or
any similar data feeds of Telerate or its Affiliates generated in the future
with respect to which an Enhancement is not necessary.
(b) Effective as of the date hereof and ending on the Royalty
Commencement Date (at which time the license granted in Subsection (a) above
shall become operative), Omega hereby grants to Telerate a license in the
Telerate Version of TradeStation for the sole purpose of testing and reviewing,
and following the Acceptance Date, advertising and promoting, the Telerate
Version of TradeStation to the extent necessary and appropriate, in Telerate's
reasonable judgment, to prepare for the sale, sublicensing and
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distribution of the Telerate Version of TradeStation as permitted herein (the
"Pre-Sales License").
2. RIGHTS RESERVED. It is understood that TradeStation is essentially the
same product as the Telerate Version of TradeStation, and that the development
of the Telerate Version of TradeStation involves no more than modifying the
current version of TradeStation to be compatible with the current data feeds of
Telerate and its Affiliates specified in Exhibit A-2 to this Agreement.
Accordingly, Omega retains, exclusively, and shall enjoy, exclusively, all
rights to promote, market, sell, modify, distribute, license and use, and to
reproduce, prepare derivative works from, modify or perform publicly or display,
TradeStation and any other product of Omega (whether now existing or hereafter
created or developed), or any part thereof, in any manner, in any version, and
for any purpose, and to enter into agreements and arrangements relating thereto
with any Person, which do not violate the restrictions contained in Subsection 3
below.
3. NON-COMPETITION.
(a) BY OMEGA. Omega shall not enter into any agreement or arrangement
with any of the Telerate Competitors to develop and then sell during the term of
this Agreement any Real-Time product which is compatible with data feeds of the
Telerate Competitors of substantially similar quality and content, as to the
types of data, as those currently generated by Telerate. Omega further agrees
that, in the event that Omega learns the specifications of data feeds of any of
the Telerate Competitors of substantially similar
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CONFIDENTIAL MATERIAL OMITTED
AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
quality and content, as to the types of data, as those currently generated by
Telerate, Omega shall not develop a new version of, or modify, TradeStation for
the purpose of making TradeStation compatible with such specifications and then
sell such new or modified version during the term of this Agreement.
(b) PERSONAL NON-COMPETE. Concurrently herewith, Omega shall cause
each of William and Rafael Cruz to execute the noncompetition agreement attached
as Exhibit B in order to evidence their respective agreements to be bound
personally by the covenants contained in Subsection 3(a). The failure of either
of William or Ralph Cruz to comply with such noncompetition agreement shall also
constitute a failure by Omega to comply with the applicable provisions of
Subsection 3(a).
D. ROYALTIES.
1. ROYALTY PAYMENTS. In consideration of Omega's grant of the exclusive
license to Telerate hereunder, effective as of the Royalty Commencement Date,
Telerate shall pay to Omega the following amounts:
(a) EXISTING TELETRAC SUBSCRIBER STAND-ALONE FEE. For as long as an
Existing TeleTrac Subscriber using a Stand-Alone Unit subscribes to, or
otherwise uses, the Telerate Version of TradeStation on such Stand-Alone Unit
(or a Workstation installed in place of that particular Stand-Alone Unit),
Telerate shall pay to Omega ****** per month per Stand-Alone Unit (including
after such time, if any, as such Stand-Alone Unit is converted to a
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CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION. ASTERISKS
DENOTE SUCH OMISSIONS
Workstation) for each such Existing TeleTrac Subscriber (the "Existing TeleTrac
Subscriber Stand-Alone Fee").
(b) NEW STAND-ALONE FEE. For as long as a New Stand-Alone Subscriber
subscribes to, or otherwise uses, the Telerate Version of TradeStation, Telerate
shall pay to Omega ****** per month per Stand-Alone Unit for each such New Stand
Alone Subscriber (the "New Stand-Alone Fee").
(c) WORKSTATION FEE. If the Telerate Version of TradeStation is
installed or later used in any Workstation, and the monthly Incremental Fee to a
Workstation Subscriber (viewed separately as to each Workstation) is the amount
specified below, Telerate shall pay to Omega the amount specified below per
month per Workstation for each Workstation Subscriber, for as long as such
Workstation Subscriber subscribes to, or otherwise uses, the Telerate Version of
TradeStation on such Workstation(s) (the "Workstation Fee"):
*************** ***************
--------------- ---------------
*************** ********************************
*************** ********************************
*************** ********************************
*************** ********************************
*************** ********************************
In no event shall the Workstation Fee be less than $70.00 per month per
Workstation.
2. EXCEPTIONS. Omega hereby acknowledges and agrees that no Existing
TeleTrac Subscriber Stand-Alone Fee, New Stand-Alone Fee or Workstation Fee
(collectively, the "Royalty Fee") payment is due with respect to (i) any copy of
the Telerate Version of
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TradeStation used by any subscriber subject to approval and returned to Telerate
within 90 days following initial delivery to such subscriber (except with
respect to amounts billed to such subscriber which such subscriber is obligated
to pay), (ii) any copy of the Telerate Version of TradeStation provided to a
subscriber on a free, trial basis, up to 90 days, but only with respect to the
free trial time given to such subscriber up to 90 days, (iii) any copy remaining
in the physical possession of, and used directly by, Telerate, its Affiliates or
Independent Distributors solely for review, advertising or promotion of the
Telerate Version of TradeStation, (iv) any copy given to a trade magazine or
similar medium solely for the purposes of review in connection with media
coverage, critique or review by such trade magazine or other medium of the
Telerate Version of TradeStation, or (v) any copies used by Telerate or its
Affiliates or Independent Distributors solely to test, maintain or support the
Telerate Version of TradeStation. Except as provided in this Subsection 2, and
in Subsection 1 above, there shall be no other uses by Telerate, its Affiliates
or Independent Distributors of the Telerate Version of TradeStation, so that,
except as provided in this Subsection 2, there may exist no use whatever of the
Telerate Version of TradeStation for which a Royalty Fee is not payable.
Telerate has informed Omega that it is Telerate's normal business practice to
impose stringent pricing guidelines on the sale and distribution of Telerate
products. Telerate agrees to impose equally stringent pricing guidelines with
respect to the sale,
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CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
sublicensing and distribution of the Telerate Version of TradeStation by
Telerate, its Affiliates and Independent Distributors so that each user of the
Telerate Version of TradeStation constitutes a Workstation or a Stand-Alone Unit
(as applicable) with respect to which a separate Royalty Fee is payable.
3. FIRST YEAR GUARANTY. Telerate hereby agrees that Omega shall be
entitled to receive guaranteed minimum aggregate Royalty Fees (regardless of the
aggregate Royalty Fees computed under Subsection 1 above) for the period
commencing on the Royalty Commencement Date and ending on the first anniversary
of the Royalty Commencement Date (the "First Anniversary") of ****************
************************************* (the "First Year Minimum"), payable in
accordance with Subsection 6 below.
4. SECOND YEAR GUARANTY. Telerate hereby agrees that Omega shall be
entitled to receive guaranteed minimum aggregate Royalty Fees (regardless of the
aggregate Royalty Fees computed under Subsection 1 above) for the period
commencing on the First Anniversary and ending on the second anniversary of the
Royalty Commencement Date (the "Second Anniversary") of *******************
*********** (the "Second Year Minimum"), payable in accordance with Subsection 6
below.
5. THIRD YEAR GUARANTY. Telerate hereby agrees that Omega shall be
entitled to receive guaranteed minimum aggregate Royalty Fees (regardless of the
aggregate Royalty Fees computed under Subsection 1 above) for the period
commencing on the Second
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CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSSIONS.
Anniversary and ending on the third anniversary of the Royalty Commencement Date
(the "Third Anniversary") of ********************************** (the "Third Year
Minimum"), payable in accordance with Subsection 6 below.
6. PAYMENTS; STATEMENTS.
(a) Subject to the following provisions of this Subsection 6, Royalty
Fees are due quarterly and are payable no later than the 60th day following the
end of the quarter to which they relate.
(b) On or before the 30th day following the end of the calendar month
containing the Royalty Commencement Date, Telerate shall pay to Omega an amount
equal to one-twelfth of the First Year Minimum (or, if such month is a partial
month, the pro-rated portion thereof). On or before the 30th day following the
end of the next eleven (11) consecutive calendar months thereafter, Telerate
shall pay to Omega an amount equal to one-twelfth of the First Year Minimum, and
on or before the 30th day following the end of the month containing the First
Anniversary (if by then the entire First Year Minimum has not been paid),
Telerate shall pay to Omega for the portion of such month ending on the First
Anniversary an amount equal to one-twelfth of the First Year Minimum (or, if
such month is a partial month, the pro-rated portion thereof), so that, after
all of such payments are made, Telerate has paid to Omega the entire First Year
Minimum.
(c) On or before the 30th day following the end of the calendar month
containing the First Anniversary, Telerate shall pay
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<PAGE>
to Omega an amount equal to one-twelfth of the Second Year Minimum (or, if such
month is a partial month, the pro-rated portion thereof). On or before the 30th
day following the end of the next eleven (11) consecutive calendar months
thereafter, Telerate shall pay to Omega an amount equal to one-twelfth of the
Second Year Minimum, and on or before the 30th day following the end of the
month containing the Second Anniversary (if by then the entire Second Year
Minimum has not been paid), Telerate shall pay to Omega for the portion of such
month ending on the Second Anniversary an amount equal to one-twelfth of the
Second Year Minimum (or, if such month is a partial month, the pro-rated portion
thereof) so that, after all of such payments are made, Telerate has paid to
Omega the entire Second Year Minimum.
(d) On or before the 30th day following the end of the calendar month
containing the Second Anniversary, Telerate shall pay to Omega an amount equal
to one-twelfth of the Third Year Minimum (or, if such month is a partial month,
the pro-rated portion thereof). On or before the 30th day following the end of
the next eleven (11) consecutive calendar months thereafter, Telerate shall pay
to Omega an amount equal to one-twelfth of the Third Year Minimum, and on or
before the 30th day following the end of the month containing the Third
Anniversary (if by then the entire Third Year Minimum has not been paid),
Telerate shall pay to Omega for the portion of such month ending on the Third
Anniversary an amount equal to one-twelfth of the Third Year Minimum (or, if
such month is a partial month, the pro-rated portion thereof) so
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<PAGE>
that, after all of such payments are made, Telerate has paid to Omega the entire
Third Year Minimum.
(e) Within sixty days following the end of each quarterly period, the
aforesaid monthly payments of the applicable year's minimum guaranteed Royalty
Fees shall be reconciled with the quarterly calculation of Royalty Fees for such
quarterly period, as follows. If the calculation of Royalty Fees for such
quarterly period results in a quarterly Royalty Fee amount which is greater than
an amount equal to one-fourth of the First Year Minimum, Second Year Minimum, or
Third Year Minimum (as applicable), then an amount equal to one-fourth of the
First Year Minimum, Second Year Minimum or Third Year Minimum (as applicable)
shall (assuming the required monthly payments of the applicable guaranteed
minimum Royalty Fees have been made) be deducted from the Royalty Fees
calculated to be payable for such quarterly period, and Telerate shall pay to
Omega, within said sixty (60) day period, the balance.
(f) Telerate shall provide to Omega the following statements with
respect to the calculation of Royalty Fees and the basis therefor:
(i) Within thirty (30) days following the end of each calendar
month (or part thereof, as the case may be) following the Royalty Commencement
Date, Telerate shall provide to Omega a separate statement covering the
subscriptions in effect for the Telerate Version of TradeStation during such
month which have been sold by Telerate or its Affiliates in each of Telerate's
three (3) market regions (the Americas, Europe/Gulf, and Asia/Pacific).
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Telerate represents and warrants that such three regions encompass all of the
regions in which subscriptions for the Telerate Version of TradeStation shall be
sold.
(ii) Within sixty (60) days following the end of each calendar
month (or part thereof, as the case may be) following the Royalty Commencement
Date, Telerate shall provide to Omega one statement covering the subscriptions
in effect for the Telerate Version of TradeStation during such month which have
been sold by all Independent Distributors of Telerate and its Affiliates.
(iii) Within sixty (60) days following the end of each quarterly
period following, and each anniversary of, the Royalty Commencement Date,
Telerate shall provide to Omega statements similar to those described in (i) and
(ii) above for the quarterly or annual (as applicable) period covered.
(iv) Each such monthly, quarterly and annual statement described
above shall set forth, with respect to each subscription for the Telerate
Version of TradeStation, (1) the subscriber's name, (2) the subscriber's account
number, (3) the product code (i.e., Existing TeleTrac Subscriber Stand-Alone
Unit, new subscriber Stand-Alone Unit or Workstation), (4) the quantity of units
per subscriber (i.e., the quantity of Stand-Alone Units or Workstations, as
applicable), (5) if a Workstation Subscriber, the amount of the Incremental Fee
billed, (6) the Royalty Fee owed (the Incremental Fee and Royalty Fee columns
shall be appropriately subtotaled and totaled in the statements), and (7) any
other
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information that is reasonably necessary to provide a reasonably detailed
understanding of the basis of the calculation of the Royalty Fees or the amount
due under Subsection 3, 4 or 5, as applicable.
(v) All such statements shall be formatted in a manner that
render such statements reasonably easy to read and understand by a reasonably
sophisticated third party. In the event that Omega is unclear about any items
set forth in a statement or how such items were determined, Telerate shall
assist Omega to understand such items or how they were determined, as the case
may be.
7. RECORDS. Telerate shall maintain complete and accurate records and
files of all documents, matters and transactions which are pertinent or relate
to the Telerate Version of TradeStation and the sale and use thereof by
Telerate, its Affiliates and Independent Distributors (with respect to
Affiliates and Independent Distributors, as more particularly described in
Subsection 8 below), including, without limitation, the number, at all times, of
Workstations and Stand-Alone Units in or from which the Telerate Version of
TradeStation has been installed or is being used, and all information, records
and files necessary to verify the correctness of the calculation and payment of
the Royalty Fees and other payments due Omega hereunder (the "Records").
Telerate shall monitor and keep track of all users of the Telerate Version of
TradeStation, including, without limitation, the number of Workstations and
Stand-Alone Units at all times in or from which
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the Telerate Version of TradeStation has been installed or is being used, so as
to be capable at all times of computing and paying the appropriate Royalty Fees
and other amounts due hereunder. Each Record shall be maintained and kept by
Telerate for a period of three (3) years following the creation thereof. Omega
shall have the right, upon reasonable prior written notice, at its expense, to
inspect and conduct or cause to be conducted audits of the Records during
Telerate's normal business hours once per year. Telerate shall fully cooperate
in all such inspections and audits. Omega has informed Telerate that it intends
to conduct a full audit of the Records annually. If any inspection or audit of
the Records discloses an underpayment to Omega of five percent (5%) or more of
the amount due, Telerate shall, promptly upon the demand of Omega, reimburse to
Omega the reasonable cost of the inspection or audit. Once a particular period
has been audited by Omega, Omega shall not again have the right to conduct an
audit with respect to such period. All information obtained by Omega and its
accountants from any such inspection or audit will be treated as Confidential
Information as specified in this Agreement and will be used solely for the
purpose of verifying the accuracy of the computation of the amounts due Omega
hereunder and in connection with resolving any dispute arising in connection
therewith.
8. AFFILIATES AND INDEPENDENT DISTRIBUTORS. For all purposes of this
Agreement, including, without limitation, this Section D, it is understood that
Telerate's Affiliates' and Independent Distributors' sale of subscriptions for,
or other
20
<PAGE>
sublicensing of, the Telerate Version of TradeStation to subscribers, customers
and other end users as permitted hereunder constitute the basis upon which the
Royalty Fees are computed and paid, as if Telerate were directly entering into
such subscription or sublicensing arrangements with customers, subscribers or
other end users of the Telerate Version of TradeStation, and that such Royalty
Fees shall not be based on the consideration, if any, received by Telerate from
its Affiliates and Independent Distributors for obtaining from Telerate the
right to enter into such subscription or sublicensing arrangements with
customers, subscribers or end users. Telerate shall take such steps as are
necessary to ensure that all transactions made by its Affiliates and Independent
Distributors pertaining to this Agreement are included in the Records, and
within all statements required to be rendered by Telerate under this Agreement,
and that all of such Records are capable of being audited at Telerate's New
Jersey offices upon the exercise by Omega of its inspection and audit rights
hereunder.
E. MARKETING EFFORTS.
1. EFFORTS.
(a) Commencing with the Acceptance Date, Telerate shall use
commercially reasonable efforts to promote, market, sell and/or sublicense the
Telerate Version of TradeStation throughout the world and, without limitation of
the foregoing, shall use commercially reasonable efforts to offer and promote
the Telerate Version of TradeStation to Existing TeleTrac Subscribers; provided,
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<PAGE>
however, that Telerate shall have complete control over, and discretion in
determining, the manner of promoting, marketing, selling and/or sublicensing the
Telerate Version of TradeStation.
(b) In the event that any Person contacts Omega to subscribe for the
Telerate Version of TradeStation or to obtain information about the Telerate
Version of TradeStation, Omega shall refer such caller to Telerate. Omega shall
have no authority to bind Telerate with respect to any such Person or any other
third party.
2. COMPETITION. Subject to the provisions of Section I and Section M,
nothing contained herein shall impair or restrict the right of Telerate, now or
in the future, to develop, procure or market products or services which may be
competitive with the Telerate Version of TradeStation or with any other product
or service offered by Omega, nor obligate Telerate to obtain any other products
or services which may currently or subsequently be offered by Omega, nor prevent
Telerate from entering into similar agreements with other companies, including
those in the same industry as Omega.
3. TRADEMARKS. Telerate shall have the right to market the Telerate
Version of TradeStation under whatever trademarks or service marks it feels are
appropriate and Omega shall have no proprietary rights in the marks used by
Telerate in connection with the Telerate Version of TradeStation or in the
packaging, advertising and promotional materials created by Telerate (except to
the extent the "TradeStation" trademark or another trademark of
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<PAGE>
Omega is used by Telerate in connection therewith). Omega acknowledges that the
names "TeleTrac" and "TeleTrac II" are proprietary to Telerate and Telerate
acknowledges that the names "Omega" and "TradeStation" are proprietary to Omega.
In the event that Telerate desires to use the "TradeStation" name or any
variation thereof in connection with its promotion, marketing or sale of the
Telerate Version of TradeStation, Omega shall, for a ten dollar, one-time
royalty, license the use of such name for such purpose to Telerate for the term
of this Agreement.
F. MAINTENANCE AND SUPPORT SERVICES FOR THE TELERATE VERSION OF TRADESTATION.
1. NOTIFICATION. During the term of this Agreement, each of Telerate and
Omega agrees to promptly notify the other in writing upon the discovery after
Acceptance of any Error (including a Material Error) which is capable of being
consistently duplicated.
2. ERRORS. During the term of this Agreement, upon the discovery of a
Material Error, Omega shall, at no additional charge to Telerate, use
commercially reasonable efforts to correct such Material Error as promptly as
practicable but Omega shall in any event commence to address the problem within
two business days after receiving written notice from Telerate of the discovery
of a Material Error. During the term of this Agreement, upon the occurrence of
any Error other than a Material Error, Omega shall
(a) commence to address the problem within five (5) business days
after receiving notice from Telerate of such Error, and
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<PAGE>
(b) use commercially reasonable efforts to correct such Error as
promptly as practicable in accordance with industry standards. The parties
acknowledge that there are certain Errors which are so insignificant that they
are not addressed until the next version of the subject program is released
("Insignificant Errors"). With respect to such Insignificant Errors, Omega will,
during the term of this Agreement, use commercially reasonable efforts to make
the required Modification at such time as Omega works on the Enhancement that
will result in the next version, if any, of the Telerate Version of TradeStation
being released.
The provisions of (a) and (b) above (together with access to the
Source Code to the extent permitted under the escrow agreement referred to in
Section J) shall constitute Telerate's sole remedy in the event of an Error
which is not a Material Error. In the event that Omega notifies Telerate that it
is unable to correct a Material Error, Telerate's sole remedy shall be to
correct such Material Error and to recover from Omega Telerate's reasonable
costs to correct such Material Error, or, if Telerate cannot correct the
Material Error, Telerate's sole remedy shall be to terminate this Agreement.
Omega shall not be responsible for any Errors or other problems to the extent
caused by Telerate's maintenance and support of the Telerate Version of
TradeStation.
3. TEMPORARY FIX. Upon the occurrence of an Error (including a Material
Error), Omega shall, if full correction of the Error will take an extended
period of time, and if requested by Telerate, and if technologically feasible,
provide a "temporary
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<PAGE>
fix" to alleviate the adverse consequences of the Error to the extent
practicable pending development of the Modification required fully to correct
the Error.
4. TRAINING. Following the Acceptance Date, Omega shall provide to
Telerate up to 480 man-hours (over twelve weeks) of on-site training with
respect to the Telerate Version of TradeStation at Telerate's facilities
worldwide. Omega will provide such training and support at Telerate's reasonable
request at no expense to Telerate except for reasonable actual out-of-pocket
expenses incurred, including, without limitation, airfare, hotel, meal and other
incidental costs and expenses, which will be reimbursed by Telerate within 30
days following submission of appropriate supporting documentation. Omega shall
provide Telerate with additional training at such times as may be mutually
agreed upon for mutually agreed upon fees.
5. PRIMARY SUPPORT. In light of the substantial number of hours of
free-of-charge training Omega will be providing to Telerate as described above
in Subsection 4, Telerate, and not Omega, shall be responsible for providing
primary support with respect to the Telerate Version of TradeStation to
Telerate's customers. Telerate shall use commercially reasonable efforts to
support and maintain the Telerate Version of TradeStation in a good and
professional manner in accordance with industry standards. However, in order to
assist Telerate from time to time in providing such support during the term of
this Agreement, Omega shall (a) make available personnel expertly trained with
respect to the
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Telerate Version of TradeStation to provide Telerate with remote diagnostic
support and maintenance services from Omega's offices during normal business
hours and (b) outside of normal business hours, by means of remote diagnostic
support and maintenance services provided from Omega's offices, assist Telerate
in providing emergency customer support services on an as-needed basis by making
a telephone number available to Telerate, which Telerate may call after-hours,
following which a representative of Omega will return the call within a
reasonable time. Omega shall, in accordance with industry standards, use
commercially reasonable efforts to maintain appropriate personnel and other
resources sufficient to perform its maintenance and support obligations under
this Agreement. The parties understand that Omega's support obligations are
intended to be secondary to Telerate's, and that Telerate's requests for support
shall be made only after Telerate has exhausted all reasonably available
internal means of solving the problem in question, including consultation with
Telerate's head technicians with respect thereto. It is further agreed that only
head technicians or regional managers of Telerate may contact Omega for
assistance.
G. TELERATE-REQUESTED ENHANCEMENTS.
1. CREATION.
Telerate and Omega anticipate that Telerate may desire that Omega
perform Enhancements from time to time during the term of this Agreement
(including, but not necessarily limited to, an Enhancement to make the Telerate
Version of TradeStation compatible
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<PAGE>
with the data feed currently being used to transmit Telerate financial market
data on which the existing TeleTrac software is used in Stand-Alone Units). In
the event that Telerate desires that an Enhancement be made, Telerate shall
provide Omega with written notice to that effect, which shall include, in as
much detail as is reasonably possible, the functional specification of the
Enhancement requested. Promptly after receipt of such notice, Omega and Telerate
shall endeavor, in good faith, (a) to determine whether the requested
Enhancement will add value to the Telerate Version of TradeStation, and, if so,
whether development of the Enhancement is justifiable and feasible in light of
all applicable circumstances, including the cost of developing the Enhancement,
and (b) assuming that the Enhancement will be valuable, justifiable and feasible
as aforesaid, (i) to mutually agree upon complete specifications for the
Enhancement, (ii) to mutually agree upon time-frames or parameters for the
development and completion of the Enhancement, (iii) to mutually agree upon the
testing procedures that will be used to test the Enhancement for acceptance
purposes, and (iv) to mutually agree upon the costs, fees and other charges
which will be paid by Telerate to Omega for the development of the Enhancement,
including the timing and amount of any applicable progress payments. Provided
that all of the foregoing is agreed upon in a writing signed by the parties,
Omega shall use commercially reasonable efforts to develop and complete the
Enhancement in accordance with the agreement of the parties. In the event that
the Enhancement developed by Omega does not pass the
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acceptance tests thereof mutually agreed upon, and cannot be corrected by Omega
within a reasonable time thereafter so as to be capable of passing such tests,
Telerate's sole remedy shall be to recover from Omega all amounts paid to Omega
for developing the Enhancement, and Telerate shall have no right to make any use
of, or to sell, sublicense or otherwise distribute or incorporate, such
Enhancement.
2. INCORPORATION. In the event that Omega performs Enhancements, such
Enhancements shall be the property solely of Omega and shall be subject to all
of the provisions contained herein relating to the Telerate Version of
TradeStation generally.
H. OMEGA GENERATED ENHANCEMENTS.
During the term of this Agreement, Omega shall, at its sole cost and
expense (subject to the next sentence), and as promptly as is practicable,
modify the Telerate Version of TradeStation to make the Telerate Version of
TradeStation consistent with any enhancements, improvements or upgrades made to
the TradeStation software generally. To the extent that it is necessary for
Telerate to provide to Omega equipment, materials or information of or
concerning Telerate in order to enable Omega so to modify the Telerate Version
of TradeStation, Telerate shall provide same at its expense and shall, at its
expense, provide to Omega such technical assistance in connection therewith as
Omega may reasonably require.
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I. TITLE TO TELERATE VERSION OF TRADESTATION.
Telerate acknowledges and agrees that, as between Telerate and Omega,
Omega is and shall remain the sole and exclusive owner of all rights, including
copyright, in TradeStation and the Telerate Version of TradeStation, and all
Enhancements thereof, including, but not limited to, all rights in and to the
"Easy Language" portion of TradeStation and the Telerate Version of
TradeStation, and that the same is or will be protected by applicable copyright
laws. Telerate shall display appropriate copyright notices on all packaging,
documentation, advertising, and promotional materials containing or describing
the Telerate Version of TradeStation to the effect that the Telerate Version of
TradeStation, and any Enhancements thereto, have been created and developed by
Omega. In addition, the sign-on screen message and the "About" box of the
Telerate Version of TradeStation program, as well as all Documentation, shall
conspicuously display the appropriate copyright notice and a legend to the
effect that the Telerate Version of TradeStation and any Enhancements have been
created and developed by Omega.
J. ESCROW ARRANGEMENT.
Within sixty (60) days of execution of this Agreement, the parties will
enter into an escrow agreement, at Telerate's expense, satisfactory in form and
substance to both parties, with an independent third-party escrow agent (whose
fees and expenses will be paid by Telerate) mutually acceptable to the parties,
pursuant to which Omega shall deposit, and the escrow agent shall accept
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deposit of, the Source Code for the Telerate Version of TradeStation. The escrow
agreement shall provide Telerate with the right to inspect and verify the items
deposited by Omega with the escrow agent, as more fully explained below.
Telerate shall not copy any of the items deposited by Omega with the escrow
agent while the items are deposited with the escrow agent, as more fully
explained below. The escrow agreement shall also require that Omega update the
escrow deposit within ten (10) days of the completion and acceptance of any
Enhancement to the Telerate Version of TradeStation. The escrow agreement shall
also contain the following provisions: (1) that the Source Code, and any
modifications thereto, be provided to the escrow agent on disk; (2) that upon
the initial deposit of, and after each modification to, the Source Code, one
representative of Telerate will be permitted, under the supervision of Omega and
at Omega's premises, to compile the Source Code in order to enable such
representative to generate an executable program for the Telerate Version of
TradeStation (and such representative can take back such executable program to
Telerate for the sole purpose of verifying that the Source Code is complete);
(3) that in no event will such representative be permitted to take any notes, or
to view any screen longer than is absolutely necessary to compile an executable
program, or to remove or take with him or her any materials other than the
compiled executable program; (4) that Telerate shall have access to the escrow
and the Source Code only in the event that (i) an Error (other than an
Insignificant Error) has occurred which Omega has
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notified Telerate Omega is unable to correct, or an Event of Default has
occurred with respect to Omega based upon its failure to correct an Error (other
than an Insignificant Error), or (ii) Omega is in default under this Agreement
pursuant to Section N.2.(a)(iv) or (v), and Telerate has not terminated this
Agreement as a result thereof and Omega's trustee in bankruptcy has rejected
this Agreement or has refused to assume it; (5) that in order to obtain access
to the escrow and the Source Code, Telerate must deliver to the escrow agent and
to Omega an affidavit, made by a duly authorized officer on behalf of Telerate,
to the effect that one of the conditions in subparagraph (4) above has occurred,
following which Omega shall have the right, exercisable by similar affidavit
delivered to the escrow agent and Telerate, to contest Telerate's right to have
access to the Source Code, in which event the issue shall be resolved in
accordance with a mutually agreed-upon, expeditious dispute-resolution mechanism
set forth in the escrow agreement; (7) that, in the event Telerate gains access
to the Source Code, it may use the Source Code for the sole purpose of
correcting Errors (which, at Omega's election, shall be performed at Omega's
premises under Omega's supervision) or, in the event of an Event of Default with
respect to Omega pursuant to Section N.2.(a)(iv) or (v) (provided that Telerate
does not terminate this Agreement as a result thereof and Omega's trustee in
bankruptcy has rejected this Agreement or
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has refused to assume it), to correct Errors and to otherwise maintain and
support the Telerate Version of TradeStation for the term of this Agreement
(and, in the event that Omega is in liquidation or has ceased operations, to
make Enhancements during the term of this Agreement, any such Enhancements to be
the property solely of Omega); and (8) that, except as specifically provided in
Section Q.4, the escrow agreement shall automatically terminate, and Telerate
shall have no further right to gain access to or use the Source Code, upon the
expiration or any other termination of this Agreement. As long as Omega executes
the escrow agreement, the failure of the escrow agreement to become effective
(by reason of Telerate's or the escrow agent's refusal to sign it or other cause
beyond Omega's control) shall not affect, diminish or impair any right or
obligation of either party under this Agreement. The provisions of this Section
J contain the only circumstances under which Omega shall ever be obligated to
disclose the Source Code to Telerate. The form of escrow agreement agreed upon
by the parties is attached as Exhibit C. The parties agree that Sun Bank/Miami,
N.A., 777 Brickell Avenue, Miami, Florida, is an acceptable escrow agent.
K. REPRESENTATIONS AND WARRANTIES.
1. GENERAL. Each party hereby represents, warrants and covenants that (a)
it has the unrestricted right to enter into and perform this Agreement, (b) it
is a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation and has the power to own its assets
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and properties and to carry on its business as now being conducted and (c) this
Agreement (w) has been duly authorized, executed and delivered, (x) constitutes
the valid and binding obligation of such party enforceable in accordance with
its terms, (y) will not violate, to such party's actual knowledge, any law,
statute, rule or regulation, or court or administrative agency judgment or
decree, and (z) will not conflict with or result in any breach or default of any
of the terms and conditions of any document or any agreement to which such party
is a party.
2. INTELLECTUAL PROPERTY.
(a) Omega hereby represents and warrants that there are no pending or
threatened actions or litigation against Omega regarding intellectual property
infringement or breach of license or maintenance agreements which would
materially and adversely affect Telerate's use of the Telerate Version of
TradeStation, and that Omega has received no written notice, and is not
otherwise aware, of any claim or potential claim against it by any person with
respect to the ownership or use of any intellectual property relating to
TradeStation.
(b) In the event that any of the representations and warranties of
Omega contained in Subsection 1 or 2(a) above are false, and a third party
brings suit against Telerate during the term of this Agreement asserting therein
rights in the Telerate Version of TradeStation or damages or other relief as a
result of an alleged infringing use by Telerate of the Telerate Version of
TradeStation ("Indemnifiable Claims"), Omega will, subject to the
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provisions and limitations set forth below, assume at its expense the defense of
such suit using counsel reasonably acceptable to Telerate, and indemnify
Telerate against any money damages or costs awarded in such suit which are based
upon the Indemnifiable Claims. Omega's obligations under this Subsection (b)
shall be excused if Telerate fails to provide to Omega prompt notice of any
Indemnifiable Claim asserted or threatened against Telerate, but only to the
extent that the delay in giving notice is prejudicial to Omega or otherwise
prejudices Omega's ability to answer, defend against or settle such
Indemnifiable Claim. Omega shall have exclusive control of the defense of such
lawsuit and all negotiations relating to its settlement, and Telerate shall
assist Omega at Omega's request in all necessary respects in connection with the
defense and/or settlement of the lawsuit. However, Omega's total liability to
incur out-of-pocket costs in the defense of any such suit or suits and to pay
damages or costs awarded in or resulting from any such suit or suits (whether by
judgment, settlement, or otherwise) shall be limited to the amount theretofore
paid to Omega by Telerate under this Agreement, and Telerate shall advance to
Omega any amounts required to be expended by Omega in excess of such limit.
Amounts so advanced shall be credited to future payments due from Telerate to
Omega under this Agreement. The foregoing provisions of this Subsection (b)
state the entire liability of Omega to Telerate in connection with any
third-party lawsuit brought against Telerate for which indemnity pursuant to
this Subsection (b) is available.
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3. DISCLAIMER. EXCEPT FOR THE EXPRESS WARRANTIES CONTAINED IN THIS SECTION
K, OMEGA EXPRESSLY DISCLAIMS ANY WARRANTIES, EXPRESS OR IMPLIED, EITHER IN FACT
OR BY OPERATION OF LAW, STATUTORY OR OTHERWISE, INCLUDING WITHOUT LIMITATION
MERCHANTABILITY AND FITNESS FOR PARTICULAR PURPOSE OR USE, AND MAKES NO
REPRESENTATIONS OR WARRANTIES REGARDING TRADESTATION OR THE TELERATE VERSION OF
TRADESTATION, OR THE COPYRIGHTS OF OMEGA THEREIN, INCLUDING, WITHOUT LIMITATION,
THEIR SCOPE OR VALIDITY, OR ANY SYSTEMS, PRODUCTS OR SERVICES BASED THEREON OR
MAKING USE THEREOF, INCLUDING, WITHOUT LIMITATION, NON-INFRINGEMENT OF RIGHTS OF
THIRD PARTIES.
4. PERFORMANCE. Omega warrants and covenants that (a) the Telerate Version
of TradeStation (i) shall be free from any material defects in material and
workmanship, and (ii) shall perform in accordance with the Specification in all
material respects and (b) the services to be provided to Telerate as specified
herein shall be performed in a good and professional manner in accordance with
industry standards.
L. LIMITATION OF LIABILITY.
1. CERTAIN DAMAGES. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN
THIS AGREEMENT, IN NO EVENT SHALL OMEGA BE LIABLE TO TELERATE, REGARDLESS OF THE
TYPE OR NATURE OF THE BREACH OR OTHER ACTION OR OMISSION ASSERTED OR PROVED, FOR
SPECIAL, CONSEQUENTIAL, INDIRECT OR INCIDENTAL DAMAGES OF ANY KIND, INCLUDING,
WITHOUT LIMITATION, LOSS OF INCOME, PROFITS, REVENUE, MARKET SHARE OR THE LIKE.
FURTHER, IN NO EVENT SHALL TELERATE BE
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ENTITLED TO ASSERT AGAINST OR RECOVER FROM OMEGA ANY DAMAGES OTHER THAN ITS
DIRECT, ACTUAL, OUT-OF-POCKET DAMAGES WHICH, IN ALL EVENTS, SHALL BE CAPPED AT
THE AMOUNT OF THE TOTAL PAYMENTS ACTUALLY RECEIVED BY OMEGA AS OF SUCH DATE
PURSUANT TO THIS AGREEMENT. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED
IN THIS AGREEMENT, BUT EXCEPT AS SET FORTH IN THE LAST SENTENCE OF THIS SECTION
L.1, IN NO EVENT SHALL TELERATE BE LIABLE TO OMEGA, REGARDLESS OF THE TYPE OR
NATURE OF THE BREACH OR OTHER ACTION OR OMISSION ASSERTED OR PROVED, FOR
SPECIAL, CONSEQUENTIAL, INDIRECT OR INCIDENTAL DAMAGES OF ANY KIND, INCLUDING,
WITHOUT LIMITATION, LOSS OF INCOME, PROFITS, REVENUE, MARKET SHARE OR THE LIKE.
FURTHER, IN NO EVENT SHALL OMEGA BE ENTITLED TO ASSERT AGAINST OR RECOVER FROM
TELERATE ANY DAMAGES OTHER THAN ITS DIRECT, ACTUAL, OUT-OF-POCKET DAMAGES
(WHICH, IT IS AGREED, WOULD INCLUDE THE RIGHT TO RECOVER FROM TELERATE ANY
AMOUNTS DUE TO BE PAID OMEGA BY TELERATE PURSUANT TO SECTION D OF THIS AGREEMENT
WHICH ARE NOT PAID BY TELERATE, INCLUDING APPLICABLE STATUTORY, PRE-JUDGMENT AND
POST-JUDGMENT INTEREST THEREON). THE FOREGOING LIMITATIONS ON THE LIABILITY OF
TELERATE SHALL NOT APPLY IN ANY RESPECT TO ANY CLAIM OF OMEGA BASED UPON (a)
TELERATE, ITS AFFILIATES OR INDEPENDENT DISTRIBUTORS ENGAGING IN ACTIVITIES
WHICH EXCEED THE SCOPE OF THE LICENSE GRANTED TO TELERATE IN SECTION C, (b) A
BREACH OR VIOLATION BY TELERATE, ITS AFFILIATES OR INDEPENDENT DISTRIBUTORS OF
ANY OF THE PROVISIONS OF SECTION I OR SECTION M, OR (c) ANY MISUSE, IMPROPER OR
UNLAWFUL USE OR MISAPPROPRIATION OR INFRINGEMENT BY TELERATE, ITS AFFILIATES OR
INDEPENDENT DISTRIBUTORS OF ANY
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TRADEMARK, SERVICE MARK, COPYRIGHT, TRADE SECRET, OTHER INTELLECTUAL PROPERTY OR
CONFIDENTIAL OR PROPRIETARY INFORMATION OF OMEGA.
2. USE. If a temporary restraining order, preliminary injunction or final
injunction is obtained against Telerate's (or Telerate's customers') use of the
Telerate Version of TradeStation due to an infringement of a patent or
copyright, or an appropriation of a trade secret, Omega will promptly, at its
option and sole expense, either (a) procure for Telerate (and Telerate's
customers) the right to continue using the Telerate Version of TradeStation in
its then current phase of development, or (b) replace or modify the Telerate
Version of TradeStation in its then current phase so that it no longer infringes
such patent or copyright or constitutes an appropriation of a trade secret; or
if Omega is unable to promptly effect (a) or (b) above, then, (c), as Telerate's
sole and exclusive remedy, accept Telerate's return of the Telerate Version of
TradeStation (in which event this Agreement shall be deemed terminated) and
refund to Telerate, subject to the provisions of Subsection 1 above, the full
amount of Telerate's actual damages sustained as a result of the infringement or
appropriation up to the total amount paid by Telerate to Omega to date under
this Agreement.
M. CONFIDENTIALITY; TRADE SECRETS.
The parties recognize and acknowledge that, in connection with this
Agreement, they may disclose to each other confidential or proprietary
information (the "Confidential Information").
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"Confidential Information" shall mean the terms of this Agreement (as to both
parties), the Telerate-Provided Materials, the Records and the statements to be
rendered by Telerate to Omega pursuant to this Agreement (as to Telerate), the
Source Code, the Object Code, and the Executable Code for TradeStation and the
Telerate Version of TradeStation (as to Omega), as well as any other information
or data received by either party from the other which has been marked
"Proprietary and Confidential" by the disclosing party, or in respect of which
the receiving party has received from the disclosing party specific written
notice of its proprietary and confidential nature. Each party agrees to use the
Confidential Information solely as contemplated under this Agreement and to hold
in confidence and to protect all Confidential Information against disclosure to
unauthorized third parties by using the same standard of care as it applies to
its own confidential or proprietary information. All materials and documents
supplied hereunder shall be and remain the property of the disclosing party, and
the receiving party agrees to limit dissemination of, and access to, such
materials and documents to its personnel having a need to know and agrees to
return or destroy all such materials and documents (including purging any
electronically stored records) upon request of the disclosing party. The above
restrictions shall not apply to information in the public domain or generally
known or which the receiving party can demonstrate has been independently
developed by it prior to disclosure or was otherwise known to the receiving
party prior to disclosure or was rightfully acquired by the
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receiving party from third parties, or which is approved for release by the
written authorization of the disclosing party, or which is required to be
disclosed by law or regulation (including in connection with any securities
filings, reports or prospectuses made or distributed or required to be made or
distributed by either party). In addition to and without limitation of the
foregoing, (a) Telerate acknowledges and agrees that the Source Code, Object
Code and Executable Code for TradeStation and the Telerate Version of
TradeStation (as same may be enhanced by Omega) contain and will contain trade
secrets of Omega, and Telerate further agrees that it shall not (i) in any way
attempt to discern Omega's trade secrets or proprietary information relating to
TradeStation or the Telerate Version of TradeStation (as same may be enhanced),
including without limitation the Source Codes, Object Codes and Executable Codes
therefor (unless such discernment is not a violation of this Agreement or the
escrow agreement referred to in Section J or a result of disclosures made by
Omega to Telerate), or (ii) disassemble or decompile the subject software, or
perform any like operation commonly known as "reverse engineering" with respect
thereto, and (b) Omega acknowledges and agrees that the current Telerate twin
environment API included in the Telerate-Provided Materials, as same may be
modified, shall not be used by Omega for any purpose other than in connection
with the license granted hereunder; provided, however, that the foregoing
prohibition shall not apply to the current Telerate twin environment API, as
same may be modified, if, but only if, Telerate publishes such current or
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modified Telerate twin environment API to the information industry in a general
announcement for the purpose of making such API, as same may have been modified,
freely available without charge by Telerate and creating an "open system" by
which computer software publishers may deal directly with Telerate subscribers
whose devices employ such API, as same may have been modified. Omega
acknowledges that Telerate may, during and following the term of this Agreement,
engage in active efforts to develop a Real-Time product which is compatible with
its data feeds that performs many of the same, or similar, functions as those
performed by the Telerate Version of TradeStation (as same may be enhanced
pursuant to this Agreement). Omega recognizes and agrees that the general
functionality (i.e., system testing, system automation, indicators, alerts on
indicators, system optimization, generation of commentary on the interpretation
of an indicator, and color coding of bar charts based upon user-defined
criteria, use or display of bar charts, candlestick charts, point and figure
charts, market profiles, multiple bar charts on a screen, bar charts and studies
on a screen, sizable chart windows, printing functions such as chart printing
(WYSIWYG), data printing (tabular printing), automated printing and full
historical printing (all data in history), and functions and displays such as
password-based security, password-based permissioning, display of quotations and
news with charts, automatic display of system alerts and alarms, storage of
multiple pages (trade plans) in memory (RAM or on disk), retrieval of historical
data from offsite data source (manual and automatic), saving charts and data to
disk, sharing charts and data over
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network, user editing of historical data and user-defined data items) performed
and to be performed by TradeStation and the Telerate Version of TradeStation,
respectively, as between Omega and Telerate, do not constitute trade secrets of
Omega. However, the parties acknowledge that the particular ways in which
TradeStation and the Telerate Version of TradeStation implement, present and
offer (or will implement, present and offer, as the case may be) such
functionality may contain protectable copyrights and trade secrets of Omega.
N. TERM; EVENTS OF DEFAULT; AND TERMINATION.
1. TERM; OPTION TO EXTEND TERM. The term of this Agreement shall commence
on the date hereof and, provided that Acceptance occurs, shall, subject to each
of the early termination events specified in this Agreement, terminate on the
Third Anniversary. Subject to the early termination events specified in this
Agreement, Telerate shall have an option to extend the term of this Agreement
for one additional year, so that its expiration date is the fourth anniversary
of the Royalty Commencement Date (the "Extension Option"). In order to exercise
the Extension Option, Telerate must give Omega written notice to that effect no
later than the 180th day following the Second Anniversary. If the Extension
Option is exercised by Telerate, it shall be irrevocable, and, (a) this
Agreement shall continue in full force and effect, subject to the early
termination events specified herein, until the fourth anniversary of the Royalty
Commencement Date (the "Fourth Anniversary"), (b) Telerate agrees that Omega
shall be entitled to receive guaranteed minimum aggregate Royalty Fees
(regardless of
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CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMSSION. ASTERSIKS DENOTE SUCH OMISSIONS.
the aggregate Royalty Fees computed under Section D.1) for the period commencing
on the Third Anniversary and ending on the Fourth Anniversary of the greater of
(i) ********************************* and (ii) the actual aggregate Royalty Fees
payable for the period commencing on the Second Anniversary and ending on the
Third Anniversary (the "Fourth Year Minimum"), (c) the Fourth Year Minimum shall
be paid to Omega in monthly installments in the same manner as the first three
year's guaranteed minimums are payable, subject to quarterly reconciliation
against the calculation of actual Royalty Fees in the same manner as set forth
in Section D.6, and (d) Telerate shall continue to supply statements to Omega
and maintain Records with respect to such fourth year in the same manner and to
the same extent as it is required to do so with respect to the first three
years, as set forth in Section D.
2. EVENTS OF DEFAULT.
(a) Any one or more of the following shall constitute an Event of
Default hereunder:
(i) Telerate fails to pay, when due, any amount required to be
paid by it under Section D of this Agreement, if such payment is not made within
thirty (30) days after Omega gives Telerate notice of such failure to pay;
(ii) (A) Omega fails materially (it being understood that if the
agreement or obligation in question is already subject to a materiality
standard, the use of the word material here shall not further alter such
standard) to comply with or perform any agreement or obligation hereunder (or
either William Cruz or Rafael
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Cruz, in cases where he is not acting on behalf of Omega, takes any action or
enters into any transaction which would, if done by or on behalf of Omega,
constitute a material failure to comply with or perform an agreement or
obligation of Omega hereunder) if such failure is not remedied on or before the
thirtieth day after notice of such failure; provided, however, that, in the
event such failure cannot, through the use of commercially reasonable efforts,
reasonably be remedied within such 30-day period, if Omega commences to remedy
the failure within said 30-day period and diligently proceeds with such remedy
until it is completed, no Event of Default shall be deemed to have occurred, or
(B) Telerate fails materially (it being understood that if the obligation or
agreement in question is already subject to a materiality standard, the use of
the word material here shall not further alter such standard) to comply with or
perform any agreement or obligation hereunder (other than failure to make a
payment, which is covered by Subsection (i) above) if such failure is not
remedied on or before the thirtieth day after notice of such failure; provided,
however, that, in the event such failure cannot, through the use of commercially
reasonable efforts, reasonably be remedied within such 30-day period, if
Telerate commences to remedy the failure within said 30-day period and
diligently proceeds with such remedy until it is completed, no Event of Default
shall be deemed to have occurred;
(iii) a representation or warranty made or deemed to have been
made hereunder by Omega or Telerate (as the case may
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be) proves to have been false or misleading in any material respect when made
and the effects of the materially false or misleading representations and
warranties are material and adverse to the other party and such effects cannot
be cured or eliminated within a reasonable period of time after notice thereof;
(iv) Omega or Telerate (as the case may be) (A) commences a
voluntary case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy, insolvency,
corporation or other similar law now or hereafter in effect that authorizes the
reorganization or liquidation of such party or its debts or the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or (B) shall consent to any such relief or to
the appointment of or taking possession by any such official in an involuntary
case or other proceeding commenced against it, or (C) makes a general assignment
for the benefit of creditors, or (D) admits in writing its inability to pay its
debts as they become due, or (E) takes any corporate action to authorize any of
the foregoing; or
(v) An involuntary case or other proceeding shall be commenced
by persons that are not bound by this Agreement against Omega or Telerate (as
the case may be) seeking liquidation, reorganization or other relief with
respect to it or its debts under any bankruptcy, insolvency or other similar law
now or hereafter in effect seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any
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substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of sixty (60) calendar days;
or an order is entered by a court of competent jurisdiction affecting
substantially all of the property or affairs of Omega or Telerate (as the case
may be) under bankruptcy, insolvency or other similar laws as now or hereafter
in effect and such order shall remain undismissed and unstayed for a period of
sixty (60) calendar days.
(b) Upon the occurrence of an Event of Default described in Section
N.2(a)(i), in addition to any other rights and remedies available to Omega
(including, without limitation, the right to recover all amounts not paid,
together with statutory, pre-judgment and post-judgment interest thereon), Omega
shall be entitled, in its sole discretion, to elect to terminate this Agreement
and the license granted to Telerate hereunder immediately upon written notice to
Telerate.
(c) Subject to the provisions of Section F.2 and Section L, upon the
occurrence of any other Event of Default by either party, in addition to any
other rights and remedies available to the non-defaulting party, the
non-defaulting party shall be entitled, in its sole discretion, to terminate
this Agreement upon thirty (30) days' prior written notice to the defaulting
party.
(d) REMEDIES UPON ORDER FOR RELIEF BEING ENTERED UNDER BANKRUPTCY
CODE. If an Event of Default described in Section N.2(a) (iv) or (v) shall have
occurred with respect to Omega, and an order for relief pursuant to 11 U.S.C.
/section/101, ET SEQ., as amended
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or supplemented from time to time (the "Bankruptcy Code") shall have been
entered, Telerate may without any further action or notice and at its sole
discretion, either (i) deem this Agreement to be terminated effective as if such
termination had occurred immediately before the date of entry of any such order
for relief; (ii) seek to obtain upon an expedited basis such approval from a
court of competent jurisdiction as may actually be necessary and required to
effect immediate termination of this Agreement; or (iii) seek to obtain upon an
expedited basis such approval from a court of competent jurisdiction as may
actually be necessary and required to compel Omega or its trustee-in-bankruptcy
to assume or reject this Agreement. Each of the parties hereto specifically
agrees that (a) each of the termination provisions contained in this Section has
been specifically bargained for, (b) each party has consented to termination of
this Agreement at the time and in the manner authorized by this Section and (c)
neither party shall in any way attempt or assist any other party that may
attempt to delay, oppose or avoid any such termination of this Agreement.
(e) RIGHTS AND OBLIGATIONS OF PARTIES PENDING ASSUMPTION OR REJECTION
OF THIS AGREEMENT IN THE EVENT OF BANKRUPTCY OF OMEGA. In the event of the
commencement of a case under the Bankruptcy Code by or against Omega, and during
the period prior to the entry of an order directing or authorizing Omega or its
trustee-in-bankruptcy to assume, reject or otherwise terminate this Agreement,
Telerate may exercise its rights under Section 365(n) of the Bankruptcy Code, as
such section may be amended or supplemented
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from time to time, and the exercise of such rights or resort to any remedies
provided thereunder shall not be deemed the exclusive rights and/or remedies
available to Telerate, but Telerate is entitled to obtain any relief to the
fullest extent provided by applicable bankruptcy or nonbankruptcy law (except as
limited by this Agreement).
(f) RIGHTS AND OBLIGATION OF PARTIES AFTER REJECTION OF THIS
AGREEMENT IN THE EVENT OF BANKRUPTCY OF OMEGA. Omega specifically acknowledges
and agrees that, in addition to the rights and remedies of Telerate under
Section 365(n) of the Bankruptcy Code, as such section may be amended or
supplemented from time to time, the rights and remedies of Telerate set forth in
this Section have been specifically bargained for and Omega will not attempt to
delay or oppose Telerate's exercise of such rights:
(i) Omega or its trustee-in-bankruptcy shall allow Telerate
without any interference by Omega or its trustee-in-bankruptcy to exercise all
of its rights, including rights to prosecute or complete pending applications
for trademarks and service marks for the Telerate Version of TradeStation or to
seek other necessary governmental action and to take such actions as may be
necessary to prevent infringement on, or violation of, any exclusive rights
granted to Telerate by this Agreement;
(ii) In the event that Omega's trustee-in-bankruptcy rejects
this Agreement or refuses to assume it (and Telerate does not elect to terminate
this Agreement), Telerate shall be entitled to have access to and use, and Omega
shall not
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interfere with Telerate's right to use, the Source Code, Object Code, Executable
Code and Documentation relating to the Telerate Version of TradeStation and any
Enhancements thereof in accordance with this Agreement, and, as to the Source
Code, in accordance with, and as limited by, the provisions of SECTION J hereof
and the escrow agreement to be executed pursuant thereto; and
(g) The parties further acknowledge and agree that all provisions
relating to the escrow arrangement constitute a supplementary agreement as such
term is used in Section 365(n) of the Bankruptcy Code.
(h) The provisions set forth in Sections N.2(c) through (g) shall be
deemed to be material nonseverable parts of the Agreement.
3. EFFECT ON SUBSCRIBERS. Upon termination of this Agreement for any
reason, including, without limitation, the expiration hereof, Telerate may not
enter into any new subscriptions or other agreements or arrangements for the use
of the Telerate Version of TradeStation, or agree to increase, or increase, the
number of Stand-Alone Units, Workstations or users with respect to any
subscriptions. Any existing subscriptions, as of the date of termination, may be
continued until the expiration of such subscriptions and renewed (provided that
no additional users, Stand-Alone Units or Workstations are added) pursuant to
the terms of such subscriptions, and Telerate shall be obligated to continue to
pay, and Omega will continue to receive, Royalty Fees for, and other amounts due
hereunder in respect of or based upon,
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such existing subscriptions for as long as the Telerate Version of TradeStation
is in use. No minimum royalty guarantees shall be in effect following the Third
Anniversary unless the Extension Option is exercised. At termination, Telerate
shall provide to Omega a complete and accurate list of all then current
subscribers and customers for the Telerate Version of TradeStation, which shall,
for each subscriber and customer, set forth the expiration date of the
subscription (or indicate that it is renewable on a periodic basis, identifying
the period, if appropriate) and which shall include all other information
required to be included in the statements required to be delivered by Telerate
under Section D.6 hereof. Such statements shall continue to be rendered on a
monthly, quarterly and annual basis (in the manner set forth in Section D.6)
until all subscriptions for, and uses of, the Telerate Version of TradeStation
have ceased. The expiration or other termination of this Agreement shall not
affect or impair Omega's audit and inspection rights granted hereunder, or
Telerate's duties to maintain the Records, which shall continue at least until
all subscriptions for and uses of the Telerate Version of TradeStation have
terminated and a full and final audit has been conducted by Omega, and until all
disputes, if any, concerning payment of Royalty Fees and other amounts due
hereunder have been fully and finally resolved.
O. NOTIFICATION OF OFFER.
If, at any time during the term of this Agreement, Omega receives a bona
fide offer that it is willing to accept from a non-
49
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Affiliated, unrelated third party who is not an employee of Omega to (i) acquire
Omega or substantially all of Omega's assets or (ii) acquire a substantial
portion of the stock or assets of Omega, or Omega enters into serious and
substantial negotiations with respect thereto, Omega shall notify Telerate in
writing of the fact that it has received such an offer or has commenced such
serious negotiations. It is understood that no such notification is required to
be given by Omega in connection with any public offering of its capital stock.
Omega is under no obligation, however, to afford to Telerate the right to match
or to make any offer, to enter into any negotiations of any kind with Telerate,
or to disclose to Telerate the nature or terms of the offer or negotiations, the
identity of the offeror or party with whom Omega is negotiating, or any other
fact or circumstance of or relating to the offer or the negotiations. Any such
notice given by Omega under this Section O shall be held in strict confidence by
Telerate.
P. NON-SOLICITATION.
To the fullest extent permitted by law, Omega agrees not to solicit the
employment of or employ any employee of Telerate or any of its Affiliates, and
Telerate agrees not to solicit the employment of or employ any employee of Omega
or any of its Affiliates, in each case, during the period commencing the date
hereof and ending on the date that is twenty-four (24) months following the
expiration or termination of this Agreement;
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provided, however, in no event shall such period of restriction terminate prior
to June 30, 1998.
Q. MISCELLANEOUS.
1. NOTICES. All notices, requests and other communications hereunder shall
be in writing and shall be delivered in person or sent by commercial overnight
courier (such as Fedex) or certified mail, return receipt requested:
(a) If to Telerate, to:
Dow Jones Telerate, Inc.
One World Financial Center
200 Liberty Street
New York, NY 10281
Attention: President
with a copy to:
Dow Jones Telerate, Inc.
One World Financial Center
200 Liberty Street
New York, NY 10281
Attention: Legal Department
(b) If to Omega, to:
Omega Research, Inc.
9200 Sunset Drive
Miami, Florida 33173
Attention: William and Rafael Cruz
with a copy to:
Rubin Baum Levin Constant
Friedman & Bilzin
2500 First Union Financial Center
200 S. Biscayne Boulevard
Miami, Florida 33131
Attention: Marc J. Stone, Esq.,
or to such other addresses as may be stipulated in writing by the parties
pursuant hereto. Unless otherwise provided, notice shall
51
<PAGE>
be effective on the date it is officially recorded as delivered by return
receipt, the courier service, or equivalent.
2. FORCE MAJEURE. No party hereto shall be deemed to be in default of any
provision of this Agreement, or in default for failures in performance,
resulting from acts or events beyond the reasonable control of such party (such
acts shall include but not be limited to, acts of God, or civil or military
authority, civil disturbance, war, strikes, fire, lightning, hurricanes,
tornado, power outages, or other similar catastrophes or events).
3. AMENDMENT. This Agreement may not be amended except by written
instrument executed by each of the parties hereto.
4. BINDING AGREEMENT; ASSIGNMENT.
(a) This Agreement shall be binding upon and shall inure to the
benefit of the parties and the parties' respective successors at law and
permitted assigns. Neither this Agreement nor any obligations or duties
hereunder may be assigned or delegated by any party hereto without the prior
written consent of the other party; provided that each party shall be entitled
without such consent to assign its rights and obligations hereunder to any
Affiliate or in connection with a sale (direct or indirect, by merger, sale of
capital stock or otherwise) of all or substantially all of its assets; provided,
however, if Omega directly or indirectly (by merger, sale of capital stock or
otherwise) sells all or substantially all of its assets to one of the Telerate
Competitors, Telerate may, within the thirty (30) day period following written
notice from Omega that Omega has signed a
52
<PAGE>
contract to sell, or has sold, substantially all of its assets (directly or
indirectly, by merger, sale of capital stock or otherwise) to a Telerate
Competitor, terminate this Agreement by giving written notice to Omega to that
effect within such thirty (30) day period. Termination of this Agreement in this
circumstance shall occur and be effective on the earlier of (i) the date such
notice of termination is given and (ii) the Third Anniversary.
(b) In the event, but only in the event, that Telerate so terminates
this Agreement following said notice of sale of Omega to a Telerate Competitor,
(i) Telerate shall have a non-exclusive one-year license to continue to sell new
subscriptions for the Telerate Version of TradeStation as permitted hereunder
(but the non-competition obligations of Omega, William Cruz and Rafael Cruz
shall, as of the date of termination, automatically cease and be of no further
force or effect), (ii) such non-exclusive license shall terminate on the first
anniversary of the date of termination of this Agreement, (iii) it is understood
that Omega shall, in this circumstance of termination only, continue to be bound
by its maintenance and support obligations under Section F, but shall not
continue to be bound by any obligation to develop any Enhancements for the
Telerate Version of TradeStation or to perform any other action or obligation
under this Agreement, (iv) Telerate's obligation to pay Royalty Fees (except for
a guaranteed minimum, which shall not apply to this one-year non-exclusive
license), render statements and maintain Records shall continue to be in
53
<PAGE>
force; and (v) the escrow agreement described in Subsection J shall, as
contemplated in the form of escrow agreement attached, be extended for such
additional year.
(c) No parties other than Telerate and Omega, and their respective
successors at law and permitted assigns (provided that such successors or
permitted assigns have expressly assumed this Agreement in writing), shall have
any right or standing to assert or enforce any right or obligation under this
Agreement.
5. HEADINGS. The headings of sections and paragraphs herein, and the
"WHEREAS" clauses contained on pages 1 and 2 of this Agreement, are included for
convenience of reference or context and shall not control the meaning or
interpretation of any of the provisions of this Agreement.
6. SURVIVAL. The provisions of this Section and of SECTIONS A, B.7, D, I,
K, L.1, M, N AND P ONLY shall survive any termination or expiration of this
Agreement.
7. GOVERNING LAW. This Agreement shall be controlled, construed and
enforced in accordance with the laws of the State of New York, other than laws
relating to conflicts of law.
8. SEPARABILITY. If any provision of this Agreement or the application
thereof to any person or circumstance shall to any extent be held to be invalid
or unenforceable, the remainder of the Agreement, or the application of such
provision to persons or circumstances as to which it is not held to be invalid
or unenforceable, shall not be affected thereby, and each provision
54
<PAGE>
shall be valid and be enforced to the fullest extent permitted by law.
9. ENTIRE AGREEMENT. This Agreement, together with all Exhibits, contains
the entire understanding of the parties and supersedes all previous and
contemporaneous verbal and written agreements.
10. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one instrument.
11. CONSTRUCTION. The parties acknowledge and confirm that this Agreement
and each of the Exhibits hereto have been heavily and thoughtfully negotiated by
the parties over an extended period of time and that any ambiguities contained
herein or therein shall therefore not in any manner be construed against the
draftsman or alleged draftsman hereof or thereof.
IN WITNESS WHEREOF, the undersigned parties have duly executed
and delivered this Agreement as of the day first above written.
DOW JONES TELERATE, INC. OMEGA RESEARCH, INC.
By: /s/ CARL M. VALENTI By: /s/ WILLIAM CRUZ
----------------------- ------------------------
Name: Carl M. Valenti Name: William Cruz
Title: President Title: President
55
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EXHIBIT INDEX
EXHIBIT DESCRIPTION
------- -----------
A Definitions
A-1 Description of Telerate-
Provided Materials
A-2 Description of Data Feeds
for Telerate Version of
TradeStation
B Noncompetition Agreement
of William Cruz and
Rafael Cruz
C Form of Escrow Agreement
D QA Test Script
56
<PAGE>
EXHIBIT A
DEFINITIONS
ACCEPTANCE; ACCEPTED:
When the Telerate Version of TradeStation has successfully completed
Quality Assurance Testing as described in Section B of the Agreement.
ACCEPTANCE DATE:
The date Telerate has Accepted or is deemed to have Accepted the Telerate
Version of TradeStation as described in Section B of the Agreement.
AFFILIATE:
With respect to any individual or entity, any other individual or entity,
directly or indirectly, through one or more intermediaries, Controlling,
Controlled by, or under common Control with the original individual or
entity.
CONTROL:
The possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of an entity, whether through
the ownership of any securities, by contract or otherwise.
DOCUMENTATION:
All existing written descriptive and instructional information published
by Omega for use by TradeStation customers relating to the use and
operation of TradeStation Version 3.5, as same shall be appropriately
modified by Telerate pursuant to this Agreement to become the
documentation for the Telerate Version of TradeStation.
ENHANCEMENT:
Any improvement or upgrade to the Telerate Version of TradeStation,
whether minor or substantial.
ERROR:
Any failure of the Telerate Version of TradeStation to perform the
applicable functions or conform to the Specification.
<PAGE>
EXECUTABLE CODE:
With respect to TradeStation or the Telerate Version of TradeStation, a
set of machine readable instructions that has been assembled or compiled
from the Source Code and Object Code and linked and that can operate on
the appropriate computer without further compiling, assembling or linking.
EXISTING TELETRAC SUBSCRIBER:
All subscribers of Telerate, its Affiliates or Independent Distributors
which are using the existing TeleTrac software in a Dow Jones Telerate
Stand-Alone Unit at the Royalty Commencement Date; provided, however, that
such a subscriber is considered an Existing TeleTrac Subscriber (for
purposes of determining whether an Existing TeleTrac Subscriber
Stand-Alone Fee, as opposed to one of the other Royalty Fees, is payable)
only with respect to the number of Stand-Alone Units of such subscriber
which use the existing TeleTrac software at the Royalty Commencement Date
(whether or not said existing Stand-Alone Units are converted or later
converted to Workstations -- i.e., the Existing TeleTrac Subscriber
Stand-Alone Fee shall continue to be payable in respect of such existing
units, even after their conversion, if any, to Workstations); provided
further, however, that, any additional Stand-Alone Units or Workstations
of such subscriber which receive the Telerate Version of TradeStation
shall constitute New Stand-Alone Units or Workstations (as applicable),
with respect to which such subscriber shall be considered a New
Stand-Alone Subscriber and/or Workstation Subscriber (as applicable) and
in respect of which New Stand-Alone Fees and/or Workstation Fees (as
applicable) are payable.
INCREMENTAL FEE:
With respect to each individual use of the Telerate Version of
TradeStation for which a Royalty Fee is payable, the gross amount charged
by Telerate in United States Dollars to a Telerate subscriber pursuant to
the subscription for such use of the Telerate Version of TradeStation
(i.e., per Workstation), not including sales and similar taxes, if any,
added to the price thereof which are remittable by Telerate. The
Incremental Fee shall not be reduced by royalties or other amounts or
consideration paid to Independent Distributors or others or any other
amounts except for said taxes. If, with respect to any subscription, the
Telerate Version of TradeStation is bundled with, sold together with, or
incorporated into, one or more other computer programs or products of
Telerate (a "bundle") for one combined price (a "bundled selling price"),
for the purposes of calculating the
2
<PAGE>
Incremental Fee hereunder: the separate list price of each product
included in the bundle (including the list price for the Telerate Version
of TradeStation) will be added together (the "non-bundled combined
price"); if the non-bundled combined price equals the bundled selling
price, the Incremental Fee will be the list price for the Telerate Version
of TradeStation; if the non-bundled combined price exceeds the bundled
selling price, each list price included in the non-bundled combined price
shall be reduced PRO RATA until the non-bundled combined price equals the
bundled selling price, and the Incremental Fee shall equal the list price
for the Telerate Version of TradeStation as so reduced on such PRO RATA
basis.
INDEPENDENT DISTRIBUTORS:
Unaffiliated entities who distribute Telerate products and services on
behalf of Telerate on a commission or royalty basis.
MATERIAL ERROR:
Any Error which materially impairs the subscriber's ability to use as a
whole the Telerate Version of TradeStation or any Error which
substantially impairs the value of such program for the typical end user.
MODIFICATION:
A change or addition to the Telerate Version of TradeStation that
establishes conformity of the Telerate Version of TradeStation to the
Specification, or a procedure or routine that eliminates the practical
adverse effect on Telerate's subscribers of such a nonconformity which was
observed in the regular operation of the Telerate Version of TradeStation
(and is capable of being consistently duplicated).
NEW STAND ALONE SUBSCRIBER:
New Stand Alone Subscriber shall mean any subscriber who is not an
Existing TeleTrac Subscriber who subscribes to the Telerate Version of
TradeStation from Telerate or its Affiliates or Independent Distributors,
as, when and so long as used or to be used pursuant to such subscription
on Stand Alone Unit(s).
OBJECT CODE:
With respect to TradeStation or the Telerate Version of TradeStation, a
set of machine readable instructions generated by the compilation of the
Source Code.
3
<PAGE>
PERSON:
Any entity or individual.
QA TEST SCRIPT:
The test script to be used to conduct the Quality Assurance Testing, a
copy of which is attached as Exhibit D, which, if capable of being
followed in all material respects, will establish the conformance of the
Telerate Version of TradeStation to the Specification. Within thirty (30)
days following the date of the Agreement, the parties shall jointly
develop a more detailed QA Test Script, which, once completed and agreed
upon by the parties, shall serve as the QA Test Script for all purposes of
the Agreement. The parties agree to cooperate in good faith to develop
jointly and agree upon such more detailed QA Test Script within said
30-day period. If such more detailed QA Test Script is not jointly
developed and agreed upon within said 30-day period, the QA Test Script
attached as Exhibit D shall serve as the QA Test Script for all purposes
of the Agreement. The purpose of developing a more detailed QA Test Script
is not to expand the functionality that is to be developed or demonstrated
by the Telerate Version of TradeStation (as described in Exhibit D), but
rather to specify in more detail the testing procedures that will be used
to determine whether the more general guidelines set forth in Exhibit D
have been met.
QUALITY ASSURANCE TESTING:
The testing of the Telerate Version of TradeStation in accordance with the
QA Test Script to determine whether the Telerate Version of TradeStation
conforms to the Specification, and each such subsequent testing performed
prior to Acceptance to determine whether or not Acceptance has occurred,
as described in Section B.
REAL-TIME:
With respect to the TradeStation program or any similar program, software
that receives and displays data on a "real-time" or instantaneous basis,
and which is not delayed in any fashion, or which displays data on no
longer than a 10-minute delay basis.
ROYALTY COMMENCEMENT DATE:
The earlier of (i) sixty (60) calendar days after the Acceptance Date, and
(ii) the date the first subscription for or use of the Telerate Version of
TradeStation is received or
4
<PAGE>
occurs for which a Royalty Fee is payable pursuant to the
Agreement.
SELL; SALE; SELLING:
The terms "sell", "sale" and "selling", as they relate to the exploitation
by Telerate of its rights under this Agreement, mean the sublicensing by
Telerate, its Affiliates and Independent Distributors (on behalf of
Telerate or Telerate's Affiliates) pursuant to this Agreement of the
Telerate Version of TradeStation product to subscribers, customers and
other end-users under subscriptions or similar arrangements providing for
periodic payment therefor by such subscribers, customers and other end
users, and do not refer to the sale or disposition, as such words are
commonly understood, of the Telerate Version of TradeStation or rights
therein.
SOURCE CODE:
With respect to TradeStation or the Telerate Version of TradeStation, the
form of code which is human readable and which can be translated by a
compiler or assembler for execution on a computer. The Source Code will be
in a language that is customarily understood by competent computer
programmers (e.g., C, C++, Assembly Language).
SPECIFICATION:
Specification, as it relates to the Telerate Version of TradeStation,
means that the Telerate Version of TradeStation will have the same
functionality in all material respects as TradeStation Version 3.5, as
reflected in the documentation for TradeStation Version 3.1 which has been
annotated by Omega to describe the two new features Version 3.5 will
contain (i.e., commentary on the interpretation of analysis techniques
(marketed by Omega as "fuzzy logic") and "trading system optimization"),
copies of which have been delivered to Telerate.
STAND-ALONE UNIT:
A Stand-Alone Unit is one computer that will run the Telerate Version of
TradeStation but will not be linked by network to any other computers.
However, (i) if such computer is providing access to the Telerate Version
of TradeStation on more than one screen, each such screen shall constitute
a separate Stand-Alone Unit, and (ii) if any such screen may be accessed
by more than one keyboard, each additional keyboard shall constitute a
separate Stand-Alone Unit.
5
<PAGE>
TELERATE COMPETITORS:
Bloomberg, Reuters, Knight-Ridder, Commodity Quote Graphics and such
parties' Affiliates and successors, whether currently existing or existing
in the future.
TELERATE-PROVIDED MATERIALS:
The equipment and materials provided to Omega to develop the Telerate
Version of TradeStation as specified in Exhibit A-1 hereto.
TELERATE VERSION OF TRADESTATION:
A version of TradeStation that is generally compatible with the data feeds
generated by Telerate and its Affiliates (such data feeds are specified in
Exhibit A-2 hereof) and, assuming no Enhancement is required, similar data
feeds of Telerate and its Affiliates which may be generated during the
term of the Agreement.
TELETRAC:
The DOS software developed by Telerate to analyze price data and marketed
as TeleTrac Version 2.4 for use solely on Stand-Alone Units.
TRADESTATION:
The technical analysis program that operates in Real-Time as more fully
described in the definition of "Specification" above.
WORKSTATION:
A Workstation is one computer receiving or able to access Telerate data
(regardless of what software programs are being used in connection with
such data), in or from which the Telerate Version of TradeStation would
reside or could be accessed either alone or with other applications and
utilities, and which would remain linked by a network with one or more
other computers which will also have Telerate data. However, (i) if such
computer is providing access to the Telerate Version of TradeStation on
more than one screen, each such screen shall constitute a separate
Workstation, and (ii) if any such screen may be accessed by more than one
keyboard, each additional keyboard shall constitute a separate
Workstation. A single network may have many Workstations.
6
<PAGE>
WORKSTATION SUBSCRIBER:
Any subscriber which subscribes to the Telerate Version of TradeStation
from Telerate or its Affiliates or Independent Distributor, as, when and
so long as used or to be used pursuant to such subscription on one or more
Workstations.
7
<PAGE>
EXHIBIT A-1
DESCRIPTION OF TELERATE-PROVIDED MATERIALS
To be delivered and fully installed at Omega's premises:
1. 2 fully functional TeleTrac units (hardware, software and fully enabled
data feed), fully enabled as to capability with Telerate data available through
the data feed.
2. 1 Twin Server (hardware, software and all applicable data feeds).
3. Software and enablement for ten workstation sites running off the Twin
Server.
4. 15 copies of complete and detailed specifications for the current
Telerate twin environment API (with sufficient detail to enable Omega to modify
TradeStation to be compatible with such environment).
To be delivered and fully installed at Cruz residence in Gables Estates,
Florida:
One copy of software (and full enablement including all data available on
the data feed) of the upcoming Telerate Twin environment which allows for
the server and the workstation software to be running on the same
computer.
Plus: all other materials, equipment, information and assistance required by
Omega from time to time in connection with the development of the Telerate
Version of TradeStation.
<PAGE>
EXHIBIT A-2
DESCRIPTION OF DATA FEEDS FOR
TELERATE VERSION OF TRADESTATION
The Telerate Workstation server commonly known as "Twin Server", as it operates
to transmit Telerate financial market data, which will run concurrently on the
same computer that will be running the Telerate Version of TradeStation.
2
<PAGE>
EXHIBIT B
NONCOMPETITION AGREEMENT
NONCOMPETITION AGREEMENT, dated as of August __, 1994, by and among
WILLIAM CRUZ and RAFAEL CRUZ (collectively, the "Cruzes"), and DOW JONES
TELERATE, INC., a York corporation ("Telerate").
PRELIMINARY STATEMENT
Telerate and Omega Research, Inc., a Florida corporation currently owned
by the Cruzes ("Omega"), have, on the date hereof, entered into a certain
Software License, Maintenance and Development Agreement (the "License
Agreement). Pursuant to Section C.3 of the License Agreement, Omega has made
certain negative covenants to Telerate. In order to comfort Telerate that the
Cruzes will not do outside of Omega what Omega cannot do directly pursuant to
Section C.3 of the License Agreement, the Cruzes have, subject to the important
bargained-for limitations described below, agreed to be personally bound to the
provisions of Section C.3 of the Agreement.
NOW, THEREFORE, it is agreed as follows:
1. PRELIMINARY STATEMENT. The Preliminary Statement is true and correct
and constitutes a part hereof.
2. COVENANT. Each of the Cruzes covenants that he shall be bound
personally to the covenants of Omega set forth in Section C.3 of the License
Agreement, and that he will not take, and will refrain from taking, any action
which Omega is prohibited from taking under said Section C.3 of the License
Agreement. The Cruzes are not executing this document for any other purpose, and
are in no way or manner guarantors or co-makers of any covenant or obligation of
any kind or nature of Omega set forth in the License Agreement or any other
agreement or instrument executed or delivered in connection therewith.
3. LIMITATION OF LIABILITY. In the event that either of the Cruzes
breaches this Agreement, Telerate's sole and exclusive remedy shall be to obtain
from a court of competent jurisdiction a temporary restraining order,
preliminary injunction and permanent injunction (for the period of restriction)
enjoining the Cruzes from taking the actions prohibited in Section 2 above.
Telerate shall have no right, in any circumstance, to seek or recover damages of
any kind from either of the Cruzes for any reason or upon any theory (legal or
otherwise) whatever, it being understood that the equitable relief described
above is Telerate's sole and exclusive remedy (whether or not as a practical
matter it is an
<PAGE>
effective remedy in the circumstances) for any breach by either or both of the
Cruzes of this Agreement. The parties acknowledge, confirm and agree that the
provisions of this Section 3 were specifically bargained for, and that the
Cruzes would not have entered into this Agreement for the benefit of Telerate
absent Telerate's absolute assurance that the Cruzes would never be personally
responsible for or answerable in damages of any kind in the event of a breach
hereof. In furtherance of the foregoing, Telerate hereby covenants that it will
never sue either of the Cruzes personally (except to the extent necessary to
obtain the equitable relief contemplated herein) with respect to any provision,
obligation or covenant contained in the License Agreement, or any breach or
violation thereof, or with respect to any transaction or matter arising out of
or related to the License Agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first above written.
------------------------
WILLIAM CRUZ
------------------------
RAFAEL CRUZ
DOW JONES TELERATE, INC.
By:
------------------------
Name: CARL M. VALENTI
Title: PRESIDENT
2
<PAGE>
EXHIBIT C
ESCROW AGREEMENT
<PAGE>
SOFTWARE ESCROW AGREEMENT
SOFTWARE ESCROW AGREEMENT, dated August ____, 1994 (the "Agreement"), by
and among OMEGA RESEARCH, INC., a Florida corporation ("Omega"), DOW JONES
TELERATE, INC., a New York corporation ("Telerate"), and SUN BANK/MIAMI,
NATIONAL ASSOCIATION ("Escrow Agent").
PRELIMINARY STATEMENT
Omega and Telerate are parties to that certain Software License,
Maintenance and Development Agreement dated August ____, 1994 (the "License
Agreement"). Pursuant to Section J of the License Agreement, Omega has agreed to
deposit in escrow with Escrow Agent, on computer disk, the Source Code (and
certain related materials) for the Telerate Version of TradeStation. This
Agreement shall govern the terms and conditions of such escrow arrangement.
Capitalized terms used herein, which are not defined herein, shall have the
respective meanings ascribed to them in the License Agreement.
NOW, THEREFORE, it is agreed as follows:
1. SUPPLEMENTARY AGREEMENT. This Agreement is supplementary to the License
Agreement. This Agreement is intended to provide certain guidance for the
limited circumstances under which Telerate shall be entitled to access to the
Source Code (and certain related materials) for the Telerate Version of
TradeStation in order to protect certain of its interests under the License
Agreement.
2. NO INFERENCE OF TERMINATION. The description herein of the possible
occurrences that would constitute a Release Event (as defined below), and the
consequences thereof, shall create no presumption that Omega or its trustee in
bankruptcy should be permitted to reject or terminate this Agreement under
applicable law. The parties agree that such a rejection or termination would be
prejudicial to Telerate's interests. This Agreement is not intended to diminish,
enlarge, modify or impair, and this Agreement shall not diminish, enlarge,
modify or impair, any right or obligation of any party under the License
Agreement.
3. ESCROW DEPOSIT. Within ten (10) days following the Acceptance Date,
Omega shall deposit with Escrow Agent, and Escrow Agent shall accept the deposit
of, in a sealed envelope, the Source Code, on computer disk, for the Telerate
Version of TradeStation, together with such programmers notes and instructions
as have been prepared by Omega in the normal course of its operations in
connection with the creation of such Source Code (collectively the "Escrowed
Code"). Omega shall, promptly after such deposit is
<PAGE>
made, notify Telerate of that fact. Escrow Agent shall hold and maintain the
Escrowed Code at its premises at 777 Brickell Avenue, Miami, Florida, in a vault
or safety deposit box, and shall not permit access thereto, or the release
thereof, by or to any person or entity whatever, except as specifically
permitted by this Agreement.
4. SUPPLEMENTARY ESCROW DEPOSITS. Within ten (10) days following the
completion and acceptance of any Enhancement to the Telerate Version of
TradeStation developed by Omega, Omega shall deposit with Escrow Agent, and
Escrow Agent shall accept deposit of, in a sealed envelope, the updated Source
Code, on computer disk, for the Telerate Version of TradeStation as so enhanced,
together with such programmers notes and instructions as have been prepared by
Omega in the normal course of its operations in connection with the creation of
such updated Source Code (collectively, an "Updated Escrowed Code"). Omega
shall, promptly after each such deposit is made, notify Telerate of that fact.
Upon any such supplementary deposit by Omega, Escrow Agent shall return to Omega
the Escrowed Code then held by Escrow Agent, and the Updated Escrowed Code shall
then become the Escrowed Code for all purposes hereunder. Omega covenants to
Telerate that each Source Code deposited into escrow pursuant to this Agreement,
including the initial deposit, will be in a language that is customarily
understood by competent computer programmers (e.g., C, C++, Assembly Language).
5. RELEASE EVENTS. The following events constitute the only events upon
which Escrow Agent is authorized to release the Escrowed Code to any person or
entity (other than deposit of the Escrowed Code with a court as more fully
explained later in this Agreement), or to allow access to the Escrowed Code by
any person or entity (individually, a "Release Event," and, collectively, the
"Release Events"):
a. VERIFICATION OF ESCROWED CODE. Within thirty (30) days following
notice from Omega of the initial escrow deposit described in Section 3 above,
and within thirty (30) days following notice from Omega of each supplementary
escrow deposit described in Section 4 above, Telerate shall be afforded access
to the Escrowed Code solely for the purpose of verifying that the Escrowed Code
contains the then-current Source Code for the Telerate Version of TradeStation.
In order to exercise such right, Telerate shall provide Omega and Escrow Agent
with written notice to that effect within the applicable 30-day period
("Verification Notice"). Within five (5) business days following the delivery of
the Verification Notice, Omega, Telerate and Escrow Agent shall schedule a
mutually convenient date, not later than thirty (30) days following the delivery
of the Verification Notice, on which a representative of Omega and a
representative of Telerate shall meet
2
<PAGE>
at the offices of Escrow Agent to receive from Escrow Agent the sealed envelope
containing the Escrowed Code. Escrow Agent shall deliver the Escrowed Code to
Omega's representative. Each of Telerate and Omega shall confirm in writing in
advance to Escrow Agent the name of its representative. Escrow Agent shall
request appropriate photo identification from each representative prior to
releasing the Escrowed Code to Omega's representative. Following said release of
the Escrowed Code to Omega's representative, Omega's representative and
Telerate's representative shall proceed to Omega's Miami office, where
Telerate's representative will be permitted to verify, under Omega's
supervision, that the Escrowed Code contains the Source Code for the
then-current version of the Telerate Version of TradeStation. The verification
procedure shall be exclusively as follows: the Telerate representative shall be
permitted to compile the Source Code in order to enable such representative to
generate an executable program for the Telerate Version of TradeStation. Such
representative may then take back with him to Telerate such executable program
for the sole purpose of verifying that the Source Code is complete. In no event
will such Telerate representative be permitted to take any notes, or to view any
screen longer than is absolutely necessary to compile an executable program, or
to remove or take with him or her any materials other than the compiled
executable program. Following completion of the compilation of the executable
program, the Escrowed Code, in the presence of the Telerate representative,
shall be sealed in an envelope, and the Telerate representative and the Omega
representative shall then proceed to the offices of Escrow Agent, whereupon the
Escrowed Code will be redeposited with Escrow Agent, subject to future release
only upon the occurrence of another Release Event.
b. FAILURE OF OMEGA TO CORRECT AN ERROR. In the event that Omega
notifies Telerate that it is unable to correct an Error (other than an
Insignificant Error), or an Event of Default under the License Agreement has
occurred with respect to Omega based upon Omega's failure to correct an Error
(other than an Insignificant Error), and Telerate has not terminated, or given
notice of termination of, the License Agreement pursuant to any provision
thereof other than Section Q.4 thereof, and Telerate desires access to the
Escrowed Code, Telerate shall deliver to Escrow Agent and to Omega an affidavit
of Telerate, made by a duly authorized officer of Telerate (the "Correction
Failure Affidavit"), stating, as applicable, that:
(i) "Telerate is entitled to access to the Escrowed Code because
Omega has notified Telerate that it is unable to correct an Error (other than an
Insignificant Error), a copy of such notification from Omega being attached
hereto [with such notification attached], and Telerate has not terminated, or
given
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notice of termination of, the License Agreement pursuant to any provision
thereof other than Section Q.4 thereof", or
(ii) "Telerate is entitled to access to the Escrowed Code
because an Event of Default under the License Agreement has occurred with
respect to Omega based upon Omega's failure to correct an Error (other than an
Insignificant Error), and Telerate has not terminated, or given notice of
termination of, the License Agreement pursuant to any provision thereof other
than Section Q.4 thereof," and
(iii) "Omega has been delivered a true and complete copy of this
affidavit on the date shown on the attached certified or registered mail receipt
or commercial carrier receipt evidencing delivery to Omega on such date" [and
attaching such receipt].
Subject to Omega's right to serve a Counter Affidavit (defined and
described below), at any time during the thirty (30) day period following the
end of the fifth (5th) business day following delivery of the Correction Failure
Affidavit, Escrow Agent shall, at Telerate's request, release the Escrowed Code
to Telerate. Upon receipt of the Escrowed Code in this circumstance, Telerate
shall use the Escrowed Code solely for the purpose of correcting the Error(s)
the failure of which to correct served as the basis for Telerate's right to have
access to the Escrowed Code. If requested by Omega in writing or in Omega's
Counter Affidavit, correction of said Error(s) will take place at Omega's
offices under Omega's supervision, in which event the procedures for release and
return of the Escrowed Code set forth in subsection (a) above shall be followed.
In no event shall any copy be made of the Escrowed Code. Upon completion of
correction of said Error(s), the Escrowed Code shall be sealed in an envelope
and redeposited with Escrow Agent. Even if Omega does not elect to have the
Error(s) corrected at its offices under its supervision, Omega shall have the
right to have a representative be present for such resealing and redeposit
procedure.
(c.) BANKRUPTCY OF OMEGA. In the event that an Event of Default occurs
with respect to Omega under Section N.2(a)(iv) or (v) of the License Agreement,
and Telerate does not terminate or give notice of termination of the License
Agreement pursuant to any provision thereof other than Section Q.4 thereof, and
Omega's trustee in bankruptcy has expressly rejected the License Agreement or
expressly refused to assume the License Agreement, and Telerate desires access
to the Escrowed Code, Telerate shall deliver to Escrow Agent and to Omega an
affidavit of Telerate, made by a duly authorized officer of Telerate (the
"Bankruptcy Affidavit"), stating:
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(i) "An Event of Default has occurred with respect to Omega under
Section N.2(a)(iv) or (v) under the License Agreement";
(ii) "Telerate has not terminated and has not given notice of
termination of the License Agreement pursuant to any provision thereof other
than Section Q.4 thereof";
(iii) "Omega's trustee in bankruptcy has expressly rejected the
License Agreement or has expressly refused to assume it, and a copy of the
action of the bankruptcy court so rejecting or refusing to assume the License
Agreement is attached" [and attaching a true, correct and complete copy of such
action]; and
(iv) "Omega has been delivered a true and complete copy of this
affidavit on the date shown on the attached certified or registered mail receipt
or commercial courier receipt evidencing delivery to Omega on such date" [and
attaching such receipt].
Subject to Omega's right to serve a Counter Affidavit, at any time
during the thirty (30) day period following the end of the fifth (5th) business
day following delivery of the Bankruptcy Affidavit, Escrow Agent shall, at
Telerate's request, release the Escrowed Code to Telerate. Upon receipt of the
Escrowed Code in this circumstance, Telerate may use the Escrowed Code, until
the expiration or termination of the License Agreement, solely for the purpose
of correcting Errors and providing maintenance and support to subscribers for
the Telerate Version of TradeStation, and if, but only if, Omega is in
liquidation or has completely ceased operations, and Telerate has not terminated
or given notice of termination of the License Agreement pursuant to Section Q.4
thereof, to make Enhancements, any such Enhancements to be the property solely
of Omega. In no event shall any copy be made of the Escrowed Code.
6. TERM. This Agreement shall be effective as of the date hereof and shall
continue to be effective until the earliest of (a) the date which is four years
and 60 days following the date of the initial deposit of the Escrowed Code
pursuant to Section 3 above (the "Outside Termination Date"), (b) the date on
which the License Agreement naturally expires by its terms, and (c) subject to
the right of Telerate to deliver a Counter Affidavit, the date on which the
Escrow Agent receives an affidavit from either Telerate or Omega (the
"Termination Affidavit") (a copy of which shall be served on the non-serving
party) stating that the License Agreement is or has been terminated pursuant to
any provision thereof other than Section Q.4 thereof, and that the non-serving
party has been delivered a true and complete copy of the Termination Affidavit
on the date shown on the certified registered mail receipt or commercial courier
receipt attached (a copy of which shall be
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attached to the Termination Affidavit). Upon any such termination of this
Agreement, Escrow Agent shall release the Escrowed Code to Omega, at Omega's
request. If, however, Omega has delivered a Termination Affidavit, subject to
Telerate's right to deliver a Counter Affidavit, Escrow Agent shall return the
Escrowed Code to Omega promptly following the fifth (5th) business day following
the delivery of the Termination Affidavit. If, at the time of such termination
of this Agreement, Telerate is in possession of the Escrowed Code pursuant to
this Agreement, Telerate shall, immediately upon termination, cease using the
Escrowed Code for any purpose and promptly return it to Omega accompanied by a
letter from Telerate affirming that Telerate has ceased using the Escrowed Code
for any purpose, has used the Escrowed Code only as permitted hereunder, and has
made no copies of any kind or nature of, or made or retained any notes or
materials concerning, the Escrowed Code. (Omega shall have the right to request
and receive from Telerate such a confirmatory letter following any release to
Telerate hereunder of the Escrowed Code.) Notwithstanding anything to the
contrary contained in this Agreement, if the Escrowed Code has not been returned
to Omega by the Outside Termination Date, Escrow Agent shall release the
Escrowed Code to Omega on or promptly following the Outside Termination Date,
regardless of any conflicting or contrary instructions or objections which may
be given by Telerate (including any Counter Affidavit), the parties agreeing
that Telerate has no right whatever to make such an objection, and that Escrow
Agent has no discretion upon the occurrence of the Outside Termination Date to
do anything other than deliver the Escrowed Code to Omega.
7. COUNTER AFFIDAVIT. In any case where Telerate has asserted the right of
access to the Escrowed Code (whether pursuant to a Verification Notice, a
Correction Failure Affidavit or a Bankruptcy Affidavit), or where Omega has
asserted the right to be returned the Escrowed Code pursuant to a Termination
Affidavit (as the case may be, a "Release Affidavit"), the party who has not
delivered the Release Affidavit (the "Objecting Party") may, within five (5)
business days of its receipt of the Release Affidavit, object to the release of
the Escrowed Code requested in or in connection with the Release Affidavit by
delivering to the party who has delivered the Release Affidavit (the "Asserting
Party") and to Escrow Agent an affidavit (a "Counter Affidavit") stating that
the Asserting Party is not entitled to receive access to or release or return of
(as the case may be) the Escrowed Code, and the reasons therefor. No party shall
deliver a Counter Affidavit unless it believes, in good faith, that the
Asserting Party is not entitled to the access or release of the Escrowed Code
asserted by the Asserting Party. In no event shall Telerate have the right to
serve, or serve, a Counter Affidavit to contest the return of the Escrowed Code
to Omega on the Outside Termination Date, or upon the natural expiration of the
term of the License Agreement. In the
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event that a Counter Affidavit is delivered, Escrow Agent shall continue to hold
the Escrowed Code, and shall not release it to, or allow access to it by, any
party, pending the joint instructions of Telerate and Omega, or as otherwise
described in Section 10(a) below.
8. DISPUTE RESOLUTION. In the event a Counter Affidavit is delivered,
Omega and Telerate shall, in good faith, attempt to resolve the dispute within
five (5) business days following the delivery of the Counter Affidavit. If a
resolution is reached, Omega and Telerate shall promptly execute joint written
instructions to Escrow Agent concerning what is to be done with the Escrowed
Code. In the event no such resolution is reached within said five-business-day
period, either party may file a suit or action in any court of competent
jurisdiction situated in Dade County, Florida to obtain such relief at law or in
equity in respect of the Escrowed Code as such party deems warranted or
appropriate.
9. LIMITATION OF REMEDIES BETWEEN TELERATE AND OMEGA. As between Telerate
and Omega, all limitations on remedies that one party may have against the other
under the License Agreement shall apply to this Agreement.
10. RIGHTS, DUTIES AND RESPONSIBILITIES OF ESCROW. It is understood that
the duties of the Escrow Agent are purely ministerial in nature. It is further
agreed that:
(a) In the event that Escrow Agent shall be uncertain as to the duties
or rights hereunder or shall receive instructions with respect to the Escrowed
Code which, in its sole opinion, are in conflict with either other instructions
received by it or any provision of this Agreement, it shall be entitled to
continue to hold the Escrowed Code, or a portion thereof, in escrow pending the
resolution of such uncertainty to Escrow Agent's sole satisfaction, by final
judgement of a court or courts of competent jurisdiction or otherwise; or Escrow
Agent, at its option, may deposit the Escrowed Code in the registry of a court
of competent jurisdiction in a proceeding to which all parties in interest are
joined. Upon so depositing the Escrowed Code and filing its complaint and
interpleader, Escrow Agent shall be completely discharged and released from
further liability.
(b) Escrow Agent shall not be liable for any action taken or omitted
hereunder except in the case of its bad faith, gross negligence or willful
misconduct. Escrow Agent shall be entitled to consult with counsel of its own
choosing and shall not be liable for any action taken, suffered or omitted by it
in reasonable reliance upon the advice of such counsel. Any
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<PAGE>
reasonable expenses incurred by Escrow Agent in connection with such
consultation shall be reimbursed by Telerate.
(c) Telerate shall indemnify and hold Escrow Agent, its agents,
representatives, and employees harmless from any claim, demand or loss suffered
by Escrow Agent and the cost thereof (including court costs and attorneys' fees
for negotiation, trial and appeal).
(d) This agreement sets forth exclusively the duties of Escrow Agent
with respect to any and all matters pertinent hereto and no implied duties or
obligations shall be read into this Agreement against Escrow Agent.
(e) Escrow Agent may resign as Escrow Agent at any time upon thirty
(30) days prior written notice to Telerate and Omega. In the case of Escrow
Agent's resignation, its only duty shall be to hold and release, if required,
the Escrowed Code in accordance with the original provisions of this Agreement
until a successor escrow agent shall be appointed and written notice of the name
and address of such successor escrow agent shall be given to the escrow agent by
Telerate and Omega, whereupon Escrow Agent's only duty shall be to deposit with
the successor escrow agent the Escrowed Code if then in its possession.
11. FEES AND EXPENSES. Escrow Agent shall be entitled to: (a) an annual
administration fee of $1,500.00 payable by Telerate and (b) be reimbursed by
Telerate for any reasonable out-of-pocket expenses for performing its
obligations in connection with this Agreement.
12. NOTICES. All notices, affidavits, instructions, requests and other
communications required or permitted hereunder shall be in writing and shall be
delivered in person or sent by commercial overnight courier (such as Fedex) or
certified or registered mail, return receipt requested:
(a) If to Telerate, to:
Dow Jones Telerate, Inc.
One World Financial Center
200 Liberty Street
New York, NY 10281
Attention: President
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with a copy to:
Dow Jones Telerate, Inc.
One World Financial Center
200 Liberty Street
New York, NY 10281
Attention: Legal Department
(b) If to Omega, to:
Omega Research, Inc.
9200 Sunset Drive
Miami, Florida 33173
Attention: William and Rafael Cruz
with a copy to:
Rubin Baum Levin Constant
Friedman & Bilzin
2500 First Union Financial Center
200 S. Biscayne Boulevard
Miami, Florida 33131
Attention: Marc J. Stone, Esq.
(c) If to Escrow Agent, to:
Sun Bank/Miami, N.A.
777 Brickell Avenue
Miami, Florida 33131
ATTN: ____________________,
or to such other addresses as may be stipulated in writing by the parties
pursuant hereto. Notice shall be effective on the date it is officially recorded
as delivered by return receipt or the courier service.
13. FORCE MAJEURE. No party hereto shall be deemed to be in default of any
provision of this Agreement, or for failures in performance, resulting from acts
or events beyond the reasonable control of such party.
14. AMENDMENT. This Agreement may not be amended except by written
instrument executed by each of the parties hereto.
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15. BINDING AGREEMENT; ASSIGNMENT. This Agreement shall be binding upon
and shall inure to the benefit of the parties and the parties' respective
successors at law and permitted assigns.
16. HEADINGS. The headings of sections and paragraphs herein are included
for convenience of reference and shall not control the meaning or interpretation
of any of the provisions of this Agreement.
17. GOVERNING LAW; VENUE. This Agreement shall be controlled, construed
and enforced in accordance with the laws of the State of Florida, other than
laws relating to conflicts of law. The venue and jurisdiction for any claim
under this Agreement shall be in the appropriate court in Dade County, Florida.
18. ENTIRE AGREEMENT. This Agreement contains the entire understanding of
the parties and supersedes all previous verbal and written agreements.
19. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one instrument.
IN WITNESS WHEREOF, the undersigned parties have duly executed this
Agreement as of the day first above written.
DOW JONES TELERATE, INC. OMEGA RESEARCH, INC.
By:_______________________ By:_________________________
Name: Name:
Title: Title:
ESCROW AGENT:
SUN BANK/MIAMI, NATIONAL ASSOCIATION
By:___________________________________
Name:_________________________________
Title:________________________________
10
<PAGE>
EXHIBIT D
QA TEST SCRIPT
<PAGE>
CHART
Data
Amount
The program shall allow the user to load up to 13,000 bars
of data per data stream in any chart window.
Resolution
The user can display data in tick, intraday (any interval
up to 1440 minutes), daily, weekly, monthly and point and
figure resolutions, for either 1 or 2 session markets.
Type
All symbols that can be displayed in TeleTrac 2.4 as
supported by TWIN will be plotted and continuously updated
by the program.
Display
Market status
The user can display a continuously updated status line at
the top of any chart window that will include the current
price, net change from prior day's close, day's high, day's
low and current indicator values.
Chart types
The program shall allow the user to display prices as
Open-High-Low-Close, High-Low-Close, Japanese Candlestick,
Dot on Close and Line on Close bars.
Configuration
The program shall allow the user to change the color and
size of any element on a chart. This includes the font and
font color, window background and bar thickness and color.
Tools
The user can place any of the following tools on any price or any
indicator on a chart. Arc, Up/Down arrows, Standard/Fibonacci
Cycles*, Ellipse, Gann Fan*, Horizontal Line*, Percent Retracement,
Rectangle, Speed Resistance Arc/Fan*, Support Resistance Lines*,
Trend Lines*, Text, Zoom. The user can modify display attributes and
position of any tool placed on a chart. Furthermore, the user shall
be allowed to enable alarms on those tools marked with an asterisk
that will alert the user when the market penetrates that tool.
Analysis Techniques
The user shall be allowed to place any of the following analysis
techniques on a chart.
Indicators, PaintBars(tm), ShowMe's(tm) Custom 1 Line, Custom 2
Lines, Custom 3 Lines, Custom 4 Lines, Mov Avg - Displaced, Mov
Avg Weighted, DMI, Bollinger Bands, Mov Avg 1 Line, Mov Avg 2
Lines, Mov Avg 3 Lines, Mov Avg Envelopes, Mov Avg Exponential,
Commodity Channel Index, On Balance Volume, Gapless Bar Chart,
True Low, Open Interest, McClellan Oscillator, MFI, Parabolic,
Accumulation Distribution, Percent R, Price Channel, Rate of
Change, RSI, RSI w/o Zones, Accumulation Swing Index, MACD,
Spread, DownTicks, Stochastic - Fast, Stochastic - Slow, Swing
Index, Volume (Tick Vol) Volume (UpTick Vol), Volume (DownTick
Vol), Volume, Up/Down Tick Difference, Ultimate Oscillator,
Volatility, Momentum, Consecutive x bars down, Consecutive x
bars up, Gap Down Bar, ShowMe(tm) Anything, Key Reversal Up, Key
Reversal Down, Outside Bar, Gap Up bar, Inside Bar, Island
Reversal Up, Island Reversal Down, Breakout of x Bar High,
Breakout of x Bar Low,
<PAGE>
%R /less than/ x, %R /greater than/ x, Price /greater than/ x
Bar Avg. Price /less than/ x Bar Avg. Close Avg /less than/ Open
Avg, Close Avg /greater than/ Open Avg, Momentum Increasing,
Momentum Decreasing, Stochastic Fast Custom, Stochastic Slow
Custom, PaintBar(tm) Custom, Percent Change, Down Ticks, Equal
Ticks, Up Ticks.
Systems
CCI Avg Crossover, Channel Breakout IntraBar, Channel Breakout
on Close, Channel Breakout Weighted, Consecutive Closes, X
Average Crossover, Divergence, Key Reversal major, MACD,
Weighted Average Crossover, Parabolic, PercentR Oscillator, RSI
Oscillator, Stochastic Crossover, Mov Avg Crossover, Mov Avg(3)
Crossover.
Experts
Fundamental Expert, Technical Expert, Fundamental
and Technical Expert.
Furthermore, the user can modify the inputs and alert criteria of any
of the aforementioned analysis techniques.
QUOTE
Data
Amount
256 quotes per window.
Resolution
Tick by tick.
Type
All symbols that can be displayed in TeleTrac 2.4 as supported
by TWIN shall be continuously updated in the quote window.
Display
Quote fields
All fields that can be displayed in TeleTrac 2.4 as supported by
TWIN will be available to the user. Furthermore, user definable
alarm fields can be added that alert the user to breakout
conditions on the high, low, time and volume.
Configuration
The program shall allow the user to change the color and size of
any element on a quote window. This includes the font and font
color, window background color and the colors of alert fields.
System Tracking Control Center
Data
Active Orders
Date/time order was placed, symbol name, type of order,
system name, signal name.
Cancelled Orders
Date/time order was cancelled, symbol name, type of order,
system name, signal name.
Filled Orders
Date/time order was filled, symbol name, type of order,
system name, signal name.
Open Positions
Symbol, position, entry price, current price, profit,
system name, signal name.
<PAGE>
Display
Configuration
The program shall allow the user to change the color and size of
any element on a STCC window. This includes the font and font
color and window background color.
Alert Tracking Control Center
Data
Date/time alert was hit, symbol, name, last price.
Display
Configuration
The program shall allow the user to change the color and size of
any element on a STCC window. This includes the font and font
color and window background color.
<PAGE>
CONFIDENTIAL MATERIAL OMITTED
AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS
FIRST AMENDMENT
TO
SOFTWARE LICENSE, MAINTENANCE AND DEVELOPMENT AGREEMENT
FIRST AMENDMENT, dated as of March 7, 1997 ("First Amendment"), between
DOW JONES MARKETS, INC., f/k/a DOW JONES TELERATE, INC., a New York corporation,
with an office at One World Financial Center, 200 Liberty Street, New York, New
York 10281 ("Telerate"), and OMEGA RESEARCH, INC., a Florida corporation with
offices at 8700 West Flagler Street, Suite 250, Miami, Florida 33174 ("Omega").
PRELIMINARY STATEMENT
Telerate and Omega are parties to that certain Software License,
Maintenance and Development Agreement dated as of August 26, 1994 (the "Original
Agreement"), pursuant to which (a) Omega agreed to license to Telerate the
Telerate Version of TradeStation, and (b) Omega agreed not to enter into any
agreement or arrangement with any of the Telerate Competitors to develop and
then sell a version of TradeStation or any Real-Time product which performs
substantially all of the same functions of TradeStation which is compatible with
the data feeds of the Telerate Competitors (the "Noncompetition Covenant"). The
parties now desire to amend the Original Agreement in order to extend the term
of the license to Telerate to market and sell subscriptions for the Telerate
Version of TradeStation by an additional three (3) years, and to extend the
Noncompetition Covenant for such additional three years. Capitalized terms used
herein which are not defined herein shall have the respective meanings ascribed
to them in the Original Agreement.
NOW, THEREFORE, in consideration of the promises and consideration herein
contained, the parties hereby agree as follows:
1. EXTENSION OF THE TERM AND NONCOMPETITION COVENANT.
a. The terms and conditions of the Original Agreement, including, but not
limited to, the term thereof and the term of the Noncompetition Covenant, shall
continue in full force and effect, subject to the early termination events
specified therein, until the sixth anniversary of the Royalty Commencement Date
(the parties hereby confirm that the Royalty Commencement Date was January 12,
1996). While it is understood that the Noncompetition Covenant applies to
TradeStation and any other Real-Time product of Omega which performs
substantially all of the same functions, and is used for substantially all of
the same purposes, as, and is competitive with, TradeStation, it does not apply
to any other product of Omega *********************************************.The
term "Telerate Competitors" is hereby expanded to include Bridge. The parties
acknowledge and agree that, notwithstanding anything in the definition "Telerate
Competitors" to the contrary, neither any data vendor which, nor the business of
any such data vendor which, is acquired by any of the Telerate Competitors
listed in the Original Agreement or Bridge, nor any successor company created by
any such Telerate Competitor or Bridge to succeed to such business (if any),
shall be deemed a Telerate
<PAGE>
CONFIDENTIAL MATERIAL OMITTED
AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS
Competitor for purposes of the Agreement unless such data vendor was, or the
business acquired was owned by, one of the Telerate Competitors listed in the
Original Agreement or Bridge. However, if the acquired company or business is
used as a conduit for the data feeds of Telerate Competitors which are
substantially similar to the data feeds of Telerate (as described in Section C.3
of the Original Agreement as amended hereby), such acquired company or business
shall be deemed a Telerate Competitor.
b. "Fourth Anniversary" means the one-year period ending January 12, 2000;
"Fifth Anniversary" means the one-year period ending January 12, 2001; and
"Sixth Anniversary" means the one-year period ending January 12, 2002.
2. MINIMUM GUARANTEED ROYALTY FEES FOR EXTENDED TERM. Omega shall be entitled
to receive guaranteed minimum aggregate Royalty Fees (regardless of the
aggregate Royalty Fees computed under Section D.1 of the Original Agreement) for
the extended term of the Agreement as follows:
a. for the period commencing on the Third Anniversary and ending on the
Fourth Anniversary, the sum of ********************************* (the "Fourth
Year Minimum");
b. for the period commencing on the Fourth Anniversary and ending on the
Fifth Anniversary, the sum of ******************************** (the "Fifth
Year Minimum"); and
c. for the period commencing on the Fifth Anniversary and ending on the
Sixth Anniversary, the sum of ********************************** (the "Sixth
Year Minimum").
Each of the Fourth Year Minimum, the Fifth Year Minimum and the Sixth Year
Minimum shall be paid to Omega in monthly installments in the same manner as the
first three years' guaranteed minimums are payable, subject to quarterly
reconciliation against the calculation of the Royalty Fees in the same manner as
set forth in Section D.6 of the Original Agreement. Telerate shall continue to
supply statements to Omega and maintain Records with respect to such fourth,
fifth and sixth years in the same manner and to the same extent as it is
required to do so with respect to the first three years, as set forth in Section
D of the Original Agreement.
3. EXTENSION OPTION. The Extension Option set forth in Section N.1 of the
Original Agreement is hereby superseded by the foregoing provisions of this
First Amendment. Consistent with the foregoing, the third sentence of Section
N.3 of the Original Agreement is hereby deleted.
4. NAME UNDER WHICH THE TELERATE VERSION OF TRADESTATION WILL BE MARKETED.
Telerate agrees that the Telerate Version of TradeStation shall, throughout the
remainder of the term of the Agreement, continue to be marketed under the name
"TradeStation(TM)." Telerate may, if it chooses,
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<PAGE>
market the Telerate Version of TradeStation under the combined trademark "Dow
Jones TradeStation(TM)". The use of the TradeStation(TM) trademark by Telerate
shall be subject to the terms of the existing trademark license in effect
between Telerate and Omega, the term of which is hereby extended to be
coincident with the term of the Agreement, and which is hereby amended to
provide for the use of the combined trademark "Dow Jones TradeStation" in lieu
of "TeleTrac TradeStation." Telerate shall display appropriate registered
trademark notices on all uses of the trademark "TradeStation", together with a
statement that TradeStation is a registered trademark of Omega Research, Inc. In
addition, the sign-on screen message and the "About" box of the Telerate Version
of TradeStation program shall, in addition to the display of the notice and
legend required to be included by Section I of the Original Agreement,
conspicuously display the appropriate registered trademark notice together with
a statement that TradeStation is a registered trademark of Omega Research, Inc.
5. FREE ENHANCEMENTS. Section G.1 of the Original Agreement is hereby amended
as follows:
1. There shall be a period placed at the end of clause (b)(iii) following
the words "acceptance purposes" and the balance of the words and punctuation of
such sentence, which are "and (iv) to mutually agree upon the costs, fees and
other charges which will be paid by Telerate to Omega for the development of the
Enhancement, including the timing and amount of any applicable payments," is
hereby deleted.
b. The following sentences are hereby added after the sentence containing
clause (b), as amended above:
"An Enhancement requested by Telerate which meets all of the
foregoing requirements shall be developed by Omega free of charge to
Telerate. Notwithstanding any of the foregoing to the contrary, Omega
shall not be required to develop any Enhancement which, in Omega's good
faith judgment, would have an adverse effect or impact on Omega or its
business interests."
6. DEVELOPMENT OF NEW DATA FEEDS AND PLATFORMS BY TELERATE. In the event that
Telerate develops (a) an additional Data Feed (as defined below) to be made
available as part of the Dow Jones Workstation Platform (or as part of an
additional Platform (as defined below) with which the Telerate Version of
TradeStation becomes compatible pursuant to these provisions), or (b) an
additional Platform (such as an Internet Platform) to be made available to
subscribers either in addition to, or in substitution for, the Dow Jones
Workstation Platform as part of which the Data Feeds specified in Exhibit A-2
(as same may be amended pursuant to these provisions) are to be offered (as the
case may be, a "New Dow Jones Data Product"), Omega shall use commercially
reasonable efforts to modify the Telerate Version of TradeStation so that it is
compatible with the New Dow Jones Data Product. Exhibit A-2 of the Original
Agreement is hereby amended in its entirety to read as follows: "The Telerate
data feeds currently known and referred to as: The Items Producer; The QDS
Producer; and the TWParser Producer, which constitute part of the Telerate
Platform known as Dow Jones Workstation, and any additional data feeds which are
made available
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in the future as part of Dow Jones Workstation to the extent compatibility of
such data feeds with the Telerate Version of TradeStation is established
pursuant to the Agreement." The parties shall adhere to the provisions and
procedures of Section G.1 of the Original Agreement (as modified by this First
Amendment) with respect to the request for, and development, testing and
acceptance of, such modified version of the Telerate Version of TradeStation,
except that subsection (a) of Section G.1 shall not apply and Omega shall not be
permitted to assert that achieving such compatibility would be adverse to Omega
or its business interests. Upon acceptance by Telerate of such modified version,
the New Dow Jones Data Product shall be deemed added to Exhibit A-2. In all
other respects, the scope of the license granted to Telerate and all
restrictions and prohibitions on Telerate's use of the Telerate Version of
TradeStation set forth in Section C or elsewhere in the Agreement shall remain
unmodified and continue to be of full force and effect. With respect to the
"exclusive" nature of such expanded license (i.e., the restrictions relating to
Telerate Competitors set forth in Section C.3 of the Original Agreement, as
amended hereby), such "exclusivity" (i.e., such restrictions) shall apply with
respect to a New Dow Jones Data Product only to the extent that the Data Feeds
which constitute or are used in connection with such New Dow Jones Data Product
are substantially similar to the Data Feeds generated by Telerate. Telerate
shall, at its expense, provide to Omega such assistance, technical and other
information, equipment and materials as may be required or as may be reasonably
requested by Omega to complete the necessary modifications. Any such
information, equipment or materials so provided shall constitute
Telerate-Provided Materials for all purposes of the Agreement relating to the
ownership and use thereof. If, despite using commercially reasonable efforts,
Omega is unable to develop the necessary modifications to make the Telerate
Version of TradeStation compatible with the New Dow Jones Data Product, the
Agreement shall remain of full force and effect, neither party shall have any
liability to the other in respect of such failure to achieve compatibility, and
each party shall remain bound to perform all of its obligations under the
Agreement. For purposes of the Agreement, "Platform" means the software through
which particular financial market data delivered on a Real-Time basis is made
available to a subscriber for such financial market data, and which constitutes
a product of the data vendor in the sense that such software may include various
features and functions relating to the manner in which the financial market data
is accessed, received, displayed and/or may be used. All references in the
Agreement to the Dow Jones Workstation Platform mean the product known as "Dow
Jones Workstation" and NOT the product known as "Dow Jones Platform" or the TTRS
system. For purposes of the Agreement, "Data Feed" or "data feed" means a type
or category of financial market data (e.g., equity prices) of a certain quality,
detail and content, formatted in a particular way or ways, for delivery to
subscribers. Consistent with such definition, and in order to eliminate any
ambiguity set forth in Section C.3 of the Original Agreement, Section C.3(a) is
hereby amended in its entirety as follows:
"Omega agrees that it shall not enter into any agreement or
arrangement with any of the Telerate Competitors to develop and then sell
during the term of this Agreement any Real-Time product which is
compatible with data feeds of the Telerate Competitors which are
substantially similar to the data feeds currently generated by Telerate.
Omega further agrees that, in the event that Omega learns the
specifications
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of data feeds of any of the Telerate Competitors which are substantially
similar to the data feeds currently generated by Telerate, Omega shall not
develop a new version of, or modify, TradeStation for the purpose of
making TradeStation compatible with such specifications and then sell such
new or modified version during the term of this Agreement."
7. COMPATIBILITY WITH OTHER PRODUCTS. Omega shall, at Telerate's request at
any time or from time to time, use commercially reasonable efforts to make each
other then existing product of Omega, for the term of the Agreement, compatible
with all Data Feeds and Platforms of Telerate with which the Telerate Version of
TradeStation is then compatible ("Other Compatible Products"). In attempting to
achieve such compatibility, the procedures and provisions described in Section 6
above shall apply. If Telerate so requests, Omega shall grant to Telerate a
non-exclusive license to distribute one or more of such Other Compatible
Products, provided that Omega and Telerate are able to agree upon a
comprehensive, written license agreement setting forth all of the terms and
conditions of such license, including, without limitation, the royalties and/or
other consideration to be paid to Omega. If Omega offers to license any of the
Other Compatible Products to a Telerate Competitor (an "Offered Product"), it
shall offer to license such Offered Product to Telerate no later than the time
such offer is made to the Telerate Competitor, and, if a binding agreement is
reached between Omega and the Telerate Competitor, the royalties and/or other
consideration to be paid to Omega by Telerate for such license (assuming that
Telerate desires to license such Offered Product and Telerate and Omega enter
into the comprehensive, written license agreement referred to above) shall not
be at a rate which is higher than that which is to be paid by the Telerate
Competitor under its agreement with Omega. If, despite using commercially
reasonable efforts, Omega is unable to develop the compatibility contemplated
above with respect to any product of Omega, neither party shall have any
liability to the other in respect of such failure to achieve compatibility, and
each party shall remain bound to perform all of its obligations under the
Agreement.
8. MODIFICATION TO LICENSE. Section C.1(a) of the Original Agreement is
hereby amended by adding the words and symbols "(or access solely from)" between
the words "installation solely in" and the words "Workstations and Stand-Alone
Units" on the ninth line of said Section C.1(a).
9. REMOTE SUPPORT. Section F.5 of the Original Agreement is hereby amended
by adding the words and punctuation ", by telephone and electronic mail,"
between the words "make available" and the words "personnel expertly trained" on
the 11th line of said Section F.5.
10. NO FURTHER AMENDMENTS. Except as set forth above, all of the terms and
conditions of the Original Agreement remain unmodified and of full force and
effect. In the event of any inconsistency between the provisions of the Original
Agreement and the provisions of this First Amendment, the provisions of this
First Amendment shall govern. The term "Agreement," as used herein, means the
Original Agreement as modified by this First Amendment.
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IN WITNESS WHEREOF, the undersigned parties have duly executed and
delivered this Agreement as of the date first above written.
DOW JONES MARKETS, INC. OMEGA RESEARCH, INC.
By: /s/ JULIAN B. CHILDS By: /s/ WILLIAM CRUZ
------------------------ ---------------------------
Julian B. Childs William Cruz, President
Title: EVP
REAFFIRMATION OF NONCOMPETITION AGREEMENT
Reference is made to that certain Noncompetition Agreement, dated as of
August 26, 1994, by and among William Cruz and Rafael (Ralph) Cruz and Telerate,
which was executed and delivered pursuant to the Original Agreement (the
"Noncompetition Agreement"). The parties hereby reaffirm all of the provisions,
terms, conditions and obligations set forth in the Noncompetition Agreement.
DOW JONES MARKETS, INC.
By: /s/ JULIAN B. CHILDS /s/ WILLIAM CRUZ
------------------------ --------------------------
Julian B. Childs WILLIAM CRUZ
Title: EVP
/s/ RALPH CRUZ
--------------------------
RALPH CRUZ
6
CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
EXHIBIT 10.4
SOFTWARE LICENSE, MAINTENANCE
AND DEVELOPMENT AGREEMENT
THIS SOFTWARE LICENSE, MAINTENANCE AND DEVELOPMENT AGREEMENT dated as of
March 12, 1997, between DOW JONES MARKETS, INC. f/k/a DOW JONES TELERATE, INC.,
a New York corporation, with an office at One World Financial Center, 200
Liberty Street, New York, New York 10281 ("Telerate"), and OMEGA RESEARCH, INC.,
a Florida corporation, with offices at 8700 West Flagler Street, Suite 250,
Miami, Florida 33174 ("Omega").
W I T N E S S E T H:
WHEREAS, Omega has previously developed the SuperCharts software;
WHEREAS, Telerate has requested that Omega modify the SuperCharts software
to create the Telerate Version of SuperCharts and the Telerate Version of
SuperCharts Special Edition;
WHEREAS, Telerate desires to obtain from Omega, and Omega is willing to
grant to Telerate, an exclusive license to promote, market, sell, sublicense and
distribute the Telerate Version of SuperCharts and to distribute, royalty-free
(as to both Telerate and to Telerate's subscribers), the Telerate Version of
SuperCharts Special Edition;
WHEREAS, Telerate desires that Omega not, during the term of this
Agreement, modify SuperCharts or SuperCharts Special Edition or any Real-Time
product to be compatible with the data feeds of the Telerate Competitors so as
to enable the Telerate Competitors
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to offer a SuperCharts or other Real-Time product similar to, and competitive
with, the Telerate Version of SuperCharts;
WHEREAS, Telerate desires that Omega develop, and Omega is willing to
develop, provided that Omega and Telerate mutually agree as herein provided,
Enhancements to the Telerate Version of SuperCharts at Telerate's request from
time to time pursuant hereto; and
WHEREAS, Telerate desires that Omega provide, and Omega is willing to
provide, to Telerate, certain maintenance and support services for (including
required Modifications to) the Telerate Version of SuperCharts Products.
NOW, THEREFORE, in consideration of the promises and consideration herein
contained, the parties hereby agree as follows:
A. DEFINITIONS.
Capitalized terms used herein and not otherwise defined shall have the
meanings set forth in Exhibit A.
B. DEVELOPMENT OF THE TELERATE VERSION OF SUPERCHARTS PRODUCTS.
1. DEVELOPMENT. Omega shall, at Omega's sole cost and expense (except as
specifically otherwise provided in this Section B), use commercially reasonable
efforts to modify SuperCharts to create the Telerate Version of SuperCharts
Products, in accordance with the Specification, as promptly as is practicable.
Omega will be dedicating substantial amounts of time and effort to the
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<PAGE>
development of the Telerate Version of SuperCharts Products, and will be
incurring substantial costs in connection with the development of the Telerate
Version of SuperCharts Products, and Omega may be forgoing other business
opportunities as a result of the time, effort and expense that will be dedicated
by Omega to the development of the Telerate Version of SuperCharts Products.
Accordingly, although Omega will use commercially reasonable efforts to develop
the Telerate Version of SuperCharts Products as quickly as is practicable, Omega
shall, subject to the provisions of Subsection 9 below, have as much time as is
reasonably required by Omega to complete the development of the Telerate Version
of SuperCharts Products and to correct any Errors or non-conformities revealed
by the Quality Assurance Testing.
2. NOTICE OF COMPLETION. Upon completion of development of the Telerate
Version of SuperCharts Products, Omega shall promptly notify Telerate thereof.
3. TESTING. Within sixty (60) days following the service of the notice of
completion, the initial Quality Assurance Testing shall be completed and the
Material Error List (defined in Subsection 4 below), if any, shall be prepared.
Telerate and Omega shall jointly conduct all Quality Assurance Testing.
4. ACCEPTANCE. If the initial Quality Assurance Testing objectively
demonstrates that the Telerate Version of SuperCharts Products performs in
accordance with the Specification in all
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material respects, the Telerate Version of SuperCharts Products shall be deemed
Accepted (the date of such demonstration being the Acceptance Date), and either
party shall at the request of the other execute and deliver a confirmatory
letter to the effect that the Telerate Version of SuperCharts Products has been
Accepted. If the initial Quality Assurance Testing reveals Errors which are not
Material Errors, the Telerate Version of SuperCharts Products shall nevertheless
be deemed Accepted and Omega shall commence making appropriate Modifications to
correct such Errors as required by this Agreement. If the initial Quality
Assurance Testing reveals any Material Error(s), or objectively demonstrates
that the Telerate Version of SuperCharts Products does not perform in accordance
with the Specification in all material respects, Telerate and Omega shall,
within the sixty (60) day period referred to in Subsection 3 above, jointly
prepare a written list describing all such Material Errors and failures to
conform in all material respects (the "Material Error List"). Omega shall then
commence to correct each of the items contained on the Material Error List.
Promptly following completion of such correction(s) by Omega, Omega shall send a
notice of correction to Telerate, within fifteen (15) days of which the Quality
Assurance Testing shall again be performed to the extent necessary to
demonstrate that the items on the Material Error List have been corrected in all
material respects. In connection with such second Quality Assurance
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<PAGE>
Testing, Telerate shall not be permitted to assert, for the purposes of
preventing the occurrence of Acceptance, any Material Errors or failures so to
conform not specified in the Material Error List, unless such additional
Material Errors or failures have resulted from the corrections effected by
Omega. If, in connection with such second Quality Assurance Testing, it is
demonstrated that all of the items on the Material Error List have been
corrected in all material respects, the Telerate Version of SuperCharts Products
shall be deemed Accepted (the date of such demonstration being the Acceptance
Date). If, in connection with such second Quality Assurance Testing, it is
demonstrated that all of the items on the Material Error List have not been
corrected in all material respects or new Material Errors or failures so to
conform have arisen as a result of the correction(s) effected by Omega, the
parties shall jointly prepare a second Material Error List within the fifteen
(15) day period specified above, and the procedures for correction and
re-testing and determining Acceptance set forth above shall continue to be
followed until Acceptance occurs. Omega shall, in each instance, subject to the
provisions of Subsection 9 below, have as much time as is reasonably necessary
to make each set of corrections required. Telerate shall have no right to make
any use whatever of the Telerate Version of SuperCharts Products prior to
Acceptance and unless Acceptance occurs, except as provided in Section C.1(b)
below.
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5. TELERATE-PROVIDED MATERIALS. To assist Omega in its development efforts,
Telerate shall, at Telerate's sole cost and expense, provide to Omega the
Telerate-Provided Materials. The Telerate-Provided Materials shall be used
solely to develop, maintain and support the Telerate Version of SuperCharts
Products as provided in this Agreement. Omega acknowledges that any and all of
the Telerate-Provided Materials are, as between Telerate and Omega, the sole
property of Telerate and that all right, title and interest to such
Telerate-Provided Materials is and shall remain with Telerate. Omega further
acknowledges that the Telerate-Provided Materials may contain Confidential
Information (as defined in Section M) of Telerate as well as copyrights of
Telerate. Omega agrees that any Confidential Information included within the
Telerate-Provided Materials is subject to the provisions of Section M, and Omega
shall not create any lien or other encumbrance on the Telerate-Provided
Materials.
6. ASSISTANCE. Telerate shall, at Telerate's sole cost and expense, provide
all technical assistance reasonably requested by Omega in connection with its
use of the Telerate-Provided Materials. Omega shall not be deemed in default
hereunder as a result of the failure of Telerate to provide, or any inadequacies
in or of, the Telerate-Provided Materials or assistance of Telerate in the use
thereof. Telerate shall provide to Omega all Telerate-Provided Materials
necessary for Omega to commence development of
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<PAGE>
the Telerate Version of SuperCharts Products as soon as is reasonably possible
following the date of this Agreement. Should the Telerate-Provided Materials
prove to be inadequate, Telerate shall promptly provide to Omega, at its
reasonable request, and at Telerate's expense, such other equipment, materials
and information of or concerning Telerate as Omega reasonably requires in order
to develop the Telerate Version of SuperCharts Products.
7. EFFECT OF NON-ACCEPTANCE. In the event that the Telerate Version of
SuperCharts Products is not Accepted because of resort by Telerate to the
provisions of Subsection 9 below (or Omega notifies Telerate in writing that,
after expending the efforts described in Subsection 1 above, Omega is unable to
develop the Telerate Version of SuperCharts Products to be in conformance with
the Specification in all material respects and will therefore cease its efforts
in respect thereof): (i) neither party shall have any further obligation
whatever to the other party under this Agreement; (ii) no license of any kind
shall be granted to Telerate under this Agreement (and Omega shall retain all
rights to the Telerate Version of SuperCharts Products) and the Pre-Sales
License (defined in Section C.1(b) below) shall at such time be automatically
terminated; (iii) each party shall bear its own costs and expenses in connection
with this Agreement; and (iv) Omega shall return to Telerate, at Telerate's
expense, all of the Telerate-Provided Materials (except to the extent that such
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<PAGE>
Telerate-Provided Materials are being used by Omega in connection with the
TradeStation Agreement).
8. PREPARATION FOR OPERATIONS; DOCUMENTATION. As soon as is practicable
following the Acceptance Date, Telerate shall commence marketing efforts to sell
subscriptions for the Telerate Version of SuperCharts in accordance with this
Agreement. Prior to commencing such efforts, Telerate shall prepare all
necessary Documentation. Omega shall provide to Telerate, promptly following
Acceptance, on disk in Microsoft Word format, all documentation currently
available for SuperCharts, which Telerate shall then modify as appropriate to
create the Documentation. Omega will provide assistance as reasonably requested
by Telerate in connection with Telerate's preparation of the Documentation.
9. FAILURE OF ACCEPTANCE TO OCCUR BY DATE CERTAIN. Notwithstanding anything
to the contrary contained in Subsection 4 above, in the event that Omega fails
to deliver the notice of completion referred to in Subsection 2 above by June
30, 1997, and such failure is not due, to any material extent, to acts, omission
or delays on the part of Telerate, Telerate shall have the right to terminate
this Agreement at any time after June 30, 1997 and prior to July 15, 1997, by
giving Omega written notice to that effect within such period. Further,
notwithstanding anything to the contrary contained in Subsection 4 above, in the
event that Acceptance does not occur by September 30, 1997, and the failure of
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<PAGE>
Acceptance to occur by such date is not due, to any material extent, to acts,
omissions or delays on the part of Telerate, Telerate shall have the right to
terminate this Agreement at any time after September 30, 1997 and prior to
October 15, 1997, by giving Omega written notice to that effect within such
period.
C. LICENSE OF THE TELERATE VERSION OF SUPERCHARTS PRODUCTS.
1. EXCLUSIVE LICENSE.
(a) GRANT AND SCOPE.
(i) TELERATE VERSION OF SUPERCHARTS. Effective as of (but not
before) the Royalty Commencement Date, Omega hereby grants to Telerate and its
Affiliates an exclusive worldwide license to promote, market, sell, sublicense
and distribute, either directly and/or through the use of Independent
Distributors, the Telerate Version of SuperCharts and all related Documentation
(but not any other version of SuperCharts, other than the Telerate Version of
SuperCharts Special Edition in the manner provided in Subsection (a)(ii) below),
on a subscription or similar basis requiring periodic payment by the subscriber,
customer or end user, for installation solely in (or access solely from)
Workstations and Stand-Alone Units for use by customers such as those Telerate
currently serves. The Telerate Version of SuperCharts may be promoted and sold
by Telerate, its Affiliates and Independent Distributors as part of packages
containing other products and services of Telerate. Omega shall provide a master
set of disks of
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the Telerate Version of SuperCharts to Telerate, and Telerate, its Affiliates
and Independent Distributors may, subject to the requirements of Section M, copy
such disks.
(ii) TELERATE VERSION OF SUPERCHARTS SPECIAL EDITION. Effective as
of (but not before) the Acceptance Date, Omega hereby grants to Telerate and its
Affiliates an exclusive worldwide license to include in (as part of) the
electronic information services or products licensed, sold and/or distributed by
Telerate, its Affiliates or its Independent Distributors to customers such as
those Telerate currently serves, the Telerate Version of SuperCharts Special
Edition (and to deliver in connection therewith all related Documentation), on a
completely royalty-free basis to the subscriber, customer and end user, for
installation solely in (or access solely from) Workstations and Stand-Alone
Units. Omega shall provide a master set of disks of the Telerate Version of
SuperCharts Special Edition to Telerate, and Telerate, its Affiliates and
Independent Distributors may, subject to the requirements of Section M, copy
such disks. Telerate has no obligation under this Agreement to include in any
Platform or Data Feed which it licenses, sells or distributes to existing
Telerate customers or to future customers the Telerate Version of SuperCharts
Special Edition; provided, however, that, effective as of the nearest
practicable date, but in all events no later than December 31, 1997, Telerate
has the affirmative
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obligation to include in the Dow Jones Workstation Platform (and any upgrades or
new releases thereof), and to distribute (and cause its Affiliates and
Independent Distributors to distribute) to all existing Telerate customers and
to future customers such as those Telerate currently serves to which the Dow
Jones Workstation Platform (or any upgrade or new release) is licensed, sold or
distributed, as part thereof, the Telerate Version of SuperCharts Special
Edition. Such obligation to distribute the Telerate Version of SuperCharts
Special Edition to existing Dow Jones Workstation subscribers relates only to
upgrades and new releases thereof. The Telerate Version of SuperCharts Special
Edition shall be marketed by Telerate, its Affiliates and Independent
Distributors as a free product automatically included in each subscription sold
or distributed by Telerate, its Affiliates or Independent Distributors for the
Dow Jones Workstation Platform (and shall be automatically included in any
upgrades or new releases thereof distributed by Telerate or its Affiliates or
Independent Distributors, and any future Platforms with which the Telerate
Version of SuperCharts Special Edition may become compatible, if Telerate agrees
to such compatibility, as described below), and Telerate, its Affiliates and
Independent Distributors shall not charge to subscribers, customers or end
users, directly or indirectly, any amount therefor.
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(iii) In the event that at any time or from time to time during
the term of this Agreement Telerate intends to offer a Platform, other than the
Dow Jones Workstation Platform, with which the Telerate Version of SuperCharts
Special Edition is not com patible, or intends to modify or enhance the Dow
Jones Workstation Platform in a manner that defeats its compatibility with the
Telerate Version of SuperCharts Special Edition, or intends to modify the Data
Feeds specified in Exhibit A-2 in a manner that defeats their compatibility
with the Telerate Version of SuperCharts Special Edition with respect to the
provision of such Data Feeds on the Dow Jones Workstation Platform, Telerate
shall provide Omega with prompt written notice thereof. If Omega then notifies
Telerate in writing within ten (10) days of Omega's receipt of such notice that
Omega is interested in modifying or enhancing the Telerate Version of
SuperCharts Special Edition in order to create compatibility with such new or
modified or enhanced Platform or Data Feed(s), and Telerate agrees that such
compatibility should be achieved (provided that Telerate's agreement shall not
be required with respect to a modification of the Dow Jones Workstation Platform
or Data Feeds which creates incompatibility), the parties shall cooperate to
achieve such compatibility as quickly as is practicable. Telerate shall then be
obligated to include the Telerate Version of SuperCharts Special Edition in the
Platform and with the Data Feeds with which it has been made compatible.
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(iv) LIMITATIONS. Telerate, its Affiliates and Independent
Distributors are not licensed, authorized or permitted in any manner by this
Agreement to use, promote, market, sell, sublicense or distribute any version of
SuperCharts or SuperCharts Special Edition or any part thereof or any other
product of Omega or any part thereof other than the Telerate Version of
SuperCharts Products ("Other Products"), and will not reproduce, prepare
derivative works from, modify or display publicly any Other Products. Telerate,
its Affiliates and Independent Distributors are prohibited from using the
Telerate Version of SuperCharts Products with any data feed or Platform other
than the current data feeds and Platform specified in Exhibit A-2 to this
Agreement (as same be deemed supplemented pursuant to the later provisions of
this subsection) or, provided the necessary Enhancement is made as provided for
herein, any similar data feed or Platform of Telerate or its Affiliates
generated in the future, or any similar data feed or Platform of Telerate or its
Affiliates generated in the future with respect to which an Enhancement is not
necessary. In the event that Telerate develops (a) an additional Data Feed to be
made available as part of the Dow Jones Workstation Platform (or as part of an
additional Platform with which the Telerate Version of SuperCharts becomes
compatible pursuant to these provisions) or (b) an additional Platform (such as
an Internet Platform) to be made available to subscribers either in addition to,
or in substitution
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for, the Dow Jones Workstation Platform as part of which the Data Feeds
specified in Exhibit A-2 (as same may be amended pursuant to these provisions)
are to be offered (as the case may be, a "New Dow Jones Data Product"), Omega
shall use commercially reasonable efforts to modify the Telerate Version of
SuperCharts so that it is compatible with the New Dow Jones Data Product. The
parties shall adhere to the provisions and procedures of Section G.1 with
respect to the request for, and development, testing and acceptance of, such
modified version of the Telerate Version of SuperCharts, except that subsection
(a) of Section G.1 shall not apply and Omega shall not be permitted to assert
that achieving such compatibility would be adverse to Omega or its business
interests. Upon acceptance by Telerate of such modified version, the New Dow
Jones Data Product shall be deemed added to Exhibit A-2. In all other respects,
the scope of the license granted to Telerate and all restrictions and
prohibitions on Telerate's use of the Telerate Version of SuperCharts set forth
in this Section C or elsewhere in this Agreement shall remain unmodified and
continue to be of full force and effect. With respect to the "exclusive" nature
of such expanded license (i.e., the restrictions relating to the Telerate
Competitors set forth in Section C.3), such "exclusivity" (i.e., such
restrictions) shall apply with respect to a New Dow Jones Data Product only to
the extent that the Data Feeds which constitute or are used in connection with
such New Dow Jones Data Product are
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substantially similar to the Data Feeds currently generated by Telerate as
specified in Exhibit A-2. In the event that Telerate decides to modify the Dow
Jones Workstation Platform (or a Data Feed which is offered on or through such
Platform) in a manner which will render it incompatible with the Telerate
Version of SuperCharts (a "Modified Workstation") Telerate shall give Omega
prompt written notice thereof, and shall fully cooperate with Omega, at
Telerate's expense, to enable Omega to modify the Telerate Version of
SuperCharts as quickly as practicable to be compatible with the Modified
Workstation prior to its release. Telerate shall, at its expense, provide to
Omega such assistance, technical and other information, equipment and materials
as may be required or as may be reasonably requested by Omega to complete the
necessary modifications to achieve compatibility with the New Dow Jones Data
Product or Modified Workstation, as the case may be. Any such information,
equipment or materials so provided shall constitute Telerate-Provided Materials
for all purposes of this Agreement relating to the ownership and use thereof.
If, despite using commercially reasonable efforts, Omega is unable to develop
the necessary modifications to make the Telerate Version of SuperCharts
compatible with the New Dow Jones Data Product or the Modified Workstation, this
Agreement shall remain of full force and effect, neither party shall have any
liability to the other in respect of such failure to achieve compatibility, and
each party
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shall remain bound to perform all of its obligations under this Agreement,
except to the extent otherwise expressly provided herein.
(b) PRE-SALES LICENSE. Effective as of the date hereof, Omega hereby
grants to Telerate a license in the Telerate Version of SuperCharts Products for
the sole purpose of testing and reviewing, and following the Acceptance Date,
advertising and promoting, the Telerate Version of SuperCharts Products to the
extent necessary and appropriate, in Telerate's reasonable judgment, to prepare
for the sale, sublicensing and distribution of the Telerate Version of
SuperCharts Products as permitted herein (the "Pre-Sales License").
2. RIGHTS RESERVED. It is understood that SuperCharts is essentially the
same product as the Telerate Version of SuperCharts Products, and that the
development of the Telerate Version of SuperCharts Products involves no more
than modifying the current version of SuperCharts to be compatible with the
current data feeds of Telerate and its Affiliates specified in Exhibit A-2 to
this Agreement. Accordingly, Omega retains, exclusively, and shall enjoy,
exclusively, all rights to promote, market, sell, modify, distribute, license
and use, and to reproduce, prepare derivative works from, modify or perform
publicly or display, SuperCharts, SuperCharts Special Edition and any other
product of Omega (whether now existing or hereafter created or developed), or
any part
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thereof, in any manner, in any version, and for any purpose, and to enter into
agreements and arrangements relating thereto with any Person, which do not
violate the restrictions contained in Subsection 3 below.
3. NON-COMPETITION.
(a) BY OMEGA. In addition to the restrictions concerning TradeStation
contained in Section C.3(a) of the TradeStation Agreement (which are unaffected
by this Agreement), Omega agrees that it shall not enter into any agreement or
arrangement with any of the Telerate Competitors to develop and then sell during
the term of this Agreement any Real-Time product which is compatible with data
feeds of the Telerate Competitors which are substantially similar to the data
feeds currently generated by Telerate. In addition to the restrictions
concerning TradeStation contained in Section C.3(a) of the TradeStation
Agreement (which are unaffected by this Agreement), Omega further agrees that,
in the event that Omega learns the specifications of data feeds of any of the
Telerate Competitors which are substantially similar to the data feeds currently
generated by Telerate, Omega shall not develop a new version of, or modify,
SuperCharts or SuperCharts Special Edition for the purpose of making SuperCharts
or SuperCharts Special Edition compatible with such specifications and then sell
such new or modified version during the term of this
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Agreement. While it is acknowledged that Telerate has no affirmative obligation
to market, sell and/or distribute the Telerate Version of SuperCharts Products
as Telerate's exclusive financial market charting and technical analysis
product, at such time, if any, as Telerate offers, markets, sells and/or
distributes any other financial market charting and technical analysis product
(including its own product) as an alternative charting and technical analysis
solution to its customers, or at such time, if any, as Telerate for any reason
substantially ceases to market or promote either of the Telerate Version of
SuperCharts Products (whether by reason of either of the Telerate Version of
SuperCharts Products ceasing to have compatibility with any Platform or
otherwise), the restrictions set forth above and in Subsection (b) below shall
automatically become completely null and void and of no further force or effect
and Telerate shall be deemed to have released Omega from all obligations which
restrict Omega from entering into agreements or arrangements with any third
party regarding SuperCharts or SuperCharts Special Edition.
(b) PERSONAL NON-COMPETE. Concurrently herewith, Omega shall cause each
of William and Ralph Cruz to execute the noncompetition agreement attached as
Exhibit B in order to evidence their respective agreements to be bound
personally by the covenants contained in Subsection 3(a). The failure of either
of William or Ralph Cruz to comply with such noncompetition agreement shall also
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CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
constitute a failure by Omega to comply with the applicable provisions of
Subsection 3(a).
D. ROYALTIES.
1. ROYALTY PAYMENTS. In consideration of Omega's grant of the exclusive
license to Telerate under Section C.1(a)(i), effective as of the Royalty
Commencement Date, Telerate shall pay to Omega the following amounts:
(a) STAND-ALONE FEE. For as long as a Stand-Alone Subscriber subscribes
to, or otherwise uses, the Telerate Version of SuperCharts, Telerate shall pay
to Omega ****** per month per Stand-Alone Unit for each such Stand Alone
Subscriber (the "Stand-Alone Fee").
(b) WORKSTATION FEE. If the Telerate Version of SuperCharts is
installed or later used in any Workstation, for as long as the Workstation
Subscriber subscribes to, or otherwise uses, the Telerate Version of SuperCharts
on such Workstation(s), Telerate shall pay to Omega an amount equal to *** of
the Incremental Fee payable by such Workstation Subscriber for each Workstation,
but in no event less than ****** per month per Workstation (the "Workstation
Fee").
(c) TELERATE VERSION OF SUPERCHARTS SPECIAL EDITION. ****************
******************************************************************************
******************************************************************************
**************.
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2. EXCEPTIONS. Omega hereby acknowledges and agrees that no Stand-Alone Fee
or Workstation Fee (collectively, the "Royalty Fee") payment is due with respect
to (i) any copy of the Telerate Version of SuperCharts used by any subscriber
subject to approval and returned to Telerate within 90 days following initial
delivery to such subscriber (except with respect to amounts billed to such
subscriber which such subscriber is obligated to pay), (ii) any copy of the
Telerate Version of SuperCharts provided to a subscriber on a free, trial basis,
up to 90 days, but only with respect to the free trial time given to such
subscriber up to 90 days, (iii) any copy remaining in the physical possession
of, and used directly by, Telerate, its Affiliates or Independent Distributors
solely for review, advertising or promotion of the Telerate Version of
SuperCharts, (iv) any copy given to a trade magazine or similar medium solely
for the purposes of review in connection with media coverage, critique or review
by such trade magazine or other medium of the Telerate Version of SuperCharts,
or (v) any copies used by Telerate or its Affiliates or Independent Distributors
solely to test, maintain or support the Telerate Version of SuperCharts. Except
as provided in this Subsection 2, and in Subsection 1 above, there shall be no
other uses by Telerate, its Affiliates or Independent Distributors of the
Telerate Version of SuperCharts, so that, except as provided in this Subsection
2, there may exist no use whatever of the Telerate
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Version of SuperCharts for which a Royalty Fee is not payable. Telerate has
informed Omega that it is Telerate's normal business practice to impose
stringent pricing guidelines on the sale and distribution of Telerate products.
Telerate agrees to impose equally stringent pricing guidelines with respect to
the sale, sublicensing and distribution of the Telerate Version of SuperCharts
by Telerate, its Affiliates and Independent Distributors so that each user of
the Telerate Version of SuperCharts constitutes a Workstation or a Stand-Alone
Unit (as applicable) with respect to which a separate Royalty Fee is payable.
3. MINIMUM GUARANTEED ROYALTY FEES. No minimum guaranteed Royalty Fees are
due for any period. The Royalty Fees shall be calculated solely upon sales of
the Telerate Version of SuperCharts as set forth in Subsection D.1 above.
4. PAYMENTS; STATEMENTS.
(a) PAYMENTS. Royalty Fees are due monthly and are payable no later
than the 60th day following the end of the month to which they relate.
(b) STATEMENTS. Telerate shall provide to Omega the following
statements with respect to the calculation of Royalty Fees and the basis
therefor:
(i) MONTHLY STATEMENTS FOR TELERATE SALES. Within thirty (30) days
following the end of each calendar month (or part
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thereof, as the case may be) following the Royalty Commencement Date, Telerate
shall provide to Omega a separate statement covering the subscriptions in effect
for the Telerate Version of SuperCharts during such month which have been sold
by Telerate or its Affiliates in each of Telerate's three (3) market regions
(the Americas, Europe/Gulf, and Asia/Pacific). Telerate represents and warrants
that such three regions encompass all of the regions in which subscriptions for
the Telerate Version of SuperCharts shall be sold.
(ii) MONTHLY STATEMENTS FOR INDEPENDENT DISTRIBUTOR SALES. Within
sixty (60) days following the end of each calendar month (or part thereof, as
the case may be) following the Royalty Commencement Date, Telerate shall provide
to Omega one statement covering the subscriptions in effect for the Telerate
Version of SuperCharts during such month which have been sold by all Independent
Distributors of Telerate and its Affiliates.
(iii) QUARTERLY AND ANNUAL STATEMENTS. Within sixty (60) days
following the end of each quarterly period following, and each anniversary of,
the Royalty Commencement Date, Telerate shall provide to Omega statements
similar to those described in (i) and (ii) above for the quarterly or annual (as
applicable) period covered.
(iv) INCLUDED INFORMATION. Each such monthly, quarterly and annual
statement described above shall set forth,
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with respect to each subscription for the Telerate Version of SuperCharts, (1)
the subscriber's name, (2) the subscriber's account number, (3) the product code
(i.e., Stand-Alone Unit or Workstation), (4) the quantity of units per
subscriber (i.e., the quantity of Stand-Alone Units or Workstations, as
applicable), (5) if a Workstation Subscriber, the amount of the Incremental Fee
billed, (6) the Royalty Fee owed (the Incremental Fee and Royalty Fee columns
shall be appropriately sub-totaled and totaled in the statements), and (7) any
other information that is reasonably necessary to provide a reasonably detailed
understanding of the basis of the calculation of the Royalty Fees.
(v) FORMAT. All such statements shall be formatted in a manner
that render such statements reasonably easy to read and understand by a
reasonably sophisticated third party. In the event that Omega is unclear about
any items set forth in a statement or how such items were determined, Telerate
shall assist Omega to understand such items or how they were determined, as the
case may be.
5. RECORDS. Telerate shall maintain complete and accurate records and files
of all documents, matters and transactions which are pertinent or relate to the
Telerate Version of SuperCharts and the sale and use thereof by Telerate, its
Affiliates and Independent Distributors (with respect to Affiliates and
Independent Distributors, as more particularly described in
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Subsection 6 below), including, without limitation, the number, at all times, of
Workstations and Stand-Alone Units in or from which the Telerate Version of
SuperCharts has been installed or is being used, and all information, records
and files necessary to verify the correctness of the calculation and payment of
the Royalty Fees and other payments due Omega hereunder (the "Records").
Telerate shall monitor and keep track of all users of the Telerate Version of
SuperCharts, including, without limitation, the number of Workstations and
Stand-Alone Units at all times in or from which the Telerate Version of
SuperCharts has been installed or is being used, so as to be capable at all
times of computing and paying the appropriate Royalty Fees and other amounts due
hereunder. Each Record shall be maintained and kept by Telerate for a period of
three (3) years following the creation thereof. Omega shall have the right, upon
reasonable prior written notice, at its expense, to inspect and conduct or cause
to be conducted audits of the Records during Telerate's normal business hours
once per year. Telerate shall fully cooperate in all such inspections and
audits. Omega has informed Telerate that it intends to conduct a full audit of
the Records annually. If any inspection or audit of the Records discloses an
underpayment to Omega of five percent (5%) or more of the amount due, Telerate
shall, promptly upon the demand of Omega, reimburse to Omega the reasonable cost
of the inspection or audit. Once a particular period has been audited by Omega,
Omega shall not
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again have the right to conduct an audit with respect to such period. All
information obtained by Omega and its accountants from any such inspection or
audit will be treated as Confidential Information as specified in this Agreement
and will be used solely for the purpose of verifying the accuracy of the
computation of the amounts due Omega hereunder and in connection with resolving
any dispute arising in connection therewith.
6. AFFILIATES AND INDEPENDENT DISTRIBUTORS. For all purposes of this
Agreement, including, without limitation, this Section D, it is understood that
Telerate's Affiliates' and Independent Distributors' sale of subscriptions for,
or other sublicensing of, the Telerate Version of SuperCharts to subscribers,
customers and other end users as permitted hereunder constitute the basis upon
which the Royalty Fees are computed and paid, as if Telerate were directly
entering into such subscription or sublicensing arrangements with customers,
subscribers or other end users of the Telerate Version of SuperCharts, and that
such Royalty Fees shall not be based on the consideration, if any, received by
Telerate from its Affiliates and Independent Distributors for obtaining from
Telerate the right to enter into such subscription or sublicensing arrangements
with customers, subscribers or end users. Telerate shall take such steps as are
necessary to ensure that all transactions made by its Affiliates and Independent
Distributors pertaining to this Agreement are
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included in the Records, and within all statements required to be rendered by
Telerate under this Agreement, and that all of such Records are capable of being
audited at Telerate's New Jersey offices upon the exercise by Omega of its
inspection and audit rights hereunder.
E. MARKETING EFFORTS.
1. EFFORTS.
(a) TELERATE OBLIGATION. Commencing with the Acceptance Date, Telerate
shall use commercially reasonable efforts to promote, market, sell and/or
sublicense the Telerate Version of SuperCharts Products throughout the world;
provided, however, that, except for Telerate's obligations under Subsection 3
below and its obligations with respect to the distribution of the Telerate
Version of SuperCharts Special Edition pursuant to Section C, Telerate shall
have complete control over, and discretion in determining, the manner of
promoting, marketing, selling and/or sublicensing the Telerate Version of
SuperCharts Products.
(b) REFERRAL OF INQUIRIES. In the event that any Person contacts Omega
to subscribe for the Telerate Version of SuperCharts or to obtain information
about the Telerate Version of SuperCharts, Omega shall refer such caller to
Telerate. Omega shall have no authority to bind Telerate with respect to any
such Person or any other third party.
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2. COMPETITION. Subject to the provisions of Section I and Section M,
nothing contained herein shall impair or restrict the right of Telerate, now or
in the future, to develop, procure or market products or services which may be
competitive with the Telerate Version of SuperCharts Products or with any other
product or service offered by Omega, nor obligate Telerate to obtain any other
products or services which may currently or subsequently be offered by Omega,
nor prevent Telerate from entering into similar agreements with other companies,
including those in the same industry as Omega, subject, however, to the
consequences described in Section C.3(a) if Telerate does so.
3. TRADEMARKS. Telerate shall market the Telerate Version of SuperCharts
Products solely under the trademarks Dow Jones SuperChartsTM and Dow Jones
SuperCharts SETM,respectively. Omega shall, for a ten dollar, one-time royalty,
license the use of such trademarks for such purpose to Telerate for the term of
this Agreement pursuant to the Trademark License attached as Exhibit E.
F. MAINTENANCE AND SUPPORT SERVICES FOR THE TELERATE VERSION OF SUPERCHARTS
PRODUCTS.
1. NOTIFICATION. During the term of this Agreement, each of Telerate and
Omega agrees to promptly notify the other in writing upon the discovery after
Acceptance of any Error (including a Material Error) which is capable of being
consistently duplicated.
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2. ERRORS. During the term of this Agreement, upon the discovery of a
Material Error, Omega shall, at no additional charge to Telerate, use
commercially reasonable efforts to correct such Material Error as promptly as
practicable but Omega shall in any event commence to address the problem within
two business days after receiving written notice from Telerate of the discovery
of a Material Error. During the term of this Agreement, upon the occurrence of
any Error other than a Material Error, Omega shall
(a) commence to address the problem within five (5) business days after
receiving notice from Telerate of such Error, and
(b) use commercially reasonable efforts to correct such Error as
promptly as practicable in accordance with industry standards. The parties
acknowledge that there are certain Errors which are so insignificant that they
are not addressed until the next version of the subject program is released
("Insignificant Errors"). With respect to such Insignificant Errors, Omega will,
during the term of this Agreement, use commercially reasonable efforts to make
the required Modification at such time as Omega works on the Enhancement that
will result in the next version, if any, of the Telerate Version of SuperCharts
or the Telerate Version of SuperCharts Special Edition (as the case may be)
being released.
The provisions of (a) and (b) above (together with access to the Source
Code to the extent permitted under the escrow
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agreement referred to in Section J) shall constitute Telerate's sole remedy in
the event of an Error which is not a Material Error. In the event that Omega
notifies Telerate that it is unable to correct a Material Error, Telerate's sole
remedy shall be to correct such Material Error and to recover from Omega
Telerate's reasonable costs to correct such Material Error, or, if Telerate
cannot correct the Material Error, Telerate's sole remedy shall be to terminate
this Agreement. Omega shall not be responsible for any Errors or other problems
to the extent caused by Telerate's maintenance and support of the Telerate
Version of SuperCharts Products.
3. TEMPORARY FIX. Upon the occurrence of an Error (including a Material
Error), Omega shall, if full correction of the Error will take an extended
period of time, and if requested by Telerate, and if technologically feasible,
provide a "temporary fix" to alleviate the adverse consequences of the Error to
the extent practicable pending development of the Modification required fully to
correct the Error.
4. PRIMARY SUPPORT. Telerate, and not Omega, shall be responsible for
providing primary support with respect to the Telerate Version of SuperCharts
Products to Telerate's customers. Telerate shall use commercially reasonable
efforts to support and maintain the Telerate Version of SuperCharts Products in
a good and professional manner in accordance with industry standards.
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However, in order to assist Telerate from time to time in providing such support
during the term of this Agreement, Omega shall (a) make available, by telephone
and electronic mail, personnel expertly trained with respect to the Telerate
Version of SuperCharts Products to provide Telerate with remote diagnostic
support and maintenance services from Omega's offices during normal business
hours and (b) outside of normal business hours, by means of remote diagnostic
support and maintenance services provided from Omega's offices, assist Telerate
in providing emergency customer support services on an as-needed basis by making
a telephone number available to Telerate, which Telerate may call after-hours,
following which a representative of Omega will return the call within a
reasonable time. Omega shall, in accordance with industry standards, use
commercially reasonable efforts to maintain appropriate personnel and other
resources sufficient to perform its maintenance and support obligations under
this Agreement. The parties understand that Omega's support obligations are
intended to be secondary to Telerate's, and that Telerate's requests for support
shall be made only after Telerate has exhausted all reasonably available
internal means of solving the problem in question, including consultation with
Telerate's head technicians with respect thereto. It is further agreed that only
head technicians or regional managers of Telerate may contact Omega for
assistance.
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G. TELERATE-REQUESTED ENHANCEMENTS.
1. CREATION.
Telerate and Omega anticipate that Telerate may desire that Omega
perform Enhancements from time to time during the term of this Agreement
(including, but not necessarily limited to, an Enhancement to make the Telerate
Version of SuperCharts Products compatible with the data feed currently being
used to transmit Telerate financial market data on which the existing Telerate
software is used in Stand-Alone Units). In the event that Telerate desires that
an Enhancement be made, Telerate shall provide Omega with written notice to that
effect, which shall include, in as much detail as is reasonably possible, the
functional specification of the Enhancement requested. Promptly after receipt of
such notice, Omega and Telerate shall endeavor, in good faith, (a) to determine
whether the requested Enhancement will add value to the Telerate Version of
SuperCharts, and, if so, whether (i) such Enhancement would have an adverse
effect on Telerate's sales of the Telerate Version of TradeStation pursuant to
the TradeStation Agreement, or (ii) development of the Enhancement is
justifiable and feasible in light of all applicable circumstances, including the
cost to Omega of developing the Enhancement in relation to the benefit Omega
would obtain under this Agreement as a result thereof, and (b) assuming that the
Enhancement will be valuable, justifiable, non-adverse and feasible as
aforesaid, (i) to mutually agree upon
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complete specifications for the Enhancement, (ii) to mutually agree upon
time-frames or parameters for the development and completion of the Enhancement,
and (iii) to mutually agree upon the testing procedures that will be used to
test the Enhancement for acceptance purposes. An Enhancement requested by
Telerate which meets all of the foregoing requirements shall be developed by
Omega free of charge to Telerate. Notwithstanding any of the foregoing to the
contrary, (x) Omega shall not be required to develop any Enhancement which, in
Omega's good faith judgment, would have an adverse effect or impact on Omega or
its business interests, and (y) Omega shall have sole and absolute discretion to
determine whether an Enhancement should be made to the Telerate Version of
SuperCharts Special Edition. Provided that all of the foregoing is agreed upon
in a writing signed by the parties, Omega shall use commercially reasonable
efforts to develop and complete the Enhancement in accordance with the agreement
of the parties. In the event that any Enhancement developed by Omega does not
pass the acceptance tests thereof mutually agreed upon, and cannot be corrected
by Omega within a reasonable time thereafter so as to be capable of passing such
tests, neither party shall have any liability of any kind to the other in
respect of such failure (unless a party has acted in bad faith in connection
therewith), and Telerate shall have no right to make any use of, or to sell,
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sublicense or otherwise distribute or incorporate, such Enhancement.
2. INCORPORATION. In the event that Omega performs Enhancements, such
Enhancements shall be the property solely of Omega and shall be subject to all
of the provisions contained herein relating to the Telerate Version of
SuperCharts and/or the Telerate Version of SuperCharts Special Edition (as the
case may be) generally.
H. OMEGA GENERATED ENHANCEMENTS.
During the term of this Agreement, Omega shall, at its sole cost and
expense (subject to the next sentence), and as promptly as is practicable,
modify the Telerate Version of SuperCharts (but not the Telerate Version of
SuperCharts Special Edition) to make the Telerate Version of SuperCharts
consistent with any enhancements, improvements or upgrades made to the
SuperCharts software generally (other than system testing, automation and
tracking features, which are excluded from the Telerate Version of SuperCharts).
To the extent that it is necessary for Telerate to provide to Omega equipment,
materials or information of or concerning Telerate in order to enable Omega so
to modify the Telerate Version of SuperCharts, Telerate shall provide same at
its expense and shall, at its expense, provide to Omega such technical
assistance in connection therewith as Omega may reasonably require.
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I. TITLE TO TELERATE VERSION OF SUPERCHARTS PRODUCTS.
Telerate acknowledges and agrees that, as between Telerate and Omega, Omega
is and shall remain the sole and exclusive owner of all rights, including
copyright, in SuperCharts, SuperCharts Special Edition and the Telerate Version
of SuperCharts Products, and all Enhancements thereof, including, but not
limited to, all rights in and to the "Easy Language" portion of SuperCharts,
SuperCharts Special Edition and the Telerate Version of SuperCharts Products,
and that the same is or will be protected by applicable copyright laws. Telerate
shall display appropriate copyright notices on all packaging, documentation,
advertising, and promotional materials containing or describing the Telerate
Version of SuperCharts and/or the Telerate Version of SuperCharts Special
Edition to the effect that the Telerate Version of SuperCharts and the Telerate
Version of SuperCharts Special Edition, and any Enhancements thereto, have been
created and developed by Omega. Telerate shall display appropriate registered
trademark notices on all uses of the trademark "SuperCharts," together with a
statement that SuperCharts is a registered trademark of Omega Research, Inc. In
addition, the sign-on screen message and the "About" box of each of the Telerate
Version of SuperCharts Products programs, as well as all Documentation, shall
conspicuously display the appropriate copyright and registered trademark notices
and a legend to the effect that such Telerate Version of SuperCharts Products
and any
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Enhancements have been created and developed by Omega and that SuperCharts is a
registered trademark of Omega Research, Inc.
J. ESCROW ARRANGEMENT.
Within sixty (60) days of execution of this Agreement, the parties will
enter into an escrow agreement, at Telerate's expense, satisfactory in form and
substance to both parties, with an independent third-party escrow agent (whose
fees and expenses will be paid by Telerate) mutually acceptable to the parties,
pursuant to which Omega shall deposit, and the escrow agent shall accept deposit
of, the Source Code for the Telerate Version of SuperCharts and the Telerate
Version of SuperCharts Special Edition. The escrow agreement shall provide
Telerate with the right to inspect and verify the items deposited by Omega with
the escrow agent, as more fully explained below. Telerate shall not copy any of
the items deposited by Omega with the escrow agent while the items are deposited
with the escrow agent, as more fully explained below. The escrow agreement shall
also require that Omega update the escrow deposit within ten (10) days of the
completion and acceptance of any Enhancement to the Telerate Version of
SuperCharts Products. The escrow agreement shall also contain the following
provisions: (1) that the Source Code, and any modifications thereto, be provided
to the escrow agent on disk; (2) that upon the initial deposit of, and after
each modification to, the Source Code, one representative of Telerate will be
permitted,
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under the supervision of Omega and at Omega's premises, to compile the Source
Code in order to enable such representative to generate an executable program
for each of the Telerate Version of SuperCharts and the Telerate Version of
SuperCharts Special Edition (and such representative can take back each such
executable program to Telerate for the sole purpose of verifying that each
Source Code is complete); (3) that in no event will such representative be
permitted to take any notes, or to view any screen longer than is absolutely
necessary to compile an executable program, or to remove or take with him or her
any materials other than the compiled executable program; (4) that Telerate
shall have access to the escrow and the Source Code only in the event that (i)
an Error (other than an Insignificant Error) has occurred which Omega has
notified Telerate Omega is unable to correct, or an Event of Default has
occurred with respect to Omega based upon its failure to correct an Error (other
than an Insignificant Error), or (ii) Omega is in default under this Agreement
pursuant to Section N.2.(a)(iv) or (v), and Telerate has not terminated this
Agreement as a result thereof and Omega's trustee in bankruptcy has rejected
this Agreement or has refused to assume it; (5) that in order to obtain access
to the escrow and the Source Code, Telerate must deliver to the escrow agent and
to Omega an affidavit, made by a duly authorized officer on behalf of Telerate,
to the effect that one of the conditions in subparagraph (4) above has occurred,
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following which Omega shall have the right, exercisable by similar affidavit
delivered to the escrow agent and Telerate, to contest Telerate's right to have
access to the Source Code, in which event the issue shall be resolved in
accordance with a mutually agreed-upon, expeditious dispute-resolution mechanism
set forth in the escrow agreement;(6) that, in the event Telerate gains access
to the Source Code, it may use the Source Code for the sole purpose of
correcting Errors (which, at Omega's election, shall be performed at Omega's
premises under Omega's supervision) or, in the event of an Event of Default with
respect to Omega pursuant to Section N.2.(a)(iv) or (v) (provided that Telerate
does not terminate this Agreement as a result thereof and Omega's trustee in
bankruptcy has rejected this Agreement or has refused to assume it), to correct
Errors and to otherwise maintain and support the Telerate Version of SuperCharts
Products for the term of this Agreement (and, in the event that Omega is in
liquidation or has ceased operations, to make Enhancements during the term of
this Agreement, any such Enhancements to be the property solely of Omega); and
(7) that, except as specifically provided in Section P.4, the escrow agreement
shall automatically terminate, and Telerate shall have no further right to gain
access to or use the Source Code, upon the expiration or any other termination
of this Agreement. As long as Omega executes the escrow agreement, the failure
of the escrow agreement to become effective (by reason of Telerate's or the
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escrow agent's refusal to sign it or other cause beyond Omega's control) shall
not affect, diminish or impair any right or obligation of either party under
this Agreement. The provisions of this Section J contain the only circumstances
under which Omega shall ever be obligated to disclose the Source Code to
Telerate. The form of escrow agreement agreed upon by the parties is attached as
Exhibit C. The parties agree that SunTrust Bank/Miami, N.A., 777 Brickell
Avenue, Miami, Florida, is an acceptable escrow agent.
K. REPRESENTATIONS AND WARRANTIES.
1. GENERAL. Each party hereby represents, warrants and covenants that (a)
it has the unrestricted right to enter into and perform this Agreement, (b) it
is a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation and has the power to own its assets
and properties and to carry on its business as now being conducted and (c) this
Agreement (w) has been duly authorized, executed and delivered, (x) constitutes
the valid and binding obligation of such party enforceable in accordance with
its terms, (y) will not violate, to such party's actual knowledge, any law,
statute, rule or regulation, or court or administrative agency judgment or
decree, and (z) will not conflict with or result in any breach or default of any
of the terms and conditions of any document or any agreement to which such party
is a party.
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2. INTELLECTUAL PROPERTY.
(a) REPRESENTATION AND WARRANTY. Omega hereby represents and warrants
that there are no pending or threatened actions or litigation against Omega
regarding intellectual property infringement or breach of license or maintenance
agreements which would materially and adversely affect Telerate's use of the
Telerate Version of SuperCharts Products, and that Omega has received no written
notice, and is not otherwise aware, of any claim or potential claim against it
by any person with respect to the ownership or use of any intellectual property
relating to SuperCharts.
(b) EXCLUSIVE REMEDY FOR BREACH. In the event that any of the
representations and warranties of Omega contained in Subsection 1 or 2(a) above
are false, and a third party brings suit against Telerate during the term of
this Agreement asserting therein rights in the Telerate Version of SuperCharts
Products or damages or other relief as a result of an alleged infringing use by
Telerate of the Telerate Version of SuperCharts Products ("Indemnifiable
Claims"), Omega will, subject to the provisions and limitations set forth below,
assume at its expense the defense of such suit using counsel reasonably
acceptable to Telerate, and indemnify Telerate against any money damages or
costs awarded in such suit which are based upon the Indemnifiable Claims.
Omega's obligations under this Subsection (b) shall be excused if Telerate
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fails to provide to Omega prompt notice of any Indemnifiable Claim asserted or
threatened against Telerate, but only to the extent that the delay in giving
notice is prejudicial to Omega or otherwise prejudices Omega's ability to
answer, defend against or settle such Indemnifiable Claim. Omega shall have
exclusive control of the defense of such lawsuit and all negotiations relating
to its settlement, and Telerate shall assist Omega at Omega's request in all
necessary respects in connection with the defense and/or settlement of the
lawsuit. However, Omega's total liability to incur out-of-pocket costs in the
defense of any such suit or suits and to pay damages or costs awarded in or
resulting from any such suit or suits (whether by judgment, settlement, or
otherwise) shall be limited to the amount theretofore paid to Omega by Telerate
under this Agreement, and Telerate shall advance to Omega any amounts required
to be expended by Omega in excess of such limit. Amounts so advanced shall be
credited to future payments due from Telerate to Omega under this Agreement. The
foregoing provisions of this Subsection (b) state the entire liability of Omega
to Telerate in connection with any third-party lawsuit brought against Telerate
for which indemnity pursuant to this Subsection (b) is available.
3. DISCLAIMER. EXCEPT FOR THE EXPRESS WARRANTIES CONTAINED IN THIS SECTION
K, OMEGA EXPRESSLY DISCLAIMS ANY WARRANTIES, EXPRESS OR IMPLIED, EITHER IN FACT
OR BY OPERATION OF LAW,
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STATUTORY OR OTHERWISE, INCLUDING WITHOUT LIMITATION MERCHANTABILITY AND FITNESS
FOR PARTICULAR PURPOSE OR USE, AND MAKES NO REPRESENTATIONS OR WARRANTIES
REGARDING SUPERCHARTS, SUPERCHARTS SPECIAL EDITION OR THE TELERATE VERSION OF
SUPERCHARTS PRODUCTS, OR THE COPYRIGHTS OF OMEGA THEREIN, INCLUDING, WITHOUT
LIMITATION, THEIR SCOPE OR VALIDITY, OR ANY SYSTEMS, PRODUCTS OR SERVICES BASED
THEREON OR MAKING USE THEREOF, INCLUDING, WITHOUT LIMITATION, NON-INFRINGEMENT
OF RIGHTS OF THIRD PARTIES.
4. PERFORMANCE. Omega warrants and covenants that (a) the Telerate Version
of SuperCharts Products (i) shall be free from any material defects in material
and workmanship, and (ii) shall perform in accordance with the Specification in
all material respects and (b) the services to be provided to Telerate as
specified herein shall be performed in a good and professional manner in
accordance with industry standards.
L. LIMITATION OF LIABILITY.
1. CERTAIN DAMAGES. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN
THIS AGREEMENT, IN NO EVENT SHALL OMEGA BE LIABLE TO TELERATE, REGARDLESS OF THE
TYPE OR NATURE OF THE BREACH OR OTHER ACTION OR OMISSION ASSERTED OR PROVED, FOR
SPECIAL, CONSEQUENTIAL, INDIRECT OR INCIDENTAL DAMAGES OF ANY KIND, INCLUDING,
WITHOUT LIMITATION, LOSS OF INCOME, PROFITS, REVENUE, MARKET SHARE OR THE LIKE.
FURTHER, IN NO EVENT SHALL TELERATE BE ENTITLED TO ASSERT AGAINST OR RECOVER
FROM OMEGA ANY DAMAGES OTHER
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THAN ITS DIRECT, ACTUAL, OUT-OF-POCKET DAMAGES WHICH, IN ALL EVENTS, SHALL BE
CAPPED AT THE AMOUNT OF THE TOTAL PAYMENTS ACTUALLY RECEIVED BY OMEGA AS OF SUCH
DATE PURSUANT TO THIS AGREEMENT. NOTWITHSTANDING ANYTHING TO THE CONTRARY
CONTAINED IN THIS AGREEMENT, BUT EXCEPT AS SET FORTH IN THE LAST SENTENCE OF
THIS SECTION L.1, IN NO EVENT SHALL TELERATE BE LIABLE TO OMEGA, REGARDLESS OF
THE TYPE OR NATURE OF THE BREACH OR OTHER ACTION OR OMISSION ASSERTED OR PROVED,
FOR SPECIAL, CONSEQUENTIAL, INDIRECT OR INCIDENTAL DAMAGES OF ANY KIND,
INCLUDING, WITHOUT LIMITATION, LOSS OF INCOME, PROFITS, REVENUE, MARKET SHARE OR
THE LIKE. FURTHER, IN NO EVENT SHALL OMEGA BE ENTITLED TO ASSERT AGAINST OR
RECOVER FROM TELERATE ANY DAMAGES OTHER THAN ITS DIRECT, ACTUAL, OUT-OF-POCKET
DAMAGES (WHICH, IT IS AGREED, WOULD INCLUDE THE RIGHT TO RECOVER FROM TELERATE
ANY AMOUNTS DUE TO BE PAID OMEGA BY TELERATE PURSUANT TO SECTION D OF THIS
AGREEMENT WHICH ARE NOT PAID BY TELERATE, INCLUDING APPLICABLE STATUTORY,
PRE-JUDGMENT AND POST-JUDGMENT INTEREST THEREON). THE FOREGOING LIMITATIONS ON
THE LIABILITY OF TELERATE SHALL NOT APPLY IN ANY RESPECT TO ANY CLAIM OF OMEGA
BASED UPON (a) TELERATE, ITS AFFILIATES OR INDEPENDENT DISTRIBUTORS ENGAGING IN
ACTIVITIES WHICH EXCEED THE SCOPE OF THE LICENSES GRANTED TO TELERATE IN SECTION
C, (b) A BREACH OR VIOLATION BY TELERATE, ITS AFFILIATES OR INDEPENDENT
DISTRIBUTORS OF ANY OF THE PROVISIONS OF SECTION I OR SECTION M, OR (c) ANY
MISUSE, IMPROPER OR UNLAWFUL USE OR MISAPPROPRIATION OR
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INFRINGEMENT BY TELERATE, ITS AFFILIATES OR INDEPENDENT DISTRIBUTORS OF ANY
TRADEMARK, SERVICE MARK, COPYRIGHT, TRADE SECRET, OTHER INTELLECTUAL PROPERTY OR
CONFIDENTIAL OR PROPRIETARYINFORMATION OF OMEGA.
2. USE. If a temporary restraining order, preliminary injunction or final
injunction is obtained against Telerate's (or Telerate's customers') use of the
Telerate Version of SuperCharts Products due to an infringement of a patent or
copyright, or an appropriation of a trade secret, Omega will promptly, at its
option and sole expense, either (a) procure for Telerate (and Telerate's
customers) the right to continue using the Telerate Version of SuperCharts
Products in its then current phase of development, or (b) replace or modify the
Telerate Version of SuperCharts Products in its then current phase so that it no
longer infringes such patent or copyright or constitutes an appropriation of a
trade secret; or if Omega is unable to promptly effect (a) or (b) above, then,
(c), as Telerate's sole and exclusive remedy, accept Telerate's return of the
Telerate Version of SuperCharts Products (in which event this Agreement shall be
deemed terminated) and refund to Telerate, subject to the provisions of
Subsection 1 above, the full amount of Telerate's actual damages sustained as a
result of the infringement or appropriation up to the total amount paid by
Telerate to Omega to date under this Agreement.
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M. CONFIDENTIALITY; TRADE SECRETS.
The parties recognize and acknowledge that, in connection with this
Agreement, they may disclose to each other confidential or proprietary
information (the "Confidential Information"). "Confidential Information" shall
mean the terms of this Agreement (as to both parties), the Telerate-Provided
Materials, the Records and the statements to be rendered by Telerate to Omega
pursuant to this Agreement (as to Telerate), the Source Code, the Object Code,
and the Executable Code for SuperCharts, SuperCharts Special Edition and the
Telerate Version of SuperCharts Products (as to Omega), as well as any other
information or data received by either party from the other which has been
marked "Proprietary and Confidential" by the disclosing party, or in respect of
which the receiving party has received from the disclosing party specific
written notice of its proprietary and confidential nature. Each party agrees to
use the Confidential Information solely as contemplated under this Agreement and
to hold in confidence and to protect all Confidential Information against
disclosure to unauthorized third parties by using the same standard of care as
it applies to its own confidential or proprietary information. All materials and
documents supplied hereunder shall be and remain the property of the disclosing
party, and the receiving party agrees to limit dissemination of, and access to,
such materials and documents to its personnel having a need to know and agrees
to return or
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destroy all such materials and documents (including purging any electronically
stored records) upon request of the disclosing party. The above restrictions
shall not apply to information in the public domain or generally known or which
the receiving party can demonstrate has been independently developed by it prior
to disclosure or was otherwise known to the receiving party prior to disclosure
or was rightfully acquired by the receiving party from third parties, or which
is approved for release by the written authorization of the disclosing party, or
which is required to be disclosed by law or regulation (including in connection
with any securities filings, reports or prospectuses made or distributed or
required to be made or distributed by either party). In addition to and without
limitation of the foregoing, (a) Telerate acknowledges and agrees that the
Source Code, Object Code and Executable Code for SuperCharts, SuperCharts
Special Edition and the Telerate Version of SuperCharts Products (as same may be
enhanced by Omega) contain and will contain trade secrets of Omega, and Telerate
further agrees that it shall not (i) in any way attempt to discern Omega's trade
secrets or proprietary information relating to SuperCharts, SuperCharts Special
Edition or the Telerate Version of SuperCharts Products (as same may be
enhanced), including without limitation the Source Codes, Object Codes and
Executable Codes therefor (unless such discernment is not a violation of this
Agreement or the escrow agreement referred to in
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Section J or a result of disclosures made by Omega to Telerate), or (ii)
disassemble or decompile the subject software, or perform any like operation
commonly known as "reverse engineering" with respect thereto, and (b) Omega
acknowledges and agrees that the current Telerate twin environment API included
in the Telerate-Provided Materials, as same may be modified, shall not be used
by Omega for any purpose other than in connection with the license granted
hereunder; provided, however, that the foregoing prohibition shall not apply to
the current Telerate twin environment API, as same may be modified, if, but only
if, Telerate publishes such current or modified Telerate twin environment API to
the information industry in a general announcement for the purpose of making
such API, as same may have been modified, freely available without charge by
Telerate and creating an "open system" by which computer software publishers may
deal directly with Telerate subscribers whose devices employ such API, as same
may have been modified. Omega acknowledges that Telerate may, during and
following the term of this Agreement, subject, however, to the consequences set
forth in Section C.3(a) to the extent applicable, engage in active efforts to
develop a Real-Time product which is compatible with its data feeds that
performs many of the same, or similar, functions as those performed by the
Telerate Version of SuperCharts Products (as same may be enhanced pursuant to
this Agreement). Omega recognizes and agrees that the general functionality
(i.e., system testing,
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system automation, indicators, alerts on indicators, system optimization,
generation of commentary on the interpretation of an indicator, and color coding
of bar charts based upon user-defined criteria, use or display of bar charts,
candlestick charts, point and figure charts, market profiles, multiple bar
charts on a screen, bar charts and studies on a screen, sizeable chart windows,
printing functions such as chart printing (WYSIWYG), data printing (tabular
printing), automated printing and full historical printing (all data in
history), and functions and displays such as password-based security,
password-based permissioning, display of quotations and news with charts,
automatic display of system alerts and alarms, storage of multiple pages (trade
plans) in memory (RAM or on disk), retrieval of historical data from offsite
data source (manual and automatic), saving charts and data to disk, sharing
charts and data over network, user editing of historical data and user-defined
data items) performed and to be performed by SuperCharts, SuperCharts Special
Edition and/or the Telerate Version of SuperCharts Products, respectively, as
between Omega and Telerate, do not constitute trade secrets of Omega. However,
the parties acknowledge that the particular ways in which SuperCharts,
SuperCharts Special Edition and the Telerate Version of SuperCharts Products
implement, present and offer (or will implement, present and offer, as the case
may be) such functionality may contain protectable copyrights and trade secrets
of Omega.
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N. TERM; EVENTS OF DEFAULT; AND TERMINATION.
1. TERM. The term of this Agreement shall commence on the date hereof and,
provided that Acceptance occurs, shall, subject to each of the early termination
events specified in this Agreement, terminate on January 12, 2003.
2. EVENTS OF DEFAULT.
(a) EVENTS. Any one or more of the following shall constitute an Event
of Default hereunder:
(i) TELERATE MONETARY BREACH. Telerate fails to pay, when due, any
amount required to be paid by it under Section D of this Agreement, if such
payment is not made within thirty (30) days after Omega gives Telerate notice of
such failure to pay.
(ii) OTHER BREACHES. (A) Omega fails materially (it being
understood that if the agreement or obligation in question is already subject to
a materiality standard, the use of the word material here shall not further
alter such standard) to comply with or perform any agreement or obligation
hereunder (or either William Cruz or Ralph Cruz, in cases where he is not acting
on behalf of Omega, takes any action or enters into any transaction which would,
if done by or on behalf of Omega, constitute a material failure to comply with
or perform an agreement or obligation of Omega hereunder) if such failure is not
remedied on or before the thirtieth day after notice of such failure; provided,
however, that, in the event such failure cannot, through the use of
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commercially reasonable efforts, reasonably be remedied within such 30-day
period, if Omega commences to remedy the failure within said 30-day period and
diligently proceeds with such remedy until it is completed, no Event of Default
shall be deemed to have occurred, or (B) Telerate fails materially (it being
understood that if the obligation or agreement in question is already subject to
a materiality standard, the use of the word material here shall not further
alter such standard) to comply with or perform any agreement or obligation
hereunder (other than failure to make a payment, which is covered by Subsection
(i) above) if such failure is not remedied on or before the thirtieth day after
notice of such failure; provided, however, that, in the event such failure
cannot, through the use of commercially reasonable efforts, reasonably be
remedied within such 30-day period, if Telerate commences to remedy the failure
within said 30-day period and diligently proceeds with such remedy until it is
completed, no Event of Default shall be deemed to have occurred.
(iii) BREACHES OF REPRESENTATIONS. A representation or warranty
made or deemed to have been made hereunder by Omega or Telerate (as the case may
be) proves to have been false or misleading in any material respect when made
and the effects of the materially false or misleading representations and
warranties are material and adverse to the other party and such effects cannot
be
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cured or eliminated within a reasonable period of time after notice
thereof.
(iv) VOLUNTARY BANKRUPTCY. Omega or Telerate (as the case may be)
(A) commences a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts under any
bankruptcy, insolvency, corporation or other similar law now or hereafter in
effect that authorizes the reorganization or liquidation of such party or its
debts or the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, or (B) shall
consent to any such relief or to the appointment of or taking possession by any
such official in an involuntary case or other proceeding commenced against it,
or (C) makes a general assignment for the benefit of creditors, or (D) admits in
writing its inability to pay its debts as they become due, or (E) takes any
corporate action to authorize any of the foregoing.
(v) INVOLUNTARY BANKRUPTCY. An involuntary case or other
proceeding shall be commenced by persons that are not bound by this Agreement
against Omega or Telerate (as the case may be) seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect seeking
the appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, and
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such involuntary case or other proceeding shall remain undismissed and unstayed
for a period of sixty (60) calendar days; or an order is entered by a court of
competent jurisdiction affecting substantially all of the property or affairs of
Omega or Telerate (as the case may be) under bankruptcy, insolvency or other
similar laws as now or hereafter in effect and such order shall remain
undismissed and unstayed for a period of sixty (60) calendar days.
(b) EFFECT OF TELERATE MONETARY DEFAULT. Upon the occurrence of an
Event of Default described in Section N.2(a)(i), in addition to any other rights
and remedies available to Omega (including, without limitation, the right to
recover all amounts not paid, together with statutory, pre-judgment and
post-judgment interest thereon), Omega shall be entitled, in its sole
discretion, to elect to terminate this Agreement and the licenses granted to
Telerate hereunder immediately upon written notice to Telerate.
(c) EFFECT OF OTHER DEFAULTS. Subject to the provisions of Section F.2
and Section L, upon the occurrence of any other Event of Default by either
party, in addition to any other rights and remedies available to the
non-defaulting party, the non-defaulting party shall be entitled, in its sole
discretion, to terminate this Agreement upon thirty (30) days' prior written
notice to the defaulting party. In addition, upon the termination of the
TradeStation Agreement for any reason, either party to this Agreement may,
within the 60-day period following the termination
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of the TradeStation Agreement, terminate this Agreement upon thirty (30) days'
prior written notice to the other party.
(d) REMEDIES UPON ORDER FOR RELIEF BEING ENTERED UNDER BANKRUPTCY CODE.
If an Event of Default described in Section N.2(a) (iv) or (v) shall have
occurred with respect to Omega, and an order for relief pursuant to 11 U.S.C.
/section/101, ET SEQ., as amended or supplemented from time to time (the
"Bankruptcy Code") shall have been entered, Telerate may without any further
action or notice and at its sole discretion, either (i) deem this Agreement to
be terminated effective as if such termination had occurred immediately before
the date of entry of any such order for relief; (ii) seek to obtain upon an
expedited basis such approval from a court of competent jurisdiction as may
actually be necessary and required to effect immediate termination of this
Agreement; or (iii) seek to obtain upon an expedited basis such approval from a
court of competent jurisdiction as may actually be necessary and required to
compel Omega or its trustee-in-bankruptcy to assume or reject this Agreement.
Each of the parties hereto specifically agrees that (a) each of the termination
provisions contained in this Section has been specifically bargained for, (b)
each party has consented to termination of this Agreement at the time and in the
manner authorized by this Section and (c) neither party shall in any way attempt
or assist any other party that may attempt to delay, oppose or avoid any such
termination of this Agreement.
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(e) RIGHTS AND OBLIGATIONS OF PARTIES PENDING ASSUMPTION OR REJECTION
OF THIS AGREEMENT IN THE EVENT OF BANKRUPTCY OF OMEGA. In the event of the
commencement of a case under the Bankruptcy Code by or against Omega, and during
the period prior to the entry of an order directing or authorizing Omega or its
trustee-in-bankruptcy to assume, reject or otherwise terminate this Agreement,
Telerate may exercise its rights under Section 365(n) of the Bankruptcy Code, as
such section may be amended or supplemented from time to time, and the exercise
of such rights or resort to any remedies provided thereunder shall not be deemed
the exclusive rights and/or remedies available to Telerate, but Telerate is
entitled to obtain any relief to the fullest extent provided by applicable
bankruptcy or nonbankruptcy law (except as limited by this Agreement).
(f) RIGHTS AND OBLIGATION OF PARTIES AFTER REJECTION OF THIS AGREEMENT
IN THE EVENT OF BANKRUPTCY OF OMEGA. Omega specifically acknowledges and agrees
that, in addition to the rights and remedies of Telerate under Section 365(n) of
the Bankruptcy Code, as such section may be amended or supplemented from time to
time, the rights and remedies of Telerate set forth in this Section have been
specifically bargained for and Omega will not attempt to delay or oppose
Telerate's exercise of such rights:
(i) Omega or its trustee-in-bankruptcy shall allow Telerate
without any interference by Omega or its trustee-in-
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bankruptcy to exercise all of its rights, including rights to prosecute or
complete pending applications for trademarks and service marks for the Telerate
Version of SuperCharts Products or to seek other necessary governmental action
and to take such actions as may be necessary to prevent infringement on, or
violation of, any exclusive rights granted to Telerate by this Agreement; and
(ii) In the event that Omega's trustee-in-bankruptcy rejects this
Agreement or refuses to assume it (and Telerate does not elect to terminate this
Agreement), Telerate shall be entitled to have access to and use, and Omega
shall not interfere with Telerate's right to use, the Source Code, Object Code,
Executable Code and Documentation relating to the Telerate Version of
SuperCharts Products and any Enhancements thereof in accordance with this
Agreement, and, as to the Source Code, in accordance with, and as limited by,
the provisions of SECTION J hereof and the escrow agreement to be executed
pursuant thereto.
(g) SUPPLEMENTARY AGREEMENT. The parties further acknowledge and agree
that all provisions relating to the escrow arrangement constitute a
supplementary agreement as such term is used in Section 365(n) of the Bankruptcy
Code.
(h) SEVERABILITY. The provisions set forth in Sections N.2(c) through
(g) shall be deemed to be material nonseverable parts of the Agreement.
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3. EFFECT ON SUBSCRIBERS. Upon termination of this Agreement for any reason,
including, without limitation, the expiration hereof, Telerate may not enter
into any new subscriptions or other agreements or arrangements for the use of
the Telerate Version of SuperCharts, or agree to increase, or increase, the
number of Stand-Alone Units, Workstations or users with respect to any
subscriptions, or make any further distribution whatever, direct or indirect, of
the Telerate Version of SuperCharts Special Edition. Any existing subscriptions,
as of the date of termination, for the Telerate Version of SuperCharts may be
continued until the expiration of such subscriptions and renewed (provided that
no additional users, Stand-Alone Units or Workstations are added) pursuant to
the terms of such subscriptions, and Telerate shall be obligated to continue to
pay, and Omega will continue to receive, Royalty Fees for, and other amounts due
hereunder in respect of or based upon, such existing subscriptions for as long
as the Telerate Version of SuperCharts is in use. At termination, Telerate shall
provide to Omega a complete and accurate list of all then current subscribers
and customers for the Telerate Version of SuperCharts (as well as a list of all
customers, subscribers and end users to whom the Telerate Version of SuperCharts
Special Edition has been delivered), which shall, for each subscriber and
customer using the Telerate Version of SuperCharts, set forth the expiration
date of the subscription (or
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indicate that it is renewable on a periodic basis, identifying the period, if
appropriate) and which shall include all other information required to be
included in the statements required to be delivered by Telerate under Section
D.4 hereof. Such statements shall continue to be rendered on a monthly,
quarterly and annual basis (in the manner set forth in Section D.4) until all
subscriptions for, and uses of, the Telerate Version of SuperCharts have ceased.
The expiration or other termination of this Agreement shall not affect or impair
Omega's audit and inspection rights granted hereunder, or Telerate's duties to
maintain the Records, which shall continue at least until all subscriptions for
and uses of the Telerate Version of SuperCharts have terminated and a full and
final audit has been conducted by Omega, and until all disputes, if any,
concerning payment of Royalty Fees and other amounts due hereunder have been
fully and finally resolved.
O. NON-SOLICITATION.
To the fullest extent permitted by law, Omega agrees not to solicit the
employment of or employ any employee of Telerate or any of its Affiliates, and
Telerate agrees not to solicit the employment of or employ any employee of Omega
or any of its Affiliates, in each case, during the period commencing the date
hereof and ending on the date that is twenty-four (24) months following the
expiration or termination of this Agreement;
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provided, however, in no event shall such period of restriction terminate prior
to June 30, 1998.
P. MISCELLANEOUS.
1. NOTICES. All notices, requests and other communications hereunder shall
be in writing and shall be delivered in person or sent by commercial overnight
courier (such as FedEx) or certified mail, return receipt requested:
(a) If to Telerate, to:
Dow Jones Markets, Inc.
One World Financial Center
200 Liberty Street
New York, NY 10281
Attention: President
with a copy to:
Dow Jones Markets, Inc.
One World Financial Center
200 Liberty Street
New York, NY 10281
Attention: Legal Department
(b) If to Omega, to:
Omega Research, Inc.
8700 West Flagler Street
Suite 250
Miami, Florida 33174
Attention: William and Ralph Cruz
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with a copy to:
Rubin Baum Levin Constant
Friedman & Bilzin
2500 First Union Financial Center
200 S. Biscayne Boulevard
Miami, Florida 33131
Attention: Marc J. Stone, Esq.,
or to such other addresses as may be stipulated in writing by the parties
pursuant hereto. Unless otherwise provided, notice shall be effective on the
date it is officially recorded as delivered by return receipt, the courier
service, or equivalent.
2. FORCE MAJEURE. No party hereto shall be deemed to be in default of any
provision of this Agreement, or in default for failures in performance,
resulting from acts or events beyond the reasonable control of such party (such
acts shall include but not be limited to, acts of God, or civil or military
authority, civil disturbance, war, strikes, fire, lightning, hurricanes,
tornado, power outages, or other similar catastrophes or events).
3. AMENDMENT. This Agreement may not be amended except by written instrument
executed by each of the parties hereto.
4. BINDING AGREEMENT; ASSIGNMENT.
(a) GENERAL. This Agreement shall be binding upon and shall inure to
the benefit of the parties and the parties' respective successors at law and
permitted assigns. Neither this Agreement nor any obligations or duties
hereunder may be assigned or delegated by any party hereto without the prior
written consent
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of the other party; provided that each party shall be entitled without such
consent to assign its rights and obligations hereunder to any Affiliate or in
connection with a sale (direct or indirect, by merger, sale of capital stock or
otherwise) of all or substantially all of its assets; provided, however, if
Omega directly or indirectly (by merger, sale of capital stock or otherwise)
sells all or substantially all of its assets to one of the Telerate Competitors,
Telerate may, within the thirty (30) day period following written notice from
Omega that Omega has signed a contract to sell, or has sold, substantially all
of its assets (directly or indirectly, by merger, sale of capital stock or
otherwise) to a Telerate Competitor, terminate this Agreement by giving written
notice to Omega to that effect within such thirty (30) day period. Termination
of this Agreement in this circumstance shall occur and be effective on the date
such notice of termination is given (unless the term of this Agreement has
expired prior thereto).
(b) SALE OF OMEGA TO TELERATE COMPETITOR. In the event, but only in the
event, that Telerate so terminates this Agreement following said notice of sale
of Omega to a Telerate Competitor, (i) Telerate shall have a non-exclusive
one-year license to continue to sell new subscriptions for the Telerate Version
of SuperCharts as permitted hereunder (but the non-competition obligations of
Omega, William Cruz and Ralph Cruz shall, as of the
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date of termination, automatically cease and be of no further force or effect),
(ii) such non-exclusive license shall terminate on the first anniversary of the
date of termination of this Agreement, (iii) it is understood that Omega shall,
in this circumstance of termination only, continue to be bound by its
maintenance and support obligations under Section F, but shall not continue to
be bound by any obligation to develop any Enhancements for the Telerate Version
of SuperCharts Products or to perform any other action or obligation under this
Agreement, (iv) Telerate's obligation to pay Royalty Fees, render statements and
maintain Records shall continue to be in force; and (v) the escrow agreement
described in Subsection J shall, as contemplated in the form of escrow agreement
attached, be extended for such additional year.
(c) THIRD PARTIES. No parties other than Telerate and Omega, and their
respective successors at law and permitted assigns (provided that such
successors or permitted assigns have expressly assumed this Agreement in
writing), shall have any right or standing to assert or enforce any right or
obligation under this Agreement.
5. HEADINGS. The headings of sections and paragraphs herein, and the
"WHEREAS" clauses contained on pages 1 and 2 of this Agreement, are included for
convenience of reference or context and shall not control the meaning or
interpretation of any of the provisions of this Agreement.
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6. SURVIVAL. The provisions of this Section and of SECTIONS A, B.7, D, I, K,
L.1, M, N AND O ONLY shall survive any termination or expiration of this
Agreement.
7. GOVERNING LAW. This Agreement shall be controlled, construed and enforced
in accordance with the laws of the State of New York, other than laws relating
to conflicts of law.
8. SEPARABILITY. If any provision of this Agreement or the application
thereof to any person or circumstance shall to any extent be held to be invalid
or unenforceable, the remainder of the Agreement, or the application of such
provision to persons or circumstances as to which it is not held to be invalid
or unenforceable, shall not be affected thereby, and each provision shall be
valid and be enforced to the fullest extent permitted by law.
9. ENTIRE AGREEMENT. This Agreement, together with all Exhibits, contains
the entire understanding of the parties with respect to the subject matter
hereof and supersedes all previous and contemporaneous verbal and written
agreements relating to such subject matter.
10. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one instrument.
11. CONSTRUCTION. The parties acknowledge and confirm that this Agreement
and each of the Exhibits hereto have been heavily
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and thoughtfully negotiated by the parties over an extended period of time and
that any ambiguities contained herein or therein shall therefore not in any
manner be construed against the draftsman or alleged draftsman hereof or
thereof.
IN WITNESS WHEREOF, the undersigned parties have duly executed and delivered
this Agreement as of the day first above written. DOW JONES MARKETS, INC. OMEGA
RESEARCH, INC.
By: /S/JULIAN B. CHILDS By: /S/WILLIAM CRUZ
-------------------- ------------------
Julian B. Childs William Cruz
Title: EVP President
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EXHIBIT INDEX
EXHIBIT DESCRIPTION
A Definitions
A-1 Description of Telerate-
Provided Materials
A-2 Description of Data Feeds
for Telerate Version of
SuperCharts Products
B Noncompetition Agreement
of William Cruz and Ralph
Cruz
C Form of Escrow Agreement
D QA Test Script (Telerate
Version of SuperCharts)
E Trademark License
F QA Test Script (Telerate
Version of SuperCharts
Special Edition)
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EXHIBIT A
DEFINITIONS
ACCEPTANCE; ACCEPTED:
When the Telerate Version of SuperCharts Products has successfully
completed Quality Assurance Testing as described in Section B of the
Agreement.
ACCEPTANCE DATE:
The date Telerate has Accepted or is deemed to have Accepted the Telerate
Version of SuperCharts Products as described in Section B of the
Agreement.
AFFILIATE:
With respect to any individual or entity, any other individual or entity,
directly or indirectly, through one or more intermediaries, Controlling,
Controlled by, or under common Control with the original individual or
entity.
CONTROL:
The possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of an entity, whether through
the ownership of any securities, by contract or otherwise.
DATA FEED OR DATA FEED:
"Data Feed" or "data feed" means a type or category of financial market
data (e.g. equity prices) of a certain quality, detail and content,
formatted in a particular way or ways, for delivery to subscribers.
DOCUMENTATION:
All existing written descriptive and instructional information
published by Omega for use by SuperCharts customers relating
to the use and operation of SuperCharts Version 4 for
<PAGE>
application to Real-Time data, as same shall be appropriately modified by
Telerate pursuant to this Agreement to become the documentation for the
Telerate Version of SuperCharts or the Telerate Version of SuperCharts
Special Edition (as the case may be).
ENHANCEMENT:
Any improvement or upgrade to the Telerate Version of
SuperCharts or the Telerate Version of SuperCharts Special
Edition, whether minor or substantial.
ERROR:
Any failure of the Telerate Version of SuperCharts or the Telerate Version
of SuperCharts Special Edition to perform the applicable functions or
conform to the Specification.
EXECUTABLE CODE:
With respect to SuperCharts, SuperCharts Special Edition, the Telerate
Version of SuperCharts or the Telerate Version of SuperCharts Special
Edition, a set of machine readable instructions that has been assembled or
compiled from the Source Code and Object Code and linked and that can
operate on the appropriate computer without further compiling, assembling
or linking.
INCREMENTAL FEE:
With respect to each individual use of the Telerate Version of SuperCharts
for which a Royalty Fee is payable, the gross amount charged by Telerate
in United States Dollars to a Telerate subscriber pursuant to the
subscription for such use of the Telerate Version of SuperCharts (i.e.,
per Workstation), not including sales and similar taxes, if any, added to
the price thereof which are remittable by Telerate. The Incremental Fee
shall not be reduced by royalties or other amounts or consideration paid
to Independent Distributors or others or any other amounts except for said
taxes. If, with respect to any subscription, the Telerate Version of
SuperCharts is bundled with, sold together with, or
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<PAGE>
incorporated into, one or more other computer programs or products of
Telerate (a "bundle") for one combined price (a "bundled selling price"),
for the purposes of calculating the Incremental Fee hereunder: the
separate list price of each product included in the bundle (including the
list price for the Telerate Version of SuperCharts) will be added together
(the "non-bundled combined price"); if the non-bundled combined price
equals the bundled selling price, the Incremental Fee will be the list
price for the Telerate Version of SuperCharts; if the non-bundled combined
price exceeds the bundled selling price, each list price included in the
non-bundled combined price shall be reduced PRO RATA until the non-bundled
combined price equals the bundled selling price, and the Incremental Fee
shall equal the list price for the Telerate Version of SuperCharts as so
reduced on such PRO RATA basis.
INDEPENDENT DISTRIBUTORS:
Unaffiliated entities who distribute Telerate products and services on
behalf of Telerate on a commission or royalty basis.
MATERIAL ERROR:
Any Error which materially impairs the subscriber's ability to use as a
whole the Telerate Version of SuperCharts or the Telerate Version of
SuperCharts Special Edition or any Error which substantially impairs the
value of such program for the typical end user.
MODIFICATION:
A change or addition to the Telerate Version of SuperCharts or the
Telerate Version of SuperCharts Special Edition that establishes
conformity of the Telerate Version of SuperCharts or the Telerate Version
of SuperCharts Special Edition to the Specification, or a procedure or
routine that eliminates the practical adverse effect on Telerate's
subscribers of such a nonconformity which was observed in the regular
operation of the Telerate Version of SuperCharts or the Telerate Version
of SuperCharts Special Edition (and is capable of being consistently
duplicated).
3
<PAGE>
OBJECT CODE:
With respect to SuperCharts, SuperCharts Special Edition, the Telerate
Version of SuperCharts or the Telerate Version of SuperCharts Special
Edition, a set of machine readable instructions generated by the
compilation of the Source Code.
PERSON:
Any entity or individual.
PLATFORM:
"Platform" means the software through which particular financial market
data delivered on a Real-Time basis is made available to a subscriber for
such financial market data, and which constitutes a product of the data
vendor in the sense that such software may include various features and
functions relating to the manner in which the financial market data
delivered is accessed, received, displayed and may be used. All references
in the Agreement to the Dow Jones Workstation Platform mean the product
known as "Dow Jones Workstation" and NOT the product known as "Dow Jones
Platform" or the TTRS system.
QA TEST SCRIPT:
The test script to be used to conduct the Quality Assurance Testing, a
copy of which is attached as Exhibit D with respect to the Telerate
Version of SuperCharts and Exhibit F with respect to the Telerate Version
of SuperCharts Special Edition, which, if capable of being followed in all
material respects, will establish the conformance of the Telerate Version
of SuperCharts Products to the Specification. Within thirty (30) days
following the date of the Agreement, the parties shall jointly develop a
more detailed QA Test Script, which, once completed and agreed upon by the
parties, shall serve as the QA Test Script for all purposes of the
Agreement. The parties agree to cooperate in good faith to develop jointly
and agree upon such more detailed QA Test Script within said 30-day
period. If such more detailed QA Test Script is not jointly developed and
agreed upon within said
4
<PAGE>
30-day period, the QA Test Script attached as Exhibit D with respect to
the Telerate Version of SuperCharts and Exhibit F with respect to the
Telerate Version of SuperCharts Special Edition shall serve as the QA Test
Script for all purposes of the Agreement. The purpose of developing a more
detailed QA Test Script is not to expand the functionality that is to be
developed or demonstrated by the Telerate Version of SuperCharts Products
(as described in Exhibit D with respect to the Telerate Version of
SuperCharts and Exhibit F with respect to the Telerate Version of
SuperCharts Special Edition), but rather to specify in more detail the
testing procedures that will be used to determine whether the more general
guidelines set forth in Exhibit D with respect to the Telerate Version of
SuperCharts and Exhibit F with respect to the Telerate Version of
SuperCharts Special Edition have been met.
QUALITY ASSURANCE TESTING:
The testing of the Telerate Version of SuperCharts Products in accordance
with the QA Test Script to determine whether the Telerate Version of
SuperCharts Products conforms to the Specification, and each such
subsequent testing performed prior to Acceptance to determine whether or
not Acceptance has occurred, as described in Section B.
REAL-TIME:
With respect to the SuperCharts program or any similar program, software
that receives and displays data on a "real-time" or instantaneous basis,
and which is not delayed in any fashion, or which displays data on no
longer than a 10-minute delay basis. "Real-Time," as used in the Agreement
in relation to any existing or future software product of Omega, means
only SuperCharts and SuperCharts Special Edition and any future financial
market charting and technical analysis product which has substantially all
of the same functions and features, and is used for substantially all of
the same purposes, as SuperCharts and SuperCharts Special Edition and is
competitive with the Telerate Version of SuperCharts or the Telerate
Version of SuperCharts Special Edition.
5
<PAGE>
ROYALTY COMMENCEMENT DATE:
The date the first subscription for or use of the Telerate Version of
SuperCharts is received or occurs for which a Royalty Fee is payable
pursuant to the Agreement.
SELL; SALE; SELLING:
The terms "sell", "sale" and "selling", as they relate to the exploitation
by Telerate of its rights under the Agreement, mean the sublicensing by
Telerate, its Affiliates and Independent Distributors (on behalf of
Telerate or Telerate's Affiliates) pursuant to the Agreement of the
Telerate Version of SuperCharts to subscribers, customers and other
end-users under subscriptions or similar arrangements providing for
periodic payment therefor by such subscribers, customers and other end
users, and do not refer to the sale or disposition, as such words are
commonly understood, of the Telerate Version of SuperCharts or rights
therein.
SOURCE CODE:
With respect to SuperCharts, SuperCharts Special Edition, the Telerate
Version of SuperCharts and the Telerate Version of SuperCharts Special
Edition, the form of code which is human readable and which can be
translated by a compiler or assembler for execution on a computer. The
Source Code will be in a language that is customarily understood by
competent computer programmers (e.g., C, C++, Assembly Language).
SPECIFICATION:
Specification, as it relates to the Telerate Version of SuperCharts, means
that the Telerate Version of SuperCharts will have the same functionality
in all material respects as SuperCharts, as reflected in the documentation
for SuperCharts, except that the Telerate Version of SuperCharts will not
have system testing, automation or tracking functions or features and
except that the Telerate Version of SuperCharts will be designed to run on
a 32-bit, rather than 16-bit, CPU. Specification, as it relates to the
Telerate Version of SuperCharts Special Edition, means that the Telerate
Version of SuperCharts Special Edition will have the
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<PAGE>
same functionality in all material respects as those functions of
SuperCharts which have been included by Omega (in its sole discretion) in
the Telerate Version of SuperCharts Special Edition.
STAND ALONE SUBSCRIBER:
Stand Alone Subscriber shall mean any subscriber who subscribes to the
Telerate Version of SuperCharts from Telerate or its Affiliates or
Independent Distributors, as, when and so long as used or to be used
pursuant to such subscription on Stand Alone Unit(s).
STAND-ALONE UNIT:
A Stand-Alone Unit is one computer that will run the Telerate Version of
SuperCharts but will not be linked by network to any other computers.
However, (i) if such computer is providing access to the Telerate Version
of SuperCharts on more than one screen, each such screen shall constitute
a separate Stand-Alone Unit, and (ii) if any such screen may be accessed
by more than one keyboard, each additional keyboard shall constitute a
separate Stand-Alone Unit.
SUPERCHARTS:
That version of Omega's financial market data charting and technical
analysis program known as SuperCharts 4 that operates in Real-Time.
SUPERCHARTS SPECIAL EDITION:
A "scaled-down" version of SuperCharts developed or to be developed by
Omega, containing (and omitting) such features and functions as Omega
shall, initially and from time to time, in its sole and absolute
discretion, determine, but which shall contain, at a minimum, the features
and functions set forth in Exhibit F.
7
<PAGE>
TELERATE COMPETITORS:
Bloomberg, Reuters, Knight-Ridder, Commodity Quote Graphics, Bridge and
such parties' Affiliates and successors, whether currently existing or
existing in the future. The parties acknowledge and agree that,
notwithstanding anything in the foregoing definition of "Telerate
Competitors" to the contrary, neither any data vendor which, nor the
business of any such data vendor which, is acquired by any of the Telerate
Competitors listed above, nor any successor company created by any such
Telerate Competitor to succeed to such business (if any), shall be deemed
a Telerate Competitor for purposes of the Agreement unless such data
vendor was, or the business acquired was owned by, one of the Telerate
Competitors listed above. However, if the acquired company or business is
used as a conduit for data feeds of the Telerate Competitors which are
substantially similar to the data feeds of Telerate (as described in
prohibited by Section C.3 of the Agreement), such acquired company or
business shall be deemed a Telerate Competitor.
TELERATE-PROVIDED MATERIALS:
The equipment and materials to be provided to Omega at its request to
develop the Telerate Version of SuperCharts Products as specified in
Exhibit A-1 hereto.
TELERATE VERSION OF SUPERCHARTS:
A version of SuperCharts that is generally compatible with the data feeds
generated by Telerate and its Affiliates (such data feeds are specified in
Exhibit A-2 hereof) and, assuming no Enhancement is required, similar data
feeds of Telerate and its Affiliates which may be generated during the
term of the Agreement.
TELERATE VERSION OF SUPERCHARTS PRODUCTS:
Collectively, the Telerate Version of SuperCharts and the Telerate Version
of SuperCharts Special Edition.
8
<PAGE>
TELERATE VERSION OF SUPERCHARTS SPECIAL EDITION:
A version of SuperCharts Special Edition that is generally compatible with
the data feeds generated by Telerate and its Affiliates (such data feeds
are specified in Exhibit A-2 hereof) and, assuming no Enhancement is
required, similar data feeds of Telerate and its Affiliates which may be
generated during the term of the Agreement.
TRADESTATION AGREEMENT:
That certain Software License, Maintenance and Development Agreement,
dated August 26, 1994, as amended, between Telerate and Omega.
WORKSTATION:
A Workstation is one computer receiving or able to access Telerate data
(regardless of what software programs are being used in connection with
such data), in or from which the Telerate Version of SuperCharts would
reside or could be accessed either alone or with other applications and
utilities, and which would remain linked by a network with one or more
other computers which will also have Telerate data. However, (i) if such
computer is providing access to the Telerate Version of SuperCharts on
more than one screen, each such screen shall constitute a separate
Workstation, and (ii) if any such screen may be accessed by more than one
keyboard, each additional keyboard shall constitute a separate
Workstation. A single network may have many Workstations.
WORKSTATION SUBSCRIBER:
Any subscriber which subscribes to the Telerate Version of SuperCharts
from Telerate or its Affiliates or Independent Distributors, as, when and
so long as used or to be used pursuant to such subscription on one or more
Workstations.
9
<PAGE>
EXHIBIT A-1
DESCRIPTION OF TELERATE-PROVIDED MATERIALS
To be delivered and fully installed at Omega's premises:
1. 2 fully functional TeleTrac units (hardware, software and fully enabled
data feed), fully enabled as to capability with Telerate data available through
the data feed.
2. 1 Twin Server (hardware, software and all applicable data feeds).
3. Software and enablement for ten workstation sites running off the Twin
Server.
4. 15 copies of complete and detailed specifications for the current
Telerate twin environment API (with sufficient detail to enable Omega to modify
SuperCharts to be compatible with such environment).
To be delivered and fully installed at Cruz residence in Gables Estates,
Florida:
One copy of software (and full enablement including all data
available on the data feed) of the upcoming Telerate Twin environment
which allows for the server and the workstation software to be
running on the same computer.
Plus: all other materials, equipment, information and assistance required by0
Omega from time to time in connection with the development of the Telerate
Version of SuperCharts Products.
<PAGE>
EXHIBIT A-2
DESCRIPTION OF DATA FEEDS FOR
TELERATE VERSION OF SUPERCHARTS PRODUCTS
The Telerate data feeds currently known and referred to as:
The Items Producer
The QDS Producer
The TWParser Producer
which constitute part of the Telerate Platform known as Dow Jones Workstation,
and any additional data feeds which are made available in the future as part of
Dow Jones Workstation to the extent that compatibility of such data feeds with
the Telerate Version of SuperCharts is established pursuant to the Agreement.
2
<PAGE>
EXHIBIT B
NONCOMPETITION AGREEMENT
NONCOMPETITION AGREEMENT, dated as of March 12, 1997, by and among WILLIAM
CRUZ and RALPH CRUZ (collectively, the "Cruzes"), and DOW JONES MARKETS, INC.
f/k/a DOW JONES TELERATE, INC., a York corporation ("Telerate").
PRELIMINARY STATEMENT
Telerate and Omega Research, Inc., a Florida corporation currently owned by
the Cruzes ("Omega"), have, on the date hereof, entered into a certain Software
License, Maintenance and Development Agreement (the "License Agreement).
Pursuant to Section C.3 of the License Agreement, Omega has made certain
negative covenants to Telerate. In order to comfort Telerate that the Cruzes
will not do outside of Omega what Omega cannot do directly pursuant to Section
C.3 of the License Agreement, the Cruzes have, subject to the important
bargained-for limitations described below, agreed to be personally bound to the
provisions of Section C.3 of the Agreement.
NOW, THEREFORE, it is agreed as follows:
A. PRELIMINARY STATEMENT. The Preliminary Statement is true and correct and
constitutes a part hereof.
1. COVENANT. Each of the Cruzes covenants that he shall be bound personally
to the covenants of Omega set forth in Section C.3 of the License Agreement, and
that he will not take, and will refrain from taking, any action which Omega is
prohibited from taking under said Section C.3 of the License Agreement. The
Cruzes are not executing this document for any other purpose, and are in no way
or manner guarantors or co-makers of any covenant or obligation of any kind or
nature of Omega set forth in the License Agreement or any other agreement or
instrument executed or delivered in connection therewith.
2. LIMITATION OF LIABILITY. In the event that either of the Cruzes breaches
this Agreement, Telerate's sole and exclusive remedy shall be to obtain from a
court of competent jurisdiction a temporary restraining order, preliminary
injunction and permanent
<PAGE>
injunction (for the period of restriction) enjoining the Cruzes from taking the
actions prohibited in Section 2 above. Telerate shall have no right, in any
circumstance, to seek or recover damages of any kind from either of the Cruzes
for any reason or upon any theory (legal or otherwise) whatever, it being
understood that the equitable relief described above is Telerate's sole and
exclusive remedy (whether or not as a practical matter it is an effective remedy
in the circumstances) for any breach by either or both of the Cruzes of this
Agreement. The parties acknowledge, confirm and agree that the provisions of
this Section 3 were specifically bargained for, and that the Cruzes would not
have entered into this Agreement for the benefit of Telerate absent Telerate's
absolute assurance that the Cruzes would never be personally responsible for or
answerable in damages of any kind in the event of a breach hereof. In
furtherance of the foregoing, Telerate hereby covenants that it will never sue
either of the Cruzes personally (except to the extent necessary to obtain the
equitable relief contemplated herein) with respect to any provision, obligation
or covenant contained in the License Agreement, or any breach or violation
thereof, or with respect to any transaction or matter arising out of or related
to the License Agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first above written.
/s/ WILLIAM CRUZ
----------------
WILLIAM CRUZ
/s/ RALPH CRUZ
--------------
RALPH CRUZ
DOW JONES MARKETS, INC.
By: /s/JULIAN B. CHILDS
-------------------
Julian B. Childs
Title: EVP
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<PAGE>
EXHIBIT C
ESCROW AGREEMENT
<PAGE>
SOFTWARE ESCROW AGREEMENT
SOFTWARE ESCROW AGREEMENT, dated ______________, 1997 (the "Agreement"),
tby and among OMEGA RESEARCH, INC., a Florida corporation ("Omega"), DOW JONES
MARKETS, INC. f/k/a DOW JONES TELERATE, INC., a New York corporation
("Telerate"), and SUNTRUST BANK/MIAMI, NATIONAL ASSOCIATION ("Escrow Agent").
PRELIMINARY STATEMENT
Omega and Telerate are parties to that certain Software License, Maintenance
and Development Agreement dated March 12, 1997 (the "License Agreement").
Pursuant to Section J of the License Agreement, Omega has agreed to deposit in
escrow with Escrow Agent, on computer disk, the Source Code (and certain related
materials) for the Telerate Version of SuperCharts and for the Telerate Version
of SuperCharts Special Edition. This Agreement shall govern the terms and
conditions of such escrow arrangement. Capitalized terms used herein, which are
not defined herein, shall have the respective meanings ascribed to them in the
License Agreement.
NOW, THEREFORE, it is agreed as follows:
1. SUPPLEMENTARY AGREEMENT. This Agreement is supplementary to the License
Agreement. This Agreement is intended to provide certain guidance for the
limited circumstances under which Telerate shall be entitled to access to the
Source Code (and certain related materials) for the Telerate Version of
SuperCharts and for the Telerate Version of SuperCharts Special Edition in order
to protect certain of its interests under the License Agreement.
2. NO INFERENCE OF TERMINATION. The description herein of the possible
occurrences that would constitute a Release Event (as defined below), and the
consequences thereof, shall create no presumption that Omega or its trustee in
bankruptcy should be permitted to reject or terminate this Agreement under
applicable law. The parties agree that such a rejection or termination would be
prejudicial to Telerate's interests. This Agreement is not intended to diminish,
enlarge, modify or impair, and this Agreement shall not diminish, enlarge,
modify or impair, any right or obligation of any party under the License
Agreement.
<PAGE>
3. ESCROW DEPOSIT. Within ten (10) days following the Acceptance Date, Omega
shall deposit with Escrow Agent, and Escrow Agent shall accept the deposit of,
in a sealed envelope, the Source Code, on computer disk, for each of the
Telerate Version of SuperCharts and the Telerate Version of SuperCharts Special
Edition, together with such programmers notes and instructions as have been
prepared by Omega in the normal course of its operations in connection with the
creation of such Source Code (collectively the "Escrowed Code"). Omega shall,
promptly after such deposit is made, notify Telerate of that fact. Escrow Agent
shall hold and maintain the Escrowed Code at its premises at 777 Brickell
Avenue, Miami, Florida, in a vault or safety deposit box, and shall not permit
access thereto, or the release thereof, by or to any person or entity whatever,
except as specifically permitted by this Agreement.
4. SUPPLEMENTARY ESCROW DEPOSITS. Within ten (10) days following the
completion and acceptance of any Enhancement to the Telerate Version of
SuperCharts or the Telerate Version of SuperCharts Special Edition developed by
Omega, Omega shall deposit with Escrow Agent, and Escrow Agent shall accept
deposit of, in a sealed envelope, such updated Source Code, on computer disk,
for the Telerate Version of SuperCharts or the Telerate Version of SuperCharts
Special Edition as so enhanced, together with such programmers notes and
instructions as have been prepared by Omega in the normal course of its
operations in connection with the creation of such updated Source Code
(collectively, an "Updated Escrowed Code"). Omega shall, promptly after each
such deposit is made, notify Telerate of that fact. Upon any such supplementary
deposit by Omega, Escrow Agent shall return to Omega the Escrowed Code then held
by Escrow Agent, and the Updated Escrowed Code shall then become the Escrowed
Code for all purposes hereunder. Omega covenants to Telerate that each Source
Code deposited into escrow pursuant to this Agreement, including the initial
deposit, will be in a language that is customarily understood by competent
computer programmers (e.g., C, C++, Assembly Language).
5. RELEASE EVENTS. The following events constitute the only events upon
which Escrow Agent is authorized to release the Escrowed Code to any person or
entity (other than deposit of the Escrowed Code with a court as more fully
explained later in this Agreement), or to allow access to the Escrowed Code by
any person or entity (individually, a "Release Event," and, collectively, the
"Release Events"):
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(a) VERIFICATION OF ESCROWED CODE. Within thirty (30) days following
notice from Omega of the initial escrow deposit described in Section 3 above,
and within thirty (30) days following notice from Omega of each supplementary
escrow deposit described in Section 4 above, Telerate shall be afforded access
to the Escrowed Code solely for the purpose of verifying that the Escrowed Code
contains the then-current Source Code for the Telerate Version of SuperCharts
and for the Telerate Version of SuperCharts Special Edition. In order to
exercise such right, Telerate shall provide Omega and Escrow Agent with written
notice to that effect within the applicable 30-day period ("Verification
Notice"). Within five (5) business days following the delivery of the
Verification Notice, Omega, Telerate and Escrow Agent shall schedule a mutually
convenient date, not later than thirty (30) days following the delivery of the
Verification Notice, on which a representative of Omega and a representative of
Telerate shall meet at the offices of Escrow Agent to receive from Escrow Agent
the sealed envelope containing the Escrowed Code. Escrow Agent shall deliver the
Escrowed Code to Omega's representative. Each of Telerate and Omega shall
confirm in writing in advance to Escrow Agent the name of its representative.
Escrow Agent shall request appropriate photo identification from each
representative prior to releasing the Escrowed Code to Omega's representative.
Following said release of the Escrowed Code to Omega's representative, Omega's
representative and Telerate's representative shall proceed to Omega's Miami
office, where Telerate's representative will be permitted to verify, under
Omega's supervision, that the Escrowed Code contains the Source Code for the
then-current version of the Telerate Version of SuperCharts and for the Telerate
Version of SuperCharts Special Edition. The verification procedure shall be
exclusively as follows: the Telerate representative shall be permitted to
compile the Source Code in order to enable such representative to generate an
executable program for the Telerate Version of SuperCharts and for the Telerate
Version of SuperCharts. Such representative may then take back with him to
Telerate such executable program for the sole purpose of verifying that the
Source Code is complete. In no event will such Telerate representative be
permitted to take any notes, or to view any screen longer than is absolutely
necessary to compile an executable program, or to remove or take with him or her
any materials other than the compiled executable program. Following completion
of the compilation of the executable program, the Escrowed Code, in the presence
of the Telerate representative, shall be sealed in an envelope, and the Telerate
representative and the Omega
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representative shall then proceed to the offices of Escrow Agent, whereupon the
Escrowed Code will be redeposited with Escrow Agent, subject to future release
only upon the occurrence of another Release Event.
(b) FAILURE OF OMEGA TO CORRECT AN ERROR. In the event that Omega
notifies Telerate that it is unable to correct an Error (other than an
Insignificant Error), or an Event of Default under the License Agreement has
occurred with respect to Omega based upon Omega's failure to correct an Error
(other than an Insignificant Error), and Telerate has not terminated, or given
notice of termination of, the License Agreement pursuant to any provision
thereof other than Section P.4 thereof, and Telerate desires access to the
Escrowed Code, Telerate shall deliver to Escrow Agent and to Omega an affidavit
of Telerate, made by a duly authorized officer of Telerate (the "Correction
Failure Affidavit"), stating, as applicable, that:
(i) "Telerate is entitled to access to the Escrowed Code because
Omega has notified Telerate that it is unable to correct an Error (other than an
Insignificant Error), a copy of such notification from Omega being attached
hereto [with such notification attached], and Telerate has not terminated, or
given notice of termination of, the License Agreement pursuant to any provision
thereof other than Section P.4 thereof", or
(ii) "Telerate is entitled to access to the Escrowed Code because
an Event of Default under the License Agreement has occurred with respect to
Omega based upon Omega's failure to correct an Error (other than an
Insignificant Error), and Telerate has not terminated, or given notice of
termination of, the License Agreement pursuant to any provision thereof other
than Section P.4 thereof," and
(iii) "Omega has been delivered a true and complete copy of this
affidavit on the date shown on the attached certified or registered mail receipt
or commercial carrier receipt evidencing delivery to Omega on such date" [and
attaching such receipt].
Subject to Omega's right to serve a Counter Affidavit (defined and
described below), at any time during the thirty (30) day period following the
end of the fifth (5th) business day following delivery of the Correction Failure
Affidavit, Escrow Agent shall, at Telerate's request, release the Escrowed Code
to
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<PAGE>
Telerate. Upon receipt of the Escrowed Code in this circumstance, Telerate
shall use the Escrowed Code solely for the purpose of correcting the Error(s)
the failure of which to correct served as the basis for Telerate's right to have
access to the Escrowed Code. If requested by Omega in writing or in Omega's
Counter Affidavit, correction of said Error(s) will take place at Omega's
offices under Omega's supervision, in which event the procedures for release and
return of the Escrowed Code set forth in subsection (a) above shall be followed.
In no event shall any copy be made of the Escrowed Code. Upon completion of
correction of said Error(s), the Escrowed Code shall be sealed in an envelope
and redeposited with Escrow Agent. Even if Omega does not elect to have the
Error(s) corrected at its offices under its supervision, Omega shall have the
right to have a representative be present for such resealing and redeposit
procedure.
(c) BANKRUPTCY OF OMEGA. In the event that an Event of Default occurs
with respect to Omega under Section N.2(a)(iv) or (v) of the License Agreement,
and Telerate does not terminate or give notice of termination of the License
Agreement pursuant to any provision thereof other than Section P.4 thereof, and
Omega's trustee in bankruptcy has expressly rejected the License Agreement or
expressly refused to assume the License Agreement, and Telerate desires access
to the Escrowed Code, Telerate shall deliver to Escrow Agent and to Omega an
affidavit of Telerate, made by a duly authorized officer of Telerate (the
"Bankruptcy Affidavit"), stating:
(i) "An Event of Default has occurred with respect to Omega under
Section N.2(a)(iv) or (v) under the License Agreement";
(ii) "Telerate has not terminated and has not given notice of
termination of the License Agreement pursuant to any provision thereof other
than Section P.4 thereof";
(iii) "Omega's trustee in bankruptcy has expressly rejected the
License Agreement or has expressly refused to assume it, and a copy of the
action of the bankruptcy court so rejecting or refusing to assume the License
Agreement is attached" [and attaching a true, correct and complete copy of such
action]; and
(iv) "Omega has been delivered a true and complete copy of this
affidavit on the date shown on the attached certified
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<PAGE>
or registered mail receipt or commercial courier receipt evidencing delivery to
Omega on such date" [and attaching such receipt].
Subject to Omega's right to serve a Counter Affidavit, at any time
during the thirty (30) day period following the end of the fifth (5th) business
day following delivery of the Bankruptcy Affidavit, Escrow Agent shall, at
Telerate's request, release the Escrowed Code to Telerate. Upon receipt of the
Escrowed Code in this circumstance, Telerate may use the Escrowed Code, until
the expiration or termination of the License Agreement, solely for the purpose
of correcting Errors and providing maintenance and support to subscribers for
the Telerate Version of SuperCharts and the Telerate Version of SuperCharts
Special Edition, and if, but only if, Omega is in liquidation or has completely
ceased operations, and Telerate has not terminated or given notice of
termination of the License Agreement pursuant to Section P.4 thereof, to make
Enhancements, any such Enhancements to be the property solely of Omega. In no
event shall any copy be made of the Escrowed Code.
6. TERM. This Agreement shall be effective as of the date hereof and shall
continue to be effective until the earliest of (a) January 12, 2003 and (b)
subject to the right of Telerate to deliver a Counter Affidavit, the date on
which the Escrow Agent receives an affidavit from either Telerate or Omega (the
"Termination Affidavit") (a copy of which shall be served on the non-serving
party) stating that the License Agreement is or has been terminated pursuant to
any provision thereof other than Section P.4 thereof, and that the non-serving
party has been delivered a true and complete copy of the Termination Affidavit
on the date shown on the certified registered mail receipt or commercial courier
receipt attached (a copy of which shall be attached to the Termination
Affidavit). Upon any such termination of this Agreement, Escrow Agent shall
release the Escrowed Code to Omega, at Omega's request. If, however, Omega has
delivered a Termination Affidavit, subject to Telerate's right to deliver a
Counter Affidavit, Escrow Agent shall return the Escrowed Code to Omega promptly
following the fifth (5th) business day following the delivery of the Termination
Affidavit. If, at the time of such termination of this Agreement, Telerate is in
possession of the Escrowed Code pursuant to this Agreement, Telerate shall,
immediately upon termination, cease using the Escrowed Code for any purpose and
promptly return it to Omega accompanied by a letter from Telerate affirming that
Telerate has ceased using the Escrowed Code for any purpose, has used the
Escrowed Code only as permitted
6
<PAGE>
hereunder, and has made no copies of any kind or nature of, or made or retained
any notes or materials concerning, the Escrowed Code. (Omega shall have the
right to request and receive from Telerate such a confirmatory letter following
any release to Telerate hereunder of the Escrowed Code.) Notwithstanding
anything to the contrary contained in this Agreement, if the Escrowed Code has
not been returned to Omega by the Outside Termination Date, Escrow Agent shall
release the Escrowed Code to Omega on or promptly following the Outside
Termination Date, regardless of any conflicting or contrary instructions or
objections which may be given by Telerate (including any Counter Affidavit), the
parties agreeing that Telerate has no right whatever to make such an objection,
and that Escrow Agent has no discretion upon the occurrence of the Outside
Termination Date to do anything other than deliver the Escrowed Code to Omega.
7. COUNTER AFFIDAVIT. In any case where Telerate has asserted the right of
access to the Escrowed Code (whether pursuant to a Verification Notice, a
Correction Failure Affidavit or a Bankruptcy Affidavit), or where Omega has
asserted the right to be returned the Escrowed Code pursuant to a Termination
Affidavit (as the case may be, a "Release Affidavit"), the party who has not
delivered the Release Affidavit (the "Objecting Party") may, within five (5)
business days of its receipt of the Release Affidavit, object to the release of
the Escrowed Code requested in or in connection with the Release Affidavit by
delivering to the party who has delivered the Release Affidavit (the "Asserting
Party") and to Escrow Agent an affidavit (a "Counter Affidavit") stating that
the Asserting Party is not entitled to receive access to or release or return of
(as the case may be) the Escrowed Code, and the reasons therefor. No party shall
deliver a Counter Affidavit unless it believes, in good faith, that the
Asserting Party is not entitled to the access or release of the Escrowed Code
asserted by the Asserting Party. In no event shall Telerate have the right to
serve, or serve, a Counter Affidavit to contest the return of the Escrowed Code
to Omega on the Outside Termination Date. In the event that a Counter Affidavit
is delivered, Escrow Agent shall continue to hold the Escrowed Code, and shall
not release it to, or allow access to it by, any party, pending the joint
instructions of Telerate and Omega, or as otherwise described in Section 10(a)
below.
8. DISPUTE RESOLUTION. In the event a Counter Affidavit is delivered, Omega
and Telerate shall, in good faith, attempt to
7
<PAGE>
resolve the dispute within five (5) business days following the delivery of the
Counter Affidavit. If a resolution is reached, Omega and Telerate shall promptly
execute joint written instructions to Escrow Agent concerning what is to be done
with the Escrowed Code. In the event no such resolution is reached within said
five-business-day period, either party may file a suit or action in any court of
competent jurisdiction situated in Dade County, Florida to obtain such relief at
law or in equity in respect of the Escrowed Code as such party deems warranted
or appropriate.
9. LIMITATION OF REMEDIES BETWEEN TELERATE AND OMEGA. As between Telerate
and Omega, all limitations on remedies that one party may have against the other
under the License Agreement shall apply to this Agreement.
10. RIGHTS, DUTIES AND RESPONSIBILITIES OF ESCROW. It is understood that the
duties of the Escrow Agent are purely ministerial in nature. It is further
agreed that:
(a) In the event that Escrow Agent shall be uncertain as to the duties
or rights hereunder or shall receive instructions with respect to the Escrowed
Code which, in its sole opinion, are in conflict with either other instructions
received by it or any provision of this Agreement, it shall be entitled to
continue to hold the Escrowed Code, or a portion thereof, in escrow pending the
resolution of such uncertainty to Escrow Agent's sole satisfaction, by final
judgement of a court or courts of competent jurisdiction or otherwise; or Escrow
Agent, at its option, may deposit the Escrowed Code in the registry of a court
of competent jurisdiction in a proceeding to which all parties in interest are
joined. Upon so depositing the Escrowed Code and filing its complaint and
interpleader, Escrow Agent shall be completely discharged and released from
further liability.
(b) Escrow Agent shall not be liable for any action taken or omitted
hereunder except in the case of its bad faith, gross negligence or willful
misconduct. Escrow Agent shall be entitled to consult with counsel of its own
choosing and shall not be liable for any action taken, suffered or omitted by it
in reasonable reliance upon the advice of such counsel. Any reasonable expenses
incurred by Escrow Agent in connection with such consultation shall be
reimbursed by Telerate.
8
<PAGE>
(c) Telerate shall indemnify and hold Escrow Agent, its agents,
representatives, and employees harmless from any claim, demand or loss suffered
by Escrow Agent and the cost thereof (including court costs and attorneys' fees
for negotiation, trial and appeal).
(d) This agreement sets forth exclusively the duties of Escrow Agent
with respect to any and all matters pertinent hereto and no implied duties or
obligations shall be read into this Agreement against Escrow Agent.
(e) Escrow Agent may resign as Escrow Agent at any time upon thirty
(30) days prior written notice to Telerate and Omega. In the case of Escrow
Agent's resignation, its only duty shall be to hold and release, if required,
the Escrowed Code in accordance with the original provisions of this Agreement
until a successor escrow agent shall be appointed and written notice of the name
and address of such successor escrow agent shall be given to the escrow agent by
Telerate and Omega, whereupon Escrow Agent's only duty shall be to deposit with
the successor escrow agent the Escrowed Code if then in its possession.
11. FEES AND EXPENSES. Escrow Agent shall be entitled to: (a) an annual
administration fee of $1,500.00 payable by Telerate and (b) be reimbursed by
Telerate for any reasonable out-of-pocket expenses for performing its
obligations in connection with this Agreement.
12. NOTICES. All notices, affidavits, instructions, requests and other
communications required or permitted hereunder shall be in writing and shall be
delivered in person or sent by commercial overnight courier (such as FedEx) or
certified or registered mail, return receipt requested:
(a) If to Telerate, to:
Dow Jones Markets, Inc.
One World Financial Center
200 Liberty Street
New York, NY 10281
Attention: President
9
<PAGE>
with a copy to:
Dow Jones Markets, Inc.
One World Financial Center
200 Liberty Street
New York, NY 10281
Attention: Legal Department
(b) If to Omega, to:
Omega Research, Inc.
8700 West Flagler Street
Suite 250
Miami, Florida 33174
Attention: William and Rafael Cruz
with a copy to:
Rubin Baum Levin Constant
Friedman & Bilzin
2500 First Union Financial Center
200 S. Biscayne Boulevard
Miami, Florida 33131
Attention: Marc J. Stone, Esq.
(c) If to Escrow Agent, to:
SunTrust Bank/Miami, N.A.
777 Brickell Avenue
Miami, Florida 33131
ATTN: ____________________,
or to such other addresses as may be stipulated in writing by the parties
pursuant hereto. Notice shall be effective on the date it is officially recorded
as delivered by return receipt or the courier service.
13. FORCE MAJEURE. No party hereto shall be deemed to be in default of any
provision of this Agreement, or for failures in
10
<PAGE>
performance, resulting from acts or events beyond the reasonable control of such
party.
14. AMENDMENT. This Agreement may not be amended except by written
instrument executed by each of the parties hereto.
15. BINDING AGREEMENT; ASSIGNMENT. This Agreement shall be binding upon and
shall inure to the benefit of the parties and the parties' respective successors
at law and permitted assigns.
16. HEADINGS. The headings of sections and paragraphs herein are included
for convenience of reference and shall not control the meaning or interpretation
of any of the provisions of this Agreement.
17. GOVERNING LAW; VENUE. This Agreement shall be controlled, construed and
enforced in accordance with the laws of the State of Florida, other than laws
relating to conflicts of law. The venue and jurisdiction for any claim under
this Agreement shall be in the appropriate court in Dade County, Florida.
18. ENTIRE AGREEMENT. This Agreement contains the entire understanding of
the parties and supersedes all previous verbal and written agreements.
19. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one instrument.
11
<PAGE>
IN WITNESS WHEREOF, the undersigned parties have duly executed this
Agreement as of the day first above written.
DOW JONES MARKETS, INC. OMEGA RESEARCH, INC.
By:_________________________ By: /S/ WILLIAM CRUZ
----------------
Print Name: ________________ William Cruz
Title: _____________________ President
ESCROW AGENT:
SUNTRUST BANK/MIAMI, NATIONAL ASSOCIATION
By:___________________________________
Name:_________________________________
Title:________________________________
12
<PAGE>
EXHIBIT D
QA TEST SCRIPT (TELERATE VERSION OF SUPERCHARTS)
CHART
Data
Amount
Limited by memory (as will be only 32-bit application).
Resolution
The user can display data in tick, intraday (any interval
up to 1440 minutes), daily, weekly, monthly and point and
figure resolutions, for multiple session markets.
Type
All symbols that can be displayed in the Telerate Version
of TradeStation as supported by TWIN will be plotted and
continuously updated by the program.
Display
Market status
The user can display a continuously updated status line at
the top of any chart window that will include the current
price, net change from prior day's close, day's high, day's
low and current indicator values.
Chart types
The program shall allow the user to display prices as
Open-High-Low-Close, High-Low-Close, Japanese Candlestick,
Dot on Close and Line on Close bars, point and figure.
Configuration
The program shall allow the user to change the color and
size of any element on a chart. This includes the font and
font color, window background and bar thickness and color.
Tools
The user can place any of the following tools on any price or any
indicator on a chart. Arc, Up/Down arrows, Standard/Fibonacci
Cycles*, Ellipse, Gann Fan*, Horizontal Line*, Percent Retracement,
Rectangle, Speed Resistance Arc/Fan*, Support Resistance Lines*,
Trend Lines*, Text, Zoom. The user can modify display
<PAGE>
attributes and position of any tool placed on a chart. Furthermore,
the user shall be allowed to enable alarms on those tools marked with
an asterisk that will alert the user when the market penetrates that
tool, on an intra-bar or end of bar basis, as selected by the
customer for that specific marketing tool.
Analysis Techniques
The user shall be allowed to place any of the following analysis
techniques on a chart.
Indicators, PaintBars(tm), ShowMe's(tm)
Custom 1 Line, Custom 2 Lines, Custom 3 Lines, Custom 4 Lines,
Mov Avg - Displaced, Mov Avg Weighted, DMI, Bollinger Bands, Mov
Avg 1 Line, Mov Avg 2 Lines, Mov Avg 3 Lines, Mov Avg Envelopes,
Mov Avg Exponential, Commodity Channel Index, On Balance Volume,
Gapless Bar Chart, True Low, Open Interest, McClellan
Oscillator, MFI, parabolic, Accumulation Distribution, Percent
R, Price Channel, Rate of Change, RSI, RSI w/o Zones,
Accumulation Swing Index, MACD, Spread, DownTicks, Stochastic -
Fast, Stochastic - Slow, Swing Index, Volume (Tick Vol) Volume
(UpTick Vol), Volume (DownTick vol), Volume, Up/Down Tick
Difference, Ultimate Oscillator, Volatility, Momentum,
Consecutive x bars down, Consecutive x bars up, Gap Down Bar,
ShowMe(tm) Anything, Key Reversal Up, Key Reversal Down, Outside
Bar, Gap Up bar, Inside Bar, Island Reversal Up, Island Reversal
Down, Breakout of x Bar High, Breakout of x Bar Low, %R/less
than/x, %R/greater than/x, Price/less than/x Bar Avg, Price/less
than/xBar Avg., Close Avg/greater than/Open Avg, Close Avg/less
than/Open Avg, Momentum Increasing, Momentum Decreasing,
Stochastic Fast Custom, Stochastic Slow Custom, PaintBar(tm)
Custom, Percent Change, Down Ticks, Equal Ticks, Up Ticks.
Experts
Fundamental Expert, Technical Expert, Fundamental
and Technical Expert.
2
<PAGE>
Furthermore, the user can modify the inputs and alert criteria of any
of the aforementioned analysis techniques.
QUOTE
Data
Amount
256 quotes per window.
Resolution
Tick by tick.
Type
All symbols that can be displayed in Telerate Version of
TradeStation as supported by TWIN shall be continuously updated
in the quote window.
Display
Quote fields
All fields that can be displayed in Telerate Version of
TradeStation as supported by TWIN will be available to the user.
Furthermore, user definable alarm fields can be added that alert
the user to breakout conditions on the high, low, time and
volume.
Configuration
The program shall allow the user to change the color and size of
any element on a quote window. This includes the font and font
color, window background color and the colors of alert fields.
Alert Tracking Control Center
Data
Date/time alert was hit, symbol, name, last price.
Display
Configuration
The program shall allow the user to change the color and size of
any element on an ATCC window. This includes the font and font
color and window background color.
3
<PAGE>
EXHIBIT E
TRADEMARK LICENSE
<PAGE>
Dow Jones Markets, Inc.
(f/k/a Dow Jones Telerate, Inc.)
One World Financial Center
200 Liberty Street
New York, NY 10281
March 12, 1997
Omega Research Inc.
8700 West Flagler Street
Suite 250
Miami, FL 33174
ATTENTION: WILLIAM AND RALPH CRUZ
Re: TRADEMARK LICENSE
Dear Messrs. Cruz:
As contemplated in the Software License, Maintenance and Development
Agreement between Omega Research, Inc. ("Omega") and Dow Jones Markets, Inc.,
f/k/a Dow Jones Telerate, Inc. ("Telerate") dated as of the date hereof (the
"Software License Agreement"), Omega shall grant Telerate a license to use the
"SuperCharts" name and mark pursuant to the terms and conditions set forth in
the Software License Agreement and those specified below.
Omega hereby grants to Telerate the right and license to use the name and
mark SuperCharts (hereinafter called the "Licensed Mark") as part of the
collective name and mark "Dow Jones SuperChartsTM" and "Dow Jones SuperCharts
SETM" solely on, and solely in connection with the promotion and marketing of,
(i) the Telerate Version of SuperCharts Products (as defined in the Software
License Agreement), (ii) electronic information services marketed with the
Telerate Version of SuperCharts Products, and (iii) any hardware and software
necessary to support the Telerate Version of SuperCharts Products and such
electronic information services (hereinafter called the "Licensed Product")
throughout the world, except that Telerate shall not use the Licensed Mark in
any territory where, or in any manner in which, Telerate, pursuant to
<PAGE>
the Software License Agreement, is prohibited from marketing or distributing the
Telerate Version of SuperCharts Products. All other rights to, and to use, the
Licensed Mark are reserved solely and exclusively to Omega including, without
limitation, the right to license such name and mark for any goods or services to
any person or entity, except to the Telerate Competitors (as defined in the
Software License Agreement) for, or in connection with, purposes or activities
to the extent prohibited by Section C.3 of the Software License Agreement.
Telerate may use the Licensed Mark in connection with the promotion of the
Licensed Products prior to the Acceptance Date and/or the Royalty Commencement
Date (as such terms are defined in the Software License Agreement), with the
prior written consent of Omega, which shall not be unreasonably withheld.
The license granted hereunder shall continue until the termination of the
Software License Agreement; provided, however, that Telerate may continue to use
the Licensed Mark in accordance with the terms of this Agreement with respect to
subscriptions to the Licensed Product that are in effect as of the termination
of the Software License Agreement for so long as Telerate is permitted to use
the Telerate Version of SuperCharts for such subscriptions pursuant to the
Software License Agreement. Telerate is obligated to use the Licensed Mark as
set forth in the Software License Agreement.
In consideration of the license granted hereunder, and upon receipt of an
invoice from Omega, Telerate shall pay Omega a one-time fee of ten dollars
($10).
Omega reserves and shall have the exclusive right to commence litigation to
protect or enforce rights to the Licensed Mark; provided, however, that if Omega
does not wish to institute an action, Telerate may, with the advance written
consent of Omega, which consent shall not be unreasonably withheld, institute
said action, in which event then Omega will, at Telerate's expense, cooperate
with Telerate in the institution of the proceeding, such proceeding to be
pursued at the expense of Telerate. Damages recovered or settlement received in
any claim, action or proceeding commenced by Omega or Telerate hereunder with
reference to the Licensed Mark that relates principally to infringement of the
Licensed Mark by Telerate Competitors, first, shall be apportioned
2
<PAGE>
and paid to the recovering parties' reasonable costs of pursuing such claim or
litigation in such proceeding, and, then, shall be apportioned and paid equally
to each of Omega and Telerate. Damages recovered or settlement received in any
claim, action or proceeding commenced by Telerate that is not principally
related to infringement by a Telerate Competitor, first, shall be apportioned
and paid to the recovering parties' reasonable costs of pursuing such claim or
litigation in such proceeding, and, then, shall be apportioned and paid equally
to each of them. Damages recovered or settlement received in any claim, action
or proceeding commenced by Omega that is not principally related to infringement
by a Telerate Competitor shall be paid solely to Omega.
Omega acknowledges and agrees that the name and mark "Dow Jones" is
proprietary to Telerate or its Affiliate and shall not challenge Telerate's or
its Affiliate's ownership of "Dow Jones." Telerate acknowledges and agrees that
the name and mark "SuperCharts" is proprietary to Omega and shall not challenge
Omega's ownership of SuperCharts.
Upon reasonable written notice, Omega may from time to time inspect the
Licensed Product on Telerate's premises and Telerate's advertising and
promotional materials concerning the Licensed Product. Telerate shall maintain
the quality of that portion of the Licensed Product that is the Telerate Version
of SuperCharts Products so that it has the same high quality as the software
furnished to Telerate under the Software License Agreement and Telerate shall
maintain the overall quality of the Licensed Product in a manner consistent with
the high standards of quality displayed by the products and services marketed by
Telerate as of the date of this Agreement. If the required standard of quality
is not being observed, upon written notice from Omega reasonably detailing the
deviation from the required standard of quality, Telerate shall make appropriate
corrections as promptly as is reasonably practicable.
Telerate may sublicense the rights granted in this Letter Agreement to its
Affiliates and independent Distributors (as such terms are defined in the
Software License Agreement) of the Licensed Product.
Telerate shall defend, indemnify and hold harmless Omega from, against and
in respect of any claims, losses, liabilities,
3
<PAGE>
judgments, awards, costs and expenses (including reasonable attorneys' fees and
costs) asserted against or incurred by Omega (collectively, "Claims") that arise
out of or relate to Telerate's use of the Licensed Mark for, or in connection
with, any portion of the Licensed Product other than the Telerate Version of
SuperCharts Products.
All notices permitted or required in connection with the license granted
hereunder shall be in writing and shall be delivered in person or sent by
commercial overnight courier (such as Fedex) or certified mail, return receipt
requested and shall be sent to the parties at the addresses specified in the
notice provision of the Software License Agreement.
All terms and conditions of the Software License Agreement, to the extent
not directly inconsistent with a provision of this Letter Agreement, shall apply
to the licensing of the Licensed Mark including, without limitation, the
representations and warranties in Sections K.1 and K.2(a) and the remedies for a
breach of such representations or warranties in Section K.2(b), and the Software
License Agreement shall be read in conjunction with this Letter Agreement, as if
this Letter Agreement were an addendum thereto, in defining, interpreting and
determining the respective rights and obligations of the parties.
Notwithstanding anything to the contrary herein, the record keeping obligations
of Section D.4 of the Software License Agreement shall not be applicable to the
license of the Licensed Mark.
This Letter Agreement shall be governed and construed in accordance with the
laws of the State of New York without regard to the choice of law principles
thereof. Any waiver by either party hereto of its rights under this Letter
Agreement, or failure to enforce any of same, shall not be construed as a
continuing waiver of the same right or obligation, or a waiver of any other
right or obligation. This Letter Agreement (and the Software License Agreement
to the extent applicable pursuant to the immediately preceding paragraph)
constitutes the entire Agreement between the parties and cannot be modified or
amended except by a writing executed by both parties. This Letter Agreement may
only be assigned to the extent, and in the circumstances, that the Software
License Agreement is permitted to be assigned.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Letter Agreement
on the date first written above.
DOW JONES MARKETS, INC.
By: /s/ JULIAN B. CHILDS
--------------------
Julian B. Childs
Title: EVP
OMEGA RESEARCH, INC.
By: /s/ WILLIAM CRUZ
----------------
William Cruz, President
5
<PAGE>
EXHIBIT F
QA TEST SCRIPT (TELERATE VERSION OF SUPERCHARTS SPECIAL EDITION)
CHART
Data
Amount
Limited by memory (as will be only 32-bit application).
Resolution
The user can display data in tick, intraday (any interval
up to 1440 minutes), daily, weekly, monthly resolutions,
for multiple session markets.
Type
All symbols that can be displayed in the Telerate Version
of TradeStation as supported by TWIN will be plotted and
continuously
updated by the program.
Display
Market status
The user can display a continuously updated status line at
the top of any chart window that will include the current
price, net change from prior day's close, day's high, day's
low and current indicator values.
Chart types
The program shall allow the user to display prices as
Open-High-Low-Close, High-Low-Close, Dot on Close and Line
on Close bars.
Configuration
The program shall allow the user to change the color and
size of any element on a chart. This includes the font and
font color, window background and bar thickness and color.
Tools
The user can place any of the following tools on any price or any
indicator on a chart. Horizontal Line*, Trend Lines*, Text, Zoom. The
user can modify display attributes and position of any tool placed on
a chart.
<PAGE>
Analysis Techniques
The user shall be allowed to place any of the following analysis
techniques on a chart.
Indicators
Mov Avg - Displaced, Mov Avg - Weighted, Bollinger Bands, Mov
Avg 1 Line, Mov Avg 2 Lines, Mov Avg 3 Lines, Mov Avg Envelopes,
Mov Avg Exponential, Open Interest, Stochastic - Fast,
Stochastic - Slow, Volume, Momentum, Relative Strength Index and
Rate of Change.
QUOTE
Data
Amount
256 quotes per window.
Resolution
Tick by tick.
Type
All symbols that can be displayed in the Telerate Version of
TradeStation as supported by TWIN shall be continuously updated
in the quote window.
Display
Quote fields
All fields that can be displayed in the Telerate Version of
TradeStation as supported by TWIN will be available to the user.
Configuration
The program shall allow the user to change the color and size of
any element on a quote window. This includes the font and font
color, window background color.
<PAGE>
OMEGA RESEARCH, INC.
8700 WEST FLAGLER STREET
SUITE 250
MIAMI, FLORIDA 33174
July 24, 1997
Dow Jones Markets, Inc.
200 Liberty Street, 17th Floor
New York, New York 10281
RE: SOFTWARE LICENSE, MAINTENANCE AND DEVELOPMENT AGREEMENT DATED AS OF MARCH
12, 1997 (THE "AGREEMENT") BETWEEN DOW JONES MARKETS, INC. AND OMEGA
RESEARCH, INC.
Ladies and Gentlemen:
This shall confirm our mutual understanding and agreement that, due to a
scrivener's error, the date of termination set forth in Section N.1 of the
Agreement (i.e., January 12, 2003) is incorrect. The parties acknowledge and
agree that the actual date of termination of the Agreement is January 12, 2002,
NOT January 12, 2003.
Please confirm your agreement to the foregoing by countersigning this
letter below.
Very truly yours,
OMEGA RESEARCH, INC.
By: /S/ MARC J. STONE
----------------------
Marc J. Stone
Vice President
AGREED TO AND ACCEPTED:
DOW JONES MARKETS, INC.
BY:/S/ J. B. CHILDS
------------------
NAME: J.B. CHILDS
-------------------
TITLE: EVP
-------------------
2
EXHIBIT 10.5
Exhibit "B"
MEMORANDUM OF COMMENCEMENT DATE
This MEMORANDUM OF COMMENCEMENT DATE (this "Memorandum") is executed as of
this 4th day of February, 1997, by and between 8700 Flagler, Ltd., a Florida
Limited Partnership, ("Landlord") and Omega Research, Inc., a Florida
Corporation ("Tenant").
WHEREAS, both parties hereby agree to enter into this Memorandum in order
memorialize the actual Commencement Date and the Actual Expiration Date of the
Lease for the rentable area on the Second Floor.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained in the Lease, the parties hereby agree as follows:
1. The Commencement Date of the Second Floor rentable area is February 17,
1997.
2. The Expiration Date of the Lease is August 16, 2002.
3. Unless otherwise specified, capitalized terms used in this Memorandum
shall have the same meanings as in the Lease.
4. This Memorandum embodies the entire agreement between Landlord and
Tenant with respect to the subject matter hereof, and all other terms
and conditions of the Lease shall remain unchanged and shall continue in
full force and effect. In the event of any conflict between the
provisions of the Lease and the provisions of this Memorandum, the
provisions of this Memorandum shall control and govern.
IN WITNESS WHEREOF, the parties have executed this Memorandum as of the
date first set forth above.
LANDLORD: TENANT:
8700 Flagler, Ltd., a Florida Omega Research, Inc.
Limited Partnership Banking Corporation
/s/ PAUL L. WHITE /S/ GUILLERMO CRUZ
- --------------------------------------- ---------------------------
By: The Allen Morris Commercial Real Guillermo Cruz, President
Estate Services Company, as Manager
Pursuant to authorization granted
by Landlord
Paul L. White, CPM, RPA, President /S/ LOREN COSTENTINO
---------------------------
Attest:
<PAGE>
THE
ALLEN MORRIS
COMPANY
[LOGO]
8700 FLAGLER BUILDING, 8700 West Flagler Street, Miami, Florida 33174
(305) 551-8700 FAX: (305) 551-8551
March 20, 1997
Mr. William R. Cruz
President
Omega Research, Inc.
8700 W. Flagler Street
Suite 250
Miami, FL 33174
RE: Omega Research Inc. Lease dated August 8, 1996
and Memorandum of Commencement dated February 4, 1997
Dear Mr. Cruz:
As per your lease dated August 8, 1996 by and between 8700 Flagler Ltd., a
Florida Limited Partnership, as Landlord and Omega Research Inc., a Florida
Corporation, as Tenant, the former commencement date of your lease was December
1, 1996 and reflecting a termination date of 66 months thereafter as May 31,
2002.
As per your "Exhibit B" Memorandum of Commencement Date, dated February 4, 1997,
the new commencement date is February 17, 1997 and the termination date is
August 16, 2002.
Therefore, paragraph 49 of Addendum dated August 8, 1996, Rental Rate Schedule
is deleted in its entirety and the following shall be substituted in lieu
thereof.
TERM RENTAL MONTHLY TOTAL
RATE RENTAL RENTAL
02/17/97 - 07/16/99 $15.25 $21,971.44 $637,171.76
07/17/99 - 07/16/00 $15.50 $22,331.63 $267,979.56
07/17/00 - 07/16/01 $16.00 $23,052.00 $276,624.00
07/17/01 - 08/16/02 $16.50 $23,772.38 $309,040.94
TOTAL $1,490,816.26
<PAGE>
Mr. William R. Cruz
March 20, 1997
Page Two
- -------------------
Please signify your confirmation of the above by placing your signature below.
Sincerely,
8700 Flagler, Ltd.
By: /s/ ESTHER RIZO
-----------------------------------
The Allen Morris Commerical Real Estate
Services Company, as Manager
by: Esther Rizo, Property Manager
APPROVED AND ACCEPTED:
BY: /S/ WILLIAM R. CRUZ
------------------------------------
William R. Cruz, President
Omega Research, Inc.
Date: 3/20/97
ER/fl
<PAGE>
STANDARD OFFICE BUILDING LEASE
THIS LEASE AGREEMENT (sometimes hereinafter referred to as the "Lease") made and
entered into this 8th day of August, 1996, by and between 8700 Flagler, Ltd., a
Florida Limited Partnership (hereinafter called "LANDLORD"), whose address for
purposes hereof is 1000 Brickell Avenue, Miami, Florida 33131 and Omega
Research, Inc., a Florida Corporation (hereinafter called "TENANT" ), whose
address for purpose hereof is 9200 Sunset Drive, Miami, Florida 33173-3266.
W I T N E S S E T H:
LANDLORD and TENANT agree to the following definitions for the defined terms
contained herein:
DEFINITIONS
a) "PREMISES" or "LEASED PREMISES" is hereby defined as: suite number 250
located in the Building and such Leased Premises being more particularly
described as approximately 17,289 square feet of Net Rentable Area (hereinafter
defined) located on the Second (2nd) floor of the Building.
b) BUILDING is hereby defined as The 8700 Flagler Building located at 8700 West
Flagler, Miami, FL 33174.
c) BASE RENTAL is hereby defined as One Million Four Hundred Ninety Thousand
Eight Hundred Sixteen and 26/100 ($1,490,816.26) (being an annual Base Rental of
$_____ *_____ ) payable in equal monthly installments of ____ *_____ (plus
applicable sales tax) which is computed at a Base Rental Rate of $______*______
per rentable square foot per annum. LANDLORD upon execution of this Lease by
LANDLORD and TENANT, hereby acknowledges payment by TENANT of the sum of
Twenty-One Thousand Nine Hundred Seventy-One and 44/100 Dollars ($21,971.44**)
representing payment of rental for the first full calendar month of this Lease.
The balance of the total Base Rental is payable in equal monthly installments as
specified above on the first day of each month; hereafter ensuing, the first of
which shall be due and payable on the first of January, 1997.
* See Addendum Paragraph #49
** Plus Applicable State Sales Tax
d) LEASE TERM is hereby defined as being for a period of Sixty-Six Months,
commencing on December 1, 1996 * and terminating on May 31, 2002. * To be
adjusted in the event occupancy is not attained by 12/01/96. In such case, the
Lease Term shall be adjusted to reflect a 66 month lease term.
e) BASE YEAR is herein defined, as being calendar year 1997.
f) TENANT'S PROPORTIONATE SHARE to be paid by the TENANT for Operating Expenses
and Impositions (as hereinafter defined) is hereby defined to be the percentage
which the Net Rentable Area then leased by the TENANT in the Building bears to
the Total Net Rentable Area contained in the Building which is approximately
129,655 rentable square feet. This percentage at the commencement of this Lease
is .1334%.
g) OPERATING EXPENSES, including Impositions for the Base Year, are hereby
defined as to be furnished when compiled.
h) Deleted
i) SECURITY DEPOSIT is hereby defined to be Forty-Six Thousand Seven Hundred
Ninety-Nine and 17/100 Dollars ($46,799.17) which TENANT has deposited
concurrently with LANDLORD upon the execution of the Lease by TENANT.
j) USE OR PURPOSE for which the TENANT will use and occupy the Lease Premises
shall be for the sole purpose of General Office use for software company
performing all functions necessary to the development,marketing, sale, support
and distribution of computer software programs.
<PAGE>
k) HEAT AND AIR CONDITIONING during hours other than those specified in the
Lease shall be billed to the TENANT for such service at the rate of Twenty-Five
and 00/100 Dollars ($25.00) per hour per Floor or portion thereof.
l) PARKING SPACES in the Building parking areas leased to the TENANT at no
charge throughout the Term of the Lease on a non-assigned basis shall be 80
parking spaces. See Addendum Paragraph #51.
m) COOPERATING BROKER is hereby defined as Century 21 - Kenall Gables
Realty/7756 N. Kendall Drive, Miami, FL 33156.
n) Upon execution and delivery of this lease to LANDLORD, LANDLORD hereby
acknowledges payment by TENANT as follows:
First month's rent $21,971.44
Sales Tax 1,428.14
Security Deposit 46,799.17
Other --
----------
----------
Total $70,198.75
==========
With the submission of this Lease for LANDLORD's consideration, TENANT also
includes a certificate of insurance as described in Paragraph 23.
TERMS
THE TERMS AND CONDITIONS OF THE STANDARD OFFICE BUILDING LEASE ATTACHED HERETO
ARE INCORPORATED BY REFERENCE AND MADE A PART HEREOF.
See Addendum Attached Hereto and Made a Part Hereof
IN WITNESS WHEREOF, the parties hereto have signed, sealed and delivered this
Lease in quadruplicate at Dade County, Florida on the date and year first
written above.
LANDLORD: 8700 Flagler, Ltd., a Florida
Limited Partnership
By: The Allen Morris Commercial Real Estate
Services Company, As Manager, pursuant to
authorization granted by LANDLORD
WITNESSES: /s/ ILLEGIBLE By: /s/ PAUL L. WHITE
------------------- ---------------------------------------
Paul L. White, President (SEAL)
/s/ ILLEGIBLE Attest: /s/ ILLEGIBLE
------------------- -----------------------------
Assistant Secretary
TENANT: Omega Research, Inc., a Florida
Corporation
WITNESSES: /s/ ILLEGIBLE By: /S/ GUILLERMO CRUZ
------------------- ---------------------------------------
Guillermo Cruz, President (SEAL)
/S/ ILLEGIBLE GUILLERMO R. CRUZ
------------------- ---------------------------------------
Print Name
---------------------------------------
Attest
Attachments: Guarantee of Lease
Exhibit A - Floor Plan
Standard Office Building Lease
Rules and Regulations
<PAGE>
STANDARD OFFICE BUILDING LEASE
LEASED 1. Subject to and upon the terms, provisions, covenants
PREMISES and conditions hereinafter stated, and each in consideration of
the duties, covenant, and obligations of the other hereunder,
LANDLORD does hereby lease, demise and let to TENANT; and TENANT
does hereby lease, demise and let from LANDLORD those Leased
Premises as reflected on the floor plan attached hereto as
Exhibit "A" and made a part hereof.
The term "Net Rentable Area", as used herein, shall
refer to (i) a single tenancy floor, all space measured from the
inside surface of the outer glass of the Building to the inside
surface of the opposite outer glass of the Building, excluding
only the areas ("Service Areas") within the outside walls used
for building stairs, fire towers, elevator shafts, flues, vents,
pipe shafts and vertical ducts, but including any such areas
which are for the specific use of the particular TENANT such as
special stairs or elevators, and (ii) a multi-tenancy floor, all
space with the inside surface of the outer glass enclosing
TENANT occupied portion of the floor and measured to the
midpoint of the walls separating areas leased by or held for
lease to other TENANTS or from areas devoted to corridors,
elevator foyers, restrooms and other similar facilities for the
use of all TENANTS on the particular floor (hereinafter
sometimes called "Common Areas") but including a proportionate
part of the Common Areas.
No deductions from Net Rentable Areas are made for
columns necessary to the Building. The Net Rentable Areas in the
Leased Premises and in the Building have been calculated on the
basis of the foregoing definition and are hereby stipulated
above as to the Leased Premises whether the same should be more
or less as a result of minor variations resulting from actual
construction and completion of the Leased Premises for occupancy
so long as such work is done substantially in accordance with
the approved plans.
TERM 2. This Lease shall be for the Term herein previously
defined unless sooner terminated or extended as provided herein.
If LANDLORD is unable to give possession of the Leased Premises
on the date of the commencement of the aforesaid Lease Term by
reason of the holding over of any prior tenant or tenants or for
any other reason, an abatement or diminution of the rent to be
paid hereunder shall be allowed TENANT under such circumstances
until possession is given to TENANT; and said abatement in rent
shall be the full extent of LANDLORD's liability to TENANT for
any loss or damage to TENANT because of said delay in obtaining
possession of the Premises. There shall be no delay in the
commencement of the Term of this Lease and/or payment of rent
where TENANT fails to occupy premises when same are ready for
occupancy, or when LANDLORD shall be delayed in substantially
completing such Leased Premises as a result of:
a. TENANT's failure to promptly furnish working
drawings and plans as required; or
b. TENANT's failure to approve cost estimates within
one (1) week of receipt from LANDLORD; or
c. TENANT's failure to promptly select materials,
finishes, or installation; or
d. TENANT's changes in plans (notwithstanding
LANDLORD's approval of any such changes); or
e. Any other act of omission by TENANT or its
agents, or failure to promptly make other decisions
necessary to the preparation of the Leased Premises for
occupancy.
The commencement of the Term and the payment of rent
shall not be affected, delayed or deferred on account of any of
the foregoing. For the purposes of this paragraph, the Leased
Premises shall be deemed substantially completed and ready for
occupancy by TENANT when LANDLORD's supervising architect
certifies that the work required of LANDLORD, if any, has been
substantially completed in accordance with the approved plans
and specifications, and the leased premises are in such
conditions that Tenant can conduct business normally.
Taking possession of the Leased Premises by TENANT shall
be conclusive evidence as against TENANT that the Leased
Premises were in good and satisfactory condition, completed in
accordance with the approved plans, when possession was so
taken. *If TENANT, with LANDLORD's consent, shall occupy the
Leased Premises prior to the beginning of the Lease Term as
specified hereinabove, all provisions of this Lease shall be in
full force and effect commencing upon such occupancy; and rent
for such period shall be paid by TENANT at the same rate herein
specified. *Tenant shall notify Landlord within ten (10)
business days of occupancy of all items which are not completed
or repairs which need to be made and Landlord shall have thirty
(30) days within which to complete work or make repairs.
BASE RENT 3. TENANT agrees to pay LANDLORD the Base Rental without
demand in advance, in monthly installments on the first day of
each and every month during the Term. If the Term of the Lease
commences on any day of a month except for the first day, TENANT
shall pay LANDLORD Base Rental as provided for
<PAGE>
herein for such commencement month on a prorated basis
(such proration to be based on the actual number days in the
commencement month); and the first month's rent paid by TENANT,
if any, upon execution of this Lease shall apply and be credited
to the next full month's rent due hereunder. Base Rental for any
partial month of occupancy at the end of the Term of this Lease
shall be prorated, such proration to be based on the actual
number of days in the partial month.
In addition to Base Rental, TENANT shall and hereby
agrees to pay to LANDLORD each month a sum equal to any sales
tax, tax on rentals, and any other charges, taxes and/or
impositions now in existence or hereafter imposed based upon the
privilege of renting the space leased hereunder or upon the
amount of rentals collected therefor. However, nothing herein
shall be taken to require TENANT to pay any part of any federal
and state taxes on income imposed upon LANDLORD.
TENANT shall be required to pay LANDLORD interest on any
installment of Base Rental and additional rent, as hereinafter
provided, that remains unpaid for five (5) days after its due
date. Said interest shall be computed at the maximum legal rate
from the due date.
ADDITIONAL 4.A. In the event that the cost to LANDLORD for the
RENT Operating Expenses of the Building, as hereinafter defined,
during any calendar year of the Lease Term subsequent to the
Base Year shall exceed the cost to LANDLORD for the Operating
Expenses of the Building during the Base Year, TENANT shall pay
to LANDLORD as additional rent TENANT's Proportionate Share (as
such term is hereinabove defined) of the increase in such costs
for each calendar year, if any. The amount of such additional
rent, if any, shall be determined in accordance with the
following formula: Proportionate Share multiplied by any
increase in Operating Expenses over the Operating Expenses of
the Base Year equals additional rent due from TENANT except that
such additional rent shall be prorated for any partial calendar
year following the commencement of the Lease Term.
The term "Operating Expenses" as used herein shall mean
all expenses, costs and disbursements of every kind and nature
which LANDLORD shall pay or become obligated to pay because of
or in connection with the ownership, maintenance and/or
operation of the Building, computed on the accrual basis, but
shall not include new capital improvements. By way of
explanation and clarification, these Operating Expenses shall
include, without limitation, the following:
1. Wages and salaries of all employees engaged in
operation and maintenance of the Building, employer's
social security taxes, unemployment taxes or insurance,
and any other taxes which may be levied on such wages
and salaries, the cost of disability and hospitalization
insurance, pension or retirement benefits, or any other
fringe benefits for such employees.
2. All supplies and materials used in operation and
maintenance of the Building.
3. Cost of all utilities including water, sewer,
electricity, gas and fuel used by the Building and not
charged directly to another tenant.
4. Cost of customary building management, janitorial
services, trash and garbage removal, guard service,
painting, window cleaning, landscaping and gardening,
servicing and maintenance of all systems and equipment,
including but limited to, elevators, plumbing, heating,
air conditioning, ventilating, lighting, electrical,
security and fire alarms, fire pumps, fire extinguishers
and hose repair, cabinets, mail chutes, and staging; and
damage caused by fire or other casualty not otherwise
recovered including the deductibles applicable to any
insurance policies.
5. Cost of insurance for property, loss of rents,
casualty and other liability applicable to the Building
and LANDLORD's personal property used in connection
therewith.
6. The amortized cost of any capital improvement which
reduces the Operating Expenses.
In the event the Operating Expenses in any year after
the Base Year are reduced because of a capital improvement, then
the Operating Expenses for the Base Year shall be reduced
accordingly for the purpose of determining additional rent as
though such improvement or automation was in effect during the
Base Year.
LANDLORD shall notify TENANT after the end of the Base
Year and each calendar year thereafter during the Term hereof,
of the amount which LANDLORD estimates (as evidenced by budgets
prepared by or on behalf of LANDLORD) shall be the amount of
TENANT's Proportionate Share of increases in Operating Expenses
for the then current calendar year and TENANT shall pay such sum
in advance to LANDLORD in equal monthly installments, during the
balance of said calendar year, commencing on the first day of
the first month following TENANT's receipt of such notification.
Following the end of each calendar year after the Base Year,
LANDLORD shall submit to TENANT a statement showing the actual
amount which should have been paid by TENANT with respect to
increases in Operating Expenses for the past calendar year, the
amount thereof actually paid during that year by TENANT and the
amount of the resulting balance due thereon, or overpayment
thereof, as the case may be. Within thirty (30) days after
receipt by TENANT of said statement, TENANT shall have the right
in person to inspect LANDLORD's books and records showing the
Operating Expenses for the Building for the calendar year
covered by said statement. Said statement shall become final
<PAGE>
and conclusive between the parties, their successors and
assigns as to the matters set forth therein unless LANDLORD
receives written objections with respect thereto within said
thirty (30) days of TENANT'S receipt of said statement. Any
balance shown to be due pursuant to said statement shall be paid
by TENANT to LANDLORD within thirty (30) days following TENANT's
receipt thereof and any overpayment shall be immediately
credited against TENANT's obligation to pay expected additional
rent in connection with anticipated increases in Operating
Expenses or, if by reason of any termination of the Lease no
such future obligation exists, refunded to TENANT. Anything
herein to the contrary notwithstanding, TENANT shall not delay
or withhold payment of any balance shown to be due pursuant to a
statement rendered by LANDLORD to TENANT, pursuant to the terms
hereof, because of any objection which TENANT may raise with
respect thereto. LANDLORD shall immediately credit any
overpayment found to be owing to TENANT against TENANT's
Proportionate Share of increases in Operating Expenses for the
then current calendar year (and future calendar years, if
necessary) upon the resolution of said objection or, if at the
time of the resolution of said objection, the Lease Term has
expired, immediately refund to TENANT any overpayment found to
be owing to TENANT. LANDLORD agrees to maintain accounting books
and records reflecting Operating Expenses of the Building in
accordance with generally accepted accounting principles.
Additional rent, due by reason of the provisions of this
Subparagraph 4A for the final month of this Lease, is due and
payable even though it may not be calculated until subsequent to
the termination date of the Lease; the Operating Expenses for
the calendar year during which the Lease terminates shall be
prorated according to that portion of said calendar year that
this Lease was actually in effect. TENANT expressly agrees that
LANDLORD, at LANDLORD's sole discretion, may apply the Security
Deposit specified in Paragraph 7 hereof, if any, in full or
partial satisfaction of any additional rent due for the final
months of this Lease by reason of the provisions of this
Subparagraph 4A. If said Security Deposit is greater than the
amount of any such additional rent, and there are no other sums
or amount owed LANDLORD by TENANT by reason of any other terms,
provisions, covenants or conditions of this Lease, then LANDLORD
shall refund the balance of said Security Deposit to TENANT as
provided in Paragraph 7 hereof. Nothing herein contained shall
be construed to relieve TENANT, or imply that TENANT is relieved
of the liability for or the obligation to pay any additional
rent due for the final months of this Lease by reason of the
provisions of this Paragraph 4A if said Security Deposit is
less than such additional rent; nor shall LANDLORD be required
to first apply said Security Deposit to such additional rent if
there are any other sums or amounts owed LANDLORD by TENANT by
reason of any other terms, provisions, covenants or conditions
of this Lease. If in any calendar year, the increase in
Operating Expenses is negative, no additional rental is to be
charged, but additional rent shall nevertheless be collected at
the Base Year's rate.
4B. In the event that "Impositions" (as such term is
hereinafter defined) against the Building and/or the land on
which it is located are increased during any calendar year of
the Lease Term subsequent to the Base Year over the amount of
said Impositions during the Base Year, then TENANT shall pay to
LANDLORD, as additional rent, TENANT's Proportionate Share of
the Impositions for each calendar year, if any.
The term "Impositions" as used herein shall mean all
Impositions, tax assessments (special or otherwise), water and
sewer assessments and other governmental liens or charges of any
and every kind, nature and sort whatsoever, ordinary and
extraordinary, foreseen and unforeseen, and substitutes
therefore, including all taxes whatsoever (except only those
taxes of the following categories: any inheritance, estate,
succession, transfer of gift taxes imposed upon LANDLORD or any
income taxes specifically payable by LANDLORD as a separate
taxpaying entity without regard to LANDLORD's income sources
arising from or out of the Building and/or the land on which it
is located) attributable in any manner to the Building, the land
on which the Building is located or the rents (however the term
may be defined) receivable therefrom, or any part thereof, or
any use thereon, or any facility located therein or used in
conjunction therewith or any charge of other payment required to
be paid to any governmental authority, whether or not any of the
foregoing shall be designated "real estate tax", "sales tax",
"rental tax", "excise tax", "business tax", or designated in any
other manner.
LANDLORD shall notify TENANT, after the end of the Base
Year and each calendar year thereafter, of the amount which
LANDLORD estimates (as evidenced by budgets prepared by or on
behalf of LANDLORD) shall be the amount of TENANT's
Proportionate Share of increases in Impositions for the then
current calendar year; and TENANT shall pay such sum to LANDLORD
in equal monthly installments during the balance of said
calendar year, in advance on the first day of each month
commencing on the first day of the first month following
TENANT's receipt of such notification. Following the date on
which LANDLORD receives a tax bill or statement showing what the
actual Impositions are with respect to each calendar year,
LANDLORD shall submit to TENANT a statement, together with a
copy of said bill or statement, showing the actual amount to be
paid by TENANT in the year in question with respect to increases
in Impositions for such year, the amount thereof theretofore
paid by TENANT and the amount of the resulting balance due
thereon, or overpayment thereof, as the case may be. Any balance
shown to be due pursuant to said statement shall be spread over
the remaining months of the year and be paid by TENANT to
LANDLORD or if after the close of the calendar year within ten
(10) days following TENANT's receipt thereof and any overpayment
shall be immediately credited against TENANT's obligation to pay
such additional rent in connection with increased Impositions in
later years, or, if no such future obligation exists, be
immediately refunded to TENANT.
<PAGE>
Additional rent, due by reason of the provisions of this
Subparagraph 4B for the final months of this Lease, shall be
payable even though the amount thereof is not determinable until
subsequent to the termination of the Lease; the Impositions for
the calendar year during which the Lease terminates shall be
prorated according to that portion of said calendar year that
this Lease was actually in effect. TENANT expressly agrees that
LANDLORD at LANDLORD's sole discretion, may apply the Security
Deposit specified in Paragraph 7 hereof, if any, in full or
partial satisfaction of any additional rent due for the final
months of this Lease by reason of the provisions of this
Paragraph 4B. If said Security Deposit is greater than the
amount of such additional rent and there are no other sums or
amounts owed LANDLORD by TENANT by reason of any other terms,
provisions, covenants or conditions of this Lease, then LANDLORD
shall refund the balance of said Security Deposit to TENANT as
provided in Paragraph 7 hereof. Nothing herein contained shall
be construed to relieve TENANT, or imply that TENANT is relieved
of the liability for or the obligation to pay any additional
rent due for the final months of this Lease by reason of the
provisions of this Paragraph 4B if said Security Deposit is less
than such additional rent; nor shall LANDLORD be required to
first apply said Security Deposit to such additional rent if
there are any other sums or amounts owed LANDLORD by TENANT by
reason of any of the terms, provisions, covenants, or conditions
of this Lease. If in any calendar year the increase in
Impositions is negative, no additional rent is to be charged;
but rent shall be collected at the Base Year's rate and adjusted
thereafter.
4C. It is the intention of the parties hereto to provide
that TENANT shall pay in advance of their due date TENANT's
Proportionate Share of increases in Operating Expenses and
Impositions and to share in reduction only by category to the
end that an increase in Operating Expenses shall not be offset
by a decrease in Impositions and vice versa. In no event shall
the Base Rental be reduced by reason of decreases in Operating
Expenses and/or Impositions. This Paragraph shall survive the
termination of the Lease.
TIME OF 6. TENANT agrees that TENANT shall promptly pay said
PAYMENT/ rents (Base Rental and additional rent), at the time and
ACCELERATION place stated above; TENANT shall also pay charges for work
UPON DEFAULT performed on order of TENANT, and any other charges that accrue
under this Lease; that, if any part of the rent or above
mentioned charges shall remain due and unpaid for the Fourteen
(14) days after written notice from LANDLORD to TENANT, LANDLORD
shall have the option, without further notice to TENANT, (in
addition to all other rights and remedies available to it by law
and in equity) of evicting TENANT and simultaneously
accelerating and declaring the balance of the entire rent for
the entire Term of the Lease to be immediately due and payable.
In the event of such acceleration upon default in payment,
TENANT shall remain liable for all expenses incurred by LANDLORD
and the full balance due on the Lease - subject only to credit
for rent received on reletting of premises and LANDLORD may
lease by distress or otherwise.
SECURITY 7. The Security Deposit shall be retained by LANDLORD as
DEPOSIT security for the payment by TENANT of the rents and all other
payments herein agreed to be paid by TENANT and for the faithful
<PAGE>
performance by TENANT of the terms, provisions, covenant and
conditions of this Lease. It is agreed that LANDLORD, at
LANDLORD's option may, at the time of any default by TENANT
under any of the terms, provisions, covenants or conditions of
the Lease, apply said sum or any part thereof toward the payment
of the rents and all other sums payable by TENANT under this
Lease and after any applicable cure period, and towards the
performance of and every one of TENANT's covenants under this
Lease, but such covenants and TENANT's liability under this
Lease shall thereby be discharged only pro tanto that TENANT
shall remain liable for any amounts that such sum shall be
insufficient to pay; that LANDLORD may exhaust any and all
rights and remedies against TENANT before resorting to said sum,
but nothing herein contained shall require or be deemed to
require LANDLORD so to do; that, in the event this deposit shall
not be utilized for any such purposes, then such deposit shall
be returned by LANDLORD to TENANT within ten (10) days next
after the expiration of the Term of this Lease or the
determination and payment of the amount due under Paragraph 4 of
this Lease, if any, whichever later occurs however, in no event
shall the security deposit or any portion thereof due to Tenant
be returned later than thirty (30) days after the expiration of
the Term of this Lease. LANDLORD shall not be required to pay
TENANT any interest on said Security Deposit.
USE 8. TENANT shall use and occupy the Leased Premises for
the use or purpose as hereinbefore stated and for no other use
or purpose.
QUIET 9. Upon payment by TENANT of the rents herein provided,
ENJOYMENT and upon the observance and performance of all terms,
provisions, covenants and conditions on TENANT's part to be
observed and performed, TENANT shall, subject to all of the
terms, provisions, covenants and conditions of this Lease,
peaceably and quietly hold and enjoy the Leased Premises for the
Term hereby demised.
INSURANCE 10. If the LANDLORD's insurance premiums exceed the
PREMIUMS standard premium rates because the nature of TENANT's operations
results in extra hazardous exposure, then TENANT shall, upon
receipt of appropriate invoices from LANDLORD, reimburse
LANDLORD for such increase in premiums. It is understood and
agreed between the parties hereto that any such increase in
premiums shall be considered as rent due and shall be included
in any lien for rent.
RULES AND 11. TENANT agrees to comply with all rules and
REGULATIONS regulations LANDLORD may adopt from time to time for operation
of the Building and parking facilities and for the protection
and welfare of Building and parking facilities, and the tenants,
visitors and occupants of the Building. The present rules and
regulations, which TENANT hereby agrees to comply with, entitled
"Rules and Regulations" are attached hereto and are by this
reference incorporated herein. Any future rules and regulations
adopted from time to time by LANDLORD shall become a part of the
Lease, and TENANT hereby agrees to comply with the same upon
delivery of a copy thereof to TENANT providing the same do not
materially deprive TENANT of its rights established under this
Lease.
GOVERNMENTAL 12. TENANT, at TENANT's sole expense, shall comply with
REQUIREMENTS all laws, rules, orders, ordinances, directions, regulations and
requirements of federal, state, county and municipal authorities
pertaining to TENANT's use of the Premises and with the recorded
covenants, conditions and restrictions, regardless of when they
become effective, including, without limitation, all applicable
federal, state and local laws, regulations or ordinances
pertaining to air and water quality, Hazardous Materials (as
hereinafter defined), waste disposal, air emissions and other
environmental matters, all zoning and other land use matters,
utility availability, and with any duty imposed upon LANDLORD or
TENANT with respect to the use or occupation of the Premises.
SERVICES 13. LANDLORD shall furnish the following services to
TENANT:
(A) Cleaning services, deemed by LANDLORD to be normal
and usual in a comparable building, on Monday through Friday,
except that shampooing of carpet as required by TENANT shall be
at TENANT's expense.
(B) Automatically operated elevator service, public
stairs, electrical current for lighting, incidentals, and normal
office use, and water at those points of supply provided for
general use of its tenants at all times and on all days
throughout the year.
(C) Heat and air conditioning on Monday through Friday
from 8:30 A.M. to 9:00 P.M. Saturday 8:00AM - 3:00PM except
Memorial Day, Fourth of July, Labor Day, Thanksgiving Day,
Christmas Day and New Year's Day. LANDLORD shall also furnish
heat and air conditioning at such other times as are not
provided for herein, provided TENANT gives written request to
LANDLORD before 2:00 P.M. on the business day preceding the
extra usage and if TENANT requires heat and air conditioning
during such hours, TENANT shall be billed for such service at
the rate hereinbefore stated and said rate may be changed each
year with thirty (30) days prior written notice and not to
exceed 10% from the preceding year.
No electric current shall be used except that furnished
or approved by LANDLORD, nor shall electric cable or wire be
brought into the Leased Premises, except upon the written
consent and approval of LANDLORD. TENANT shall use only office
machines and equipment that operate on the Building's standard
electric circuits, but which in no event shall overload the
Building's standard electric circuits from which TENANT obtains
electric current. Any consumption of electric current in excess
of that normal and customary for this tenant, or which require
special circuits or equipment (the installation of which shall
be at TENANT's expense after approval in writing by LANDLORD),
shall be paid for by TENANT as additional rent paid to LANDLORD
in an amount to be determined by LANDLORD
<PAGE>
based upon LANDLORD's estimated cost of such excess
electric current consumption or based upon the actual cost
thereof if such excess electric current consumption is
separately metered.
Such services shall be provided as long as TENANT is not
in default under any of the terms, provision, covenants, and
conditions of this Lease, subject to interruption caused by
power, accidents, breakdowns, catastrophes, national or local
emergencies, acts of God and conditions and causes beyond the
control of LANDLORD, and upon such happening, no claim for
damages or abatement of rent for failure to furnish any such
services shall be made by TENANT or allowed by LANDLORD.
TENANT 14. It is understood and agreed between the parties
CHARGES hereto that any charges against TENANT by LANDLORD for services
or for work done on the Leased Premises by order of TENANT, or
otherwise accruing under this Lease, shall be considered as rent
due and shall be included in any lien for rent.
REPAIR OF 15. LANDLORD shall maintain in good order and repair the
BUILDING Building (excluding repairs to be made by TENANT), including
AND without limitation public areas, the parking areas, landscape
PREMISES areas, elevators, stairs, corridors, restrooms, the base
building heat, ventilating, air conditioning, mechanical,
plumbing, and electrical systems, and the structure itself,
including the roof, foundations, exterior walls, and glass
exterior surfaces of the Premises and the Building, all
structural members of the Building and all underground utility
lines serving the Building. Provided, however, the cost of any
repairs or maintenance to the foregoing necessitated by the
gross negligence of TENANT or its agents, contractors or
employees shall be reimbursed by TENANT to LANDLORD upon demand
as additional rent.
At its sole cost, TENANT shall maintain in good repair
and tenable condition, subject to normal wear and tear, casualty
and condemnation, that portion of the Premises within the
demising walls thereof, including any wall coverings and paint
on the interior side of the demising walls, below the ceiling
slab and above the floor slab, any tile, carpet or other floor
covering installed thereon, and including any systems or other
equipment below the floor or above the ceiling tile that was
installed for TENANT. TENANT's maintenance obligation shall
extend to all tenant improvements and contents within the
Premises. TENANT shall not be obligated to repair damage
resulting from the gross negligence of LANDLORD or its agents,
contractors, or employees.
TENANT shall make no structural alterations or
structural additions of any kind to the interior of the Premises
without first obtaining LANDLORD's written consent. TENANT, at
its sole cost, may make non-structural alterations or
non-structural additions within the Premises subject to the
following conditions:
a. TENANT shall give LANDLORD prior written notice of
its intention to make alterations, additions, or repairs.
b. LANDLORD reserves the right to approve the plans and
specifications for such alterations and additions, such approval
shall not be unreasonably withheld or delayed.
c. TENANT shall only use contractors who are approved by
LANDLORD, and such contractors shall be required to furnish
evidence of insurance coverage, including Public Liability,
Workers Compensation, and Automobile Liability coverage, as well
as any other coverage required by LANDLORD. The limits of such
coverage shall be no less than those required of TENANT. TENANT
shall cause such work to be performed in accordance with all
applicable building codes and other governmental regulations to
be completed and paid and shall discharge any and all liens or
claims of lien arising therefrom, or if TENANT disputes any such
lien or claim of lien, TENANT may post a bond to remove the lien
from the Premises in accordance with local statute. All such
work, including additions, fixtures, and improvements (but
excluding movable office furniture and equipment and other
personal property of TENANT) made or placed in or upon the
Premises by either TENANT or LANDLORD shall be and become
LANDLORD's property upon installation all without compensation
to TENANT.
MECHANIC 16. TENANT further agrees that TENANT shall pay all
LIENS liens of contractors, subcontractors, mechanics, laborers,
materialmen, and other items of like character, and shall
indemnify LANDLORD against all expenses, costs, and charges,
including bond premiums for release of liens and attorney's fees
and costs reasonably incurred in and about the defense of any
suit in discharging the said Premises or any part thereof from
any liens, judgements, or encumbrances caused or suffered by
TENANT. In the event any such lien shall be made or filed,
TENANT shall bond against or discharge the same within ten (10)
days after the same has been made or filed. It is understood and
agreed between the parties hereto that the expenses, costs and
charges above referred to shall be considered as rent due and
shall be included in any lien for rent.
TENANT shall not have any authority to create any liens
for labor or materials on LANDLORD's interest in the Leased
Premises, and TENANT shall place all persons contracting with
TENANT for the destruction or removal of any facilities or other
improvements or for the erection, installation, alteration, or
repair of any facilities or other improvements on or about the
Leased Premises, and all materialmen, contractors,
subcontractors, mechanics, and laborers on notice that they must
look only to TENANT and to TENANT's interest in the Leased
Premises to secure the payment of any bill for work done or
material furnished at the request or instruction of TENANT.
<PAGE>
17. Pursuant to all of the terms, provisions, covenants
and conditions contained herein, for the Term of this Lease,
TENANT hereby leases from LANDLORD that number of parking spaces
specified herein in the Building parking areas.
TENANT agrees to hold LANDLORD harmless for damage to
the vehicles or personal property in vehicles that may occur
while the vehicles are parked in the parking areas of the
Building.
ESTOPPEL 18. TENANT agrees that from time to time, upon not less
AGREEMENT than ten (10) days prior request by LANDLORD, TENANT shall
deliver to LANDLORD a statement in writing certifying (a) that
this Lease is unmodified and in full force and effect (or, if
there have been modifications, that the Lease as modified is in
full force and effect and stating the modifications); (b) the
dates to which the rent and other charges have been paid; and
(c) that LANDLORD is not in default under any provisions of this
Lease, or, if in default, the nature thereof in detail.
SUBORDINATION 19. If the Building and/or Leased Premises are any time
subject to a mortgage and/or deed of trust, and TENANT has
received written notice from mortgagee of same, then in any
instance in which TENANT gives notice to LANDLORD alleging
default by LANDLORD hereunder, TENANT shall also simultaneously
give a copy of such notice to each LANDLORD's mortgagee; and
each LANDLORD's mortgagee shall have the right (but not the
obligation) to cure or remedy such default during the period
See Addendum that is permitted to LANDLORD hereunder, plus an additional
Paragraph #52 period of thirty(30) days, and TENANT shall accept such curative
or remedial action (if any) taken by LANDLORD's mortgagee with
the same effect as if such action had been taken by LANDLORD.
This Lease shall at LANDLORD's option, which option may
be exercised at any time during the Lease Term, be subject and
subordinate to any mortgage now or hereafter encumbering the
Building. This provision shall be self-operative without the
execution of any further instruments. Notwithstanding the
foregoing, however, TENANT hereby agrees to execute any
instruments which LANDLORD may deem desirable to evidence the
subordination of this Lease to any and all such mortgages.
Failure to execute a subordination agreement within 10 days
after request from LANDLORD shall be deemed a default hereunder.
ATTORNMENT 20. If the interest of LANDLORD under this
Lease shall be transferred voluntarily or by reason of
foreclosure or other proceedings for enforcement of any mortgage
on the Leased Premises; TENANT shall be bound to such transferee
(herein sometimes called the "Purchaser") for the balance of the
Term hereof remaining, and any extensions or renewals thereof
which may be effective in accordance with the terms and
provisions hereof with the same force and effect as if the
Purchaser were LANDLORD under this Lease, and TENANT does hereby
agree to attorn to the Purchaser, including the mortgagee under
any such mortgage if it be the Purchaser, as its said attornment
to be effective and self-operative without the execution of any
further instruments upon the Purchaser succeeding to the
interest of the this Lease. The respective rights and
obligations of TENANT and the Purchaser upon such attornment, to
the extent of the then remaining balance of the Term of this
Lease and any such extensions and renewals, shall be and are the
same as those set forth herein. In the event of such transfer of
LANDLORD's interests, LANDLORD shall be released and relieved
from all liability and responsibility thereafter accruing to
TENANT under Lease or otherwise and LANDLORD's successor by
acceptance of rent from TENANT hereunder shall become liable and
responsible to TENANT in respect to all obligations of LANDLORD
under this Lease thereafter accruing.
ASSIGNMENT 21. Without the written consent of LANDLORD first
obtained in each case, which consent may not be unreasonably
withheld or delayed. TENANT shall not, voluntarily or
involuntarily, whether by operation of law or otherwise, assign,
transfer, mortgage, pledge or otherwise encumber or dispose of
this Lease or underlet the Leased Premises or any part thereof
or permit the Leased Premises or any part thereof to be occupied
by other persons.
In lieu of consenting or not consenting, LANDLORD may,
at its option, (i) in the case of a proposed assignment of this
Lease or a proposed subletting of all of the Leased Premises,
terminate this Lease in its entirety, or (ii) in the case of a
proposed subletting of a portion of the Leased Premises,
terminate this Lease as to that portion of the Premises which
TENANT has proposed to sublet. In the event LANDLORD elects to
terminate this Lease pursuant to clause (ii) of this paragraph,
TENANT's obligation as to Base Rental and additional rent shall
be reduced in the same proportion that the Net Rentable Area of
the portion of the Premises which TENANT proposed to sublet
bears to the total Net Rentable Area of the Premises. If this
Lease is assigned or if the Leased Premises or any part thereof
is underlet or occupied by anybody other than TENANT,
voluntarily or involuntarily, whether by operation of law or
otherwise, LANDLORD may, after default by TENANT under this
Lease in the case of a sublease and at any time (whether or not
TENANT is in default under this Lease) in the case of an
assignment, collect or accept rent from the assignee,
undertenant
<PAGE>
or occupant and apply the net amount collected or
accepted to the rent herein reserved; but such collection or
acceptance shall not be deemed a waiver of the foregoing
covenant or the acceptance of the assignee, undertenant or
occupant as TENANT hereunder; nor shall it be construed as or
implied to be a release of TENANT from the further observance
and performance by TENANT of the terms, provisions, covenants
and conditions herein contained.
In the event TENANT is a partnership, corporation or
See Addendum other firm or entity, any transfer of more than fifty percent
Paragraph #53 (50%) of the right, title or interest herein, existing as of the
date hereof, shall, for the purposes hereof, be deemed to be an
assignment. Fifty percent (50%) of any sums or other economic
considerations received by TENANT as a result of a subletting,
whether denominated rentals under the sublease or otherwise,
which exceed, in the aggregate, the total sums which TENANT is
obligated to pay LANDLORD under this Lease (prorated to reflect
obligations applicable to that portion of the Leased Premises
subject to such sublease) shall be payable to LANDLORD,
immediately following TENANT's receipt of the same, under this
Lease without affecting or reducing any other obligations of
TENANT hereunder and shall constitute additional rent. Fifty
percent (50%) of any sums or other economic considerations
received by TENANT as a result of an assignment of this Lease,
whether denominated rentals under the assignment or otherwise,
shall be payable to LANDLORD, immediately following TENANT's
receipt of the same under this Lease without affecting or
reducing any other obligations of TENANT hereunder and shall
constitute additional rent.
SUCCESSORS 22. All terms, provisions, covenants and conditions to
AND ASSIGNS be observed and performed by TENANT shall be applicable to and
binding upon TENANT's respective heirs, administrators,
executors, successors and assigns, subject, however, to the
restrictions as to assignment or subletting by TENANT as
provided therein. All expressed covenants of this Lease shall be
deemed to be covenants running with the land.
HOLD HARMLESS 23. TENANT agrees to indemnify and hold harmless
AND TENANT'S LANDLORD against all claims or damages to persons or property by
INSURANCE reason of the use or occupancy of the Leased Premises by TENANT,
its agents, contractors or employees or invitees and to pay all
expenses incurred by LANDLORD in connection therewith including
attorney's fees and court costs, except in the case of gross
negligence on part of Landlord in common area maintenance.
LANDLORD shall not be liable to TENANT or to any person,
firm, corporation, or other business association claiming by,
through or under TENANT, for failure to furnish or for delay in
furnishing any services provided for in this Lease nor shall any
such failure or delay operate or relieve TENANT from the prompt
and punctual performance of each and all of the covenants to be
performed herein by TENANT; nor from any defects in the Premises
or Building; or from defects in the cooling, heating, electric,
water, elevator or other applicable apparatus or systems or
water discharge from sprinkler systems in the Building; nor for
theft, mysterious disappearance or loss of any property of
TENANT, water from the premises or any part of the Building, not
due to Landlord's gross negligence and provided that such
failure to provide in furnishing services is the result of
circumstances beyond Landlord's control.
Tenant shall at all times maintain the following
insurance coverage and amounts:
(i) Commercial General Liability Insurance, including
Contractual Liability coverage, relating to the Leased Premises
and its appurtenances on an occurrence basis with a minimum
limit of at least $1,000,000 per occurrence, $1,000,000
aggregate, including Personal Injury and Products/Completed
Operations. In addition before undertaking any alterations,
additions, improvements, construction or occupancy, TENANT shall
obtain public liability insurance and name LANDLORD and
LANDLORD's property manager as additional insured insuring
TENANT and LANDLORD (and its designees) against any liability
which may arise on account of such proposed alterations,
additions, improvements or construction on an occurrence basis
with a minimum single limit of at least $1,000,000.
(ii) Property insurance on an "all risk" basis including
but not limited to fire and lightning, extended coverage (all
risk of physical loss), vandalism and malicious mischief and
flood (if required by LANDLORD, any mortgagee or governmental
authority and if obtainable) in an amount adequate to cover the
full replacement cost of TENANT's personal property, the
property of others in the care, custody or control of TENANT,
and any improvements and betterments installed by TENANT and
loss of use (business interruption). TENANT and LANDLORD waive
any and all rights of recovery against each other for damage to
the aforementioned property and agree to obtain waivers of
subrogation in their respective property insurance policies.
(iii) Workers compensation insurance for statutory
limits including a minimum of $1,000,000 employer's liability
covering all persons employed, directly or indirectly, in
connection with any finish work performed by TENANT or any
repair or alteration authorized by this Lease or consented to by
LANDLORD, and all employees or agents of TENANT.
(iv) Automobile liability insurance to cover owned,
non-owned, and hired vehicles with a combined single limit of
not less than $1,000,000.
(v) Such other insurance as may be carried on the Leased
Premises and TENANT's operation thereof as may be required by
LANDLORD from time to time. The coverage afforded by such
insurance shall not limit TENANT's liability hereunder. If
TENANT fails to obtain and provide any or all of the aforesaid
<PAGE>
insurance, then LANDLORD may, (but shall not be required to)
purchase such insurance on behalf of TENANT and TENANT shall, on
demand, reimburse LANDLORD for the cost of such insurance
together with interest thereof (from the date on which LANDLORD
paid such cost to the date on which TENANT reimburses LANDLORD
therefore) the maximum rate permitted by law and same shall
constitute additional rent. In case LANDLORD shall be made a
party to any litigation commenced against TENANT, then TENANT
shall protect and hold harmless and shall pay all costs and
reasonable attorney's fees incurred or paid by LANDLORD in
connection with such litigation and any thereof, regardless of
the initiation of court proceedings.
TENANT shall furnish LANDLORD certificates of insurance
certifying the above coverage. The certificates shall include
acknowledgment that the policies have been amended to provide
thirty (30) days notice of termination to LANDLORD and confirmed
that LANDLORD and LANDLORD's Property Manager are named as
Additional Insured.
Notwithstanding any contrary provision of this Lease,
TENANT shall look solely (to the extent insurance coverage is
not applicable or available) to the interest of LANDLORD in the
Building for the satisfaction of any judgement or the judicial
process requiring the payment of money as a result of any gross
negligence or breach of this Lease by LANDLORD or LANDLORD's
management agent and LANDLORD shall have no personal liability
hereunder of any kind.
ATTORNEYS' 24. If either party defaults in the performance of any
FEES of the terms, provisions, covenants and conditions and by reason
thereof, the other party employs the services of an attorney to
enforce performance of the covenants, or to perform any service
based upon defaults, regardless of the initiation of court
proceedings, then in any of said events, the prevailing party
shall be entitled to reasonable attorney's fees and all expenses
and costs incurred by the prevailing party pertaining thereto
(including costs and fees relating to any appeal) and in
enforcement of any remedy.
DESTRUCTION 25. In the event the Leased Premises or portion thereof
OR DAMAGE shall be destroyed or so damaged or injured by fire or other
casualty, during the Term of the Lease, whereby the same shall
be rendered untenantable, then LANDLORD shall have the right,
but not the obligation, to render such Leased Premises
tenantable by repairs within one hundred eighty (180) days
therefrom.
LANDLORD agrees that, within sixty (60) days following
damage or destruction, it shall notify TENANT with respect to
whether or not LANDLORD intends to restore the Premises. If said
Premises are not rendered tenantable within the aforesaid one
hundred eighty (180) days, it shall be optional with either
party hereto to cancel this Lease, and in the event of such
cancellation, the rent shall be paid only to the date of such
fire or casualty. The cancellation herein mentioned shall be
evidenced in writing.
Notwithstanding the foregoing, should damage or
destruction occur during the last twelve (12) months of the
Lease Term, either LANDLORD or TENANT shall have the option to
terminate this Lease, effective on the date of damage or
destruction, provided notice to terminate is given within thirty
(30) days of the date of such damage or destruction. During any
time that the Leased Premises are untenantable due to causes set
forth in this paragraph, the rent or a just and fair proportion
thereof shall be abated.
EMINENT 26. If there shall be taken during the Term of this
DOMAIN Lease, any portion of the Leased Premises, parking facilities or
Building, other than a part not interfering with maintenance,
operation or use of the Leased Premises, LANDLORD may elect to
terminate this Lease or to continue same in effect. If LANDLORD
elects to continue the Lease, the rental shall be reduced in
proportion to the area of the Leased Premises so taken and
LANDLORD shall repair any damage to the Leased Premises, parking
facilities, or Building resulting from such taking. If any part
of the Leased Premises is taken by condemnation or eminent
domain which renders the Premises unsuitable for its intended
use, TENANT may elect to terminate this Lease; or if any part of
the Leased Premises is so taken which does not render the
Premises unsuitable for its intended use, this Lease shall
continue in effect; and the rental shall be reduced in
proportion to the area of the Leased Premises so taken and
LANDLORD shall repair any damage to the Leased Premises
resulting from such taking. If all of the Leased Premises is
taken by condemnation or eminent domain, this Lease shall
terminate on the date possession is taken by the authority. All
sums awarded or agreed upon between LANDLORD and the condemning
authority for the taking of the interest of LANDLORD whether as
damages or as compensation, and whether for partial or total
condemnation, shall be the sole property of LANDLORD. If this
Lease should be terminated under any provisions of this
paragraph, rental shall be payable up to the date that
possession is taken by the authority, and LANDLORD shall refund
to TENANT any prepaid unaccrued rent less any sum or amount then
owing by TENANT to LANDLORD.
ABANDONMENT 27. If during the Term of this Lease, TENANT shall
abandon, vacate or remove from the Leased Premises the major
portion of the goods, wares, equipment or furnishings usually
kept on said Leased Premises, or shall cease doing business in
said Leased Premises, or shall suffer the rent to be in arrears,
LANDLORD may, at its option, cancel this Lease in the manner
stated in Paragraph 28 hereof, or LANDLORD may enter said Leased
Premises as the agent of TENANT by force or otherwise, without
being liable in any way therefore and relet the Leased Premises
with or without any furniture that may be therein, as the agent
of TENANT, at such price and upon such terms and for such
duration of time as LANDLORD may determine, and receive the rent
therefore, applying the same to the payment of the rent due by
these presents, and if the full rental herein
<PAGE>
provided shall not be realized by LANDLORD over and
above the expenses to LANDLORD of such reletting, TENANT shall
pay any deficiency. LANDLORD shall have all rights of
acceleration contained in Paragraph 6, upon abandonment by
TENANT. Moreover, any personalty remaining in the Premises may
be disposed of, without further notice to TENANT, in any manner
LANDLORD deems fit in its sole discretion, without any liability
or rent credit to TENANT.
DEFAULT 28. It is agreed between the parties hereto that if
TENANT shall be adjudicated a bankrupt or an insolvent or take
the benefit of any federal or state reorganization or
composition proceeding or make a general assignment or take the
benefit of any insolvency law; or if TENANT's leasehold interest
under this Lease shall be sold under any execution or process of
law; or if a trustee in bankruptcy or a receiver be appointed or
elected or had for TENANT (whether under federal or state laws);
or if said Premises shall be abandoned or deserted; or if TENANT
shall fail to perform any of the terms, provisions, covenants or
conditions of this Lease on TENANT's part to be performed; or if
this Lease or the Term thereof be transferred or pass to or
devolve upon any persons, firms, officers or corporations other
than TENANT by death of TENANT, operation of the law or
otherwise; then and in any such events, at the option of
LANDLORD, the total remaining unpaid Base Rental for the Term of
this Lease shall become due and payable and the Term of this
Lease shall expire and end ten (10) days after LANDLORD has
given TENANT written notice (in the manner hereinafter provided)
of such act, condition or default and TENANT hereby agrees
immediately then to pay said Base Rental or quit and surrender
said Leased Premises to LANDLORD; but this shall not impair or
affect LANDLORD's right to maintain summary proceedings for the
recovery of the possession of the Leased Premises in all cases
provided for by law. If the Term of this Lease shall be so
terminated, LANDLORD may immediately, or at any time thereafter,
re-enter or repossess the Leased Premises and remove all persons
and property therefrom without being liable for trespass or
damages. In addition, LANDLORD shall be entitled to all rights
and remedies available at law or in equity in the event TENANT
shall fail to perform any of the terms, provisions, covenants or
conditions of this Lease on TENANT's part to be performed. All
rights and remedies specifically granted to LANDLORD herein by
law, or in equity shall be cumulative and not mutually
exclusive.
WAIVER OF 30. Failure of LANDLORD to declare any default
DEFAULT immediately upon occurrence thereof, or delay in taking any
action in connection therewith, shall not waive such default;
but LANDLORD shall have the right to declare any such default at
any time and take such action as might be lawful or authorized
hereunder, in law and/or in equity. No waiver by LANDLORD of a
default by TENANT shall be implied, and no express waiver by
LANDLORD shall affect any default other than the default
specified in such waiver and that only for the time and
extension therein stated.
No waiver of any term, provision, condition or covenant
of this Lease by LANDLORD shall be deemed to imply or
constitute, a further waiver by LANDLORD of any other term,
provision, condition or covenant of this Lease.
RIGHT OF 31. Upon notice and consent by Tenant, which consent
LEASE shall not be unreasonably withheld except in the case of an
emergency, LANDLORD, or any of its agents, shall have the right
to enter the Leased Premises during all reasonable hours to
examine the same or to make such repairs, additions or
alterations as may be deemed necessary for the safety, comfort,
or preservation thereof, or to said Building, or to exhibit said
Leased Premises at any time within one hundred eighty (180) days
before the expiration of this Lease. Said right of entry shall
likewise exist for the purpose of removing placards, signs,
fixtures, alterations, or additions which do not conform to this
Lease.
NOTICE 32. Any notice given LANDLORD as provided for in this
Lease shall be sent to LANDLORD by registered mail addressed to
LANDLORD at LANDLORD's Management Office. Any notice to be given
TENANT under the terms of this Lease, unless otherwise stated
herein, shall be in writing and shall be sent and G. Patricia
Lamas by registered mail or Federal Express to the office of
TENANT in the Building or hand delivered to TENANT. Either
party, from time to time, by such notice, may specify another
See Addendum address to which subsequent notice shall be sent.
Paragraph #54
LANDLORD 33. All automobile parking areas, driveways, entrances
CONTROLLED and exits thereto, Common Areas, and other facilities furnished
AREAS by LANDLORD, including all parking areas, truck ways, loading
areas, pedestrian walkways and ramps, landscaped areas,
stairways, corridors, and other areas and improvements provided
by LANDLORD for the general use, in common, of tenants, their
officers, agents, employees, servants, invitees, licensees,
visitors, patrons and customers shall be at all times subject to
the exclusive control and management of LANDLORD; and LANDLORD
shall have the right from time to time to establish, modify and
enforce rules and regulations with respect to all facilities and
areas and improvements; to police same; from time to time to
change the area, level and location and arrangement of parking
areas and other facilities hereinabove referred to; to restrict
parking by and enforce parking charges (by operation of meters
or otherwise) to tenants, their
<PAGE>
officers, agents, invitees, employees, servants, licensees,
visitors, patrons and customers, to close all or any portion of
said areas or facilities to such extent as may in the opinion of
LANDLORD's counsel be legally sufficient to prevent a dedication
thereof or the accrual of any rights to any person or the public
therein, to close temporarily all or any portion of the public
areas, Common Areas or facilities, to discourage non-tenant
parking, to charge a fee for visitor and/or customer parking and
to do and perform such other acts in and to said areas and
improvements as, in the sole judgement of LANDLORD, LANDLORD
shall determine to be advisable with a view to the improvement
of the convenience and use thereof by tenants, their officers,
agents, employees, servants, invitees, visitors, patrons,
licensees and customers. LANDLORD shall operate and maintain the
Common Areas and other facilities referred to in such reasonable
manner as LANDLORD shall determine from time to time. Without
limiting the scope of such discretion, LANDLORD shall have the
full right and authority to designate a manager of the parking
facilities and/or Common Areas and other facilities who shall
have full authority to make and enforce rules and regulations
regarding the use of the same or to employ all personnel and to
make and enforce all rules and regulations pertaining to and
necessary for the proper operation and maintenance of the
parking area and/or Common Areas and other facilities. Reference
in this paragraph to parking area and/or facilities shall in no
way be construed as giving TENANT hereunder any rights and/or
privileges in connection with such parking areas and/or
facilities unless such rights and/or privileges are expressly
set forth in Paragraph 17 hereof. Notwithstanding anything to
the contrary in this paragraph or Lease, no action by Landlord
shall operate to reduce the number of parking spaces leased to
Tenant under Paragraph 1 hereof.
CONDITION OF 34. TENANT agrees to surrender to LANDLORD, at the end
PREMISES ON of the Term of this Lease and/or upon any cancellation of this
TERMINATION Lease, said Leased Premises in as good condition as said Leased
OF LEASE AND Premises were at the beginning of the Term of this Lease,
HOLDING OVER ordinary wear and tear, and damage by fire or other casualty not
caused by TENANT's negligence excepted. TENANT agrees that if
TENANT does not surrender said Leased Premises to LANDLORD at
the end of the Term of this Lease, then TENANT shall pay to
LANDLORD (150%) the amount of the current rental for each month
or portion thereof that TENANT holds over plus all damages that
LANDLORD may suffer on account of TENANT's failure to so
surrender to LANDLORD possession of said Leased Premises and
shall indemnify and save LANDLORD harmless from and against all
claims made by any succeeding tenant of said Leased Premises
against LANDLORD on account of delay of LANDLORD in delivering
possession of said Leased Premises to said succeeding tenant so
far as such delay is occasioned by failure to so surrender said
Leased Premises in accordance herewith or otherwise.
No receipt of money by LANDLORD from TENANT after
termination of this Lease or the service of any notice of
commencement of any suit or final judgement for possession shall
reinstate, continue or extend the Term of this Lease or affect
any such notice, demand, suit or judgement.
No act or thing done by LANDLORD or its agents during
the Term hereby granted shall be deemed an acceptance of a
surrender of the Leased Premises, and no agreement to accept a
surrender of the Leased Premises shall be valid unless it be
made in writing and subscribed by a duly authorized officer or
agent of LANDLORD.
OCCUPANCY 35. TENANT shall be responsible for and shall pay before
TAX delinquency all municipal, county or state taxes assessed during
the Term of this Lease against any occupancy interest or
personal property of any kind, owned by or placed in, upon or
about the Leased Premises by TENANT.
SIGNS 36. LANDLORD shall have the sole right to install signs
on the interior or exterior of the Building and Leased Premises
and/or change the Building's name or street address.
TRIAL BY 37. It is mutually agreed by and between LANDLORD and
JURY TENANT that the respective parties hereto shall, and they hereby
do WAIVE TRIAL BY JURY in any action, proceeding or counterclaim
brought by either of the parties hereto against the other on any
matters arising out of or in any way connected with this Lease,
the relationship of LANDLORD and TENANT, and TENANT's use or
occupancy of the Premises.
CROSS 39. If the term of any lease, other than this Lease,
DEFAULT made by TENANT for any other space in the Building shall be
terminated or terminable after the making of this Lease because
of any default by TENANT under such other lease, such default
shall, ipso facto constitute a default hereunder and empower
LANDLORD
<PAGE>
at LANDLORD's sole option, to terminate this Lease as
herein provided in the event of default.
INVALIDITY 40. If any term, provision, covenant or condition of
OF this Lease or the application thereof to any person or
PROVISION circumstances shall, to any extent, be invalid or unenforceable,
the remainder of this Lease or the application of such term,
provision, covenant or condition to persons or circumstances
other than those as to which it is held invalid or unenforceable
shall not be affected thereby and each term, provision, covenant
or condition of this Lease shall be valid and be enforceable to
the fullest extent permitted by law. This Lease shall be
construed in accordance with the laws of the State of Florida.
TIME OF 41. It is understood and agreed between the parties
ESSENCE hereto that time is of the essence of all the terms provisions,
covenants and conditions of this Lease.
MISCELLANEOUS 42. The terms "LANDLORD" and "TENANT" as herein
contained shall include singular and/or plural, masculine,
feminine and/or neuter, heirs, successors, executors,
administrators, personal representatives and/or assigns wherever
the context so requires or admits. The terms, provisions,
covenants and conditions of this Lease are expressed in the
total language of this Lease Agreement and the paragraph
headings are solely for the convenience of the reader and are
not intended to be all inclusive. Any formally executed addendum
to or modification of this Lease shall be expressly deemed
incorporated by reference herein unless a contrary intention is
clearly stated therein.
EFFECTIVE 43. Submission of this instrument for examination does
DATE not constitute an offer, right of first refusal, reservation of
or option for the Leased Premises or any other space or premises
in, on or about the Building. This instrument becomes effective
as a Lease only upon execution and delivery by both LANDLORD and
TENANT.
ENTIRE 44. This Lease contains the entire agreement between the
AGREEMENT parties hereto and all previous negotiations leading thereto,
and it may be modified only by an agreement in writing signed by
LANDLORD and TENANT. No surrender of the Leased Premises, or of
the remainder of the terms of this Lease, shall be valid unless
accepted by LANDLORD in writing. TENANT acknowledges and agrees
that TENANT has not relied upon any statement, representation,
prior written or contemporaneous oral promises, agreements or
warranties except such as are expressed herein.
DUAL 45. Either Party represents and warrants that it has
AGENCY dealt with no broker, agent or other person in connection with
DISCLOSURE this transaction and that no broker, agent or other person
brought about this transaction, other than The Allen Morris
Commercial Real Estate Services Company and the Cooperating
Broker, if any. The Allen Morris Commercial Real Estate Services
Company, as agent for LANDLORD, shall be compensated by LANDLORD
and the Cooperating Broker, if any, who is subagent of The Allen
Morris Commercial Real Estate Services Company, shall be
compensated by LANDLORD. TENANT agrees to indemnify and hold
LANDLORD harmless from and against any claims by any other
broker, agent or other person claiming a commission or other
form of compensation by virtue of having dealt with TENANT with
regard to this leasing transaction. The provisions of this
paragraph shall survive the termination of this Lease.
FORCE 46. Neither LANDLORD nor TENANT shall be required to
MAJEURE perform any term, condition, or covenant in this Lease so long
as such performance is delayed or prevented by force majeure,
which shall mean acts of God, labor disputes (whether lawful or
not), material or labor shortages, restrictions by any
governmental authority, civil riots, floods, and any other cause
not reasonably within the control of LANDLORD or TENANT and
which by the exercise of due diligence LANDLORD or TENANT is
unable, wholly or in part, to prevent or overcome. Lack of money
shall not be deemed force majeure.
RADON GAS 47. Radon is a naturally occurring radioactive gas that,
when it has accumulated in a building in sufficient quantities,
may present health risks to persons who are exposed to it over
time. Levels of radon that exceed federal and state guidelines
have been found in buildings in Florida. Additional information
regarding radon and radon testing may be obtained from your
county public health unit.
USE OF 48. TENANT shall not cause or permit any Hazardous
HAZARDOUS Material to be brought upon, kept or used in or about the
MATERIALS Premises or the Building by TENANT, its agents, employees,
contractors or invitees. If TENANT breaches this obligation,
TENANT shall indemnify, defend and hold LANDLORD harmless from
any and all claims, judgements, damages, penalties, fines,
costs, liabilities or losses (including, without limitation,
SEE ADDENDUM diminution in value of the Premises or the Building, damages for
PARAGRAPH #55 the loss or restriction on use of rentable space or of any
amenity of the Premises or the Building, damages arising from
any adverse impact on marketing of space, and sums paid in
settlement of claims, attorneys' fees, consultant fees and
expert fees) which arise during or after the Lease Term as a
result of such contamination. This indemnification of LANDLORD
by TENANT includes, without limitation, costs incurred in
connection with any investigation of site conditions or any
clean-up, remedial, removal or restoration work required by any
federal, state or local governmental agency or political
subdivision because of Hazardous Material present in the soil or
ground water, in the Premises or in the Building.
Without limiting the foregoing, if the presence of any
Hazardous Material on the Premises or in the Building caused by
TENANT its agents, employees, contractors or invitees results in
any contamination of the Premises and/or the Building, TENANT
shall promptly take all actions at its sole expense as are
necessary to return the
<PAGE>
Premises and/or the Building to the conditions existing
prior to the introduction of any such Hazardous Material to the
Premises; provided that LANDLORD's approval of such actions
shall first be obtained, which approval shall not be
unreasonably withheld so long as such actions would not
potentially have any material adverse long-term or short-term
effect on the Premises and/or the Building. The foregoing
indemnity shall survive the expiration or earlier termination of
this Lease. As used herein, the term "Hazardous Material" means
such hazardous or toxic substance, material or waste, including,
but not limited to, those substances, materials, and wastes
listed in the United States Department of Transportation
Hazardous Materials Table (49 CFR 172.101) or by the
Environmental Protection Agency as hazardous substances (40 CFR
Part 302) and amendments thereto, or such substances, materials
and wastes that are or become regulated under any applicable
local, state or federal law. LANDLORD and its Agents shall have
the right, but not the duty, to inspect the Premises at any time
to determine whether TENANT is complying with the terms of this
Lease. If TENANT is not in compliance with this Lease, LANDLORD
shall have the right to immediately enter Premises to remedy any
contamination caused by TENANT's failure to comply
notwithstanding any other provision of this Lease. LANDLORD
shall use its best efforts to minimize interference with
TENANT's business but shall not be liable for any interference
caused thereby. Any default under this paragraph shall be a
material default enabling LANDLORD to exercise any of the
remedies set forth in this Lease.
<PAGE>
ADDENDUM
ATTACHED TO and made a part of this Lease Agreement dated August 8, 1996, by and
between 8700 FLAGLER, LTD., a Florida Limited Partnership, as LANDLORD, and
OMEGA RESEARCH, INC., a Florida Corporation, as TENANT, covering approximately
17,289 square feet of Net Rentable Area on the Second (2nd) Floor, better known
as Suite 250 of the Building known as The 8700 Flagler Building located at 8700
West Flagler Street, Miami, Dade County, Florida 33174.
49. RENTAL RATE SCHEDULE:
TENANT agrees to pay LANDLORD, the total Base Rental of One Million Four
Hundred Ninety Thousand Eight Hundred Sixteen and 26/100 Dollars
($1,490,816.26) at the rates and amounts outlined below, in accordance with
the terms and conditions of the Lease Agreement herewith.
TERM RENTAL MONTHLY TOTAL
RATE RENTAL RENTAL
12/01/96 - 04/30/99 $15.25 $21,971.44 $637,171.76
05/01/99 - 04/30/00 $15.50 $22,331.63 $267,979.56
05/01/00 - 04/30/01 $16.00 $23,052.00 $276,624.00
05/01/01 - 05/31/02 $16.50 $23,772.38 $309,040.94
TOTAL TERM: $1,490,816.26
50. WAIVER OF RENT, COMMENCEMENT OF RENT:
Anything notwithstanding to the contrary as stated in Paragraph 49 (RENTAL
RATE SCHEDULE) of the within Lease, LANDLORD shall grant TENANT a waiver of
rental during the 17th, 18th, 29th, 41st, 53rd and 66th months of the Lease
Term provided that LANDLORD is in receipt of the initial month's rent in
advance which represents rental payment for the month of December 1996
according to the terms of the within Lease at the time of execution of this
Lease. Therefore, Paragraph 49 of the within Lease is hereby amended by the
following:
TENANT agrees to pay LANDLORD a total Base Rental of One Million Three
Hundred Fifty-Five Thousand Seven Hundred Forty-Five and 93/100
Dollars ($1,355,745.93) all other terms and conditions of the within
Lease shall remain in full force and effect throughout the Term of
this Lease.
51. PARKING SPACES:
LANDLORD guarantees 80 parking spaces to TENANT on a non-reserved basis. In
addition to the 80 parking spaces, TENANT shall be permitted to park in any
non-reserved space with the exception of those around the existing fountain
area reserved for visitors. However, in the event that there is a net
increase in the amount of reserved spaces (exclusive of visitor spaces) of
more than 20 for the existing building and not including any new building
that may be constructed, LANDLORD will then guarantee 100 spaces to TENANT
on a non-reserved basis. In the event the demand for parking spaces in the
parking lot exceeds the number of spaces existing, LANDLORD reserves the
right to enforce the parking ratios in the Lease on a non-preferential basis
to fairly allocate the parking spaces and in this event TENANT shall be
guaranteed 100 spaces on a non-reserved basis.
<PAGE>
52. NON-DISTURBANCE AGREEMENT:
Within ninety (90) days following execution of this Lease, LANDLORD shall
submit the Lease to the first mortgage holder and shall use its best efforts
to obtain for TENANT a Non-Disturbance Agreement from LANDLORD'S existing
first mortgage holder.
53. RIGHT TO ASSIGN OR SUBLET:
TENANT shall have the right to assign this Lease in its entirety or to
sublease all or any portion of the Premises without the consent of the
LANDLORD to any party resulting from a merger or consolidation or public
stock offering or capital investment with TENANT. Any other assignment or
sublease would be made with prior written consent of the LANDLORD which
shall not be unreasonably withheld or delayed.
54. NOTICE:
In addition to LANDLORD providing notice to TENANT to the designated person
outlined in Paragraph #32 of the Lease, LANDLORD shall also provide a copy
of any notice served pursuant to Paragraph #6 time of payment/acceleration
upon default to TENANT'S outside counsel, Marc J. Stone c/o Rubin, Baum,
Levin, 2500 First Union Financial Center, Miami, Florida 33131 (phone
305-374-7580)]
55. HAZARDOUS MATERIALS:
LANDLORD hereby represents and warrants that neither the Building nor the
real property on which the Building is situated (the "Property") has ever
been used by LANDLORD to generate, manufacture, refine, transport, treat,
store, handle or dispose of Hazardous Materials (as hereinafter defined),
and that LANDLORD will not knowingly permit any such Hazardous Materials to
be brought into the Property. LANDLORD further represents and warrants to
TENANT that, as of the date of LANDLORD'S execution of this Lease, LANDLORD
has not received any summons, citation, letter or other written
communication, from any agency or department of any government concerning
the presence on the Property of any Hazardous Materials or the violation of
any law relating thereto. LANDLORD acknowledges that TENANT is relying on
the representations and covenants contained in this Section in leasing the
Premises.
56. ALLOWANCE-LANDLORD PERFORMS WORK:
LANDLORD shall complete the Leased Premises substantially in accordance with
plans, cost and specifications to be approved by both LANDLORD and TENANT.
LANDLORD shall provide an allowance of up to eleven dollars per square foot
($190,179.00) for improvements for finishing said Premises. In the event the
cost of improvements for finishing said Premises exceeds LANDLORD'S
allowance for same, the cost in excess of said allowance shall be paid in
advance by TENANT, the amount of such advance payment being determined on
the basis of LANDLORD'S estimate of the total cost of finishing the Leased
Premises, such estimate being based on the aforementioned plans and
specifications. Costs shall include direct and indirect construction costs,
permit fees, architectural fees, applicable insurance premiums, and any
other costs directly attributable to finishing the Leased Premises. Any
advance payment received by LANDLORD from TENANT in excess of TENANT's
portion of the cost of finishing the Leased Premises shall be refunded to
TENANT by LANDLORD after a final accounting of the total cost of said Leased
Premises is completed by LANDLORD. In no event no later than thirty (30)
days after completion.
<PAGE>
57. RIGHT OF FIRST REFUSAL:
Provided that this Lease is then in full force and effect and TENANT is not
in default hereunder, LANDLORD agrees that, prior to leasing any
space in the second (2nd) floor to any party other than TENANT (each, a
"Third Party"), during the initial Term of the Lease following Lease
commencement, LANDLORD shall notify TENANT, in writing, each time TENANT
receives a bona fide offer to lease the 2nd floor space to a Third Party. On
or before the fifth (5th) business day after the date TENANT receives each
such notice from LANDLORD, TENANT shall have the right (each, a "First
Refusal Right" and, collectively, the "First Refusal Rights") to send
LANDLORD a notice stating that TENANT elects to rent the 2nd floor space in
question upon same terms and conditions as such bona fide offer. If TENANT
duly and timely exercises any First Refusal Right, LANDLORD and TENANT
shall, within five (5) business days after TENANT delivers to LANDLORD
notice of its election to lease the 2nd floor space in question, enter into
a mutually acceptable Lease Modification for the 2nd floor space. Without
limitation of LANDLORD'S obligation to notify TENANT, in writing, each time
LANDLORD receives a bona fide offer to lease on the second (2nd) floor to a
Third Party, TENANT shall not be eligible to exercise any particular First
Refusal Right unless TENANT's financial condition is, at the time of receipt
of such notice from LANDLORD, substantially the same or better than TENANT'S
financial condition as of the date hereof. In the event TENANT does not (a)
notify landlord of its election to exercise its First Refusal Rights within
five (5) business day period described above or (b) does not execute a
mutually acceptable Lease Modification for the 2nd floor space within (5)
business days of making such written election, TENANT'S First Refusal Rights
shall be deemed null and void for that particular First Refusal Right.
TENANT's failure (and/or ineligibility, on account of its financial
condition, as hereinabove described) to exercise its First Refusal Right
with respect to a Third Party shall not be deemed a waiver with respect to
subsequent First Refusal Rights relating to other Third Parties.
<PAGE>
EXHIBIT "A"
ATTACHED TO and made a part of this Lease Agreement dated August 8, 1996, by and
between 8700 FLAGLER, LTD., a Florida Limited Partnership, as LANDLORD, and
OMEGA RESEARCH, INC., a Florida Corporation, as TENANT, covering approximately
17,289 square feet of net rentable area on the Second (2nd) Floor, better known
as Suite 250 of the Building known as The 8700 Flagler Building located at 8700
W. Flagler, Miami, Dade County, Florida 33174.
[GRAPHIC OMITTED]
<PAGE>
RULES AND REGULATIONS
The following Rules and Regulations, hereby accepted by TENANT, are
prescribed by LANDLORD to enable LANDLORD to provide, maintain, and operate, to
the best of LANDLORD's ability, orderly, clean and desirable premises, for
tenants therein at as economical a cost as reasonably possible and in as
efficient a manner as reasonably possible, to assure security for the protection
of tenants so far as reasonably possible, and to regulate conduct in and use of
said Premises, in such manner as to minimize interference by others in the
proper use of same by TENANT.
1. TENANT, its officers, agents, servants and employees shall not block
or obstruct any of the entries, passages, doors, elevators, elevator doors,
hallways or stairways of building or parking facilities, or place, empty or
throw any rubbish, litter, trash or material of any nature into such areas, or
permit such areas to be used at any time except for ingress or egress of TENANT,
its officers, agents, servants, employees, patron, licensees, customers,
visitors or invitees.
2. The movement of furniture, equipment, merchandise or materials into
or out of the Leased Premises, building or parking facilities shall be
restricted to time, method and routing of movement as determined by LANDLORD
upon request from TENANT and TENANT shall assume all liability and risk to
property, Premises in such movement. Tenant shall not move furniture, machines,
equipment merchandise or materials into or out of the Leased Premises without
having first provided a notification to LANDLORD twenty-four (24) hours in
advance. Safes, large files, large electronic data processing equipment and
other heavy equipment or machines shall be moved into Leased Premises only with
LANDLORD's written consent and placed where directed by LANDLORD.
3. No sign, door plaque, advertisement or notice shall be displayed,
painted or affixed by TENANT, its officers, agents, servants, employees,
patrons, licensees, customers, visitors, or invitees in or on any part of the
outside or inside the Leased Premises without prior written consent of LANDLORD
and then only of such color, size, character, style and materials and in such
places as shall be approved and designated by LANDLORD. Signs on doors and
entrances to Leased Premises shall be placed thereon by a contractor designated
by LANDLORD and paid for by TENANT.
4. LANDLORD shall not be responsible for lost or stolen property,
equipment, money or any article taken from Leased Premises regardless of how or
when loss occurs, except if loss occurs due to gross negligence.
5. No additional locks shall be placed on any door or changes made to
existing locks in the Premises without the prior written consent of LANDLORD.
LANDLORD shall furnish two keys to each lock on doors in the Leased Premises and
LANDLORD, upon request of TENANT, shall provide additional duplicate keys at
TENANT's expense. LANDLORD may, at all times, keep a pass key to the Leased
Premises with the exception of restricted areas as defined by Tenant. Existing
locks shall be changed prior to Tenant taking occupancy in accordance with the
working drawings. All keys shall be returned to LANDLORD promptly upon
termination of this Lease.
6. TENANT, its officers, agents, servants or employees shall not drive
nails or screw into or in any way deface any part of Leased Premises without the
prior written consent of LANDLORD. If TENANT desires signal, communication,
alarm or other utility or service connection installed or changed, such work
shall be done at expense of TENANT, with the approval and under the direction of
LANDLORD.
7. LANDLORD reserves the right to:
(i) Close the Premises at 6:00 P.M., subject, however, to
TENANT's right to admittance under regulations prescribed by
LANDLORD, and to require the persons entering the Premises to
identify themselves and establish their right to enter or to
leave the Premises;
(ii) close all parking areas between the hours of 10:00 P.M.
and 6:00 A.M. during week days; and
(iii) close a portion of parking areas on weekends and
holidays for the purpose of repairs and/or construction.
8. TENANT, its officers, agents, servants and employees shall not
permit the operation of any musical or sound producing instruments or device
which may be heard outside Leased Premises, or which may emanate electrical
waves which shall impair radio or televisions broadcasting or reception from or
in building.
9. TENANT, its officers, agents, servants and employees shall, before
leaving Leased Premises unattended, close and lock all doors and shut off all
utilities; damage resulting from failure to do so shall be paid by TENANT.
Before closing of the day and leaving the said Premises each TENANT shall use
best efforts that all blinds and/or draperies are pulled and drawn.
10. All plate and other glass now in Leased Premises which is broken
through cause attributable to TENANT, its officers, agents, servants and
employees, patrons, licensees, customers, visitors or invitees shall be replaced
by and at expense of TENANT under the direction of LANDLORD.
11. TENANT shall give LANDLORD prompt notice of all accidents to or
defects in air conditioning equipment, plumbing, electric facilities or any part
or appurtenance of Leased Premises.
12. The plumbing facilities shall not be used for any other purpose
than that for which they are constructed, and no foreign substance of any kind
shall be thrown therein, and the expense of any breakage, stoppage, or damage
resulting from a violation of this provision shall be borne by TENANT, who
shall, or whose officers, employees, agents, servants, patrons, customers,
licensees, visitors or invitees shall have caused it.
13. All contractors performing work for TENANT within the Leased
Premises shall be referred to LANDLORD for approval before performing such work.
Installations materially affecting floors, walls, windows, doors, ceiling,
equipment or any other physical feature of the, Leased Premises. None of this
work shall be done by TENANT without Tenant warrants that all work shall be in
accordance with all applicable county codes and building standards.
<PAGE>
LANDLORD's prior written approval.
14. No showcases or other articles shall be put in front of or affixed
to any part of the exterior of the Premises, nor placed in the halls, corridors
or vestibules without the prior written consent of LANDLORD.
15. Glass panel doors, that reflect or admit light into the passageways
or into any place in the Premises shall not be covered or obstructed by TENANT,
and TENANT shall not permit, erect, and/or place drapes, furniture, fixtures,
shelving, display cases or tables, lights or signs and advertising devices in
front of or in proximity of interior and exterior windows, glass panels, or
glass doors providing a view into the interior of the Leased Premises unless
same shall have first been approved in writing by LANDLORD.
16. Canvassing, soliciting and peddling in the Premises is prohibited
and each TENANT shall cooperate to prevent the same. In this respect, TENANT
shall when possible promptly report such activities to the Property Management
office.
17. There shall not be used in any space, or in the public halls of the
Premises, either by any TENANT or by jobbers or others, in the delivery or
receipt of merchandise, any hand trucks, except those equipped with rubber tires
and side guards.
18. The work of LANDLORD's janitorial personnel shall not be hindered
by TENANT after 5:30 P.M., and such work may be done at any time when the
offices are vacant. The windows, doors and fixtures may be cleaned at any time.
TENANT shall provide adequate waste and rubbish receptacles, cabinets,
bookcases, map cases, etc., necessary to prevent unreasonable hardship to
LANDLORD in discharging its obligation regarding cleaning service. In this
regard, TENANT shall also empty all glasses, cups and other containers holding
any type of liquid whatsoever.
19. In the event TENANT must dispose of crates, boxes, etc., which
shall not fit into office wastepaper baskets, it shall be the responsibility of
TENANT with LANDLORD's assistance to dispose of same. In no event, shall TENANT
set such items in the public hallways or other areas of Leased Premises, for
disposal.
20. Tenants are cautioned in purchasing furniture and equipment that
can easily fit on the elevator and can pass through the doors of the Leased
Premises. Large pieces should be made in parts and setup in the Leased
Premises. LANDLORD reserves the right to refuse to allow any furniture or
equipment of any description to be placed in the building which does not comply
with the above conditions.
21. TENANTS shall be responsible for any damage to the Leased Premises,
including carpeting and flooring, as a result of rust or corrosion of file
cabinets, roller chairs, metal objects or spills of any type of liquid.
22. If the Premises demised to TENANT become infested with vermin,
TENANT, at its sole cost and expense, shall cause its premises to be
exterminated from time to time, to the satisfaction of LANDLORD, and shall
employ such extermination therefore as shall be approved by Landlord.
23. TENANT shall not install any antenna or aerial wires, or radio or
television equipment, or any other type of equipment, inside or outside the
building, without LANDLORD's prior approval in writing, and upon such terms and
conditions as may be specified by LANDLORD in each and every instance.
24. TENANT shall not advertise the business, profession or activities
of TENANT in any manner which violates the letter of spirit of any code of
ethics adopted by any recognized association or organization pertaining thereto.
25. TENANT, its officers, agents, employees, servants, patrons,
customers, licensees, invitees and visitors shall not solicit business in the
Premise's parking facilities or Common Areas, nor shall TENANT distribute any
handbills or other advertising matter in automobiles parked in the Premise's
parking facilities.
26. TENANT shall not conduct its business in such manner as to create
any nuisance, or interfere with, annoy or disturb any other TENANT in the
Premise, or LANDLORD in its operation of the Premises or commit waste or suffer
or permit waste to be committed in the Leased Premises. In addition, TENANT
shall not allow its officers, employees, agents, servants, patrons, customers,
licensees, and visitors to conduct themselves in such a manner as to create any
nuisance or interfere with, annoy or disturb any other TENANT in the Premises or
LANDLORD in its operation of the building or commit waste or suffer or permit
waste to be committed in the Leased Premises.
27. TENANT, its officers, agents, servants and employees shall not
install or operate any refrigerating, heating or air conditioning apparatus or
carry on any mechanical operation or bring into Leased Premises any flammable
fluids or explosives without written permission of LANDLORD. This restriction
does not apply to refrigerators, microwaves or other small appliances for use in
an employee cafeteria/lunchroom.
28. TENANT, its officers, employees, agents and servants shall not use
Leased Premises for housing, lodging or sleeping purposes or for the cooking or
preparation of food without prior written consent of LANDLORD.
29. TENANT, its officers, employees, agents, servants, patrons,
customers, licensees, visitors or invitees shall not bring into Leased Premises
or keep on Leased Premises any fish, fowl, reptile, insect, or animal or any
bicycle or other vehicle without the written consent of LANDLORD.
30. Neither TENANT nor any officers, employees, agents, servants,
patrons, customers, licensees, visitors or invitees of any TENANT shall go upon
the roof of the Premises without the consent of LANDLORD.
31. TENANTS employing laborers or others outside of the Premises shall
not have their employees paid in the Premises, but shall arrange to pay their
payrolls elsewhere.
EXHIBIT 10.7
OMEGA RESEARCH, INC.
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is entered into and
effective as of July __, 1997 by and between Omega Research, Inc., a Florida
corporation (the "Company"), and ____________________ ("Indemnitee").
WHEREAS, the Company desires to attract and retain the services of
highly qualified individuals, such as Indemnitee, to serve the Company and its
related entities;
WHEREAS, to induce Indemnitee to continue to provide services to the
Company, the Company wishes to provide for the indemnification of, and the
advancement of expenses to, Indemnitee to the maximum extent permitted by law;
WHEREAS, the Company and Indemnitee recognize the difficulty in
obtaining and maintaining liability insurance for the Company's directors,
officers, employees, agent and fiduciaries, the cost of such insurance and the
limited coverage of such insurance;
WHEREAS, the Company and the Indemnitee further recognize the
substantial level of corporate litigation in general, subjecting directors,
officers, employees, agents and fiduciaries to expensive litigation risks at the
same time as the availability and coverage of liability insurance is limited;
WHEREAS, the Company and Indemnitee desire to have in place the
additional protection provided by an indemnification agreement providing for the
indemnification and advancement of expenses to the Indemnitee to the maximum
extent permitted by Florida law; and
WHEREAS, in view of the considerations set forth above, the Company
desires that Indemnitee shall be indemnified and advanced expenses by the
Company as set forth herein.
NOW, THEREFORE, the Company and Indemnitee hereby agree as set forth
below.
1. CERTAIN DEFINITIONS.
a. "Change in Control" shall mean, and shall be deemed
to have occurred if, on or after the date of this
Agreement, (i) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, as amended), other than a trustee or
other fiduciary holding securities under an employee
benefit plan of the Company acting in such capacity
or a corporation owned directly or indirectly by the
shareholders of the Company in substantially the same
proportions as their ownership of stock of the
Company, becomes the "beneficial owner" (as defined
in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing
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more than 50% of the total voting power represented
by the Company's then outstanding Voting Securities,
(ii) individuals who currently constitute the Board
of Directors of the Company and any new director
whose election by the Board of Directors or
nomination for election by the Company's shareholders
was approved by a vote of at least two thirds (2/3)
of the directors who are currently directors or whose
election or nomination for election was previously so
approved, cease for any reason to constitute a
majority thereof, (iii) the shareholders of the
Company approve a merger or consolidation of the
Company with any other corporation other than a
merger or consolidation that would result in the
Voting Securities of the Company outstanding
immediately prior thereto continuing to represent
(either by remaining outstanding or by being
converted into Voting Securities of the surviving
entity) at least 80% of the total voting power
represented by the Voting Securities of the Company
or such surviving entity outstanding immediately
after such merger or consolidation, or (iv) the
shareholders of the Company approve a plan of
complete liquidation of the Company or an agreement
for the sale or disposition by the Company of (in one
transaction or a series of related transactions) all
or substantially all of the Company's assets.
b. "Claim" shall mean with respect to a Covered Event:
any threatened, pending or completed action, suit,
proceeding or alternative dispute resolution
mechanism, or any hearing, inquiry or investigation
that Indemnitee in good faith believes might lead to
the institution of any such action, suit, proceeding
or alternative dispute resolution mechanism, whether
civil, criminal, administrative, investigative or
other.
c. References to the "Company" shall include, in
addition to Omega Research, Inc., any constituent
corporation (including any constituent of a
constituent) absorbed in a consolidation or merger to
which Omega Research, Inc. (or any of its wholly
owned subsidiaries) is a party which, if its separate
existence had continued, would have had power and
authority to indemnify its directors, officers,
employees, agents or fiduciaries, so that if
Indemnitee is or was a director, officer, employee,
agent or fiduciary of such constituent corporation,
or is or was serving at the request of such
constituent corporation as a director, officer,
employee, agent or fiduciary of another corporation,
partnership, joint venture, employee benefit plan,
trust or other enterprise, Indemnitee shall stand in
the same position under the provisions of this
Agreement with respect to the resulting or surviving
corporation as Indemnitee would have with respect to
such constituent corporation if its separate
existence had continued.
d. "Covered Event" shall mean any event or occurrence
related to the fact that Indemnitee is or was a
director, officer, employee, agent or fiduciary of
the
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Company, or any subsidiary of the Company, or is or
was serving at the request of the Company as a
director, officer, employee, agent or fiduciary of
another corporation, partnership, joint venture,
trust or other enterprise, or by reason of any action
or inaction on the part of Indemnitee while serving
in such capacity.
e. "Expenses" shall mean any and all expenses (including
attorneys' fees and all other costs, expenses and
obligations incurred in connection with
investigating, defending, being a witness in or
participating in (including on appeal), or preparing
to defend, to be a witness in or to participate in,
any action, suit, proceeding, alternative dispute
resolution mechanism, hearing, inquiry or
investigation), judgments, fines, penalties and
amounts paid in settlement (if such settlement is
approved in advance by the Company, which approval
shall not be unreasonably withheld) of any Claim and
any federal, state, local or foreign taxes imposed on
the Indemnitee as a result of the actual or deemed
receipt of any payments under this Agreement.
f. "Expense Advance" shall mean a payment to Indemnitee
pursuant to Section 3 in advance of the settlement of
or final judgement in any action, suit, proceeding or
alternative dispute resolution mechanism, hearing,
inquiry or investigation which constitutes a Claim.
g. "Independent Legal Counsel" shall mean an attorney or
firm of attorneys, selected in accordance with the
provisions of Section 2(d) hereof, who shall not have
otherwise performed services for the Company or
Indemnitee within the last three years (other than
with respect to matters concerning the rights of
Indemnitee under this Agreement, or of other
Indemnitees under similar indemnity agreements).
h. References to "other enterprises" shall include
employee benefit plans; references to "fines" shall
include any excise taxes assessed on Indemnitee with
respect to an employee benefit plan; and references
to "serving at the request of the Company" shall
include any service as a director, officer, employee,
agent or fiduciary of the Company which imposes
duties on, or involves services by, such director,
officer, employee, agent or fiduciary with respect to
an employee benefit plan, its participants or its
beneficiaries; and if Indemnitee acted in good faith
and in a manner Indemnitee reasonably believed to be
in the interest of the participants and beneficiaries
of an employee benefit plan, Indemnitee shall be
deemed to have acted in a manner "not opposed to the
best interests of the Company" as referred to in this
Agreement.
i. "Reviewing Party" shall mean, subject to the
provisions of Section 2(d), any person or body
appointed by the Board of Directors in accordance
with
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applicable law to review the Company's obligations
hereunder and under applicable law, which may include
a member, members or all of the Company's Board of
Directors, Independent Legal Counsel or any other
person or body not a party to the particular Claim
for which Indemnitee is seeking indemnification.
j. "Section" refers to a section of this Agreement
unless otherwise indicated.
k. "Voting Securities" shall mean any securities of the
Company that vote generally in the election of
directors.
2. INDEMNIFICATION.
a. INDEMNIFICATION OF EXPENSES. Subject to the
provisions of Section 2(b) below, the Company shall
indemnify Indemnitee for Expenses to the fullest
extent permitted by law if Indemnitee was or is or
becomes a party to or witness or other participant
in, or is threatened to be made a party to or witness
or other participant in, any Claim (whether by reason
of or arising in part out of a Covered Event),
including all interest, assessments and other charges
paid or payable in connection with or in respect of
such Expenses.
b. REVIEW OF INDEMNIFICATION OBLIGATIONS.
Notwithstanding the foregoing, in the event any
Reviewing Party shall have determined (in a written
opinion, in any case in which Independent Legal
Counsel is the Reviewing Party) that Indemnitee is
not entitled to be indemnified hereunder under
applicable law, (i) the Company shall have no further
obligation under Section 2(a) to make any payments to
Indemnitee not made prior to such determination by
such Reviewing Party, and (ii) the Company shall be
entitled to be reimbursed by Indemnitee (who hereby
agrees to reimburse the Company) for all Expenses
theretofore paid to Indemnitee to which Indemnitee is
not entitled hereunder under applicable law;
provided, however, that if Indemnitee has commenced
or thereafter commences legal proceedings in a court
of competent jurisdiction to secure a determination
that Indemnitee is entitled to be indemnified
hereunder under applicable law, any determination
made by any Reviewing Party that Indemnitee is not
entitled to be indemnified hereunder under applicable
law shall not be binding and (A) the Company's
obligations under Section 2(a) shall continue, and
(B) Indemnitee shall not be required to reimburse the
Company for any Expenses theretofore paid in
indemnifying Indemnitee, in either case until a final
judicial determination is made with respect thereto
(as to which all rights of appeal therefrom have been
exhausted or lapsed). Indemnitee's obligation to
reimburse the Company for any Expenses shall be
unsecured and no interest shall be charged thereon.
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c. INDEMNITEE RIGHTS ON UNFAVORABLE DETERMINATION;
BINDING EFFECT. If any Reviewing Party determines
that Indemnitee is not entitled to be indemnified
hereunder in whole or in part under applicable law,
Indemnitee shall have the right to commence
litigation seeking an initial determination by the
court or challenging any such determination by such
Reviewing Party or any aspect thereof, including the
legal or factual bases therefor, and, subject to the
provisions of Section 16, the Company hereby consents
to service of process and to appear in any such
proceeding. Absent such litigation, any determination
by any Reviewing Party shall be conclusive and
binding on the Company and Indemnitee.
d. SELECTION OF REVIEWING PARTY; CHANGE IN CONTROL. If
there has not been a Change in Control, any Reviewing
Party shall be selected by the Board of Directors
and, if there has been such a Change in Control
(other than a Change in Control which has been
approved by a majority of the Company's Board of
Directors who were directors immediately prior to
such Change in Control), any Reviewing Party with
respect to all matters thereafter arising concerning
the rights of Indemnitee to indemnification of
Expenses under this Agreement or any other agreement
or under the Company's Articles of Incorporation or
Bylaws as now or hereafter in effect, or under any
other applicable law, if desired by Indemnitee, shall
be Independent Legal Counsel selected by Indemnitee
and approved by the Company (which approval shall not
be unreasonably withheld). Such counsel, among other
things, shall render its written opinion to the
Company and Indemnitee as to whether and to what
extent Indemnitee would be entitled to be indemnified
hereunder under applicable law and the Company agrees
to abide by such opinion. The Company agrees to pay
the reasonable fees of the Independent Legal Counsel
referred to above and to indemnify fully such counsel
against any and all expenses (including attorneys'
fees), claims, liabilities and damages arising out of
or relating to this Agreement or its engagement
pursuant hereto. Notwithstanding any other provision
of this Agreement, the Company shall not be required
to pay Expenses of more than one Independent Legal
Counsel in connection with all matters concerning a
single Indemnitee, and such Independent Legal Counsel
shall be the Independent Legal Counsel for any or all
other Indemnitees unless (i) the employment of
separate counsel by one or more Indemnitees has been
previously authorized by the Company in writing, or
(ii) an Indemnitee shall have provided to the Company
a written statement that such Indemnitee has
reasonably concluded that there may be a conflict of
interest between such Indemnitee and the other
Indemnitees with respect to the matters arising under
this Agreement.
e. MANDATORY PAYMENT OF EXPENSES. Notwithstanding any
other provision of this Agreement other than Section
10 hereof, to the extent that Indemnitee has been
successful on the merits or otherwise, including,
without limitation,
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the dismissal of an action without prejudice, in
defense of any Claim, Indemnitee shall be indemnified
against all Expenses incurred by Indemnitee in
connection therewith.
3. EXPENSE ADVANCES.
a. OBLIGATION TO MAKE EXPENSE ADVANCES. Upon receipt of
a written undertaking by or on behalf of the
Indemnitee to repay such amounts if it shall
ultimately be determined that the Indemnitee is not
entitled to be indemnified by the Company under
applicable law, the Company shall make Expense
Advances to Indemnitee.
b. FORM OF UNDERTAKING. Any obligation to repay any
Expense Advances hereunder pursuant to a written
undertaking by the Indemnitee shall be unsecured and
no interest shall be charged thereon.
c. DETERMINATION OF REASONABLE EXPENSE ADVANCES. The
parties agree that for the purposes of any Expense
Advance for which Indemnitee has made written demand
to the Company in accordance with this Agreement, all
Expenses included in such Expense Advance that are
certified by affidavit of Indemnitee's counsel as
being reasonable shall be presumed conclusively to be
reasonable.
4. PROCEDURES FOR INDEMNIFICATION AND EXPENSE ADVANCES.
a. TIMING OF PAYMENTS. All payments of Expenses
(including without limitation Expense Advances) by
the Company to the Indemnitee pursuant to this
Agreement shall be made to the fullest extent
permitted by law as soon as practicable after written
demand by Indemnitee therefor is presented to the
Company, but in no event later than thirty (30)
business days after such written demand by Indemnitee
is presented to the Company, except in the case of
Expense Advances, which shall be made no later than
ten (10) business days after such written demand by
Indemnitee is presented to the Company.
b. NOTICE/COOPERATION BY INDEMNITEE. Indemnitee shall,
as a condition precedent to Indemnitee's right to be
indemnified or Indemnitee's right to receive Expense
Advances under this Agreement, give the Company
notice in writing as soon as practicable of any Claim
made against Indemnitee for which indemnification
will or could be sought under this Agreement;
provided, however, that no delay on the part of
Indemnitee in notifying the Company shall relieve the
Company from any obligation under this Agreement
unless (and then only to the extent) the Company
thereby is prejudiced. Notice to the Company shall be
directed to the Chief Executive
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Officer of the Company at the address shown on the
signature page of this Agreement (or such other
address as the Company shall designate in writing to
Indemnitee). In addition, Indemnitee shall give the
Company such information and cooperation as it may
reasonably require and as shall be within
Indemnitee's power.
c. NO PRESUMPTIONS; BURDEN OF PROOF. For purposes of
this Agreement, the termination of any Claim by
judgment, order, settlement (whether with or without
court approval) or conviction, or upon a plea of nolo
contendere, or its equivalent, shall not create a
presumption that Indemnitee did not meet any
particular standard of conduct or have any particular
belief or that a court has determined that
indemnification is not permitted by this Agreement or
applicable law. In addition, neither the failure of
any Reviewing Party to have made a determination as
to whether Indemnitee has met any particular standard
of conduct or had any particular belief, nor an
actual determination by any Reviewing Party that
Indemnitee has not met such standard of conduct or
did not have such belief, prior to the commencement
of legal proceedings by Indemnitee to secure a
judicial determination that Indemnitee should be
indemnified under this Agreement under applicable
law, shall be a defense to Indemnitee's claim or
create a presumption that Indemnitee has not met any
particular standard of conduct or did not have any
particular belief. In connection with any
determination by any Reviewing Party or otherwise as
to whether the Indemnitee is entitled to be
indemnified hereunder under applicable law, the
burden of proof shall be on the Company to establish
that Indemnitee is not so entitled.
d. NOTICE TO INSURERS. If, at the time of the receipt by
the Company of a notice of a Claim pursuant to
Section 4(b) hereof, the Company has liability
insurance in effect which may cover such Claim, the
Company shall give prompt notice of the commencement
of such Claim to the insurers in accordance with the
procedures set forth in the respective policies. The
Company shall thereafter take all necessary or
desirable action to cause such insurers to pay, on
behalf of the Indemnitee, all amounts payable as a
result of such Claim in accordance with the terms of
such policies.
e. SELECTION OF COUNSEL. In the event the Company shall
be obligated hereunder to provide indemnification for
or make any Expense Advances with respect to the
Expenses of any Claim, the Company, if appropriate,
shall be entitled to assume the defense of such Claim
with counsel approved by Indemnitee (which approval
shall not be unreasonably withheld) upon the delivery
to Indemnitee of written notice of the Company's
election to do so. After delivery of such notice,
approval of such counsel by Indemnitee and the
retention of such counsel by the Company, the Company
will not be liable to Indemnitee under this Agreement
for any fees or expenses of separate counsel
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subsequently retained by or on behalf of Indemnitee
with respect to the same Claim; provided that, (i)
Indemnitee shall have the right to employ
Indemnitee's separate counsel in any such Claim at
Indemnitee's expense and (ii) if (A) the employment
of separate counsel by Indemnitee has been previously
authorized by the Company, (B) Indemnitee shall have
reasonably concluded that there may be a conflict of
interest between the Company and Indemnitee or any
other party being represented by counsel selected by
the Company in the conduct of any such defense, or
(C) the Company shall not continue to retain such
counsel to defend such Claim, then the fees and
expenses of Indemnitee's separate counsel shall be
Expenses for which Indemnitee may receive
indemnification or Expense Advances hereunder.
5. ADDITIONAL INDEMNIFICATION RIGHTS; NONEXCLUSIVITY.
a. SCOPE. The Company hereby agrees to indemnify the
Indemnitee to the fullest extent permitted by law,
notwithstanding that such indemnification is not
specifically authorized by the other provisions of
this Agreement, the Company's Articles of
Incorporation, the Company's Bylaws or by statute. In
the event of any change after the date of this
Agreement in any applicable law, statute or rule
which expands the right of a Florida corporation to
indemnify a member of its board of directors or an
officer, employee, agent or fiduciary, it is the
intent of the parties hereto that Indemnitee shall
enjoy by this Agreement the greater benefits afforded
by such change. In the event of any change in any
applicable law, statute or rule which narrows the
right of a Florida corporation to indemnify a member
of its board of directors or an officer, employee,
agent or fiduciary, such change, to the extent not
otherwise required by such law, statute or rule to be
applied to this Agreement, shall have no effect on
this Agreement or the parties' rights and obligations
hereunder except as set forth in Section 10(a)
hereof.
b. NONEXCLUSIVITY. The indemnification and the payment
of Expense Advances provided by this Agreement shall
be in addition to any rights to which Indemnitee may
be entitled under the Company's Articles of
Incorporation, its Bylaws, any other agreement, any
vote of shareholders or disinterested directors, the
Florida Business Corporation Act or otherwise. The
indemnification and the payment of Expense Advances
provided under this Agreement shall continue as to
Indemnitee for any action taken or not taken while
serving in an indemnified capacity even though
subsequent thereto Indemnitee may have ceased to
serve in such capacity.
6. NO DUPLICATION OF PAYMENTS. The Company shall not be liable
under this Agreement to make any payment in connection with
any Claim made against Indemnitee to the extent Indemnitee has
otherwise actually received payment (under
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any insurance policy, provision of the Company's Articles of
Incorporation, Bylaws or otherwise) of the amounts otherwise
payable hereunder.
7. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company
for some or a portion of Expenses incurred in connection with
any Claim, but not, however, for all of the total amount
thereof, the Company shall nevertheless indemnify Indemnitee
for the portion of such Expenses to which Indemnitee is
entitled.
8. MUTUAL ACKNOWLEDGMENT. Both the Company and Indemnitee
acknowledge that in certain instances, federal law or
applicable public policy may prohibit the Company from
indemnifying its directors, officers, employees, agents or
fiduciaries under this Agreement or otherwise. Indemnitee
understands and acknowledges that the Company has undertaken
or may be required in the future to undertake with the
Securities and Exchange Commission to submit the question of
indemnification to a court in certain circumstances for a
determination of the Company's right under public policy to
indemnify Indemnitee.
9. LIABILITY INSURANCE. To the extent the Company maintains
liability insurance applicable to directors, officers,
employees, agents or fiduciaries, Indemnitee shall be covered
by such policies in such a manner as to provide Indemnitee the
same rights and benefits as are provided to the most favorably
insured of the Company's directors, if Indemnitee is a
director; or of the Company's officers, if Indemnitee is not a
director of the Company but is an officer; or of the Company's
key employees, agents or fiduciaries, if Indemnitee is not an
officer or director but is a key employee, agent or fiduciary.
10. EXCEPTIONS. Notwithstanding any other provision of this
Agreement, the Company shall not be obligated pursuant to the
terms of this Agreement:
a. EXCLUDED ACTION OR OMISSIONS. To indemnify or make
Expense Advances to Indemnitee with respect to Claims
arising out of acts, omissions or transactions for
which Indemnitee is prohibited from receiving
indemnification under applicable law.
b. CLAIMS INITIATED BY INDEMNITEE. To indemnify or make
Expense Advances to Indemnitee with respect to Claims
initiated or brought voluntarily by Indemnitee and
not by way of defense, counterclaim or crossclaim,
except (i) with respect to actions or proceedings
brought to establish or enforce a right to
indemnification under this Agreement or any other
agreement or insurance policy or under the Company's
Articles of Incorporation or Bylaws now or hereafter
in effect relating to Claims for Covered Events, (ii)
in specific cases if the Board of Directors has
approved the initiation or bringing of such Claim, or
(iii) as otherwise required under Section 607.0850 of
the
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Florida Business Corporation Act, regardless of
whether Indemnitee ultimately is determined to be
entitled to such indemnification, Expense Advances,
or insurance recovery, as the case may be.
c. LACK OF GOOD FAITH. To indemnify Indemnitee for any
Expenses incurred by the Indemnitee with respect to
any action instituted (i) by Indemnitee to enforce or
interpret this Agreement, if a court having
jurisdiction over such action determines as provided
in Section 13 that each of the material assertions
made by the Indemnitee as a basis for such action was
not made in good faith or was frivolous, or (ii) by
or in the name of the Company to enforce or interpret
this Agreement, if a court having jurisdiction over
such action determines as provided in Section 13 that
each of the material defenses asserted by Indemnitee
in such action was made in bad faith or was
frivolous.
d. CLAIMS UNDER SECTION 16(B). To indemnify Indemnitee
for Expenses and the payment of profits arising from
the purchase and sale by Indemnitee of securities in
violation of Section 16(b) of the Securities Exchange
Act of 1934, as amended, or any similar successor
statute.
11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
12. BINDING EFFECT; SUCCESSORS AND ASSIGNS. This Agreement shall
be binding upon and inure to the benefit of and be enforceable
by the parties hereto and their respective successors, assigns
(including any direct or indirect successor by purchase,
merger, consolidation or otherwise to all or substantially all
of the business or assets of the Company), spouse, heirs and
personal and legal representatives. The Company shall require
and cause any successor (whether direct or indirect, and
whether by purchase, merger, consolidation or otherwise) to
all, substantially all, or a substantial part, of the business
or assets of the Company, by written agreement in form and
substance satisfactory to Indemnitee, expressly to assume and
agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform if
no such succession had taken place. This Agreement shall
continue in effect regardless of whether Indemnitee continues
to serve as a director, officer, employee, agent or fiduciary
(as applicable) of the Company or of any other enterprise at
the Company's request.
13. EXPENSES INCURRED IN ACTION RELATING TO ENFORCEMENT OR
INTERPRETATION. In the event that any action is instituted by
Indemnitee under this Agreement or under any liability
insurance policies maintained by the Company to enforce or
interpret any of the terms hereof or thereof, Indemnitee shall
be entitled to be indemnified for all Expenses incurred by
Indemnitee with respect to such action (including without
limitation attorneys' fees), regardless of whether Indemnitee
is ultimately successful in such action, unless as a part of
such action a court having jurisdiction over such
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action makes a final judicial determination (as to which all
rights of appeal therefrom have been exhausted or lapsed) that
each of the material assertions made by Indemnitee as a basis
for such action was not made in good faith or was frivolous;
provided, however, that until such final judicial
determination is made, Indemnitee shall be entitled under
Section 3 to receive payment of Expense Advances hereunder
with respect to such action. In the event of an action
instituted by or in the name of the Company under this
Agreement to enforce or interpret any of the terms of this
Agreement, Indemnitee shall be entitled to be indemnified for
all Expenses incurred by Indemnitee in defense of such action
(including without limitation costs and expenses incurred with
respect to Indemnitee's counterclaims and cross-claims made in
such action), unless as a part of such action a court having
jurisdiction over such action makes a final judicial
determination (as to which all rights of appeal therefrom have
been exhausted or lapsed) that each of the material defenses
asserted by Indemnitee in such action was made in bad faith or
was frivolous; provided, however, that until such final
judicial determination is made, Indemnitee shall be entitled
under Section 3 to receive payment of Expense Advances
hereunder with respect to such action.
14. PERIOD OF LIMITATIONS. No legal action shall be brought and no
cause of action shall be asserted by or in the right of the
Company against Indemnitee, Indemnitee's estate, spouse,
heirs, executors or personal or legal representatives after
the expiration of one year from the date of accrual of such
cause of action, and any claim or cause of action of the
Company shall be extinguished and deemed released unless
asserted by the timely filing of a legal action within such
one year period; provided, however, that if any shorter period
of limitations is otherwise applicable to any such cause of
action, such shorter period shall govern.
15. NOTICE. All notices, requests, demands and other
communications under this Agreement shall be in writing and
shall be deemed duly given (i) if delivered by hand and signed
for by the party addressed, on the date of such delivery, or
(ii) if mailed by domestic certified or registered mail with
postage prepaid, on the third business day after the date
postmarked. Addresses for notice to either party are as shown
on the signature page of this Agreement, or as subsequently
modified by written notice.
16. CONSENT TO JURISDICTION. The Company and Indemnitee each
hereby irrevocably consent to the jurisdiction of the courts
of the State of Florida for all purposes in connection with
any action or proceeding which arises out of or relates to
this Agreement.
17. SEVERABILITY. The provisions of this Agreement shall be
severable in the event that any of the provisions hereof
(including any provision within a single section, paragraph or
sentence) are held by a court of competent jurisdiction to be
invalid, void or otherwise unenforceable, and the remaining
provisions shall remain enforceable to the fullest extent
permitted by law. Furthermore, to the fullest extent
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possible, the provisions of this Agreement (including without
limitation each portion of this Agreement containing any
provision held to be invalid, void or otherwise unenforceable,
that is not itself invalid, void or unenforceable) shall be
construed so as to give effect to the intent manifested by the
provision held invalid, illegal or unenforceable.
18. CHOICE OF LAW. This Agreement, and all rights, remedies,
liabilities, powers and duties of the parties to this
Agreement, shall be governed by and construed in accordance
with the laws of the State of Florida as applied to contracts
between Florida residents entered into and to be performed
entirely in the State of Florida without regard to principles
of conflicts of laws.
19. SUBROGATION. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to
all of the rights of recovery of Indemnitee, who shall execute
all documents required and shall do all acts that may be
necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
20. AMENDMENT AND TERMINATION. No amendment, modification,
termination or cancellation of this Agreement shall be
effective unless it is in writing signed by both the parties
hereto. No waiver of any of the provisions of this Agreement
shall be deemed to be or shall constitute a waiver of any
other provisions hereof (whether or not similar), nor shall
such waiver constitute a continuing waiver.
21. INTEGRATION AND ENTIRE AGREEMENT. This Agreement sets forth
the entire understanding between the parties hereto and
supersedes and merges all previous written and oral
negotiations, commitments, understandings and agreements
relating to the subject matter hereof between the parties
hereto.
22. NO CONSTRUCTION AS EMPLOYMENT AGREEMENT. Nothing contained in
this Agreement shall be construed as giving Indemnitee any
right to be retained in the employ of the Company or any of
its subsidiaries or affiliated entities.
IN WITNESS WHEREOF, the parties hereto have executed this
Indemnification Agreement as of the date first above written.
OMEGA RESEARCH, INC.
By:
-----------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
-12-
<PAGE>
Address: 8700 West Flagler Street
Miami, Florida 33174
AGREED TO AND ACCEPTED
INDEMNITEE:
-------------------------------------
(signature)
Name:
Address: Omega Research, Inc.
8700 West Flagler Street
Miami, Florida 33174
-13-
EXHIBIT 10.9
AGREEMENT REGARDING EMPLOYMENT
AGREEMENT, effective as of the date set forth at the foot of this
Agreement, by and between OMEGA RESEARCH, INC., a Florida corporation
("Employer"), and ____________________ ("Employee").
PRELIMINARY STATEMENT
This Agreement covers various subjects, including (i) protection of
Employer's trade secrets and confidential information, (ii) non-solicitation of
Employer's customers, licensees and other employees, (iii) restrictions on
Employee's ability to compete with Employer or participate in competitive
businesses both during and after Employee's employment, (iv) misuse of trade
secrets or confidential information belonging to others and interference with
rights of others, (v) the full-time, exclusive nature of Employee's employment
commitment, and (vi) unfair business practices. Each of these subjects is
equally important, and if Employee accepts employment or continued employment
with Employer, Employee is agreeing to faithfully observe all covenants and
agreements set forth below relating to each subject addressed, without
exception.
Employee has been informed by Employer, and understands, that (a)
Employer has developed and owns, as a result of substantial effort and expense
on the part of Employer, valuable trade secrets and other valuable confidential
business information to which Employee has and/or will have substantial access,
(b) Employee has developed and/or will be developing important and substantial
relationships with other valuable employees of Employer and/or with certain of
Employer's clients, licensees, vendors and/or other third parties having
dealings with Employer, and (c) Employer has devoted and/or will be devoting
substantial efforts and expense to train Employee to perform Employee's
employment duties, which has resulted (or, if this is a new employment, assuming
it continues, will likely result) in the development by Employee of specialized
and valuable skills, knowledge and abilities.
In light of all of the foregoing, in order to protect Employer's
legitimate business interests, including its goodwill with its clients,
licensees and other employees and Employer's trade secrets, and as a condition
to Employee's employment with Employer (or, if Employee is already employed by
Employer, as a condition to Employer agreeing to continue to employ Employee),
Employee has agreed to make for the benefit of Employer the reasonable covenants
and agreements set forth below. As an employee of Employer, Employee agrees to
observe all of the provisions of this Agreement, as well as all other rules and
policies that Employer may announce from time to time.
NOW, THEREFORE, it is agreed as follows:
1. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION
(a) CONFIDENTIAL INFORMATION. Employee acknowledges that Employee
has been informed by Employer that it is Employer's policy to maintain as secret
and confidential all information and materials (whether or not stamped or marked
"Confidential" or bearing some other indicia of confidentiality) relating to (i)
the financial condition, operations and business interests,
1
<PAGE>
objectives, plans and strategies of Employer, (ii) the systems, know-how,
records, products, product plans, product designs, product development,
services, cost information, inventions, computer programs, marketing and sales
strategies techniques and/or programs, methods, methodologies, manuals, lists
and other trade secrets from time to time acquired, sold, developed, maintained
and/or used by Employer, (iii) the nature and terms of Employer's relationships
with its clients, licensees, suppliers, lenders, underwriters, vendors,
consultants, independent contractors, attorneys, accountants and employees, and
(iv) any proposed public or private offering of Employer (all such information
and materials are collectively referred to as "Confidential Information").
Accordingly, Employee agrees that Employee will not directly or indirectly at
any time (including after the date on which Employee's employment terminates)
divulge or disclose for any purpose (except as specifically authorized by
Employer) to any persons, firms, corporations or other entities (collectively,
"Third Parties"), or use or cause or authorize any Third Parties to use, any
such Confidential Information. "Confidential Information" does not include
information that, at the time of disclosure, is generally known in Employer's
industry or information which Employee can demonstrate was known to or developed
by Employee prior to the date of Employee's commencement of employment with
Employer without reliance upon or use of Confidential Information. If Employee
is required by order of a court or other governmental authority to disclose any
Confidential Information, Employee shall immediately notify Employer so that
Employer may attempt to obtain an appropriate protective order, and, in all
events, Employee shall only disclose the portion of the Confidential Information
required by such order to be disclosed.
(b) EMPLOYER'S MATERIALS. Employee further agrees that (i)
Employee will at no time retain or remove from the premises of Employer any
products, prototypes, drawings, notebooks, software programs or discs, tapes or
similar containers of software, manuals, data, books, records, materials or
documents of any kind or description containing Confidential Information for any
purpose unconnected with the strict performance of Employee's duties with
Employer, and (ii) upon the termination of Employee's employment with Employer
for any reason, Employee shall immediately deliver or cause to be delivered to
Employer any and all such drawings, notebooks, software programs or discs, tapes
or similar containers of software, manuals, data, books, records, materials and
other documents and materials (and all copies thereof) in Employee's possession
or under Employee's control relating to any Confidential Information or any
other materials which are the property of Employer.
(c) EMPLOYEE'S ACKNOWLEDGMENT. Employee acknowledges that Employee
is aware that Employee may be subject to severe criminal penalties (including
fines and lengthy imprisonment) under both federal and state law, including
Title 18, Sections 1831, et. seq. of the United States Code (The Economic
Espionage Act of 1996) and Section 812.081, Florida Statutes, as well as
substantial personal civil liability, for (i) stealing, or without Employer's
permission, taking, misappropriating or concealing, or by fraud or deception
procuring, Confidential Information, or (ii) without Employer's permission,
receiving, possessing, altering, destroying, copying, sending, downloading,
uploading or conveying Confidential Information. Employee further acknowledges
that any person or entity to whom Confidential Information is given by Employee
may also become subject to severe criminal penalties and civil liability.
2
<PAGE>
2. COVENANT-NOT-TO-COMPETE
(a) Employee covenants and agrees that, during Employee's
employment with Employer and for a period of two (2) years after the date
Employee ceases for any reason to be employed by Employer, Employee shall not,
directly or indirectly, (i) sell or provide or license, or be involved in the
sale or provision or licensing of, any Financial Market Data Software Products
or Services (as defined below) to any person or entity who is or was a client,
licensee or customer of Employer at any time during Employee's employment with
Employer and for or to whom Employer is performing such services or selling or
licensing such products or for or to whom Employer has performed such services
or sold or licensed such products at any time during the one-year period ending
on Employee's termination of employment, or (ii) in any capacity engage or
participate in any venture, enterprise, activity or business which involves the
sale, licensing, performance or provision of Financial Market Data Software
Products or Services, passively (except for passive investments in
publicly-traded companies) or actively, as an owner, director, officer, partner,
member, consultant, independent contractor, advisor, participant, employee or
agent, anywhere within the world. "Financial Market Data Software Products or
Services" means software products and/or services which (A) collect or deliver
financial market data (including but not limited to stocks, bonds, options,
futures, commodities, other securities and/or fundamental company data), and/or
(B) are or can be used to make, review or devise investment analyses or
strategies, including, without limitation, charting, technical analysis and/or
strategy testing and automation. Employee acknowledges that the business of
Employer is international in scope, that, due to the electronic and telephonic
nature of Employer's business and the nature of Employer's clients, licensees
and customers, one could effectively compete with such business from nearly
anywhere in the world, and that, therefore, such geographical area of
restriction is reasonable in the circumstances to protect Employer's trade
secrets and other legitimate business interests.
(b) PAYMENT FOR COVENANT-NOT-TO-COMPETE. Employer and Employee
both believe that, due to the specialized nature of Employer's business, it
would not be difficult for Employee, upon termination of Employee's employment,
to find gainful employment or have other business pursuits which are not
violative of the restrictions set forth above, as there are several industries
and lines of business in which Employee could work which are dissimilar to, and
not competitive with, Employer's business. However, Employer understands that
such restrictions may limit Employee's new employment options following a
termination of Employee's employment with Employer. Accordingly, if following
termination of employment with Employer, Employee is offered a position which,
if accepted, would violate the restrictive covenants set forth above, Employer
will either (i) consent to Employee accepting employment restricted by
subsection (a) above, or (ii) not consent, but pay Employee additional
consideration for Employee remaining bound by such restrictions. In order to
receive the benefit of these provisions, Employee must be and remain in
compliance with all provisions of this Agreement, and must comply with the
following procedures. Upon Employee's receipt of a written offer of employment
which Employee desires to accept and, if accepted, would constitute a violation
of subsection (a) above, Employee shall promptly notify Employer of such offer
and provide to Employer a copy thereof together with a written statement
explaining in reasonable detail Employee's job responsibilities at the new
3
<PAGE>
employment. Within thirty (30) days following the date that Employer has been
given a copy of such offer and written statement, Employer will notify Employee
that either (x) Employer consents to Employee accepting such new employment (but
such consent shall extend only to the job responsibilities described in the
written statement and shall not under any circumstances authorize Employee to
disclose or use any Confidential Information or to fail to comply with any other
provision of this Agreement), or (y) Employee may not accept the new employment.
If Employer decides that Employee may not accept the new employment, Employer
shall pay to Employee each month an amount equal to 1/24th of Employee's annual
salary in effect at the date of termination of Employee's employment
("Additional Monthly Payments"). Such Additional Monthly Payments will cease at
the end of the 24th month following the date of Employee's termination of
employment, provided that, if Employee commences other full-time employment
during such 24- month period, such Additional Monthly Payments shall cease upon
the commencement of such new employment. Employee shall promptly notify Employer
if Employee accepts any such new employment. If Employee fails to notify
Employer of new full-time employment and continues to accept Additional Monthly
Payments from Employer after commencing new full-time employment, Employee shall
be obligated to repay to Employer all Additional Monthly Payments received from
Employer pursuant to these provisions.
(c) Employee acknowledges that Employer devotes substantial time,
effort and expense to the recruitment, selection, training, development and
promotion of talented individuals for positions of significant responsibility
with Employer. Employee further acknowledges that it would be unfair to use
Employee's familiarity with Employer's business and other employees and
Employer's independent contractors and consultants to participate, directly or
indirectly, in any activities designed to cause any of Employer's other
employees to leave Employer's employ or to cause any of Employer's independent
contractors or consultants to cease performing services for Employer.
Accordingly, Employee covenants and agrees that, during Employee's employment
with Employer and for a period of two (2) years after the date Employee ceases
for any reason to be employed by Employer, Employee shall not, directly or
indirectly, solicit the services of or recruit, whether on Employee's own behalf
or on behalf of others, any of the following types of employees, independent
contractors or consultants of Employer: (i) executives, managers, supervisors or
department directors; (ii) technicians, engineers, programmers or information
services workers (whether employees, independent contractors or consultants);
(iii) product, project or task managers or supervisors (whether employees,
independent contractors or consultants); (iv) sales or marketing personnel or
consultants; financial or accounting services personnel or consultants; (v)
legal personnel; or (vi) customer support personnel or consultants; or otherwise
persuade or cause, or attempt to persuade or cause, any such employee,
independent contractor or consultant to leave Employer's employ or cease
performing services for Employer. Employee acknowledges that it would be
difficult to ascertain with a degree of certainty the substantial damages that
would be incurred by Employer if Employee violates or breaches the foregoing
covenant. In order to avoid such difficulty and in an attempt to approximate the
damage that Employer would incur in the event of such violation or breach, if
Employee takes or participates in any of the actions prohibited above with
respect to any of the employees, independent contractors or consultants
described above, and such employee, independent contractor or consultant then
leaves Employer's employ or ceases to
4
<PAGE>
perform services for Employer, Employee shall pay to Employer, as liquidated
damages, the sum of $50,000 per employee, independent contractor or consultant
who so leaves Employer's employ or ceases to perform services for Employer. The
payment of such liquidated damages shall not limit, impair or diminish
Employer's right to seek and obtain (x) any appropriate equitable relief
(including but not limited to specific performance, temporary restraining order
and temporary and permanent injunction), (y) monetary and other relief, at law
or in equity, for other causes of action which may have resulted from Employee's
breach or violation (such as intentional interference with contractual or
business relations in the event an employee is solicited by Employee for a
competitive position and such employee is subject to a covenant-not-to-compete),
or (z) monetary and other relief, at law or in equity, from or against persons
or entities other than Employee.
3. EMPLOYER'S REMEDIES FOR BREACH OF SECTIONS 1 AND 2
Employee agrees that if Employee shall violate or breach any of
Employee's covenants or agreements in Section 1 or 2(a) hereof, Employer shall
be entitled to an accounting and repayment of any and all profits, compensation,
commissions, payments and benefits which Employee directly or indirectly has
realized and realizes as a result of, or in connection with, any such violation
or breach. In addition, in the event of a breach or violation or threatened or
imminent breach or violation of any provisions of Section 1 or 2 hereof,
Employer shall be entitled to a temporary and permanent injunction or any other
appropriate decree of specific performance or equitable relief (without, unless
otherwise required by statute, being required to post bond or other security)
from a court of competent jurisdiction in order to prevent, prohibit or restrain
any such breach or violation or threatened or imminent breach or violation by
Employee. Employer shall be entitled to such injunctive or other equitable
relief in addition to any ascertainable damages which are suffered (or
liquidated damages which may be payable, as the case may be). It is understood
that resort by Employer to such injunctive or other equitable relief shall not
be deemed to waive or to limit in any respect any other rights or remedies which
Employer may have with respect to such breach or violation.
4. REASONABLENESS OF RESTRICTIONS
(a) REASONABLENESS. Employee acknowledges that any breach or
violation of Section 1 or 2 hereof will likely cause irreparable injury and
damage to Employer and that it would be very difficult or impossible to measure
all of the damages resulting from any such breach or violation. Employee further
acknowledges that Employee has carefully read and considered the provisions of
Sections 1, 2 and 3 hereof and, having done so, agrees that the restrictions and
remedies set forth in such Sections (including the time period, geographical and
types of restrictions imposed) are fair and reasonable and are reasonably
required for the protection of the trade secrets, good will and other legitimate
business interests of Employer.
(b) SEVERABILITY. Employee understands and intends that each
provision and restriction agreed to by Employee in Sections 1, 2 and 3 hereof be
construed as separate and divisible from every other provision and restriction.
In the event that any one of the provisions of, or
5
<PAGE>
restrictions in, Sections 1, 2 and/or 3 hereof shall be held to be invalid or
unenforceable, and is not reformed by a court of competent jurisdiction (which a
court, in lieu of striking a provision entirely, is urged by the parties to do),
the remaining provisions and restrictions shall continue to be valid and
enforceable as though the invalid or unenforceable provision or restriction had
not been included. In the event that any such provision relating to time period,
geographical or type of restriction shall be declared by a court of competent
jurisdiction to exceed the maximum or permissible time period, geographical or
type of restriction such court deems reasonable and enforceable, said time
period, geographical or type of restriction shall be deemed to become and shall
then be the maximum time period or geographical area or type of restriction
which such court deems reasonable and enforceable.
5. OWNERSHIP OF WORK DEVELOPED IN WHOLE OR IN PART BY EMPLOYEE.
Employee covenants and agrees with Employer that any and all
formulae, devices, patterns, know-how, technology, computer programs,
documentation, processes, lists, compilations, literature, inventions,
methodologies, techniques and other work product ("Work") created or developed
in whole or in part by Employee (whether alone or in cooperation with others)
during the term of Employee's employment, if created or developed in whole or in
part (i) on Employer's premises, or (ii) during Employee's normal working hours,
or (iii) with the use of Employer's resources, or (iv) based upon Employee's
access to or knowledge of Confidential Information, no matter what such Work
relates to or is about, shall immediately be disclosed by Employee to Employer
and is and shall be solely Employer's property. Employee further covenants and
agrees with Employer that any Work created or developed in whole or in part by
Employee (whether alone or in cooperation with others) during the term of
Employee's employment, even if wholly developed or created off Employer's
premises, on Employee's own time, and without use of Employer's resources or
Confidential Information, if related to Employer's business, is and shall be
solely Employer's property. In all such cases, Employee agrees that Employer is
the "person for whom the work was prepared" for the purposes of determining
authorship of any copyright in the Work, and all of the Work shall be deemed
"work made for hire" as that term is defined in Section 101 of the U.S.
Copyright Act. In addition, all inventions, discoveries, improvements, trade
secrets, trademarks, service marks, trade dress, know-how, names, ideas and
other proprietary rights and intellectual property rights, whether or not
patentable, embodied in, represented by, incorporated in, part of, or relating
to any of the Work (collectively, "Other Intellectual Property Rights") are, and
shall be, as between Employer and Employee, the property of solely Employer,
and, so there will be no doubt, Employee hereby assigns to Employer, its
successors and assigns all of Employee's right, title and interest in and to all
Other Intellectual Property Rights. If, for any reason, any of the Work is
determined not to be a "work made for hire" under U.S. law or the law of any
other jurisdiction, Employee agrees to assign, and does hereby assign, to
Employer, its successors and assigns all of Employee's right, title and interest
in and to all copyrights in all of the Work. Employee shall execute and deliver
to Employer from time to time upon Employer's request such confirmatory
assignments, instruments and other documents so as to evidence and confirm full
record and beneficial ownership of Employer in all such Work. Employee hereby
irrevocably appoints Employer as Employee's attorney-in-fact for the purpose of
signing and delivering such assignments, instruments and other documents, such
appointment being coupled with an interest.
6
<PAGE>
"Work" does not include works or inventions which do not relate to Employer's
business and are wholly created or developed by Employee off Employer's
premises, on Employee's own time and without use of Employer's resources or
Confidential Information.
6. CONTINUED EMPLOYMENT OF EMPLOYEE
Nothing in this Agreement shall be deemed or construed in any
manner to create or continue any employment relationship other than an
employment "at will." Employee and Employer are each free to terminate such
employment relationship at any time, for any reason.
7. EMPLOYMENT AS SOLE OCCUPATION
Employee agrees to devote Employee's full business time,
attention, skill and effort exclusively to the duties that Employer assigns to
Employee from time to time. Employee agrees that Employee may not engage in any
business activities or render any services of a business, commercial or
professional nature, whether or not for compensation, for the benefit of anyone
other than Employer, unless Employer has given its consent in writing in
advance.
8. NON-INTERFERENCE WITH THIRD-PARTY RIGHTS
By signing this Agreement, and accepting employment or continued
employment with Employer, Employee is representing and warranting to Employer
that (a) Employee is free to accept or continue employment with Employer,
meaning that Employee has no contractual or other commitments which restrict
Employee from performing Employee's employment duties to the fullest extent, and
(b) only Employer is entitled to the benefit of Employee's work and efforts.
Employer advises Employee that Employer has no interest in using any other
person's patents, copyrights, trademarks, trade secrets or confidential or
proprietary information ("Intellectual Property Rights") in an unlawful manner,
and Employee agrees that Employee will not, in performing Employee's employment
duties, make use of any Intellectual Property Rights belonging to another which
Employer has no right to use. If Employee has any doubt about whether Employee
is misusing Intellectual Property Rights of another, Employee shall promptly
notify one of Employer's Co-CEO's, or Employer's Vice President-Operations or
General Counsel so that Employer may investigate and make the appropriate
decision.
9. VIOLATION OF POLICIES BY OTHER EMPLOYEES
Many, if not most, of Employer's employees are required to sign
this Agreement as a condition of employment or continued employment with
Employer. If Employee becomes aware that any other employee of Employer is
violating any provisions of this Agreement, Employee shall promptly report such
violation to one of Employer's Co-CEO's, or Employer's Vice President-
Operations or General Counsel. The information provided, and its source, will be
treated confidentially to the extent possible in the circumstances. While
Employer understands that it is not always easy or pleasant to report
wrongdoings of a co-worker, it is critically important that these
7
<PAGE>
provisions be observed by Employee, as violations of this Agreement may cause
substantial and irreparable harm to Employer's business which would cause all
employees of Employer to suffer.
10. UNFAIR BUSINESS PRACTICES
If, during Employee's employment with Employer, Employee learns or
suspects that any unfair or questionable business practice may be occurring,
Employee shall advise one of Employer's Co-CEO's or Employer's Vice
President-Operations or General Counsel promptly. This obligation is
intentionally broad and general because it is difficult to anticipate all
possible circumstances, and Employee should resolve all doubts by reporting the
information in question to one of such persons. In particular, if Employee
receives an offer of any kind (kickbacks, job offers, gifts, offers of money in
exchange for information, etc.) from any outside party or another employee of
Employer, Employee shall immediately notify Employer and provide all information
relating to such offer. No gift, favor, offer, benefit, promise to pay or other
thing of value shall be offered, made or authorized by Employee for any
questionable, improper or illegal purpose, nor shall any bribe or kickback be
offered, made or authorized by Employee, directly or indirectly, regardless of
motive, to or for the benefit of any customer, supplier or other person or
entity doing business with Employer, or any employee or agent thereof, or to or
for the benefit of any governmental official or employee.
11. LAW APPLICABLE
This Agreement shall be governed by and construed pursuant to the
laws of the State of Florida.
12. SUCCESSION
This Agreement shall inure to the benefit of the parties and their
respective heirs, administrators, legal representatives, successors and assigns
and shall be binding upon the parties and their respective heirs,
administrators, legal representatives and successors.
13. NO WAIVER
A waiver of any breach or violation of any term, provision or
covenant contained in this Agreement shall not be deemed a continuing waiver or
a waiver of any future or past breach or violation. No oral waiver shall be
effective or binding.
8
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement on the
day and year set forth below.
Dated: ____________ EMPLOYEE:
____________________________
EMPLOYER:
OMEGA RESEARCH, INC.
By:_________________________
William Cruz, President
9
EXHIBIT 23.1
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the use
of our reports, and to all references to our firm, included in or made a part of
this registration statement.
/s/ ARTHUR ANDERSEN LLP
- -----------------------
ARTHUR ANDERSEN LLP
Miami, Florida,
July 25, 1997.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
OMEGA RESEARCH, INC. FINANCIAL DATA SCHEDULE
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE COMPANY'S
FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1996 AND
THE SIX-MONTH PERIOD ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001042814
<NAME> OMEGA RESEARCH, INC.
<MULTIPLIER> 1
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 JAN-30-1997
<CASH> 141,633 263,595
<SECURITIES> 0 0
<RECEIVABLES> 6,984,337 14,784,141
<ALLOWANCES> 2,627,289 6,885,114
<INVENTORY> 92,188 96,432
<CURRENT-ASSETS> 4,596,559 8,277,890
<PP&E> 1,914,035 1,908,457
<DEPRECIATION> 828,923 979,929
<TOTAL-ASSETS> 5,803,328 9,256,729
<CURRENT-LIABILITIES> 967,851 1,449,537
<BONDS> 0 0
0 0
0 0
<COMMON> 194,800 194,800
<OTHER-SE> 4,640,677 7,612,392
<TOTAL-LIABILITY-AND-EQUITY> 5,803,328 9,256,729
<SALES> 13,943,234 12,092,426
<TOTAL-REVENUES> 17,820,162 14,618,986
<CGS> 1,716,884 855,583
<TOTAL-COSTS> 10,797,584 9,239,973
<OTHER-EXPENSES> (59,436) (17,664)
<LOSS-PROVISION> 830,430 1,231,684
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 7,082,014 5,396,677
<INCOME-TAX> 2,797,396<F1> 2,131,687<F1>
<INCOME-CONTINUING> 4,284,618<F1> 3,264,990<F1>
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 4,284,618<F1> 3,264,990
<EPS-PRIMARY> 0.21<F1><F2> 0.15<F1><F2>
<EPS-DILUTED> 0.21<F1><F2> 0.15<F1><F2>
<FN>
<F1>REFLECTS PRO FORMA PROVISION FOR INCOME TAXES AS IF THE COMPANY WERE A
C CORPORATION SUBJECT TO FEDERAL AND STATE CORPORATE INCOME TAXES. SEE
NOTE 1 OF NOTES TO FINANCIAL STATEMENTS.
<F2>PRO FORMA WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING USED IN THE
CALCULATION OF EARNINGS PER SHARE INCLUDES 321,000 AND 966,000 SHARES
FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE SIX-MONTH PERIOD ENDED
JUNE 30, 1997, RESPECTIVELY, AT AN ASSUMED INITIAL PUBLIC OFFERING
PRICE OF $11.00 PER SHARE, THE PROCEEDS OF WHICH WOULD FUND
UNDISTRIBUTED S CORPORATION EARNINGS. SEE NOTE 1 OF NOTES TO
FINANCIAL STATEMENTS.
</FN>
</TABLE>
