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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF THE
SECURITIES EXCHANGE ACT OF 1934
SEAGATE SOFTWARE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 77-0397623
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION)
915 DISC DRIVE 95066
SCOTTS VALLEY, CALIFORNIA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (408) 438-6550
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Securities to be registered pursuant to Section 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g) of the Act:
Series A Preferred Stock, $.001 par value per share
Common Stock, $.001 par value per share
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CERTAIN FORWARD-LOOKING INFORMATION
The information contained in this Registration Statement includes forward-
looking statements. Since this information is based on current expectations
which involve risks and uncertainties, actual results could differ materially
from those expressed in the forward-looking statements. Various important
factors known to Seagate Software, Inc. that could cause such material
differences are identified in the section entitled "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Factors
Affecting Future Operating Results" contained in Item 2 of this Registration
Statement.
ITEM 1. BUSINESS
GENERAL
Seagate Software, Inc. (the "Company" or "Seagate Software") was
incorporated in Delaware in November 1993. The Company is a majority-owned and
consolidated subsidiary of Seagate Technology, Inc. ("Seagate Technology" or
the "Parent Company"). The Company develops, markets and supports software
products and provides related services through two business units. The
Information Management Group ("IMG") business unit offers business
intelligence products that support the access, analysis, reporting and
delivery of enterprise data, and the Network and Storage Management Group
("NSMG") business unit offers infrastructure management products that support
the management of Information Technology ("IT") systems.
The Company's products and services are designed to provide users with more
reliable and productive access to and use of critical information and increase
the manageability and reliability of computing systems. The Company's
offerings include products for query and reporting, on line analytical
processing ("OLAP"), data backup and restoration and network management for a
variety of computing environments, including Windows, Windows NT, NetWare and
UNIX. The Company also offers professional services, including consulting and
training programs.
PRODUCTS
BUSINESS INTELLIGENCE PRODUCTS
The Company's IMG business unit offers business intelligence products that
enable organizations to better leverage their corporate data investments.
These products bring database and data warehouse information to enterprise
desktops and enable users to identify business trends, analyze complex
information, create timely reports and make informed decisions. The Company's
principal business intelligence products include the following:
. Seagate Crystal Reports--A client/server report writing application.
. Seagate Crystal Info--A three tier client/server workgroup decision
support application designed for automated information sharing.
. Seagate Holos--A comprehensive development environment engineered for
building large-scale custom business intelligence applications, such as
OLAP.
INFRASTRUCTURE MANAGEMENT PRODUCTS
The Company's NSMG business unit offers IT systems infrastructure management
products that enable organizations to manage and optimize resources across
different platforms, automate systems management tasks and processes and
simplify the management of disparate systems. The Company's principal
infrastructure management products include the following:
. Seagate Backup Exec--A comprehensive backup and restore program for
servers and desktops.
. Seagate Desktop Management Suite--An integrated product suite featuring
network inventory, software distribution, backup and remote control.
. Seagate NerveCenter--A rules-based event management application that
correlates network and system events and initiates corrective actions.
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The Company provides its software products to customers under non-exclusive,
non-transferable license agreements (including shrink-wrap licenses for certain
products). As is customary in the software industry, in order to protect its
intellectual property rights, the Company does not sell or transfer title to
its software products to customers. The Company enters into both object-code
only and source-code licenses of its products. Under the Company's current
standard end user license agreement, licensed software may be used solely for
the customers' internal operations and only at specified sites, which may be
comprised of a stand-alone computer, a single network server with multiple
terminals or multiple network servers with multiple terminals.
RESEARCH AND DEVELOPMENT
The Company incurred research and development expenses of approximately
$42,842,000, $36,897,000 and $21,152,000 in 1997, 1996 and 1995, respectively.
Certain of the research and development expenses, which have not been material
to date, are funded by the Company's customers. The Company is pursuing its
product development objectives by continuing its emphasis on internally
developing new software products and product enhancements, acquiring products,
technologies and businesses complementary to the Company's existing product
lines and forming alliances with leading technology companies. The Company has
formed separate in-house development teams to integrate acquired products and
technologies into existing product lines.
SALES AND MARKETING
The Company employs a multi-faceted sales strategy. The Company utilizes
direct sales forces, and certain indirect sales channels, such as distributors
and original equipment manufacturer ("OEM") relationships for sales of its
selected products to end users. These distributors and OEMs may also sell other
products that are complementary to or compete with those of the Company. The
Company provides sales and marketing programs to encourage the sale of its
products, but there can be no assurance that its distributors and OEMs will not
place a higher priority on competing products. Agreements with its distributors
and OEMs are generally non exclusive and may be terminated by either party
without cause. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Factors Affecting Future Operating Results."
The Company generally markets its products domestically and overseas through
a network of wholly-owned subsidiaries. These subsidiaries utilize authorized
distributors and direct sales forces. The Company adapts certain products for
foreign markets, including translation and documentation, and the Company
prepares marketing and sales support programs accordingly.
The Company's marketing efforts are designed to increase awareness and
consideration of, and generate leads for, the Company's products. Marketing
activities include print advertising in trade and technical publications, on-
line advertising on the World Wide Web, cooperative marketing with distributors
and resellers, participation in seminars and tradeshows, mailings to end users
and other public relations efforts. The Company's marketing groups produce or
oversee the production of substantially all of the on-line and print product
literature, brochures, advertising and similar marketing and promotional
material for the Company.
Revenue from one third party customer accounted for 18% and 16% of the
Company's total revenues in 1997 and 1996, respectively. In 1995, revenue from
Seagate Technology was 11% of total revenues. Revenues from the Company's
distributors and OEMs were 63%, 70% and 75% of total revenues during 1997, 1996
and 1995, respectively. Revenues outside of North America were 30%, 11% and 8%
of total revenues during 1997, 1996 and 1995, respectively.
TECHNICAL SUPPORT AND MAINTENANCE
The Company's technical support groups, located at various sites in the U.S.,
Canada and Europe, provide pre-sale, installation and post-sale support to
current users and potential customers evaluating the Company's products.
Certain technical support groups also offer seven-day, 24-hour toll-free
telephone services. The Company believes that effective technical support
during product evaluation substantially contributes to product acceptance, and
that post-sale support has been, and will continue to be, a substantial factor
in maintaining customer satisfaction.
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The Company offers maintenance programs for certain of its software products,
which may consist of product enhancements, updated products and technical
support. Generally, customers renew maintenance and support on an annual basis
by paying a maintenance fee. Maintenance revenue implicit in new product sales
and recurring maintenance charges are recognized ratably over the period the
maintenance and support services are to be provided.
COMPETITION
The business intelligence and infrastructure management software markets in
which the Company competes are comprised of numerous competitors, and the
Company expects competition to increase. The Company has recently experienced
increased competition from additional entrants into its markets, including
companies that specialize in the development, marketing and support of
information management and network and storage management software products.
Many of the Company's current and prospective competitors have significantly
greater financial, technical and marketing resources than the Company. In
addition, many prospective customers may have the internal capability to
implement solutions to their problems.
The competitive factors affecting the market for the Company's software
products include the following: product functionality, performance and
reliability; demonstrable economic benefits for users relative to cost; price;
quality of customer support and user documentation and ease of installation;
vendor reputation, experience and financial stability. The Company believes
that it currently competes effectively with respect to these factors. The
Company's ability to remain competitive will depend, to a great extent, upon
its ongoing performance in the areas of product development and customer
support. To be successful in the future, the Company must respond promptly and
effectively to the challenges of technological change and its competitors'
innovations by continually enhancing its own product offerings. Performance in
these areas will, in turn, depend upon the Company's ability to attract and
retain highly qualified technical personnel in a competitive market for
experienced and talented software developers. The Company also expects to
continue its strategy of identifying and acquiring business intelligence and
infrastructure management assets and technologies and businesses that have
developed such products and technologies.
PATENTS AND INTELLECTUAL PROPERTY RIGHTS
The Company has been awarded three United States patents and has two United
States and four foreign patent applications pending. Because software
technology changes rapidly, the Company believes that the improvement of
existing products, reliance upon trade secrets and unpatented proprietary know-
how and development of new products are generally more important than patent
protection. The Company nevertheless believes that patents are of value to its
business and intends to continue its efforts to obtain patents, when available,
in connection with its research and development programs. There can be no
assurance that any patents obtained will provide substantial protection or be
of commercial benefit to the Company, or that their validity will not be
challenged.
The Company's license agreements have restrictions in place to protect and
defend the Company's intellectual property. The Company realizes that although
it has incorporated these restrictions, there is a possibility for unauthorized
use of its software. In addition to relying on these contractual rights, the
Company is implementing a copyright registration program to establish and
protect the Company's proprietary rights in its products, and has an ongoing
trademark registration program in which it registers certain of its product
names, slogans, and logos in the United States and some foreign countries.
EMPLOYEES
As of June 27, 1997, the Company employed approximately 1,400 persons. The
Company's success is highly dependent on its ability to attract and retain
qualified employees. Competition for qualified employees is intense in the
software industry. None of the Company's employees are represented by a labor
union or is the subject of a collective bargaining agreement. The Company has
never experienced a work stoppage and believes that its employee relations are
good.
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ITEM 2. FINANCIAL INFORMATION
SELECTED FINANCIAL DATA
The consolidated financial data with respect to the fiscal years ended June
27, 1997, June 28, 1996 and June 30, 1995 are derived from the audited
Consolidated Financial Statements of the Company which are included elsewhere
in this Registration Statement. The consolidated financial data set forth
below with respect to the fiscal years ended July 1, 1994 and July 2, 1993 are
derived from the Consolidated Financial Statements of the Company which are
not included in this Registration Statement. The following data should be read
in conjunction with the Consolidated Financial Statements and notes thereto
included elsewhere in this Registration Statement and in the section entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere herein.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
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(IN THOUSANDS, EXCEPT SHARE JUNE 27, JUNE 28, JUNE 30, JULY 1, JULY 2,
AND PER SHARE DATA) 1997 1996 1995 1994 1993
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<S> <C> <C> <C> <C> <C>
Net revenues............... $216,950 $ 141,586 $ 92,796 $ 30,696 $ 12,774
Gross profit............... 169,161 112,567 70,417 23,556 10,776
Loss from operations....... (64,033) (137,806) (80,166) (11,068) (5,157)
Net loss................... (57,700) (129,668) (82,864) (6,884) (3,102)
Net loss per common share.. (852.11)
Total assets............... 143,594 201,598 101,928 20,854 3,746
Stockholders' equity....... $ 61,618 $ 115,602 $ 47,215 $ 6,978 $ 984
Weighted average common
shares outstanding........ 67,714
</TABLE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CERTAIN FORWARD-LOOKING INFORMATION
Certain statements in this Management's Discussion and Analysis of Financial
Condition and Results of Operations ("MD&A") and contained elsewhere in this
Registration Statement are forward-looking statements based on current
expectations, and entail various risks and uncertainties that could cause
actual results to differ from those projected in such forward-looking
statements. Certain of these risks and uncertainties are set forth below in the
sections entitled "Fiscal Year Comparisons," "Liquidity and Capital Resources"
and "Factors Affecting Future Operating Results."
OVERVIEW
The Company is a majority-owned and consolidated subsidiary of Seagate
Technology, a data technology company that provides products for storing,
managing and accessing digital information on computer systems. The Company's
revenues have been derived from the sale of software product licenses and
related maintenance and support and training and consulting through two
business units. The IMG business unit products support the access, analysis,
reporting and delivery of enterprise data, and the NSMG business unit products
support the management of IT systems infrastructures.
The Company was incorporated in Delaware in November 1993 and commenced
operations in May 1994 pursuant to Seagate Technology's acquisition of Crystal
Computer Services, Inc. From May 1994 to June 1996, Seagate Technology acquired
the ten software companies listed in the following table:
SOFTWARE COMPANIES ACQUIRED BY THE PARENT COMPANY
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DATE ACQUIRED NAME OF COMPANY ACQUIRED NATURE OF ACQUIRED COMPANY'S BUSINESS
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<S> <C> <C>
May 1994................ Crystal Computer Services, Inc. Management reporting software
August 1994............. Palindrome Corporation Data protection and management software for
Novell NetWare platform networks and
enterprise LANs
February 1995........... Network Computing, Inc. Network management software for Novell
NetWare platform networks
March 1995.............. NetLabs, Inc. Network management software for UNIX
platform networks
May 1995................ Frye Computer Systems, Inc. Network management software for PC-LANs
June 1995............... Creative Interaction Technologies, Inc. Batch scheduling software for heterogeneous
client/server computing
February 1996........... Arcada Holdings, Inc. (in connection Data protection and storage management software
with the merger with Conner
Peripherals, Inc.)
March 1996.............. OnDemand Software, Inc. Network installation software
May 1996................ Calypso Software Systems, Inc. Software for systems and applications
management in complex distributed
client/server networks
June 1996............... Holistic Systems, Ltd. OLAP-compliant, integrated business
intelligence software
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Beginning in April 1996, Seagate Technology contributed ownership of its
software product assets acquired pursuant to the acquisitions listed above, and
its related subsidiaries, to Seagate Software. In connection with the
contribution, the newly recapitalized Seagate Software issued preferred stock
and common stock to Seagate Technology and its subsidiaries.
As of June 27, 1997, Seagate Technology and its subsidiaries held 99.9% of
the Company's outstanding capital stock. On a fully diluted basis, the
outstanding minority interests of Seagate Software amount to approximately 9%
of the Company and consist of the Company's Common Stock and options to
purchase its Common Stock, held by certain employees and directors of the
Company and Seagate Technology, issued pursuant to the Company's 1996 Incentive
Stock Option Plan.
The Company's historical results of operations reflect the operations of the
above described software companies on a consolidated basis. Acquisitions
accounted for as purchases are included in the Company's results of operations
for the periods subsequent to the date of acquisition. The acquisitions of
Crystal Computer Services, Inc. and Arcada Holdings, Inc. were accounted for as
poolings-of-interests and their results of operations are included for all
periods presented. Additionally, the results of operations include the
recognition, as of the date of each acquisition, of Seagate Technology's basis
in acquired assets, and the allocation to Seagate Software of certain expenses
incurred by Seagate Technology for officer and employee salaries, rent and
depreciation, legal, accounting, sales and marketing and general and
administrative expenses.
Historically, the Company's revenues have been generated primarily from
distributors, direct sales to end users, large corporations and OEMs including
Seagate Technology. The Company's revenue related to Parent Company
transactions primarily consists of shipments to Seagate Technology's OEM tape
drive divisions located in Costa Mesa, California and Scotland. The Company has
also developed strategic relationships with a number of computer hardware
manufacturers and packaged application software developers.
The Company recognizes license revenues in accordance with American Institute
of Certified Public Accountants Statement of Position 91-1, "Software Revenue
Recognition." Revenues from software license agreements are recognized at the
time of product delivery, provided there are no significant vendor obligations
remaining to be fulfilled and collectibility is probable. Typically, the
Company's software licenses do not include significant ongoing vendor
obligations. Therefore, the Company generally recognizes all revenues from
software licenses in the period in which the product is delivered.
Service revenues from customer maintenance fees for ongoing customer support
and product updates are recognized ratably over the maintenance term, which is
typically 12 months. Payments for maintenance fees are generally received in
advance and recognized ratably. Service revenues from training and consulting
are recognized when such services are performed.
The Company operates and reports financial results on a fiscal year of 52 or
53 weeks ending on the Friday closest to June 30. Accordingly, fiscal 1997
ended on June 27, 1997, fiscal 1996 ended on June 28, 1996 and fiscal 1995
ended on June 30, 1995. All fiscal years comprised 52 weeks. Fiscal 1998 will
be a 53-week year and will end on July 3, 1998. All references to years
represent fiscal years unless otherwise noted.
Arcada Holdings, Inc., which was acquired by the Company pursuant to Seagate
Technology's merger with Conner Peripherals, Inc., had a fiscal year which
ended on the Saturday closest to December 31. Accordingly, Arcada's statement
of operations for the year ended December 30, 1995 has been combined with the
Company's statement of operations for the year ended June 30, 1995. In order to
conform Arcada's fiscal year end to the Company's fiscal year end, the
Company's consolidated statement of operations for the year ended June 28, 1996
includes six months (July 1, 1995 through December 31, 1995) for Arcada which
are also included in the Company's consolidated statement of operations for the
year ended June 30, 1995.
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FISCAL YEAR COMPARISONS
REVENUES. Total revenues increased 53% from $141,586,000 in 1996 to
$216,950,000 in 1997. This increase was due in part to growth in sales of
product licenses within the Company's NSMG and IMG business units.
Additionally, the 1997 results included a full year of operations for the 1996
acquisitions of OnDemand Software, Inc. and Holistic Systems, Ltd. These 1996
acquisitions accounted for approximately $41,639,000 of additional revenues in
1997 as compared with 1996.
Total revenues increased 53% from $92,796,000 in 1995 to $141,586,000 in
1996. This increase was due in part to growth in sales of product licenses
within the Company's NSMG and IMG business units. Additionally, the 1996
results included a full year of operations for the 1995 acquisitions of
Palindrome Corporation, Network Computing, Inc., Netlabs, Inc., Frye Computer
Systems, Inc. and Creative Interaction Technologies. These 1995 acquisitions
accounted for approximately $17,590,000 of additional revenues in 1996 as
compared with 1995. In 1996, the Company acquired OnDemand Software, Inc.,
Calypso Software, Inc. and Holistic Systems, Ltd. Revenues for the 1996
acquisitions are included from the dates of acquisition and accounted for
approximately $4,969,000 of revenues in 1996 as compared with none in 1995.
COST OF REVENUES. The cost of revenues consists of the amortization of
acquired developed technology, royalties, product packaging, documentation,
duplication, production and the cost of maintenance, consulting support and
other services. Acquired developed technology is amortized based on the
greater of the straight-line method over its estimated useful life (30 to 60
months) or the ratio of current revenues to the total of current and
anticipated future revenues. The cost of revenues increased from $29,019,000
in 1996 to $47,789,000 in 1997, representing 20% and 22% of total revenues,
respectively. The majority of the increase in absolute dollars was due to an
increase in the amortization of acquired developed technology due to a higher
level of intangible assets and an increase in IMG's costs related to service
revenues and related costs resulting from the inclusion of a full year of
operations in 1997 of the 1996 acquisition of Holistic Systems, Ltd.
Additionally, in 1997 the Company wrote-off and wrote-down certain developed
technologies amounting to approximately $6,918,000 as a result of asset values
that had become impaired based on the Company's phasing out of certain
products.
The cost of revenues increased from $22,379,000 in 1995 to $29,019,000 in
1996 representing 24% and 20% of total revenues, respectively. The majority of
the increase in absolute dollars was due to an increase in the amortization of
acquired developed technology due to a higher level of intangible assets.
SALES AND MARKETING. Sales and marketing expenses consist primarily of
personnel related expenses, advertising, sales and marketing promotions and
customer technical support costs. Sales and marketing costs increased from
$71,129,000 in 1996 to $107,706,000 in 1997, representing 50% of total
revenues in both periods. The increase in absolute dollars was due to
increased personnel, advertising and promotion costs necessary to support
revenue growth and the expansion of the Company's European distribution
channel. Additionally, the 1997 results included a full year of operations for
the Company's 1996 acquisitions compared with a partial year of operations in
1996.
Sales and marketing expenses increased from $38,495,000 in 1995 to
$71,129,000 in 1996, representing 41% and 50% of total revenues, respectively.
The majority of the increase in absolute dollars was due to increased
personnel, advertising and promotion costs necessary to support revenue growth
and expansion of the Company's distribution channels. Additionally, the 1996
results included a full year of operations for the Company's 1995 acquisitions
and a partial year of operations for the 1996 acquisitions.
RESEARCH AND DEVELOPMENT. Research and development expenses consist
primarily of personnel related expenses, depreciation of development equipment
and facilities and occupancy costs. In accordance with Statement of Financial
Accounting Standards No. 86, "Accounting for the Costs of Computer Software to
be Sold, Leased or Otherwise Marketed," software development costs are
expensed as incurred until technological feasibility has been established, at
which time such costs are capitalized until the product is available for
general release to customers. To date, the establishment of technological
feasibility of the Company's products and
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general release of such software has substantially coincided. As a result,
software development costs qualifying for capitalization have been
insignificant.
Research and development expenses increased from $36,897,000 in 1996 to
$42,842,000 in 1997, representing 26% and 20% of total revenues, respectively.
The increase in absolute dollars was primarily due to increases in personnel
and related expenses, new product development and localization costs,
partially offset by facility consolidations and reductions in workforce within
the NSMG business unit. Additionally, the 1997 results included a full year of
operations for the Company's 1996 acquisitions compared with a partial year of
operations in 1996.
Research and development expenses increased from $21,152,000 in 1995 to
$36,897,000 in 1996, representing 23% and 26% of total revenues, respectively.
The increase in absolute dollars was primarily due to increases in personnel
and related expenses and a greater number of development programs resulting
from the acquisition of software companies. Additionally, the 1996 results
included a full year of operations for the Company's 1995 acquisitions and a
partial year of operations for the 1996 acquisitions.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of personnel related expenses for finance, legal, information
technology, human resources and general management, fixed asset provisions and
outside services. Total general and administrative expenses increased from
$22,852,000 in 1996 to $36,861,000 in 1997, representing 16% and 17% of total
revenues, respectively. The increase in absolute dollars was primarily due to
increases in personnel and related expenses and increases in corporate
administrative expenses and information systems necessary to support the
Company's growth. Additionally, the 1997 results included a full year of
operations for the Company's 1996 acquisitions compared with a partial year of
operations in 1996.
General and administrative expenses increased from $13,086,000 in 1995 to
$22,852,000 in 1996, representing 14% and 16% of total revenues, respectively.
The increase in absolute dollars was primarily due to increases in personnel
and related expenses, the establishment of corporate administrative facilities
and cost sharing allocations from the Parent Company. Additionally, the 1996
results included a full year of operations for the Company's 1995 acquisitions
and a partial year of operations for the 1996 acquisitions.
WRITE-OFF OF IN-PROCESS RESEARCH AND DEVELOPMENT. As a result of its
acquisitions, the Company has acquired a number of projects and products that
were considered in-process research and development on the date of
acquisition. The Company determined that purchased in-process technology had
not reached technological feasibility as no working model or detail program
design existed at the time of purchase, and no alternative uses had been
identified. Accordingly, in-process research and development was expensed when
acquired.
During 1997, total write-offs of in-process research and development were
$2,613,000. The Company incurred this charge in connection with additional
amounts paid with respect to the June 1996 acquisition of Holistic Systems,
Ltd.
During 1996, total write-offs of in-process research and development were
$96,958,000, which consisted of $43,949,000 from the acquisition of the
minority interest of Arcada Holdings, Inc., $35,892,000 from the acquisition
of Holistic Systems, Ltd., $8,900,000 from the acquisition of OnDemand
Software, Inc., $5,400,000 from the acquisition of Calypso Software Systems,
Inc. and $2,817,000 from the acquisition of Sytron Corporation, a data storage
management software company that was acquired in July 1995 by Arcada Software,
Inc., a majority-owned subsidiary of Arcada Holdings, Inc. Arcada Holdings,
Inc. was acquired by the Company in connection with Seagate Technology's
merger with Conner Peripherals, Inc. in February 1996.
During 1995, total write-offs of in-process research and development were
$73,177,000, which consisted of $42,980,000 from the acquisition of Palindrome
Corporation, $8,900,000 from the acquisition of Frye Computer Systems, Inc.,
$7,500,000 from the acquisition of Netlabs, Inc., $5,700,000 from the
acquisition of Creative
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Interaction Technologies, $5,280,000 from the acquisition of Network
Computing, Inc. and $2,817,000 from the acquisition of Sytron Corporation.
AMORTIZATION OF GOODWILL AND OTHER INTANGIBLES. Goodwill represents the
excess of the purchase price of acquired companies over the estimated fair
values of the tangible and intangible net assets acquired. Goodwill is
amortized on a straight-line basis over six to seven years. Other intangible
assets consist of acquired trademarks, assembled workforces, distribution
networks, developed technology, customer bases, and covenants not to compete.
Amortization of other intangibles, other than acquired developed technology,
is provided based on the straight-line method over the respective useful lives
of the assets ranging from one to five years.
Amortization of goodwill and other intangibles increased from $13,035,000 in
1996 to $27,202,000 in 1997, representing 9% and 13% of total revenues,
respectively. The increase in absolute dollars was primarily due to increased
amortization expense on a higher level of intangible assets and write-downs
and write-offs of the carrying value of goodwill and other intangible assets
of approximately $10,259,000 based on shortfalls of estimated future cash
flows.
Amortization of goodwill and other intangibles increased from $4,673,000 in
1995 to $13,035,000 in 1996, representing 5% and 9% of total revenues,
respectively. The increase in absolute dollars was primarily due to increased
amortization expense on a higher level of intangible assets and write-downs
and write-offs of the carrying value of goodwill and other intangible assets
of approximately $2,157,000 based on the Company's decision to discontinue the
use of a trademark and not to enforce a covenant not to compete.
RESTRUCTURING. Restructuring charges were $9,502,000 in 1996 and $2,524,000
in 1997, representing 7% and 1% of total revenues, respectively. The
restructuring charges were incurred in both years as a result of
reorganizations and closures within the NSMG business unit for the reduction
of personnel, write-off or write- down of equipment, intangibles and other
assets, closure of duplicate facilities, fees for legal and accounting
services, contract cancellations and other related expenses.
UNUSUAL ITEMS. Unusual items were $13,446,000 in 1997, representing 6% of
total revenues. The Company incurred this charge for compensation expense in
connection with additional amounts paid with respect to the June 1996
acquisition of Holistic Systems, Ltd.
INTEREST AND OTHER, NET. Total interest and other expense represented a net
expense of $433,000 in 1995, $610,000 in 1996 and $2,381,000 in 1997,
representing 0.5%, 0.4% and 1.1% of total revenues, respectively. The
increases in 1997 and 1996 were primarily due to interest expense on
borrowings from Seagate Technology.
INCOME TAXES. The Company recorded a $8,714,000 benefit from income taxes at
an effective rate of 13% in 1997 compared with a $8,748,000 benefit from
income taxes at an effective rate of 6% for 1996. The effective rate used to
record the benefit from income taxes in each fiscal year was less than the
statutory rate primarily from increases in the valuation allowance for
deferred tax assets and charges in 1996 for in-process research and
development for certain acquisitions that were not deductible for tax
purposes.
The Company recorded a $8,748,000 benefit from income taxes at an effective
rate of 6% in 1996 compared with a $2,265,000 provision for income taxes in
1995 recorded at an effective rate of 3%. The effective rate used to record
the benefit from income taxes in 1996 and provision for income taxes in 1995
was less than the statutory rate primarily from increases in the valuation
allowance for deferred tax assets and charges for in-process research and
development for certain acquisitions that were not deductible for tax
purposes.
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LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has financed its business acquisitions through
cash purchases and issuances of equity securities funded by the Parent Company.
Operations have been financed by cash flows from operating activities and
borrowings from the Parent Company. Borrowings from the Parent Company were
$28,971,000 and $32,991,000 at June 27, 1997 and June 28, 1996, respectively.
The Company pays interest of 6% per annum on such borrowings.
Total cash was $12,085,000 and $7,595,000 at June 27, 1997 and June 28, 1996,
respectively. This increase in cash was primarily due to an increase in cash
provided by operating activities, but was offset in part by the Company's
additions to property, equipment and leasehold improvements. The Company's cash
is maintained in highly liquid operating accounts and primarily consists of
bank deposits. At June 27, 1997 and June 28, 1996, the Company had working
capital deficits of approximately $27,939,000 and $27,193,000, respectively.
During the year ended June 27, 1997, the Company made investments in property
and equipment totaling approximately $17,500,000 for new office facilities,
leasehold improvements, computers, furniture and office equipment. The Company
presently anticipates it will make investments in 1998 of approximately
$10,692,000 in property and equipment and will fund such investments from
existing cash balances and cash flows from operations.
Obligations under capital leases were $113,000 and $535,000 for 1997 and
1996, respectively. As of June 27, 1997, the Company did not have any material
commitments for capital expenditures.
The Company believes its current cash balances, its borrowings from the
Parent Company and cash flows generated from the Company's operations will be
sufficient to meet its anticipated cash needs for working capital and capital
expenditures for at least the next 12 months. Although operating activities may
provide cash in certain periods, to the extent that the Company experiences
growth in the future, the Company anticipates that operating and investing
activities may use cash. Consequently, any such growth will require the Company
to obtain additional debt financing from Seagate Technology or alternative
sources. The Company believes that additional financing will be available from
Seagate Technology at a reasonable cost.
FACTORS AFFECTING FUTURE OPERATING RESULTS
POTENTIAL FLUCTUATIONS IN ANNUAL AND/OR QUARTERLY OPERATING RESULTS. The
Company's future results of operations may be subject to substantial future
fluctuations. Because the Company has a relatively limited operating history
and has recently increased its operations through acquisitions, the Company
does not have a significant number of periods of relevant historical financial
data upon which to base planned operating expenses. The Company's expense
levels are therefore based in part on its expectations as to future revenues,
which are difficult to accurately forecast due to its limited operating
history. In addition, the Company operates with no backlog because its software
products are generally shipped shortly after orders are received. Annual and/or
quarterly sales and operating results therefore depend on the volume and timing
of and the ability to fill orders received within a given quarter, and such
factors are difficult to forecast. The Company recognizes a substantial portion
of its revenue in the last month of each quarter and, therefore, may be unable
to adjust spending in a timely manner to compensate for any unexpected revenue
shortfall. If revenue levels in a given year or quarter are below expectations,
the Company's operating results may be materially adversely affected.
The Company expects to experience significant fluctuations in annual and/or
quarterly operating results based upon a number of factors including, but not
limited to, (i) market acceptance of new products and product enhancements,
(ii) the Company's ability to develop, introduce and market new products and
product enhancements in a timely fashion, (iii) the timing of large orders,
(iv) increased competition, (v) changes in pricing policies by the Company
and/or its competitors, (vi) the Company's ability to control costs, (vii) the
amount of one time charges incurred in future acquisitions, (viii) the
Company's ability to integrate future acquisitions into its operations, (ix)
technological changes in the Company's markets, (x) personnel changes and (xi)
general economic factors. Because of these considerations, the Company believes
that a period to period
10
<PAGE>
comparison of its operations is not necessarily meaningful and should not be
relied upon as any indication of future performance.
REVENUE CONCENTRATION. The Company derives a substantial majority of its
revenues from a limited number of software products and anticipates that
revenue from these products will continue to account for a majority of the
Company's revenue in the foreseeable future. Broad market acceptance of such
products is therefore critical to the Company's future success. New versions
of these products have been introduced recently into the market, and failure
to achieve broad market acceptance of these products as a result of
competition, technological change or other factors would have a material
adverse effect on the business, operating results and financial condition of
the Company. The life cycle of these products is difficult to estimate, and
the Company's future financial performance may depend in part on the
successful development, introduction and market acceptance of new products,
applications and product enhancements. There can be no assurance that the
Company will continue to be successful in marketing its key products or any
new products, applications or product enhancements.
NEW PRODUCT DEVELOPMENT AND TECHNOLOGICAL CHANGE. The markets for the
Company's products are characterized by rapidly changing technology, evolving
industry standards and frequent new product introductions. The Company's
future success will therefore depend on its ability to design, develop, test
and support new software products and enhancements on a timely and cost
effective basis. There can be no assurance that the Company will be successful
in developing and marketing new products that respond to technological changes
or that the Company's new products will achieve market acceptance. If the
Company is unable for technological or other reasons to develop and introduce
new products in a timely manner in response to changing market conditions or
customer requirements, the Company's business, operating results and financial
condition may be materially adversely affected. If potential new products are
delayed or fail to achieve market acceptance, the Company's business,
operating results and financial condition will be materially adversely
affected.
RELIANCE ON SALES STAFF AND CHANNEL PARTNERS. The Company sells and supports
its products through its sales staff and third party distributors and OEMs.
The Company has made significant expenditures in recent years into the
expansion of its sales and marketing force and plans to continue to expand its
sales and marketing force. The Company's future success will depend in part
upon the productivity of its sales and marketing force and the ability of the
Company to continue to attract, integrate, train, motivate and retain new
sales and marketing personnel. Competition for sales and marketing personnel
in the software industry is intense. There can be no assurance that the
Company will be successful in hiring and retaining such personnel in
accordance with its plans. There can be no assurance that the Company's recent
and other planned expenses in sales and marketing will ultimately prove to be
successful or that the incremental revenue generated will exceed the
significant incremental costs associated with these efforts. In addition,
there can be no assurance that the Company's sales and marketing organization
will be able to compete successfully against the significantly more extensive
and better funded sales and marketing operations of many of the Company's
current and potential competitors. If the Company is unable to develop and
manage its sales and marketing force expansion effectively, the Company's
business, operating results and financial condition would be materially
adversely affected.
The Company derives a substantial portion of its revenue from the marketing
and distribution of its products by its distributors and OEMs. The Company's
agreements with distributors and OEMs typically allow such resellers to carry
product lines that are competitive with those of the Company and in many cases
may be terminated by either party without cause. There can be no assurance
that such distributors and OEMs will place high priority on the marketing of
the Company's products or that they will continue to carry the Company's
products. Loss of the Company's current distributors and OEMs or the inability
to attract new distributors and OEMs could materially adversely affect the
Company's business, operating results and financial condition.
COMPETITION. The markets for the Company's products are highly competitive
and characterized by rapidly changing technology and evolving standards.
Increased competition can be expected to cause price reductions, reduced gross
margins and loss of market share, any of which could have a material adverse
effect on the Company's business, operating results and financial condition.
Current and potential competitors may be able to
11
<PAGE>
respond more quickly to new or emerging technologies and changes in customer
requirements, or to devote greater resources for the development, promotion,
sale and support of their products than the Company. It is possible that new
competitors or alliances among competitors may emerge and rapidly acquire
significant market share. In addition, network operating system vendors could
introduce new or upgrade existing operating systems or environments that could
render the Company's products obsolete and unmarketable. There can be no
assurance that the Company will successfully compete against current or future
competitors, or that competitive pressures faced by the Company will not
materially adversely affect its business, operating results and financial
condition.
DEPENDENCE ON KEY PERSONNEL. The Company's future performance depends to a
significant degree upon the continued service of its key members of management
as well as marketing, sales and product development personnel. The loss of one
or more of the Company's key personnel would have a material adverse effect on
the Company's business, operating results and financial condition. The Company
believes its future success will also depend in large part upon its ability to
attract and retain highly skilled management, marketing, sales and product
development personnel. Competition for such personnel is intense, and there
can be no assurance that the Company will be able to retain its key employees
or that it will be successful in attracting, assimilating and retaining them
in the future.
MANAGEMENT OF INTEGRATION AND GROWTH. The Company has recently expended
substantial management resources in integrating its operations after a period
characterized by a substantial number of acquisitions. In addition, the
Company is in the process of expanding the geographic scope of its customer
base and operations. This integration and expansion have resulted and will
continue to result in substantial demands on the Company's management
resources. The Company's future operating results will depend on the ability
of its officers and other key employees to continue to implement and improve
its operations and customer support and financial control systems and to
effectively expand, train and manage its employee base.
RISK OF ACQUISITIONS. The Company has acquired numerous businesses and
intends to enter into future business combinations and acquisitions of
complementary companies, products and technologies, although there can be no
assurance that suitable companies, divisions or products will be available for
acquisition. Such acquisitions are inherently subject to certain risks,
including the difficulty of assimilating the operations and personnel of the
combined companies, the potential disruption of the Company's ongoing
business, the potential inability to retain key technical and managerial
personnel, additional expenses associated with the amortization of acquired
intangible assets, and the potential impairment of relationships with
employees and customers as a result of any integration of new personnel. There
can be no assurance that the Company will be successful in overcoming these
risks or that such transactions will not have a material adverse effect upon
the Company's business, financial condition or results of operations.
RISKS OF INFRINGEMENT. The Company's success depends on its proprietary
technology. The Company relies on a combination of patent, copyright,
trademark and trade secret rights, confidentiality procedures, employee and
third party nondisclosure agreements and licensing arrangements to protect its
proprietary rights. As part of its confidentiality procedures, the Company
enters into license agreements with respect to its software, documentation and
other proprietary information. In licensing its products, the Company relies
in part on shrink wrap licenses that are not signed by the end user and,
therefore, may be unenforceable under the laws of certain jurisdictions.
Despite the precautions undertaken by the Company, it may be possible for a
third party to copy or otherwise obtain and use the Company's products and
technology without authorization. Policing unauthorized use of the Company's
products is difficult and, although the Company is unable to determine the
extent to which piracy of its software products exists, software piracy can be
expected to be a persistent problem.
PROTECTION OF INTELLECTUAL PROPERTY. No assurance can be given that
competitors will not successfully challenge the validity or scope of the
Company's patents and that such patents will provide a competitive advantage
to the Company. As part of its confidentiality procedures, the Company
generally enters into non disclosure agreements with its employees,
distributors and corporate partners, and license agreements with respect to
its software documentation and other proprietary information. Despite these
precautions, it may be
12
<PAGE>
possible for a third party to copy or otherwise obtain and use the Company's
products or technology without authorization or to develop similar technology
independently. Effective protection of intellectual property rights is
unavailable or limited in certain foreign countries. There can be no assurance
that the Company's protection of its proprietary rights will be adequate or
that the Company's competitors will not independently develop similar
technology, duplicate the Company's products or design around any patents
issued to the Company or other intellectual property rights of the Company.
The Company is not aware that any of its products infringe the proprietary
rights of third parties. There can be no assurance, however, that third parties
will not claim such infringement by the Company with respect to current or
future products. The Company believes that software product developers will be
subject increasingly to claims of infringement as the number of products and
competitors in the Company's industry segment grows and the functionality of
products in the industry segment overlaps. Any such claims, with or without
merit, could result in costly litigation that could absorb significant
management time, which could have a material adverse effect on the Company's
business, operating results and financial condition. Such claims might require
the Company to enter into royalty or license agreements. Such royalty or
license agreements, if required, may not be available on terms acceptable to
the Company or at all, and the Company's inability to enter such agreements
could have a material adverse effect on the Company's business, operating
results and financial condition.
PRODUCT LIABILITY. The Company markets its products to customers for IT
system management and resource optimization and to access, analyze, report and
deliver enterprise data. The Company's license agreements with its customers
typically contain provisions designed to limit the Company's exposure to
potential product liability claims. It is possible, however, that the
limitation of liability provisions contained in the Company's license
agreements may not be effective as a result of existing or future federal,
state or local laws or ordinances or unfavorable judicial decisions. The sale
and support of its products by the Company may entail the risk of such claims,
which could be substantial in light of the use of such products in system
management, resource optimization and business intelligence applications. A
successful product liability claim brought against the Company could have a
material adverse effect upon the Company's business, operating results and
financial condition.
POTENTIAL LITIGATION/LIABILITY RELATED TO YEAR 2000 COMPLIANCE. The Company's
products are used in numerous operating environments. It is likely that,
commencing in the Year 2000, the functionality of certain operating
environments will be adversely affected when one or more component products of
the environment is unable to process four-digit characters representing years.
Although the Company is taking measures to bring its products into Year 2000
compliance in a timely way, there can be no assurance that such efforts will be
fully successful or that the Company's fully compliant products, if any, will
be able to function when integrated with other noncompliant component products.
Even if the Company successfully brings its products into Year 2000
compliance, the Company anticipates that substantial litigation may be brought
against vendors of all component products of noncompliant operating
environments, including the Company. The Company's agreements with its
customers typically contain provisions designed to limit the Company's
liability for such claims. It is possible, however, that these measures will
not provide protection from liability claims, as a result of existing or future
federal, state or local laws or ordinances or unfavorable judicial decisions.
The Company believes that any such claims, with or without merit, could result
in costly litigation (and possible adverse judgment) that could absorb
significant management and product development time and potentially result in
significant liability to the Company, which could have a material adverse
effect on the Company's business, operating results and financial condition.
SOFTWARE PRODUCT ERRORS OR DEFECTS. Software products as complex as those
offered by the Company frequently contain errors or defects, especially when
first introduced or when new versions or enhancements are released. Despite
product testing, the Company's recently introduced products or any products may
contain defects or software errors and, as a result, the Company may experience
delayed or lost revenues during the period required to correct any defects or
errors. Any such defects or errors could result in adverse customer reactions,
negative publicity regarding the Company and its products, harm to the
Company's reputation or loss
13
<PAGE>
of or delay in market acceptance, or could require extensive product changes,
any of which could have a material adverse effect upon the Company's business,
operating results or financial conditions.
RISK OF INTERNATIONAL SALES. The Company's international business involves a
number of risks, including lack of acceptance of localized products, cultural
differences in the conduct of business, longer accounts receivable payment
cycles, greater difficulty in accounts receivable collection, seasonality due
to the slow down in European business activity during the summer months,
unexpected changes in regulatory requirements, royalties and withholding taxes
that restrict repatriation of earnings, tariffs and other trade barriers,
difficulty in hiring qualified personnel, economic and political conditions in
each country, management of an enterprise spread over various countries and
the burden of complying with a wide variety of foreign laws. A majority of the
Company's international sales are currently denominated in U.S. dollars, and
an increase in the value of the U.S. dollar relative to foreign currencies
could make the Company's products more expensive and potentially less
competitive in foreign markets. There can be no assurance that such factors
will not have a material adverse effect on the Company's future international
sales and therefore the overall operating results and financial condition of
the Company.
ITEM 3. PROPERTIES
Seagate Software's executive offices are located in Scotts Valley,
California. Principal facilities are located in Florida, California, Canada
and the United Kingdom. A major portion of the Company's facilities are
occupied under leases which expire at various times through 2008. The
following is a summary of square footage leased by the Company:
FACILITIES
<TABLE>
<CAPTION>
TOTAL
LOCATION SQUARE FEET
-------- -----------
<S> <C>
North America
California
Central California........................................ 53,429
Northern California....................................... 41,838(1)
Northeast USA............................................... 50,640
Southeast USA............................................... 114,144(2)
Other USA................................................... 33,390
Canada...................................................... 40,194
-------
Total North America..................................... 333,635
Europe
United Kingdom.............................................. 31,361
Germany..................................................... 6,527
France...................................................... 4,000
Other Europe................................................ 1,756
-------
Total Europe............................................ 43,644
Asia
Australia................................................... 4,799
Malaysia.................................................... 1,760
Singapore................................................... 2,125
Japan....................................................... 1,400
Other Pacific Rim........................................... 2,206
-------
Total Asia.............................................. 12,290
-------
Grand Total............................................. 389,569
=======
</TABLE>
- --------
(1) Excludes approximately 16,375 square feet subleased to others.
(2) Excludes approximately 12,641 square feet of unoccupied space.
14
<PAGE>
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's outstanding shares of Common Stock and Series A
Preferred Stock on an as converted basis (collectively with the Common Stock,
the "Common Equivalent Shares") as of October 2, 1997 by (i) each person who
is known to the Company to be the beneficial owner of 5% or more of the
Company's outstanding Common Equivalent Shares, (ii) each of the Company's
directors and executive officers named in the Summary Compensation Table below
and (iii) all current directors and executive officers as a group.
<TABLE>
<CAPTION>
NUMBER OF PERCENT
COMMON OF COMMON
EQUIVALENT EQUIVALENT
SHARES SHARES(1)
---------- ----------
<S> <C> <C>
Seagate Technology (2).................................. 54,695,833 99.9%
920 Disc Drive
Scotts Valley, CA 95066
Alan F. Shugart (3)..................................... 6,000 *
Stephen J. Luczo (4).................................... 4,000 *
Donald L. Waite (5)..................................... 20,000 *
Gary B. Filler (6)...................................... 4,000 *
Lawrence Perlman (7).................................... 4,000 *
Ellen E. Chamberlain (8)................................ 12,000 *
Terence R. Cunningham (9)............................... 40,000 *
Gregory B. Kerfoot (10)................................. 40,000 *
All directors and executive officers as a group (8
persons) (11).......................................... 130,000 *
</TABLE>
- --------
* Less than one percent.
(1) Applicable percentage ownership is based on 54,716,688 Common Equivalent
Shares outstanding as of October 2, 1997 together with applicable options
for such stockholder. The Company's Series A Preferred Stock is reflected
on an as converted basis assuming a 1:1 conversion. Beneficial ownership
is determined in accordance with the rules of the Securities and Exchange
Commission based on factors including voting and investment power with
respect to shares subject to applicable community property laws. Common
Equivalent Shares subject to options currently exercisable or exercisable
within 60 days after October 2, 1997 are deemed outstanding for computing
the percentage ownership of the person holding such options, but are not
deemed outstanding for computing the percentage of any other person.
(2) Includes 7,200,000 shares of Class B Exchangeable Shares of Seagate
Software Information Management Group, Inc., Vancouver, British Columbia
("IMG Vancouver"), which may be exchanged at the option of the holder,
Seagate Technology International, a subsidiary of the Parent Company, for
an equal number of shares of Series A Preferred Stock of the Company
within 60 days of October 2, 1997. See Item 7, "Certain Relationships and
Related Transactions."
(3) Includes 6,000 shares of Common Stock which may be acquired upon the
exercise of stock options exercisable within 60 days after October 2,
1997.
(4) Includes 4,000 shares of Common Stock which may be acquired upon the
exercise of stock options exercisable within 60 days after October 2,
1997.
(5) Includes 16,000 shares of Common Stock which are subject to repurchase by
the Company. The Company's repurchase right lapses for 4,000, 6,000 and
6,000 shares on April 4, 1998, 1999 and 2000, respectively.
(6) Includes 4,000 shares of Common Stock which may be acquired upon the
exercise of stock options exercisable within 60 days after October 2,
1997.
15
<PAGE>
(7) Includes 4,000 shares of Common Stock which may be acquired upon the
exercise of stock options exercisable within 60 days after October 2,
1997.
(8) Includes 12,000 shares of Common Stock which may be acquired upon the
exercise of stock options exercisable within 60 days after October 2,
1997.
(9) Includes 40,000 shares of Common Stock which may be acquired upon the
exercise of stock options exercisable within 60 days after October 2,
1997.
(10) Includes 40,000 shares of Common Stock which may be acquired upon the
exercise of stock options exercisable within 60 days after October 2,
1997.
(11) Includes 110,000 shares of Common Stock which may be acquired upon the
exercise of stock options exercisable within 60 days after October 2,
1997.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company and certain information
about them as of October 2, 1997 are as follows:
<TABLE>
<CAPTION>
DIRECTOR OR
EXECUTIVE
NAME AGE POSITION OFFICER SINCE
---- --- -------- -------------
<S> <C> <C> <C>
Stephen J. Luczo........ 40 Chairman of the Board of Directors 1996
Gary B. Filler.......... 56 Director 1996
Lawrence Perlman........ 59 Director 1996
Alan F. Shugart......... 67 Director 1996
Donald L. Waite......... 64 Director 1996
Terence R. Cunningham... 38 President and Chief Operating Officer 1996
Gregory B. Kerfoot...... 37 Chief Strategic Officer 1996
Ellen E. Chamberlain.... 40 Senior Vice President, Treasurer and 1996
Chief Financial Officer
</TABLE>
Mr. Luczo currently serves as Chairman of the Board of Directors for the
Company and is President and Chief Operating Officer of Seagate Technology. He
joined Seagate Technology in October 1993 as Senior Vice President, Corporate
Development. In March 1995 he was promoted to Executive Vice President,
Corporate Development and Chief Operating Officer of the Software Group.
Before joining Seagate Technology in 1993, Mr. Luczo was Senior Managing
Director and Co-head of the Bear Stearns and Co. Global Technology Group from
February 1992 to October 1993. Mr. Luczo also serves on the Board of Directors
of Gadzoox Networks, Inc. and Dragon Systems, Inc.
Mr. Filler serves as a Director for the Company and has been a financial
consultant since September 1996. He was Senior Vice President and Chief
Financial Officer of Diamond Multimedia Systems, Inc., a multimedia and
graphics company, from January 1995 to September 1996. From June 1994 to
January 1995, Mr. Filler was a business consultant and private investor. From
February 1994 until June 1994, he served as Executive Vice President and Chief
Financial Officer of ASK Group, Inc., a computer systems company. Mr. Filler
was Chairman of the Board of Directors of Seagate Technology from September
1991 until October 1992. From October 1990 until September 1991, Mr. Filler
served as Vice Chairman of the Board of Directors of Seagate Technology. Mr.
Filler also serves as a Director of Seagate Technology.
Mr. Perlman serves as a Director of the Company. He was appointed Chairman
of the Board of Directors of Ceridian Corporation, a technology based services
company, in November 1992. Mr. Perlman previously held several executive
positions at Ceridian Corporation (formerly Control Data Corporation)
including President and Chief Executive Officer of Imprimis Technology
Incorporated, a subsidiary of Control Data Corporation. Mr. Perlman is also a
Director of Seagate Technology, Computer Network Technology Corporation and
Valspar Corporation. He was a regent of the University of Minnesota from 1992
to 1995.
16
<PAGE>
Mr. Shugart currently serves as a Director of the Company. Mr. Shugart is
the Chairman of the Board of Directors and the Chief Executive Officer of
Seagate Technology. He has held several executive positions with Seagate
Technology from its inception including President from September 1991 to
September 1997, Chief Executive Officer from 1979 to the present, and Chairman
from 1979 to September 1991 and October 1992 to the present. Mr. Shugart, in
addition to serving on the Board of Directors of Seagate Technology, serves on
the Boards of Directors of Valence Technology, Inc. and SanDisk Corporation.
Mr. Waite serves as a Director for the Company and currently serves as
Executive Vice President, Chief Administrative Officer and Chief Financial
Officer for Seagate Technology. Mr. Waite joined Seagate Technology in 1983
and has served in various roles at the Parent Company prior to being named to
his current position in March 1995. Mr. Waite is also a Director of California
Micro Devices.
Mr. Cunningham founded Crystal Computer Services, Inc. ("Crystal") in 1984
and served as its President until Crystal's acquisition by Seagate Technology.
In May 1994 he joined Seagate Technology in connection with the Parent
Company's acquisition of Crystal and continued as President for such
subsidiary. In May 1996, he was named President of the Storage Management
Group and later in the year named Executive Vice President and General Manager
of Seagate Software NSMG. In fiscal 1998 Mr. Cunningham was named President
and Chief Operating Officer for the Company as well as Executive Vice
President and General Manager of NSMG.
Mr. Kerfoot joined Crystal in September 1988 as the Director of Research and
Development and Chief Architect of Crystal Reports. Mr. Kerfoot joined Seagate
Technology in May 1994 when the Parent Company acquired Crystal, and he
continued as Director of Research and Development for such subsidiary. In May
1996, he was appointed President of the Information Management Group and later
in the year named Executive Vice President and General Manager of Seagate
Software IMG. In fiscal 1998 Mr. Kerfoot was named Chief Strategic Officer for
the Company as well as Executive Vice President and General Manager of IMG.
Ms. Chamberlain joined Seagate Technology in March 1985 and served in
various finance positions through March 1994 when she began supporting the
corporate development efforts. She was promoted to Vice President and
Treasurer of Seagate Technology in November 1994 in addition to her financial
role in Corporate Development. In April 1996, Ms. Chamberlain was appointed
Vice President and Assistant Treasurer of the Company and in December of 1996,
she was appointed Senior Vice President and Chief Financial Officer of the
Company. In fiscal 1998 Ms. Chamberlain was also named Treasurer for the
Company.
17
<PAGE>
ITEM 6. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid by the Company to the
President and the three other most highly compensated executive officers of
the Company (the "Named Executive Officers") for the year ended June 27, 1997:
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
SECURITIES
OTHER ANNUAL UNDERLYING
FISCAL COMPENSATION OPTIONS
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($) GRANTED(1)
- --------------------------- ------ --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Stephen J. Luczo........ 1997 100,000(2) 195,000(2) 1,659(2) 80,000
Chief Operating Officer
Terence R. Cunningham... 1997 150,530 537,127(3) -- 100,000
Executive Vice
President and General
Manager, NSMG
Gregory B. Kerfoot...... 1997 139,947 953,292(3) -- 100,000
Executive Vice
President and General
Manager, IMG
Ellen E. Chamberlain.... 1997 155,000 221,500(4) 6,000 28,000
Senior Vice President
and Chief Financial
Officer
</TABLE>
- --------
(1) The stock options listed in the table represent options to purchase Common
Stock of the Company. See below for additional information regarding
options to purchase stock of the Company granted during fiscal year 1997.
(2) Amount represents the percentage of Mr. Luczo's salary that directly
benefited the Company. These amounts were directly paid by the Company to
Seagate Technology under a General Services Agreement. See Pushdown and
Carveout Accounting note to the Consolidated Financial Statements.
(3) Includes amounts earned under a three year bonus plan entered into after
the acquisition of Crystal with Mr. Cunningham and Mr. Kerfoot based upon
the revenue performance of IMG for the years 1995 through 1997.
(4) Includes amounts deferred under Seagate Technology's compensation plan.
18
<PAGE>
OPTION GRANTS IN 1997
The following table sets forth certain information concerning grants of
stock options to each of the Company's Named Executive Officers during the
fiscal year ended June 27, 1997.
<TABLE>
<CAPTION>
% OF
NUMBER OF TOTAL POTENTIAL REALIZABLE VALUE
SECURITIES OPTIONS EXERCISE AT ASSUMED ANNUAL RATES OF
UNDERLYING GRANTED TO OR BASE STOCK PRICE APPRECIATION
OPTIONS EMPLOYEES PRICE PER FOR OPTION TERM (4)
GRANTED IN FISCAL SHARE EXPIRATION ---------------------------
NAME (1) YEAR (2/3) DATE 5% 10%
---- ---------- ---------- --------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stephen J. Luczo........ 80,000 2.81% $6.00 01/09/07 $301,869 $ 764,996
Terence R. Cunningham... 100,000 3.51 6.00 12/10/06 377,337 956,245
Gregory B. Kerfoot...... 100,000 3.51 6.00 12/10/06 377,337 956,245
Ellen E. Chamberlain.... 28,000 0.98 6.00 12/10/06 105,654 267,749
</TABLE>
- --------
(1) All stock options granted in 1997 vest over a four year period, 20% of the
shares granted vest on the first anniversary of the date of grant, an
additional 20% of the option shares vest on the second anniversary of the
date of grant, 30% of the option shares vest on the third anniversary of
the date of grant and the option shares vest in full on the fourth
anniversary of the date of grant. Under the 1996 Seagate Software
Incentive Stock Option Plan, the Company's Board retains discretion to
modify the terms, including the price, of outstanding options.
(2) Options were granted at an exercise price equal to the fair market value
of the Company's Common Stock on the grant date, as determined by the
Board of Directors of Seagate Software.
(3) Exercise price and withholding obligations may be paid in cash or delivery
of already-owned shares subject to certain conditions.
(4) Potential realizable value is based on the assumption that the Company's
Common Stock appreciates at the annual rate shown (compounded annually)
from the date of grant until the expiration of the ten year option term.
These numbers are calculated based on the requirements promulgated by the
Securities and Exchange Commission and do not reflect the Company's
estimate of future stock price growth.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
The following table sets forth certain information regarding the exercise of
stock options in the last fiscal year by the persons named in the Summary
Compensation Table and the value of options held by such individuals at the
end of the fiscal year.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
NUMBER OF UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES VALUE OPTIONS AT 1997 YEAR END AT 1997 YEAR END (2)
ACQUIRED RECEIVED ------------------------- -------------------------
NAME ON EXERCISE $(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stephen J. Luczo........ -- -- 4,000 96,000 $ 8,000 $ 32,000
Terence R. Cunningham... -- -- 20,000 180,000 40,000 160,000
Gregory B. Kerfoot...... -- -- 20,000 180,000 40,000 160,000
Ellen E. Chamberlain.... -- -- 6,400 53,600 12,800 51,200
</TABLE>
- --------
(1) Market value of the Company's Common Stock at the exercise date minus the
exercise price.
(2) Market value of the Company's Common Stock at fiscal year end minus the
exercise price. The fair market value of Seagate Software Common Stock at
1997 fiscal year end, as determined by the Seagate Software Board of
Directors, was $6.00 per share.
19
<PAGE>
DIRECTOR COMPENSATION
Directors who are employed by the Company and/or the Parent Company, receive
no additional compensation for service on the Board of Directors. Only Gary
Filler and Lawrence Perlman, the non-employee directors, receive cash
compensation for attending meetings of both the Board of Directors and
Compensation Committee. Mr. Filler and Mr. Perlman receive $1,000 each quarter
they serve as a member of both the Board of Directors and the Compensation
Committee.
Stephen Luczo, Chairman of the Board of Directors, received options to
purchase 80,000 shares of the Company's Common Stock at the exercise price of
$6.00 per share during 1997.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company was recapitalized in April 1996 to integrate the business
conducted by the software divisions of the Parent Company. The Company entered
into a Contribution Agreement, dated April 4, 1996, affecting the
reorganization and defining the relationship between Seagate Technology and the
Company. Pursuant to this Contribution Agreement and subsequent amendments, all
of the software divisions have been transferred to the Company or its
subsidiaries in exchange for 54,633,333 shares of Series A Preferred Stock and
shares exchangeable to Series A Preferred Stock and 62,500 shares of Common
Stock.
Prior to December 1996, Seagate Technology International ("STI"), a wholly
owned subsidiary of Seagate Technology, owned all outstanding capital stock of
IMG Vancouver (the "IMG Stock"). Pursuant to an agreement among STI, Seagate
Software and IMG Vancouver dated December 19, 1996, STI surrendered the IMG
Stock (which was subsequently cancelled by IMG Vancouver) in exchange for
7,200,000 Convertible Preference Shares of IMG Vancouver. On December 26, 1996,
the Convertible Preference Shares were exchanged for 7,200,000 Class B
Exchangeable Shares of IMG Vancouver. These Class B Exchangeable Shares do not
have voting rights except as required by law, but can be exchanged at STI's
sole discretion for 7,200,000 shares of Seagate Software Series A Preferred
Stock. In connection with the issuance of the Class B Exchangeable Shares
described above, STI was granted voting rights in Seagate Software equivalent
to 7,200,000 shares of Series A Preferred Stock. Also on December 26, 1996, IMG
Vancouver issued 10,000 Class A Common Shares, which carry the right to vote,
to Seagate Software. Seagate Software therefore now owns all voting shares of
IMG Vancouver. For financial reporting purposes, the 7,200,000 shares of Series
A Preferred Stock of the Company which STI could elect to receive in exchange
for the Class B Exchangeable Shares of IMG Vancouver have been treated as
issued and outstanding shares of Series A Preferred Stock of the Company.
Pursuant to a General Services Agreement between the Company and Seagate
Technology, the Company receives services such as general management, treasury,
tax, financial reporting, benefits administration, insurance, information
technology, legal, accounts payable and receivable and credit functions from
the Parent Company. During 1997, 1996 and 1995 Seagate Technology charged the
Company $1,958,000, $2,260,000 and $1,273,000, respectively, for various
corporate services.
Additionally, the Company has entered into an Intercompany Revolving Loan
Agreement ("Loan Agreement") dated as of June 28, 1996 between the Company and
Seagate Technology, whereby the Parent Company finances certain of the
Company's working capital requirements. The Loan Agreement provides for maximum
borrowings of up to $60,000,000 and matures within two years and is extendable
by mutual consent. Borrowings from the Parent Company were $28,971,000 and
$32,991,000 at June 27, 1997 and June 28, 1996, respectively. Borrowings from
the Parent Company consist primarily of funding the Company's operating
activities. The Company pays interest of 6% per annum on such borrowings.
Revenues from the Parent Company were $5,762,000, $9,374,000 and $10,662,000
in 1997, 1996 and 1995, respectively. This revenue primarily consists of
shipments to Seagate Technology's OEM Tape drive divisions located in Costa
Mesa, California and Scotland.
20
<PAGE>
The Company is included in the consolidated federal and certain combined and
consolidated foreign and state income tax returns of Seagate Technology.
Seagate Technology and the Company have entered into a tax sharing agreement
(the "Tax Allocation Agreement") pursuant to which the Company computes
hypothetical tax returns as if the Company was not joined in consolidated or
combined returns with Seagate Technology. The Company must pay Seagate
Technology the positive amount of any such hypothetical taxes. If the
hypothetical tax returns show entitlement to refunds, including any refunds
attributable to a carryback, then Seagate Technology will pay the Company the
amount of such refunds. At year end for both 1997 and 1996, there were no
outstanding intercompany tax-related balances due to or from the Company to
Seagate Technology.
ITEM 8. LEGAL PROCEEDINGS
The Company is engaged in legal actions arising in the ordinary course of its
business and believes that the ultimate outcome of these actions will not have
a material adverse effect on the Company's financial position, liquidity, or
results of operations.
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDERS MATTERS
As of June 27, 1997, the Company had outstanding 83,355 shares of Common
Stock held by 43 shareholders and 54,633,333 shares of Series A Preferred Stock
and shares exchangeable to Series A Preferred Stock held by one shareholder.
There is no established public trading market for any class of the Company's
equity securities.
The Company has not paid any dividends on any of its capital stock and does
not anticipate that any cash dividends will be declared in the foreseeable
future.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
The following sales of securities by the Company have occurred in the three
years ended June 27, 1997:
The Company was recapitalized in April 1996 to integrate the business
conducted by the software divisions of the Parent Company. The Company entered
into a Contribution Agreement, dated April 4, 1996, affecting the
reorganization and defining the relationship between Seagate Technology and the
Company. Pursuant to this Contribution Agreement and subsequent amendments, all
of Seagate Technology's software divisions have been transferred to the Company
or its subsidiaries in exchange for 54,633,333 shares of Series A Preferred
Stock and shares exchangeable to Series A Preferred Stock and 62,500 shares of
Common Stock.
Prior to December 1996, Seagate Technology International ("STI"), a wholly
owned subsidiary of Seagate Technology, owned all outstanding capital stock of
IMG Vancouver (the "IMG Stock"). Pursuant to an agreement among STI, Seagate
Software and IMG Vancouver dated December 19, 1996, STI surrendered the IMG
Stock (which was subsequently cancelled by IMG Vancouver) in exchange for
7,200,000 Convertible Preference Shares of IMG Vancouver. On December 26, 1996,
the Convertible Preference Shares were exchanged for 7,200,000 Class B
Exchangeable Shares of IMG Vancouver. These Class B Exchangeable Shares do not
have voting rights except as required by law, but can be exchanged at STI's
sole discretion for 7,200,000 shares of Seagate Software Series A Preferred
Stock. In connection with the issuance of the Class B Exchangeable Shares
described above, STI was granted voting rights in Seagate Software equivalent
to 7,200,000 shares of Series A Preferred Stock. Also on December 26, 1996, IMG
Vancouver issued 10,000 Class A Common Shares, which carry the right to vote,
to Seagate Software. Seagate Software therefore now owns all voting shares of
IMG Vancouver. For financial reporting purposes, the 7,200,000 shares of Series
A Preferred Stock of the Company which STI could elect to receive in exchange
for the Class B Exchangeable Shares of IMG Vancouver have been treated as
issued and outstanding shares of Series A Preferred Stock of the Company.
The Company issued an aggregate of 20,855 shares, during 1997, of its Common
Stock to an aggregate of 42 persons, each of whom is a current or former
employee of the Company. All such shares were issued pursuant
21
<PAGE>
to the Company's 1996 Incentive Stock Option Plan. Such shares were issued
upon exercise of stock options with an exercise price of $4.00 per share. The
transactions described in this paragraph were exempt from the registration
requirements of the Securities Act of 1933, as amended.
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
The Company's authorized capital stock consists of 95,600,000 shares of
Common Stock, $.001 par value per share, and 73,000,000 shares of Preferred
Stock, $.001 par value per share, 54,633,333 of which have been designated as
Series A Convertible Preferred Stock (the "Series A Preferred") and 18,366,667
of which remain undesignated.
Pursuant to this Registration Statement, the Company is registering under
the Securities and Exchange Act of 1934, as amended, its Series A Preferred
and Common Stock. A description of the Company's capital stock follows.
COMMON STOCK. Holders of shares of Common Stock are entitled to one vote per
share in all matters to be voted on by shareholders. Subject to the prior
rights of holders of outstanding shares of Preferred Stock, if any, the
holders of Common Stock are entitled to receive such dividends, if any, as may
be declared from time to time by the Board of Directors in its discretion from
funds legally available therefore, and upon liquidation or dissolution of the
Company are entitled to receive all assets available for distribution to the
shareholders. The Common Stock has no preemptive or other subscription rights,
and there are no conversion rights or redemption or sinking fund provisions
with respect to such shares. All of the outstanding shares of Common Stock are
fully paid and nonassessable.
The Company may at any time, out of funds legally available therefore,
repurchase shares of Common Stock of the Company (i) issued to or held by
employees, directors or consultants of the Company or its subsidiaries upon
termination of their employment or services, pursuant to any agreement
providing for such right of repurchase, or (ii) issued to or held by any
person subject to the Company's right of first refusal to purchase such shares
where the purchase is pursuant to the exercise of such right of first refusal,
in either case whether or not dividends on the Preferred Stock shall have been
declared and paid or funds set aside therefore.
PREFERRED STOCK. The shares of Series A Preferred Stock have the following
rights, preferences and privileges:
Conversion. The holders of the Series A Preferred have the right to convert
the Series A Preferred at any time into Common Stock. The Series A Preferred
will convert automatically into the Company's Common Stock, at the then
effective Conversion Price, upon the closing of a firm commitment underwritten
public offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended. The initial conversion rate will be one
share of Series A Preferred for each share of Common Stock. The conversion
price of the Series A Preferred will be subject to adjustment to reduce the
effect of dilution in the event that the Company issues additional shares of
Common Stock, shares convertible into Common Stock (such as shares of Series A
Preferred) or options, warrants or other rights exercisable for Common Stock
at a purchase price or exercise price less than the applicable conversion
price then in effect for each series of Preferred Stock other than: (i) shares
of Common Stock issued upon conversion of the Company's Preferred Stock; (ii)
certain shares of Common Stock issued as a dividend or distribution on Series
A Preferred Stock; (iii) shares of Common Stock issued pursuant to equipment
lease financing transactions approved by the Board of Directors; (iv) shares
of Common Stock issued to employees, officers, directors, consultants and/or
advisors under employee benefit plans, including the Company's 1996 Incentive
Stock Option Plan, and arrangements approved by the Board of Directors and (v)
shares of Common Stock issued by way of a dividend or other distribution on
shares of Common Stock excluded from the definition of additional shares of
Common Stock by the foregoing clauses. In the event of any splits, reverse
splits, combinations or consolidation of Common Stock, unaccompanied by
corresponding adjustments of Series A Preferred, or of stock dividends paid on
Common Stock, the conversion price of the Series A Preferred will be
proportionately adjusted.
22
<PAGE>
Voting. Each share of Series A Preferred entitles the holder to one vote for
each share of Common Stock into which such share could then be converted.
Except as required by law, the holders of shares of Series A Preferred and the
holders of shares of Common Stock shall vote together as one class on all
matters submitted to a vote of stockholders of the Company.
Dividend Preference. The holders of shares of Series A Preferred Stock shall
be entitled to receive, when, as and if declared by the Board of Directors out
of funds legally available for the purpose, an annual cash dividend in the
amount of $0.45 per share (as adjusted to reflect any stock split, stock
dividend, combination, recapitalization and the like (collectively, a
"Recapitalization") with respect to the Series A Preferred), prior and in
preference to any declaration or payment of any dividend (payable other than
in Common Stock) on the Common Stock of the Company. Such dividends shall not
be cumulative, and no right shall accrue to holders of Series A Preferred by
reason of the fact that dividends on such shares are not declared or paid in
any year. On the date that is the end of the first fiscal year in which the
Company recognizes net income after taxes, the holders of shares of Series A
Preferred shall be entitled to receive, out of funds legally available for the
purpose, an annual cash dividend in the amount of $0.45 per share (as adjusted
to reflect any Recapitalization) prior and in preference to any declaration or
payment of any dividend (payable other than in Common Stock) on the Common
Stock of the Company (the "Cumulative Dividend"). The Cumulative Dividend
shall accrue from the Cumulative Dividend Date and shall be payable only when,
as and if determined by the Board, provided, that if the Cumulative Dividend
shall not have been paid and a sum sufficient for the payment thereof set
apart, the deficiency shall first be fully paid before any dividend or other
distribution (other than dividends payable solely in Common Stock) shall be
paid or declared and set apart for the Common Stock of the Company. In the
event any dividend shall be paid to the holders of Common Stock, such dividend
shall be distributed among the holders of the Common Stock and the Series A
Preferred in proportion to the shares of Common Stock then held by them and
the shares of Common Stock which such holders have the right to acquire upon
the conversion of the Series A Preferred then held.
Liquidation Preference. In the event of any liquidation, dissolution or
winding up of the Company, a distribution shall be made to the holders of
Series A Preferred in respect of such Series A Preferred before any amount
shall be paid to the holders of Common Stock in respect of such Common Stock.
The holders of the Series A Preferred Stock shall be entitled to receive prior
and in preference to any distribution of the assets of the Company to the
holders of the Common Stock by reason of their ownership thereof as a result
of a Liquidation Event, an amount per share equal to (i) $7.50, as adjusted to
reflect any Recapitalization of the Series A Preferred, plus (ii) all accrued
or declared but unpaid dividends, if any. If, upon the occurrence of a
Liquidation Event, the assets and funds thus distributed among the holders of
the Series A Preferred shall be insufficient to permit the payment to such
holders of their full liquidation preference, then the entire assets and funds
of the Company legally available for distribution to the holders of capital
stock shall be distributed ratably among the holders of the Series A
Preferred. After payment has been made to the holders of the Series A
Preferred of the full amounts to which they shall be entitled as set forth
above, then the entire remaining assets and funds of the Company shall be
distributed among the holders of the Common Stock and the Series A Preferred
in proportion to the shares of Common Stock then held by them and the shares
of Common Stock which they then have the right to acquire upon the conversion
of the Series A Preferred held by them. A consolidation or merger of the
Company with or into any other corporation or the sale or other transfer in a
single transaction or a series of related transactions of all or substantially
all of the assets of this Company, or any other reorganization of this Company
shall be deemed a Liquidation Event of the Company provided that the merger or
consolidation of the Company with or into a wholly owned subsidiary of the
Company or into another corporation or person or entity in which the holders
of the capital stock of the Company hold at least 50% of the voting securities
of the surviving entity shall not be deemed to be a Liquidation Event of the
Company.
CLASS B EXCHANGEABLE SHARES. Although the Class B Exchangeable Shares are
not securities of the Company subject to registration herein, the following
description is provided as such shares may be converted into the Company's
Series A Preferred. Prior to December 1996, Seagate Technology International
("STI"), a wholly owned subsidiary of Seagate Technology, owned all
outstanding capital stock of IMG Vancouver (the
23
<PAGE>
"IMG Stock"). Pursuant to an agreement among STI, Seagate Software and IMG
Vancouver dated December 19, 1996, STI surrendered the IMG Stock (which was
subsequently cancelled by IMG Vancouver) in exchange for 7,200,000 Convertible
Preference Shares of IMG Vancouver. On December 26, 1996, the Convertible
Preference Shares were exchanged for 7,200,000 Class B Exchangeable Shares of
IMG Vancouver. These Class B Exchangeable Shares do not have voting rights
except as required by law, but can be exchanged at STI's sole discretion for
7,200,000 shares of Seagate Software Series A Preferred Stock. In connection
with the issuance of the Class B Exchangeable Shares described above, STI was
granted voting rights in Seagate Software equivalent to 7,200,000 shares of
Series A Preferred Stock. Also on December 26, 1996, IMG Vancouver issued
10,000 Class A Common Shares, which carry the right to vote, to Seagate
Software. Seagate Software therefore now owns all voting shares of IMG
Vancouver. For financial reporting purposes, the 7,200,000 shares of Series A
Preferred Stock of the Company which STI could elect to receive in exchange for
the Class B Exchangeable Shares of IMG Vancouver have been treated as issued
and outstanding shares of Series A Preferred Stock of the Company.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article 6.1 of the Company's Bylaws provides that the corporation shall, to
the maximum extent and in the manner permitted by the General Corporation Law
of Delaware, indemnify each of its directors and officers against expenses
(including attorneys' fees), judgments, fines, settlements, and other amounts
actually and reasonably incurred in connection with any proceeding, arising by
reason of the fact that such person is or was an agent of the Company. For
purposes of this section, a "director" or "officer" of the Company includes any
person (i) who is or was a director or officer of the corporation, (ii) who is
or was serving at the request of the corporation as a director or officer of
another corporation, partnership, joint venture, trust or other enterprise, or
(iii) who was a director or officer of a corporation which was a predecessor
corporation of the Company or of another enterprise at the request of such
predecessor corporation. The Company has entered into indemnification
agreements with its officers and directors containing provisions which are in
some respects broader than the specific indemnification provision contained in
the Delaware General Corporation Law. The indemnification agreements may
require the Company, among other things, to indemnify such officers and
directors against certain liabilities that may arise by reason of their status
or service as directors or officers (other than liabilities arising from
willful misconduct of a culpable nature), to advance their expenses incurred as
a result of any proceeding against them as to which they could be indemnified,
and to obtain directors' and officers' insurance if available on reasonable
terms.
At present, there is no pending litigation or proceeding involving a
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 which may result in a claim for such indemnification.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Item 15.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
24
<PAGE>
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements and Schedules
1. Financial Statements. The following Consolidated Financial Statements of
Seagate Software and subsidiaries and the Report of Independent Auditors are
included at pages F-1 through F-25 of this Registration Statement.
<TABLE>
<CAPTION>
DESCRIPTION PAGE NO.
----------- --------
<S> <C>
Report of Ernst & Young LLP, Independent Auditors................. F-2
Consolidated Balance Sheets--June 27, 1997 and June 28, 1996...... F-3
Consolidated Statements of Operations--Years Ended June 27, 1997,
June 28, 1996 and June 30, 1995.................................. F-4
Consolidated Statements of Cash Flows--Years Ended June 27, 1997,
June 28, 1996 and June 30, 1995.................................. F-5
Consolidated Statements of Stockholders' Equity--Years Ended June
27, 1997, June 28, 1996 and June 30, 1995........................ F-6
Notes to Consolidated Financial Statements........................ F-7
</TABLE>
2. Financial Statement Schedules. The following Consolidated Financial
Statement Schedules of Seagate Software and subsidiaries are filed as part of
this Registration Statement and should be read in conjunction with the
Consolidated Financial Statements of Seagate Software and subsidiaries.
<TABLE>
<CAPTION>
DESCRIPTION PAGE NO.
----------- --------
<S> <C>
Schedule II--Valuation and Qualifying Accounts...................... II-1
</TABLE>
Schedules not listed above have been omitted because they are not applicable
or are not required or the information required to be set forth therein is
included in the Consolidated Financial Statements or notes thereto.
25
<PAGE>
3. Exhibits:
<TABLE>
<C> <S> <C>
2.1 Restructuring and Contribution Agreement dated April 4, 1996
among the Registrant, Seagate Technology, Inc., and Seagate
Peripherals, Inc. and for purposes of Sections 3 and 6 only:
Seagate Technology International Holdings and Crystal Computer
Services, Inc.
2.2 Exchange Agreement dated June 29, 1996 among the Registrant,
Seagate Technology, Inc. and Seagate Peripherals, Inc.
3.1 Certificate of Incorporation of Registrant, as amended
3.2 Bylaws of Registrant, as amended
4.1 Voting Agreement dated December 26, 1996 among the Registrant,
Seagate Software Information Management Group, Inc. and Seagate
Technology International Holdings
10.1 1996 Stock Option Plan, as amended, form of Stock Option
Agreement and form of Amendment to Stock Option Agreement
10.2(A) Seagate Technology, Inc. Employee Stock Purchase Plan, as
amended
10.3 Lease Agreement, dated December 27, 1994, between the Registrant
and Clover Investments, Inc.
10.4 Lease Agreement, dated March 21, 1996 between the Registrant and
400 International Parkway Development Company
10.5* General Services Agreement dated June 28, 1997 between the
Registrant and Seagate Technology, Inc.
10.6 Tax Allocation Agreement dated April 4, 1996 between the
Registrant and Seagate Technology, Inc.
10.7 Intercompany Revolving Loan Agreement dated June 28, 1996
between the Registrant and Seagate Technology, Inc.
10.8 Form of Indemnification Agreement entered into between the
Registrant and its directors and officers
10.9 Support Agreement dated December 26, 1996 between the Registrant
and Seagate Software Information Management Group, Inc.
13.1 Holistic Systems Limited (now Seagate Software Information
Management Group Limited) Statements of Consolidated Profits and
Cash Flows and Related Notes Year Ended 31 March 1996
21.1 Subsidiaries of the Registrant
24.1 Power of Attorney (see page 27)
27.1 Financial Data Schedule
</TABLE>
- --------
* Confidential treatment has been requested for a portion of this exhibit
pursuant to a request for confidential treatment filed with the Securities
and Exchange Commission. Omitted portions have been filed separately with
the Commission.
(A) Incorporated by reference to exhibits filed in connection with Seagate
Technology's Registration Statement on Form S-8 (Reg. No. 33-56215) as
declared effective by the Securities and Exchange Commission on November
16, 1994.
26
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED.
Seagate Software, Inc.
/s/ Terence R. Cunningham
By: _________________________________
TERENCE R. CUNNINGHAM
PRESIDENT
AND CHIEF OPERATING OFFICER
Dated: October 3, 1997
POWER OF ATTORNEY
Know All Persons By These Presents, that each person whose signature appears
below constitutes and appoints Terence R. Cunningham, Stephen J. Luczo, and
Ellen E. Chamberlain, jointly and severally, his or her attorney-in-fact, each
with the power of substitution, for him or her in any and all capacities, to
sign any amendments to this Registration Statement on Form 10 and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all
that each of said attorneys-in-fact, or his substitute or substitutes, may do
or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON
BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Terence R. Cunningham President and Chief October 3, 1997
- ------------------------------------- Operating Officer
(TERENCE R. CUNNINGHAM)
/s/ Gregory B. Kerfoot Chief Strategic October 3, 1997
- ------------------------------------- Officer
(GREGORY B. KERFOOT)
/s/ Ellen E. Chamberlain Senior Vice October 3, 1997
- ------------------------------------- President,
(ELLEN E. CHAMBERLAIN) Treasurer and Chief
Financial Officer
/s/ Stephen J. Luczo Chairman of the October 3, 1997
- ------------------------------------- Board of Directors
(STEPHEN J. LUCZO)
/s/ Gary B. Filler Director October 3, 1997
- -------------------------------------
(GARY B. FILLER)
/s/ Lawrence Perlman Director October 3, 1997
- -------------------------------------
(LAWRENCE PERLMAN)
/s/ Alan F. Shugart Director October 3, 1997
- -------------------------------------
(ALAN F. SHUGART)
/s/ Donald L. Waite Director October 3, 1997
- -------------------------------------
(DONALD L. WAITE)
27
<PAGE>
SEAGATE SOFTWARE, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors.......................... F-2
Consolidated Balance Sheets as of June 27, 1997 and June 28, 1996.......... F-3
Consolidated Statements of Operations for the Years Ended
June 27, 1997, June 28, 1996 and June 30, 1995............................ F-4
Consolidated Statements of Cash Flows for the Years Ended
June 27, 1997, June 28, 1996 and June 30, 1995............................ F-5
Consolidated Statements of Stockholders' Equity for the Years
Ended June 27, 1997, June 28, 1996 and June 30, 1995...................... F-6
Notes to the Consolidated Financial Statements............................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders Seagate Software, Inc.
We have audited the accompanying consolidated balance sheets of Seagate
Software, Inc. as of June 27, 1997 and June 28, 1996, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended June 27, 1997. Our audits also
included the financial statement schedule listed at Item 15(a) of the
Registration Statement on Form 10. These consolidated financial statements and
schedule 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Seagate Software, Inc. at June 27, 1997 and June 28, 1996, and the
consolidated results of its operations and its cash flows for each of the
three years in the period ended June 27, 1997, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
/s/ ERNST & YOUNG LLP
San Jose, California
September 17, 1997
F-2
<PAGE>
SEAGATE SOFTWARE, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
JUNE 27, JUNE 28,
1997 1996
--------- ---------
<S> <C> <C>
ASSETS
Cash.................................................... $ 12,085 $ 7,595
Accounts receivable, net................................ 28,172 32,755
Inventories............................................. 3,206 1,625
Other current assets.................................... 4,040 2,833
--------- ---------
Total Current Assets................................ 47,503 44,808
Property, equipment and leasehold improvements, net..... 20,785 15,161
Goodwill and other intangibles, net..................... 75,306 123,629
Restricted cash......................................... -- 18,000
--------- ---------
Total Assets........................................ $ 143,594 $ 201,598
========= =========
LIABILITIES
Loan payable to Seagate Technology...................... $ 28,971 $ 32,991
Accounts payable........................................ 9,116 11,121
Accrued employee compensation........................... 10,267 8,189
Accrued expenses........................................ 16,035 13,605
Accrued income taxes.................................... 2,699 389
Deferred revenue........................................ 8,354 5,706
--------- ---------
Total Current Liabilities........................... 75,442 72,001
Deferred income taxes................................... 6,233 13,738
Other liabilities....................................... 301 257
--------- ---------
Total Liabilities................................... 81,976 85,996
Commitments and Contingencies
STOCKHOLDERS' EQUITY
Convertible preferred stock, $.001 par value--73,000,000
shares authorized; Series A: shares issued and
outstanding--54,633,333 in 1997 and 47,433,333 in 1996
(aggregate liquidation preference of $409,750 in 1997
and $355,750 in 1996).................................. 55 47
Common stock, $.001 par value--95,600,000 shares
authorized; shares issued and outstanding--83,355 in
1997 and 62,500 in 1996................................ -- --
Additional paid-in capital.............................. 342,091 338,534
Accumulated deficit..................................... (280,685) (222,985)
Foreign currency translation adjustment................. 157 6
--------- ---------
Total Stockholders' Equity.......................... 61,618 115,602
--------- ---------
Total Liabilities and Stockholders' Equity.......... $ 143,594 $ 201,598
========= =========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
SEAGATE SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
------------------------------
JUNE 27, JUNE 28, JUNE 30,
1997 1996 1995
--------- --------- --------
<S> <C> <C> <C>
Revenues:
Licensing...................................... $183,556 $ 124,380 $ 79,992
Licensing from Seagate Technology.............. 5,762 9,374 10,662
Maintenance, support and other................. 27,632 7,832 2,142
--------- --------- --------
Total revenues............................... 216,950 141,586 92,796
Cost of revenues:
Licensing...................................... 17,535 14,885 12,914
Licensing from Seagate Technology.............. 1,834 3,999 4,112
Maintenance, support and other................. 6,560 194 240
Amortization of developed technologies......... 21,860 9,941 5,113
--------- --------- --------
Total cost of revenues....................... 47,789 29,019 22,379
--------- --------- --------
Gross profit................................... 169,161 112,567 70,417
Operating expenses:
Sales and marketing............................ 107,706 71,129 38,495
Research and development....................... 42,842 36,897 21,152
General and administrative (including parent
company allocations of $1,939 in 1997, $2,242
in 1996 and $1,080 in 1995)................... 36,861 22,852 13,086
In-process research and development............ 2,613 96,958 73,177
Amortization of goodwill and other
intangibles................................... 27,202 13,035 4,673
Restructuring costs............................ 2,524 9,502 --
Unusual items.................................. 13,446 -- --
--------- --------- --------
Total operating expenses..................... 233,194 250,373 150,583
--------- --------- --------
Loss from operations........................... (64,033) (137,806) (80,166)
Interest expense............................... (2,688) (970) (767)
Other, net..................................... 307 360 334
--------- --------- --------
Interest and other, net...................... (2,381) (610) (433)
--------- --------- --------
Loss before income taxes....................... (66,414) (138,416) (80,599)
Benefit from (provision for) income taxes...... 8,714 8,748 (2,265)
--------- --------- --------
Net loss....................................... $ (57,700) $(129,668) $(82,864)
========= ========= ========
Net loss per common share...................... $ (852.11)
=========
Weighted average number of common shares
outstanding................................... 67,714
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
SEAGATE SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
------------------------------
JUNE 27, JUNE 28, JUNE 30,
1997 1996 1995
-------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss....................................... $(57,700) $(129,668) $ (82,864)
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation and amortization................ 41,381 24,737 11,983
Deferred income taxes........................ (7,505) (3,021) (650)
Write-off of in-process research and develop-
ment........................................ 2,613 96,958 73,177
Write-off of goodwill and intangibles........ 17,192 2,157 --
Unusual items................................ 13,446 -- --
Write-offs due to restructure................ 1,494 4,427 --
Other........................................ -- 400 219
Changes in operating assets and liabilities:
Accounts receivable........................ 4,583 (12,129) (10,655)
Inventories................................ (1,581) (11) (82)
Other current assets....................... (1,207) 1,080 367
Accounts payable........................... (1,609) 4,887 3,438
Accrued employee compensation.............. 2,078 2,570 4,536
Accrued expenses........................... 2,430 4,629 (4,053)
Accrued income taxes....................... 5,796 (3,297) 2,634
Deferred revenue........................... 2,648 1,613 4,067
Other liabilities.......................... 44 (3,667) 26
-------- --------- ---------
Net cash provided by (used in) operating ac-
tivities.................................... 24,103 (8,335) 2,143
INVESTING ACTIVITIES
Acquisition of property, equipment and
leasehold improvements, net................... (15,823) (10,167) (4,671)
Acquisitions of businesses, net of cash
acquired...................................... -- (94,007) (124,747)
Escrow establishment........................... -- (18,000) --
(Increase)/decrease in other non-current
assets, net................................... -- 1,556 (1,142)
Other, net..................................... -- 4 2
-------- --------- ---------
Net cash (used in) investing activities...... (15,823) (120,614) (130,558)
FINANCING ACTIVITIES
Sale of common stock........................... 79 -- 185
Funding by Seagate Technology for acquisitions
of businesses................................. -- 108,400 121,239
Borrowings from Seagate Technology, net........ (4,020) 20,418 11,415
-------- --------- ---------
Net cash provided by (used in) financing ac-
tivities.................................... (3,941) 128,818 132,839
Effect of exchange rate changes on cash........ 151 8 (4)
-------- --------- ---------
Increase (decrease) in cash.................. 4,490 (123) 4,420
Elimination of Arcada's net cash activity for
the duplicated six months ended December 31,
1995........................................ -- 1,768 --
Cash at the beginning of the year.............. 7,595 5,950 1,530
-------- --------- ---------
Cash at the end of the year.................... $ 12,085 $ 7,595 $ 5,950
======== ========= =========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
SEAGATE SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
SERIES A
CONVERTIBLE COMMON FOREIGN
FOR THE YEARS ENDED JUNE 27, 1997, PREFERRED STOCK STOCK ADDITIONAL CURRENCY
JUNE 28, 1996 AND JUNE 30, 1995 ----------------- ------------- PAID-IN TRANSLATION ACCUMULATED
(IN THOUSANDS, EXCEPT SHARE AMOUNTS) SHARES AMOUNT SHARES AMOUNT CAPITAL ADJUSTMENT DEFICIT TOTAL
- ------------------------------------ ---------- ------ ------ ------ ---------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JULY 1,
1994................... -- $-- -- $-- $ 17,511 $-- $ (10,533) $ 6,978
Issuance of common stock
upon exercise of
options................ -- -- -- -- 185 -- -- 185
Issuance of Arcada
warrants to Conner
Peripherals, Inc....... -- -- -- -- 1,300 -- -- 1,300
Equity funding provided
by Conner Peripherals,
Inc. pursuant to
research and
development
arrangement............ -- -- -- -- 375 -- -- 375
Acquisition by Seagate
Technology of Creative
Interaction
Technologies;
Network Computing,
Inc.; Netlabs, Inc.;
Frye Computer Systems,
Inc. and Palindrome
Corporation............ -- -- -- -- 121,239 -- -- 121,239
Foreign currency
translation
adjustment............. -- -- -- -- -- 2 -- 2
Net loss................ -- -- -- -- -- -- (82,864) (82,864)
---------- ---- ------ ---- -------- ---- --------- ---------
BALANCE AT JUNE 30,
1995................... -- -- -- -- 140,610 2 (93,397) 47,215
Acquisition by Seagate
Technology of OnDemand
Software, Inc. and
minority interest of
Arcada Holdings, Inc... -- -- -- -- 98,249 -- -- 98,249
Issuance of convertible
preferred stock and
common stock to Seagate
Technology pursuant to
the formation of
Seagate Software....... 34,500,000 34 62,500 -- (34) -- -- --
Issuance of convertible
preferred stock to
Seagate Technology
pursuant to the
acquisition of Calypso
Software Systems,
Inc.................... 1,733,333 2 -- -- 13,797 -- -- 13,799
Issuance of convertible
preferred stock to
Seagate Technology
pursuant to the
acquisition of Holistic
Systems, Ltd........... 11,200,000 11 -- -- 84,046 -- -- 84,057
Income Tax Benefit from
Seagate Technology
stock option
exercises.............. -- -- -- -- 1,866 -- -- 1,866
Foreign currency
translation
adjustment............. -- -- -- -- -- 4 -- 4
Net loss................ -- -- -- -- -- -- (129,668) (129,668)
Elimination of Arcada
Holdings, Inc. activity
for the duplicated six
months ended December
31, 1995............... -- -- -- -- -- -- 80 80
---------- ---- ------ ---- -------- ---- --------- ---------
BALANCE AT JUNE 28,
1996................... 47,433,333 47 62,500 -- 338,534 6 (222,985) 115,602
Income Tax Benefit from
Seagate Technology
stock option
exercises.............. -- -- -- -- 3,486 -- -- 3,486
Issuance of common stock
upon exercise of
employee stock
options................ -- -- 20,855 -- 79 -- -- 79
Issuance of convertible
preferred stock
pursuant to the
transfer to the Company
of IMG Vancouver....... 7,200,000 8 -- -- (8) -- -- --
Foreign currency
translation
adjustment............. -- -- -- -- -- 151 -- 151
Net loss................ -- -- -- -- -- -- (57,700) (57,700)
---------- ---- ------ ---- -------- ---- --------- ---------
BALANCE AT JUNE 27,
1997................... 54,633,333 $ 55 83,355 $-- $342,091 $157 $(280,685) $ 61,618
========== ==== ====== ==== ======== ==== ========= =========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
SEAGATE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS. Seagate Software, Inc. (the "Company" or "Seagate
Software") was incorporated in Delaware in November 1993. The Company develops,
markets and supports software products, and provides related services through
two business units. The Information Management Group ("IMG") business unit
offers business intelligence products that support the access, analysis,
reporting and delivery of enterprise data, and the Network and Storage
Management Group ("NSMG") business unit offers infrastructure management
products that support the management of Information Technology ("IT") systems.
The Company's products and services are designed to provide users with more
reliable and productive access to and use of critical information and increase
the manageability and reliability of computing systems. The Company's offerings
include products for query and reporting, on line analytical processing
("OLAP"), data backup and restoration and network management for a variety of
computing environments, including Windows, Windows NT, NetWare and UNIX. The
Company also offers professional services, including consulting and training
programs.
The Company is a majority-owned and consolidated subsidiary of Seagate
Technology, Inc. ("Seagate Technology" or the "Parent Company"). Seagate
Technology is a data technology company that provides products for storing,
managing and accessing digital information on computer and data communications
systems. These products include disc drives, disc drive components and tape
drives.
BASIS OF PRESENTATION. These financial statements are presented as if the
Company had existed as an entity separate from Seagate Technology during the
periods presented and include the historical assets, liabilities, revenues and
expenses that are directly related to the Company's operations. Intercompany
transactions and balances have been eliminated.
The Company's current capital structure was established by a recapitalization
and contribution agreement in April 1996 when Arcada Holdings, Inc. ("Arcada"),
an existing wholly-owned software subsidiary of Seagate Technology, changed its
name to Seagate Software, Inc. and issued Common Stock to Seagate Technology.
Seagate Technology then contributed to Seagate Software all of its interests in
six wholly owned software subsidiaries (Palindrome Corporation; Network
Computing, Inc.; NetLabs, Inc.; Frye Computer Systems, Inc.; Creative
Interaction Technologies, Inc.; and OnDemand Software, Inc.) in exchange for
34,500,000 shares of Seagate Software Series A Preferred Stock. These six
wholly-owned subsidiaries and Arcada had been previously acquired by Seagate
Technology during the period from August 1994 through March 1996. In May 1996
and June 1996, Seagate Technology acquired two additional software companies,
Calypso Software Systems, Inc. and Holistic Systems, Ltd., and contributed
ownership of these companies to Seagate Software in exchange for a total of
12,933,333 shares of Series A preferred stock.
Prior to December 1996, Seagate Technology International ("STI"), a wholly
owned subsidiary of Seagate Technology, owned all outstanding capital stock
(the "IMG Stock") of IMG Vancouver (formerly Crystal Services, Inc.). Pursuant
to an agreement among STI, Seagate Software and IMG Vancouver dated December
19, 1996, STI surrendered the IMG Stock (which was subsequently cancelled by
IMG Vancouver) in exchange for 7,200,000 Convertible Preference Shares of IMG
Vancouver. On December 26, 1996, the Convertible Preference Shares were
exchanged for 7,200,000 Class B Exchangeable Shares of IMG Vancouver. These
Class B Exchangeable Shares do not have voting rights except as required by
law, but can be exchanged at STI's sole discretion for 7,200,000 shares of
Seagate Software Series A Preferred Stock. In connection with the issuance of
the Class B Exchangeable Shares described above, STI was granted voting rights
in Seagate Software equivalent to 7,200,000 shares of Series A Preferred Stock.
Also on December 26, 1996, IMG Vancouver issued 10,000 Class A Common Shares,
which carry the right to vote, to Seagate Software. Seagate Software therefore
now owns all voting shares of IMG Vancouver. For financial reporting purposes,
Seagate Software has control over IMG Vancouver and therefore consolidates the
results of IMG Vancouver. Additionally, the 7,200,000 shares of
F-7
<PAGE>
SEAGATE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Series A Preferred Stock of the Company which STI could elect to receive in
exchange for the Class B Exchangeable Shares of IMG Vancouver have been
treated as issued and outstanding shares of Series A Preferred Stock of the
Company.
In May 1994, Seagate Technology acquired Crystal Computer Services, Inc.
("Crystal") in a transaction accounted for as a pooling-of-interests. The
results of Crystal are included for all periods presented.
In February 1996, Seagate Technology acquired Conner Peripherals, Inc.
("Conner") in a transaction accounted for as a pooling-of-interests. At the
time of the merger between Seagate Technology and Conner, Arcada was
approximately a 69 percent (on a fully diluted basis) majority-owned software
subsidiary of Conner. In connection with the merger, Seagate Technology also
acquired the outstanding minority interest of Arcada in a transaction
accounted for as a purchase. Because the merger was accounted for as a
pooling-of-interests, the financial statements of Seagate Software include the
results of Arcada for all periods presented. Arcada had a fiscal year which
ended on the Saturday closest to December 31. Accordingly, Arcada's statement
of operations for the year ended December 30, 1995, has been combined with the
Company's statement of operations for the year ended June 30, 1995. In order
to conform Arcada's fiscal year end to the Company's fiscal year end, the
Company's consolidated statement of operations for the year ended June 28,
1996 includes six months (July 1, 1995 through December 31, 1995) for Arcada
which are also included in the Company's consolidated statement of operations
for the year ended June 30, 1995.
The Company operates and reports financial results on a fiscal year of 52 or
53 weeks ending on the Friday closest to June 30. Accordingly, fiscal 1997
ended on June 27, 1997, fiscal 1996 ended on June 28, 1996 and fiscal 1995
ended on June 30, 1995. All fiscal years comprised 52 weeks. Fiscal 1998 will
be a 53-week year and will end on July 3, 1998. All references to years in
these notes to consolidated financial statements represent fiscal years unless
otherwise noted.
ECONOMIC DEPENDENCE ON SEAGATE TECHNOLOGY. The Company has incurred net
losses since inception and had net losses aggregating $270,232,000 during
1997, 1996 and 1995, and had a working capital deficit at June 27, 1997, of
$27,939,000. The Company has entered into a Loan Agreement dated as of June
28, 1996, between the Company and Seagate Technology, whereby the Parent
Company finances certain of the Company's working capital needs. The Loan
Agreement provides for maximum borrowings of up to $60,000,000 and matures
within two years and is extendible by mutual consent. Borrowings from the
Parent Company were $28,971,000 and $32,991,000 at June 27, 1997 and June 28,
1996, respectively. Borrowings from the Parent Company consist primarily of
funding the Company's operating activities. The Company pays interest of 6%
per annum on such borrowings. The Company is economically dependent on Seagate
Technology and believes that to the extent future cash flows from operations
and borrowings under the existing loan agreement with Seagate Technology are
not sufficient to fund the Company's working capital deficit and planned
activities during the next 12 months, that additional funding will be
available at a reasonable cost from Seagate Technology.
ACCOUNTING ESTIMATES. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ materially from
those estimates.
CONCENTRATION OF CREDIT RISK. Financial instruments that potentially subject
the Company to significant concentrations of credit risk consist primarily of
cash, cash equivalents and accounts receivable. Accounts receivable are
derived from revenues earned from customers primarily located in North America
and Europe. The Company performs ongoing credit evaluations of its customers
and generally does not require collateral. The Company maintains reserves for
potential credit losses and historically such losses have been immaterial.
Revenue from one third party customer accounted for 18 percent and 16 percent
of total revenues in 1997 and 1996, respectively. In 1995, revenue from
Seagate Technology was 11 percent of total revenues.
F-8
<PAGE>
SEAGATE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOREIGN CURRENCY TRANSLATION. The U.S. dollar is the functional currency for
most of the Company's foreign operations. Gains and losses on the
remeasurement into U.S. dollars of amounts denominated in foreign currencies
are included in net income for those operations whose functional currency is
the U.S. dollar. Gains and losses on translation into U.S. dollars of foreign
operations whose functional currency is the local currency are recorded as a
separate component of stockholders' equity.
CASH MANAGEMENT. Seagate Technology uses a centralized cash management
function for all of its domestic operations, including certain domestic
operations of the Company. A substantial majority of the Company's cash is
from balances maintained by the Company's foreign subsidiaries.
CASH AND CASH EQUIVALENTS. The Company considers all highly liquid
investments with an original maturity of 90 days or less at the time of
purchase to be cash equivalents.
INVENTORIES. Inventories are stated at the lower of cost (first in, first
out method) or market, and consist primarily of materials used in software
products, related supplies and packaging materials.
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS. Property and equipment,
including leasehold improvements, are stated at cost. Depreciation is computed
using the straight-line method over the estimated useful lives of the assets
which range from three to five years. Assets under capital leases and
leasehold improvements are amortized using the straight-line method over the
shorter of the estimated useful lives of the assets or the remaining lease
term.
IMPAIRMENT OF LONG-LIVED ASSETS. The Company adopted 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") during the
year ended June 28, 1996. The adoption of SFAS 121 did not have a material
impact on the Company's financial position or results of operations.
GOODWILL AND OTHER INTANGIBLE ASSETS. Goodwill represents the excess of the
purchase price of acquired companies over estimated fair values of tangible
and intangible net assets acquired. Goodwill is amortized on a straight-line
basis over six to seven years. The carrying values of long-term assets and
intangibles other than developed technology ("other intangibles") are reviewed
if facts and circumstances suggest that they may be impaired. If this review
indicates that carrying values of long-term assets and other intangibles and
associated goodwill will not be recoverable based on projected undiscounted
future cash flows, carrying values are reduced to estimated fair values by
first reducing goodwill and second by reducing long-term assets and other
intangibles.
Other intangible assets consist of trademarks, assembled workforces,
distribution networks, developed technology, customer bases, and covenants not
to compete related to acquisitions accounted for by the purchase method. See
Note on Business Combinations and Acquisitions. Amortization of purchased
intangibles, other than acquired developed technology, is provided on the
straight-line basis over the respective useful lives of the assets ranging
from 36 months to 60 months for trademarks, 48 months for assembled workforces
and distribution networks, 12 to 36 months for customer bases and 18 to 24
months for covenants not to compete. In-process research and development
without alternative future use is expensed when acquired.
The Company applies Statement of Financial Accounting Standard No. 86,
"Accounting for the Costs of Computer Software to Be Sold, Leased or Otherwise
Marketed" ("SFAS 86") to developed technologies acquired in business
acquisitions. Acquired developed technology is amortized based on the greater
of the straight-line basis over the estimated useful life (30 to 60 months) or
the ratio of current revenues to the total of current and anticipated future
revenues. The recoverability of the carrying value of acquired developed
technology and associated goodwill is reviewed periodically. If estimated
undiscounted future cash flows are not
F-9
<PAGE>
SEAGATE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
sufficient to recover the combined carrying value of the acquired developed
technology and associated goodwill, the carrying value of goodwill is first
reduced and then the carrying value of acquired developed technology is reduced
by any remaining difference.
SOFTWARE DEVELOPMENT COSTS. Software development costs are included in
research and development and are expensed as incurred. SFAS 86 requires the
capitalization of certain software development costs once technological
feasibility is established, which based on the Company's development process is
generally the completion of a working model. The capitalized costs are
amortized based on the greater of the straight-line basis over the estimated
product life, which is generally three to five years, or the ratio of current
revenues to current and anticipated future revenues. The time period between
achieving technological feasibility and the general availability of software
has been short and the capitalization of software development costs has not
been material to date.
FAIR VALUE DISCLOSURES. The Company maintains its cash principally with major
banks in interest and non-interest bearing bank accounts. There are no realized
or unrealized gains or losses and fair value equals carrying value for all cash
balances.
PUSHDOWN AND CARVEOUT ACCOUNTING. Seagate Technology has provided substantial
services to the Company, including general management, treasury, tax, financial
reporting, benefits administration, insurance, information technology, legal,
accounts payable and receivable and credit functions. Seagate Technology has
charged the Company for these services through corporate expense allocations.
The amount of corporate expense allocations is dependent upon the total amount
of allocable costs incurred by Seagate Technology on behalf of Seagate Software
less amounts charged as a specific cost or expense rather than by allocation.
Included in general and administrative and sales and marketing expenses are
corporate allocation charges of $1,958,000, $2,260,000, and $1,273,000, for the
fiscal years ended 1997, 1996 and 1995, respectively.
The Company also participates in Seagate Technology's profit sharing and
management bonus plans. Compensation expenses recorded by the Company related
to these plans total $3,158,000, $910,000 and $315,000 for 1997, 1996 and 1995,
respectively.
The employees of the Company also participate in the Seagate Technology
Employee Stock Purchase Plan (the "Purchase Plan"). The Purchase Plan permits
eligible employees who have completed thirty days of employment prior to the
inception of the offering period to purchase common stock of Seagate Technology
through payroll deductions at the lower of 85% of the fair market value of the
common stock at the beginning or at the end of each six-month offering period.
Under the plan, 80,643, 41,574 and 11,512 shares of common stock of Seagate
Technology were issued to the Company's employees in 1997, 1996 and 1995,
respectively.
REVENUE RECOGNITION. The Company recognizes revenue in accordance with the
American Institute of Certified Public Accountants' Statement of Position 91-1
entitled "Software Revenue Recognition." The Company's total revenues are
derived from license revenues for its various software products as well as
maintenance, support, training and consulting. Revenues for maintenance,
support services, training and consulting are recognized separately from
software licenses. License revenues are recognized upon delivery of the product
if no significant vendor obligations remain and collection of the resulting
receivable is probable. Allowances for estimated future returns and price
protection are provided upon shipment. Maintenance and support revenues consist
of ongoing support and product updates and are recognized ratably over the term
of the contract, which is typically twelve months. Revenues from training and
consulting are recognized when the services are performed.
ADVERTISING EXPENSE. The cost of advertising is expensed as incurred. The
Company does not incur any direct response advertising. Advertising costs
totaled $21,617,000, $15,748,000 and $2,119,000 for 1997, 1996 and 1995,
respectively.
F-10
<PAGE>
SEAGATE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NET LOSS PER SHARE. The net loss per common share is computed for 1997 using
the weighted average number of shares of common stock outstanding during the
period. Common equivalent shares from common stock options and convertible
preferred stock are excluded from the computation as their effect is
antidilutive. The net loss per common share for 1996 and 1995 is not presented
because the Company's current capital structure did not exist prior to April
1996 and presentation for prior periods would not be meaningful.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share," ("SFAS 128")
which the Company is required to adopt in the fiscal quarter ended January 2,
1998. At that time, the Company will be required to change the method
currently used to compute net income (loss) per share and to restate all prior
periods. Under the new requirements for calculating primary net income (loss)
per share, the dilutive effect of stock options will be excluded. If SFAS 128
had been effective for 1997, it would not have had an effect on the reported
net loss per share as only the weighted average number of shares of common
stock outstanding during the period was used in the calculation.
ACCOUNTS RECEIVABLE.
Accounts receivable are summarized below, in thousands:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Accounts receivable........................................... $29,442 $33,352
Less allowance for non-collection............................. (1,270) (597)
------- -------
$28,172 $32,755
======= =======
INVENTORIES.
Inventories are summarized below, in thousands:
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Raw materials................................................. $ 1,699 $ 712
Finished goods................................................ 1,507 913
------- -------
$ 3,206 $ 1,625
======= =======
</TABLE>
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS.
Property, equipment and leasehold improvements consisted of the following,
in thousands:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE 1997 1996
------------------- -------- -------
<S> <C> <C> <C>
Equipment.............................. Three to five years $ 27,504 $17,518
Building and leasehold improvements.... Life of lease 6,428 2,622
Construction in progress............... 2,505 474
-------- -------
36,437 20,614
Less accumulated depreciation and
amortization.......................... (15,652) (5,453)
-------- -------
$ 20,785 $15,161
======== =======
</TABLE>
Depreciation expense was $8,911,000, $3,918,000, and $2,197,000 in 1997,
1996, and 1995, respectively.
F-11
<PAGE>
SEAGATE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
GOODWILL AND OTHER INTANGIBLES.
Goodwill and other intangibles consisted of the following, in thousands:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Goodwill.................................................... $ 46,200 $ 60,167
Developed technology........................................ 46,136 58,165
Trademarks.................................................. 9,972 9,551
Assembled workforce......................................... 6,666 6,526
Distribution network........................................ 2,925 2,925
Other intangibles........................................... 12,853 12,576
-------- --------
124,752 149,910
Accumulated amortization.................................... (49,446) (26,281)
-------- --------
Goodwill and other intangibles.............................. $ 75,306 $123,629
======== ========
</TABLE>
Amortization of developed technologies is included in costs of revenues. In
1997 the amortization of acquired developed technologies includes write-downs
and write-offs to net realizable value of $6,918,000. In 1997 and 1996 the
amortization of goodwill and other intangibles includes write-downs and write-
offs to estimated fair value of $10,259,000 and $2,157,000, respectively.
BUSINESS COMBINATIONS AND ACQUISITIONS
The Company acquired a total of nine companies and one minority interest
during 1996 and 1995. There were no acquisitions in 1997.
VALUATION OF ACQUIRED INTANGIBLE ASSETS. Values assigned to acquired in-
process research and development, developed technology, distribution networks,
customer bases, trademarks, and assembled workforces were determined using
independent valuations obtained by the Company.
To determine the value of in-process research and development, the Company
considered, among other factors, the state of development of each project, the
time and cost needed to complete each project, expected income, associated
risks which included the inherent difficulties and uncertainties in completing
each project and thereby achieving technological feasibility and risks related
to the viability of and potential changes to future target markets. This
analysis resulted in amounts assigned to in-process research and development
for projects that had not yet reached technological feasibility and which did
not have alternative future uses.
To determine the value of developed technologies, the expected future cash
flows of existing product technologies were evaluated taking into account
risks related to the characteristics and applications of each product,
existing and future markets and assessments of the life cycle stage of each
product. Based on this analysis, the existing technologies that had reached
technological feasibility were capitalized.
To determine the value of the distribution networks and customer bases, the
Company considered, among other factors, the size of the current and potential
future customer bases, the quality of existing relationships with customers,
the historical costs to develop customer relationships, the expected income
and associated risks. Associated risks included the inherent difficulties and
uncertainties in transitioning the business relationships from the acquired
entity to the Company and risks related to the viability of and potential
changes to future target markets.
F-12
<PAGE>
SEAGATE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
To determine the value of trademarks, the Company considered, among other
factors, the assumption that in lieu of ownership of a trademark, a company
would be willing to pay a royalty in order to exploit the related benefits of
such trademark.
To determine the value of assembled workforces, the Company considered,
among other factors, the costs to replace existing employees including search
costs, interview costs and training costs .
Goodwill is determined based on the residual difference between the amount
paid and the values assigned to identified tangible and intangible assets. If
the values assigned to identified tangible and intangible assets exceed the
amounts paid, including the effect of deferred taxes, the values assigned to
long-term assets were reduced proportionally until there was no negative
goodwill.
ACQUISITION OF MINORITY INTEREST OF ARCADA HOLDINGS, INC. The combination of
Seagate Software with Arcada, a company which develops, markets and supports
data protection and storage management software products that operated across
multiple desktop and client/server environments, was accounted for as a
pooling-of-interests and, accordingly, all prior periods presented in the
accompanying consolidated financial statements include the accounts and
operations of Arcada. Arcada's results of operations for the duplicated six
months ended December 30, 1995 were as follows, in thousands:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 30, 1995
-----------------
<S> <C>
Net revenues............................................ $37,700
Operating expenses...................................... 29,320
Other income (expense).................................. 588
Net loss................................................ (80)
In connection with the pooling-of-interests, the Company acquired the then
outstanding minority interest of Arcada. The minority interest was
approximately 31 percent on a fully diluted basis. The acquisition of the
minority interest was accounted for as a purchase and in connection with the
acquisition, Seagate Technology issued common stock and options to purchase
common stock with a fair market value of approximately $85,074,000. The
following is a summary of the purchase price allocation for the acquisition of
the minority interest, in thousands:
Assembled workforce..................................... $ 1,355
Distribution network.................................... 94
Corporate accounts...................................... 375
Strategic alliances..................................... 1,437
OEM agreements.......................................... 3,217
Value added resellers................................... 2,030
Trademarks.............................................. 2,811
Developed technology.................................... 4,623
In-process research and development..................... 43,949
Deferred tax liability.................................. (6,254)
Goodwill................................................ 31,437
-------
$85,074
=======
</TABLE>
ACQUISITION OF PALINDROME CORPORATION. In August 1994, the Company acquired
all of the outstanding shares and stock options of Palindrome Corporation
("Palindrome"), a company engaged in developing, producing and marketing data
protection and management software for NetWare-based networks and enterprise
LANs. The purchase price of approximately $70,244,000 was paid in cash. The
Company accounted for the
F-13
<PAGE>
SEAGATE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
acquisition using the purchase method, and the results of operations of
Palindrome are only included in the Company's operations since the acquisition
was completed. The following is a summary of the purchase price allocation, in
thousands:
<TABLE>
<S> <C>
Current assets and other tangible assets......................... $ 5,680
Liabilities assumed.............................................. (4,557)
Trademarks....................................................... 2,000
Assembled workforce.............................................. 1,900
Distribution network............................................. 2,900
Developed technology............................................. 13,020
In-process research and development.............................. 42,980
Deferred tax liability........................................... (1,710)
Goodwill......................................................... 8,031
-------
$70,244
=======
</TABLE>
ACQUISITION OF NETWORK COMPUTING, INC. In February 1995, the Company acquired
all of the outstanding shares and stock options of Network Computing, Inc.
("NCI"), a company engaged in developing, producing and marketing network
management software products for Novell NetWare networks. The purchase price of
approximately $10,488,000 was paid in cash. The Company accounted for the
acquisition using the purchase method, and the results of operations of NCI are
only included in the Company's operations since the acquisition was completed.
The following is a summary of the purchase price allocation, in thousands:
<TABLE>
<S> <C>
Current assets and other tangible assets......................... $ 383
Liabilities assumed.............................................. (554)
Trademarks....................................................... 850
Assembled workforce.............................................. 410
Developed technology............................................. 2,310
Customer base.................................................... 140
Covenant not to compete.......................................... 1,040
In-process research and development.............................. 5,280
Deferred tax liability........................................... (1,786)
Goodwill......................................................... 2,415
-------
$10,488
=======
</TABLE>
ACQUISITION OF NETLABS, INC. In March 1995, the Company acquired all of the
outstanding shares and stock options of NetLabs, Inc. ("NetLabs"), a company
engaged in developing, producing and marketing network management software
solutions for UNIX-based networks. The purchase price of approximately
$15,262,000 was paid in cash. The Company accounted for the acquisition using
the purchase method, and the results of operations of NetLabs are only included
in the Company's operations since the acquisition was completed. The following
is a summary of the purchase price allocation, in thousands:
<TABLE>
<S> <C>
Current assets and other tangible assets......................... $ 2,457
Liabilities assumed.............................................. (5,208)
Assembled workforce.............................................. 1,380
Developed technology............................................. 5,000
In-process research and development.............................. 7,500
Deferred tax liability........................................... (2,370)
Goodwill......................................................... 6,503
-------
$15,262
=======
</TABLE>
F-14
<PAGE>
SEAGATE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
ACQUISITION OF FRYE COMPUTER SYSTEMS, INC. In May 1995, the Company acquired
all of the outstanding shares of Frye Computer Systems, Inc. ("Frye"), a
company engaged in developing, producing and marketing network management
software solutions for PC-LANs. The purchase price of approximately
$15,164,000 was paid in cash. The Company accounted for the acquisition using
the purchase method, and the results of operations of Frye are only included
in the Company's operations since the acquisition was completed. The following
is a summary of the purchase price allocation, in thousands:
<TABLE>
<S> <C>
Current assets and other tangible assets......................... $ 1,364
Liabilities assumed.............................................. (503)
Trademarks....................................................... 300
Assembled workforce.............................................. 600
Developed technology............................................. 2,600
Covenant not to compete.......................................... 1,900
In-process research and development.............................. 8,900
Deferred tax liability........................................... (2,030)
Goodwill......................................................... 2,033
-------
$15,164
=======
</TABLE>
ACQUISITION OF CREATIVE INTERACTION TECHNOLOGIES. In June 1995, the Company
acquired all of the outstanding shares and stock options of Creative
Interaction Technologies ("CIT"), a company engaged in developing, producing
and marketing AshWin, a batch scheduler for heterogeneous client/server
computing. The purchase price of approximately $10,080,000 was paid in cash.
The Company accounted for the acquisition using the purchase method, and the
results of operations of CIT are only included in the Company's operations
since the acquisition was completed. The following is a summary of the
purchase price allocation, in thousands:
<TABLE>
<S> <C>
Current assets and other tangible assets......................... $ 284
Liabilities assumed.............................................. (764)
Assembled workforce.............................................. 220
Developed technology............................................. 4,200
In-process research and development.............................. 5,700
Deferred tax liability........................................... (1,662)
Goodwill......................................................... 2,102
-------
$10,080
=======
</TABLE>
ACQUISITION OF SYTRON CORPORATION. In July 1995, Arcada Software, Inc., a
majority-owned subsidiary of Arcada, acquired the assets and liabilities of
Sytron Corporation ("Sytron"), a company which develops, produces and markets
software products for data storage management. The purchase price of
approximately $5,017,000 was paid in cash. Arcada accounted for the
acquisition using the purchase method, and the results of operations of Sytron
are only included in the Company's operations since the acquisition was
completed. The following is a summary of the purchase price allocation, in
thousands:
<TABLE>
<S> <C>
Current assets and other tangible assets.......................... $ 848
Liabilities assumed............................................... (508)
Developed technology.............................................. 1,487
In-process research and development............................... 2,817
Goodwill.......................................................... 373
------
$5,017
======
</TABLE>
F-15
<PAGE>
SEAGATE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
ACQUISITION OF ONDEMAND SOFTWARE, INC. In March 1996, the Company acquired
all of the outstanding shares and stock options of OnDemand Software, Inc.
("OnDemand"), a company engaged in developing, producing and marketing
WinINSTALL, a product which automates installation, upgrades and uninstalls of
network applications throughout the enterprise. The purchase price of
approximately $13,425,000 was paid in cash. The Company accounted for the
acquisition using the purchase method, and the results of operations of
OnDemand are only included in the Company's operations since the acquisition
was completed. The following is a summary of the purchase price allocation, in
thousands:
<TABLE>
<S> <C>
Current assets and other tangible assets......................... $ 832
Liabilities assumed.............................................. (227)
Assembled workforce.............................................. 270
Developed technology............................................. 2,000
Covenant not to compete.......................................... 50
In-process research and development.............................. 8,900
Goodwill......................................................... 1,600
-------
$13,425
=======
</TABLE>
ACQUISITION OF CALYPSO SOFTWARE SYSTEMS, INC. In May 1996, the Company
acquired all of the outstanding shares of Calypso Software Systems, Inc.
("Calypso"), a company engaged in developing, producing and marketing software
for managing systems and applications in complex, distributed client/server
computer networks. The purchase price of approximately $13,865,000 was paid in
cash. The Company accounted for the acquisition using the purchase method, and
the results of operations of Calypso are only included in the Company's
operations since the acquisition was completed. The following is a summary of
the purchase price allocation, in thousands:
<TABLE>
<S> <C>
Current assets and other tangible assets......................... $ 1,209
Liabilities assumed.............................................. (245)
Assembled workforce.............................................. 400
Developed technology............................................. 3,600
Customer base.................................................... 540
In-process research and development.............................. 5,400
Goodwill......................................................... 2,961
-------
$13,865
=======
</TABLE>
F-16
<PAGE>
SEAGATE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
ACQUISITION OF HOLISTIC SYSTEMS, LTD. In June 1996, the Company acquired all
of the outstanding shares of Holistic Systems, Ltd. ("Holistic"), a company
engaged in developing, producing and marketing OLAP-compliant, integrated
enterprise business intelligence systems encompassing facilities for executive
information, decision support and other business intelligence applications.
The purchase price of approximately $85,458,000 was paid in cash, and a
portion of such consideration ($18,000,000) was placed in escrow for
contingent consideration. The escrow was released by the Company during the
third quarter of fiscal 1997. The Company accounted for the acquisition using
the purchase method, and the results of operations of Holistic are only
included in the Company's operations since the acquisition was completed. The
following is a summary of the initial purchase price allocation, in thousands:
<TABLE>
<S> <C>
Current assets and other tangible assets......................... $ 9,993
Liabilities assumed.............................................. (5,087)
Trademarks....................................................... 5,889
Assembled workforce.............................................. 1,890
Developed technology............................................. 16,453
Customer base.................................................... 3,746
In-process research and development.............................. 35,892
Restricted cash held in escrow................................... 18,000
Deferred tax liability........................................... (1,318)
Goodwill......................................................... --
-------
$85,458
=======
</TABLE>
As noted above, $18,000,000 of the acquisition consideration was held in
escrow as contingent consideration. The Company decided to release to the
former shareholders of Holistic the escrow funds of $18,000,000 in the third
quarter of fiscal 1997 even though the required contingencies had not been
satisfied. As a result, the Company recorded compensation expense as an
unusual item amounting to $13,446,000 for payments made to Company employees
who were also former shareholders of Holistic and an additional purchase price
amount of $4,554,000 for payments to former shareholders of Holistic who were
not employees of the Company. The additional purchase price was allocated
based on the same methodology as the original purchase price and in the third
quarter of 1997, the Company recorded an additional in-process research and
development write-off of $2,613,000, acquired intangible assets of $2,037,000
and a deferred tax liability of $96,000.
STOCKHOLDERS' EQUITY
The Company's authorized capital stock consists of 95,600,000 shares of
common stock and 73,000,000 shares of preferred stock, 54,633,333 of which
have been designated as Series A preferred stock and 18,366,667 of which
remain undesignated.
PREFERRED STOCK. The Series A preferred have the following rights,
preferences and privileges:
Conversion. The holders of the Series A preferred stock have the right to
convert the Series A preferred stock at any time into common stock. The
preferred stock will be automatically converted into common stock, at the then
effective conversion price, upon the closing of a firm commitment underwritten
public offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended. The initial conversion rate will be one
share of preferred stock for each share of common stock. The conversion price
of the preferred stock will be subject to adjustment to reduce the effect of
dilution in the event that the Company issues additional shares of common
stock or equivalents.
F-17
<PAGE>
SEAGATE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Voting. Each share of Series A preferred stock entitles the holder to one
vote for each share of common stock into which such share could then be
converted. Except as required by law, the holders of shares of Series A
preferred stock and the holders of shares of common stock shall vote together
as one class on all matters submitted to a vote of stockholders of the
Company.
Dividend Preference. The holders of shares of Series A preferred stock shall
be entitled to receive, when, as and if declared by the Board of Directors out
of funds legally available for the purpose, an annual cash dividend in the
amount of $0.45 per share (as adjusted to reflect any stock split, stock
dividend, combination, recapitalization and the like (collectively a
"Recapitalization") with respect to the Series A preferred stock), prior and
in preference to any declaration or payment of any dividend (payable other
than in common stock) on the common stock of the Company. Such dividends shall
not be cumulative, and no right shall accrue to holders of Series A preferred
stock by reason of the fact that dividends on such shares are not declared or
paid in any year. On the date that is the end of the first fiscal year in
which the Company recognizes net income after taxes, the holders of shares of
Series A preferred stock shall be entitled to receive, out of funds legally
available for the purpose, an annual cash dividend in the amount of $0.45 per
share (as adjusted to reflect any Recapitalization) prior and in preference to
any declaration or payment of any dividend (payable other than in common
stock) on the common stock of the Company (the "Cumulative Dividend"). The
Cumulative Dividend shall accrue from the Cumulative Dividend Date and shall
be payable only when, as and if determined by the Board, provided, that if the
Cumulative Dividend shall not have been paid and a sum sufficient for the
payment thereof set apart, the deficiency shall first be fully paid before any
dividend or other distribution (other than dividends payable solely in common
stock) shall be paid or declared and set apart for the common stock of the
Company. In the event any dividend shall be paid to the holders of common
stock such dividend shall be distributed among the holders of the common stock
and the Series A preferred stock in proportion to the shares of common stock
then held by them and the shares of common stock which they then have the
right to acquire upon the conversion of the Series A preferred stock held by
them.
Liquidation Preference. In the event of any liquidation, dissolution or
winding up of the Company, a distribution equivalent to the liquidation
preference shall be made to the holders of Series A preferred stock before any
amount shall be paid to the holders of common stock of $7.50 per share, plus
all accrued or declared but unpaid dividends, if any.
DIVIDENDS. No dividends have been declared, or paid, to date by the Company
on any of the outstanding common stock or preferred stock.
STOCK OPTION PLANS. The Company's 1996 Incentive Stock Option Plan (the
"Plan") provides for the issuance of either incentive or nonstatutory stock
options to employees and consultants of the Company. The Company has reserved
a total of 12,600,000 shares under the Plan. Options granted under the
Company's Plan are granted at fair market value, expire ten years from the
date of the grant and vest over four years, 20% at the end of year one and
year two and 30% at the end of year three and year four.
F-18
<PAGE>
SEAGATE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Following is a summary of stock option activity from the inception of the
plan through the year ended June 27, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
---------------------------
NUMBER WEIGHTED AVERAGE
OF SHARES EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Balance at June 30, 1995........................... -- --
Granted.......................................... 3,276,200 $4.00
Exercised........................................ -- --
Canceled......................................... (45,088) $4.00
---------
Balance at June 28, 1996........................... 3,231,112 $4.00
Granted.......................................... 2,851,255 $5.42
Exercised........................................ (20,855) $4.00
Canceled......................................... (973,733) $4.36
---------
Balance at June 27, 1997........................... 5,087,779 $4.73
=========
</TABLE>
Options available for grant were 7,491,366 at June 27, 1997 and 9,368,888 at
June 28, 1996. The following tables summarize information about options
outstanding at June 27, 1997.
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
------------------------------------------------
WEIGHTED AVERAGE
NUMBER REMAINING CONTRACTUAL WEIGHTED AVERAGE
EXERCISE PRICES OF SHARES LIFE (IN YEARS) EXERCISE PRICE
- --------------- --------- --------------------- ----------------
<S> <C> <C> <C>
$4.00.......................... 3,236,319 9.0 $4.00
$6.00.......................... 1,851,460 9.6 $6.00
---------
Total........................ 5,087,779 9.2 $4.73
=========
</TABLE>
<TABLE>
<CAPTION>
EXERCISABLE OPTIONS
--------------------------
NUMBER WEIGHTED AVERAGE
EXERCISE PRICES OF SHARES EXERCISE PRICE
- --------------- --------- ----------------
<S> <C> <C>
$4.00................................................ 531,213 $4.00
$6.00................................................ -- --
-------
Total.............................................. 531,213 $4.00
=======
</TABLE>
PRO FORMA INFORMATION. In October 1995, the Financial Accounting Standards
Board released Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"). SFAS 123 provides an
alternative to APB Opinion 25, "Accounting for Stock Issued to Employees"
("APBO 25") and requires additional disclosures. The Company has elected to
follow APBO 25 in accounting for stock options granted. Under APBO 25, the
Company generally recognized no compensation expense with respect to such
options.
Pro forma information regarding net income and earnings per share is
required by SFAS 123 for stock options granted after June 30, 1995 as if the
Company had accounted for its stock options under the fair value method of
SFAS 123. The fair value of the Company's stock options was estimated using a
Black-Scholes option valuation model. The Black-Scholes option valuation model
was developed for use in estimating the fair value of traded options which
have no vesting restrictions and are fully transferable. In addition, the
Black-Scholes model requires the input of highly subjective assumptions,
including the expected stock price volatility. Because
F-19
<PAGE>
SEAGATE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
the Company's stock options granted to employees have characteristics
significantly different from those of exchange-traded options (and are not
fully transferable) and because changes in the subjective input assumptions
can materially affect the fair value estimate, in management's opinion, the
Black-Scholes model does not necessarily provide a reliable single measure of
the fair value of its stock options granted to employees. The fair value of
the Company's stock options granted to employees was estimated assuming no
expected dividends and the following weighted average assumptions:
<TABLE>
<CAPTION>
SEAGATE
SEAGATE SOFTWARE TECHNOLOGY
INCENTIVE EMPLOYEE STOCK
STOCK OPTION PURCHASE
PLAN SHARES PLAN SHARES
------------------ -----------------
1997 1996 1997 1996
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Expected life (in years)................ 3.65 3.65 .50 .50
Risk-free interest rate................. 6.2% 5.6% 5.4% 5.4%
Volatility.............................. .55 .55 .46 .46
</TABLE>
The weighted average exercise price and weighted average fair value of stock
options granted in 1997 under the Company's Plan were $5.42 and $2.48 per
share, respectively. The weighted average purchase price and weighted average
fair value of shares granted in 1997 under the Seagate Technology Employee
Stock Purchase Plan were $32.88 and $8.89, respectively.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized over the options' vesting period (for stock options) and
the six month purchase period for stock purchases under the Purchase Plan. Pro
forma net loss per common share is not presented for 1996 as the Company did
not have a formal capital structure during most of 1996. The Company's pro
forma information follows, in thousands:
<TABLE>
<CAPTION>
1997 1996
-------- ---------
<S> <C> <C>
Net loss................................................... $(61,568) $(130,043)
Net loss per common share.................................. $(909.24)
</TABLE>
The effects on pro forma disclosures of applying SFAS 123 are not likely to
be representative of the effects on pro forma disclosures of future years.
Because SFAS 123 is applicable only to options granted subsequent to June 30,
1995, and the Company did not commence granting stock options for the purchase
of Seagate Software common stock until June 1996, the pro forma effect will
not be fully reflected until 2000.
INCOME TAXES
The Company is included in the consolidated federal and certain combined and
consolidated foreign and state income tax returns of Seagate Technology.
Seagate Technology and the Company have entered into a tax sharing agreement
(the "Tax Allocation Agreement") pursuant to which the Company computes
hypothetical tax returns as if the Company was not joined in consolidated or
combined returns with Seagate Technology. The Company must pay Seagate
Technology the positive amount of any such hypothetical taxes. If the
hypothetical tax returns show entitlement to refunds, including any refunds
attributable to a carryback, then Seagate Technology will pay the Company the
amount of such refunds. At the end of fiscal 1997 and 1996, there were no
outstanding intercompany tax-related balances due to or from the Company to
Seagate Technology.
F-20
<PAGE>
SEAGATE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The (benefit from) provision for income taxes consisted of the following, in
thousands:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Current Tax Expense
Federal............................................ $(5,007) $(7,196) $ 367
State.............................................. (384) (762) 188
Foreign............................................ 4,182 996 1,710
------- ------- -------
Total Current Tax Expense............................ (1,209) (6,962) 2,265
======= ======= =======
Deferred Tax Expense
Federal............................................ (6,330) (1,498) --
State.............................................. (1,175) (288) --
------- ------- -------
Total Deferred Tax Expense........................... (7,505) (1,786) --
------- ------- -------
(Benefit from) provision for Income Taxes............ $(8,714) $(8,748) $ 2,265
======= ======= =======
</TABLE>
For purposes of the historical financial statements, the benefit from income
taxes has been computed on a separate return basis, except that the tax
benefits of certain of the Company's tax losses and credits were allocated to
the Company on a current basis if such losses could be utilized by Seagate
Technology in its tax returns.
The proforma information assuming a tax benefit based on a separate return
basis is as follows, in thousands:
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 27, 1997
-------------
<S> <C>
Loss before benefit from income taxes.......................... $(66,414)
(Benefit) from income taxes.................................... (3,323)
--------
Net Loss....................................................... $(63,091)
========
</TABLE>
The income tax benefits related to the exercise of employee stock options
increased amounts due from Seagate Technology pursuant to the Tax Allocation
Agreement and were credited to additional paid-in capital. Such amounts
approximated $3,486,000, $1,866,000 and none in 1997, 1996 and 1995,
respectively.
F-21
<PAGE>
SEAGATE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The significant
components of the Company's deferred tax assets and liabilities were as
follows, in thousands:
<TABLE>
<CAPTION>
1997 1996
-------- ---------
<S> <C> <C>
Deferred Tax Assets
Receivable reserves....................................... $ 1,859 $ 960
Accrued warranty.......................................... 192 128
Inventory valuation accounts.............................. 299 501
Accrued compensation and benefits......................... 1,517 1,399
Depreciation.............................................. 827 576
Accrued restructuring..................................... 963 1,655
Accrued expenses not currently deductible................. 850 597
Acquisition related items................................. 34,745 24,656
Domestic and foreign net operating loss carryforwards..... 13,098 12,684
Tax credit carryforwards.................................. 1,155 1,155
Other..................................................... 2,372 1,620
-------- ---------
Total Deferred Tax Assets............................... 57,877 45,931
Valuation allowance....................................... (57,877) (45,931)
-------- ---------
Net Deferred Tax Assets................................. -- --
======== =========
Deferred Tax Liabilities
Acquisition related items................................. (6,233) (13,738)
-------- ---------
Total Deferred Tax Liabilities.......................... (6,233) (13,738)
-------- ---------
Net Deferred Tax Liabilities.............................. $ (6,233) $ (13,738)
======== =========
</TABLE>
A valuation allowance has been provided for the deferred tax assets as of
the end of fiscal 1997 and 1996. Realization of the deferred tax assets is
dependent on future earnings, the timing and amount of which are uncertain. In
addition, the net operating loss and tax credit carryforwards of acquired
subsidiaries are subject to further limitations on utilization due to the
"change in ownership" provisions of Internal Revenue Code Section 382 and the
"separate return limitation year" rules of the federal consolidated return
regulations. Approximately $8,213,000 of the valuation allowance in fiscal
1997 and 1996 is attributable to deferred tax assets that when realized, will
reduce unamortized goodwill or other intangible assets of the acquired
subsidiaries. The valuation allowance increased by $11,946,000, $26,038,000
and $13,161,000 in 1997, 1996 and 1995, respectively.
As of June 27, 1997, the Company has domestic and foreign net operating loss
carryforwards of approximately $37,515,000 expiring in 2003 through 2010 if
not used to offset future taxable income. In addition, the Company, as of June
27, 1997, has research and development tax credit carryforwards of
approximately $1,155,000 expiring in 2005 through 2011 if not used to offset
future tax liabilities.
F-22
<PAGE>
SEAGATE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The reconciliation between the (benefit from) provision for income taxes at
the U.S. statutory rate and the effective rate are summarized as follows, in
thousands:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
(Benefit) provision at U.S. statutory rate...... $(23,245) $(48,446) $(28,210)
State income taxes (benefit), net............... (382) (762) 188
Foreign taxes in excess of the U.S. statutory
rate........................................... 255 25 --
In-process research and development............. -- 15,382 24,626
Goodwill and other acquisition related items.... 5,666 2,833 1,217
Valuation allowance............................. 8,871 22,216 4,293
Other........................................... 121 4 151
-------- -------- --------
$ (8,714) $ (8,748) $ 2,265
======== ======== ========
</TABLE>
RESTRUCTURING COSTS
In March 1996, the Company recorded restructuring charges totaling
$9,502,000 as a result of the acquisition of Arcada, a majority-owned
subsidiary of Seagate Technology which was acquired in connection with Seagate
Technology's merger with Conner. The restructuring charges were incurred for
the reduction of personnel, write-off or write down of equipment, intangibles
and other assets, closure of duplicate and excess facilities, attorneys and
accountants fees, contract cancellations and other expenses. In connection
with the restructuring, the Company expects a total workforce reduction of
approximately 121 employees. Of that number, approximately 64 have been
terminated as of June 27, 1997, and a certain number of employees have left
the Company due to normal attrition.
During 1997, the Company recorded restructuring charges of approximately
$2,524,000, which consisted of $3,481,000 resulting from NSMG's consolidation
efforts, offset by an adjustment to reduce the 1996 restructuring by $957,000.
The restructuring charges were incurred for the reduction of personnel, write-
off or write down of equipment, intangibles and other assets, closure of
duplicate and excess facilities and other expenses. In connection with such
restructuring, the Company currently expects a total workforce reduction of
approximately 109 employees. Of that number, approximately 84 have been
terminated as of June 27, 1997, and a certain number of employees have left
the Company due to normal attrition.
The following table summarizes the Company's restructuring activity for the
two years ended June 27, 1997, in thousands:
<TABLE>
<CAPTION>
CONTRACT
EQUIPMENT, CANCELLATIONS
SEVERANCES EXCESS INTANGIBLES PROFESSIONAL AND OTHER
AND BENEFITS FACILITIES AND OTHER ASSETS FEES EXPENSES TOTAL
------------ ---------- ---------------- ------------ ------------- -------
<S> <C> <C> <C> <C> <C> <C>
1996 restructuring
charges................ $1,554 $1,571 $ 5,630 $ 525 $ 222 $ 9,502
Cash charges............ (518) -- -- (568) -- (1,086)
Non-cash charges........ -- (121) (4,168) -- (138) (4,427)
------ ------ ------- ----- ----- -------
Reserve balances, June
28, 1996............... 1,036 1,450 1,462 (43) 84 3,989
1997 restructuring
charges................ 770 505 2,106 -- 100 3,481
Cash charges............ (975) (915) -- -- -- (1,890)
Non-cash charges........ -- (72) (1,422) -- -- (1,494)
Adjustments and
reclassifications...... (351) 267 (732) 43 (184) (957)
------ ------ ------- ----- ----- -------
Reserve balances, June
27, 1997............... $ 480 $1,235 $ 1,414 $ -- $ -- $ 3,129
====== ====== ======= ===== ===== =======
</TABLE>
F-23
<PAGE>
SEAGATE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION
The Company operates in a single industry segment by developing, marketing
and supporting business intelligence and systems infrastructure management
software products, and related professional services.
The following tables summarize the Company's operations in different
geographic areas, in thousands:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 27, 1997
----------------------------------------------
ADJUSTMENTS
NORTH AND
AMERICA EUROPE ELIMINATIONS CONSOLIDATED
--------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues from unaffiliated
customers..................... $ 203,324 $ 13,626 $ -- $ 216,950
Transfers between geographic
areas......................... 861 841 (1,702) --
--------- -------- ------- ---------
Total net sales................ $ 204,185 $ 14,467 $(1,702) $ 216,950
========= ======== ======= =========
Income (loss) from operations.. (58,962) (5,071) -- (64,033)
Other income (expense), net.... (2,315) (66) -- (2,381)
--------- -------- ------- ---------
Income (loss) before income
taxes......................... $ (61,277) $ (5,137) $ -- $ (66,414)
========= ======== ======= =========
Identifiable assets............ $ 103,880 $ 39,714 $ -- $ 143,594
========= ======== ======= =========
<CAPTION>
YEAR ENDED JUNE 28, 1996
----------------------------------------------
ADJUSTMENTS
NORTH AND
AMERICA EUROPE ELIMINATIONS CONSOLIDATED
--------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues from unaffiliated
customers..................... $ 139,123 $ 2,463 $ -- $ 141,586
Transfers between geographic
areas......................... 312 -- (312) --
--------- -------- ------- ---------
Total net sales................ $ 139,435 $ 2,463 $ (312) $ 141,586
========= ======== ======= =========
Income (loss) from operations.. (102,273) (35,533) -- (137,806)
Other income (expense), net.... (644) 34 -- (610)
--------- -------- ------- ---------
Income (loss) before income
taxes......................... $(102,917) $(35,499) -- $(138,416)
========= ======== ======= =========
Identifiable assets............ $ 155,730 $ 45,868 -- $ 201,598
========= ======== ======= =========
</TABLE>
The loss from operations includes net revenues less operating expenses. The
loss from operations in Europe for the year ended June 28, 1996 is primarily
related to the write-off of $35,892,000 of in-process research and development
in connection with the acquisition of Holistic. The loss from operations in
Europe for the year ended June 27, 1997 includes approximately $7,662,000
related to the amortization of intangible assets relating to the acquisition
of Holistic and $2,613,000 relating to the write-off of in-process research
and development for contingent payments made to the former shareholders of
Holistic during 1997. The identifiable assets by geographic area are those
assets used in the Company's operations in each area.
Export sales were $44,129,000, $33,617,000 and $13,343,000 in 1997, 1996 and
1995, respectively.
LEGAL PROCEEDINGS
The Company is engaged in legal actions arising in the ordinary course of
its business and believes that the ultimate outcome of these actions will not
have a material adverse effect on the Company's financial position, liquidity,
or results of operations.
F-24
<PAGE>
SEAGATE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
COMMITMENTS
LEASES. The Company leases certain property, facilities and equipment under
non-cancelable lease agreements. Facility leases expire at various dates
through 2008 and contain various provisions for rental adjustments. The leases
require the Company to pay property taxes, insurance and normal maintenance
costs. The Company also occupies certain facilities owned by Seagate
Technology. Future minimum payments for operating leases were as follows at
June 27, 1997, in thousands:
<TABLE>
<CAPTION>
OPERATING
LEASES
---------
<S> <C>
1998............................................................ $ 5,701
1999............................................................ 5,271
2000............................................................ 3,639
2001............................................................ 3,117
2002............................................................ 2,836
After 2002...................................................... 13,302
-------
$33,866
=======
</TABLE>
Total rent expense for all facility and equipment operating leases was
approximately $5,292,000, $3,181,000 and $1,941,000 for 1997, 1996 and 1995,
respectively.
CAPITAL EXPENDITURES. The Company did not have any material commitments for
construction of facilities as of June 27, 1997.
SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Cash Transactions, in thousands:
Cash paid for interest.................................. $ 214 $ 36 $ 227
Cash paid for income taxes.............................. 2,357 4,892 4,151
</TABLE>
F-25
<PAGE>
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
--------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING OF COSTS AND OTHER ACCOUNTS- DEDUCTIONS- END OF
DESCRIPTION PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD
----------- ------------ ---------- --------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
YEAR ENDED JUNE 27,
1997:
Deducted from asset
accounts:
Allowance for doubtful
accounts............. $597,000 $1,522,000 $-- $849,000(1) $1,270,000
======== ========== ==== ======== ==========
YEAR ENDED JUNE 28,
1996:
Deducted from asset
accounts:
Allowance for doubtful
accounts............. $405,000 $ 408,000 $-- $216,000(2) $ 597,000
======== ========== ==== ======== ==========
YEAR ENDED JUNE 30,
1995:
Deducted from asset
accounts:
Allowance for doubtful
accounts............. $ 64,000 $ 443,000 $-- $ 16,000(3) $ 491,000(4)
======== ========== ==== ======== ==========
</TABLE>
- --------
(1) $849,000 uncollectible accounts written off, net of recoveries.
(2) $216,000 uncollectible accounts written off, net of recoveries.
(3) $16,000 uncollectible accounts written off, net of recoveries.
(4) The ending balance of the allowance for doubtful accounts for the year
ended June 30, 1995 does not agree to the beginning balance for the year
ended June 28, 1996 due to the pooling with Arcada. See Basis of
Presentations note to the Consolidated Financial Statements.
II-1
<PAGE>
SEAGATE SOFTWARE, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER NUMBER
------- ----------
<C> <S> <C>
2.1 Restructuring and Contribution Agreement dated April 4,
1996 among the Registrant, Seagate Technology, Inc., and
Seagate Peripherals, Inc. and for purposes of Sections 3
and 6 only: Seagate Technology International Holdings and
Crystal Computer Services, Inc.
2.2 Exchange Agreement dated June 29, 1996 among the
Registrant, Seagate Technology, Inc. and Seagate
Peripherals, Inc.
3.1 Certificate of Incorporation of Registrant, as amended
3.2 Bylaws of Registrant, as amended
4.1 Voting Agreement dated December 26, 1996 among the
Registrant, Seagate Software Information Management
Group, Inc. and Seagate Technology International Holdings
10.1 1996 Stock Option Plan, as amended, form of Stock Option
Agreement and form of Amendment to Stock Option Agreement
10.2(A) Seagate Technology, Inc. Employee Stock Purchase Plan, as
amended
10.3 Lease Agreement, dated December 27, 1994, between the
Registrant and Clover Investments, Inc.
10.4 Lease Agreement, dated March 21, 1996 between the
Registrant and 400 International Parkway Development
Company
10.5* General Services Agreement dated June 28, 1997 between
the Registrant and Seagate Technology, Inc.
10.6 Tax Allocation Agreement dated April 4, 1996 between the
Registrant and Seagate Technology, Inc.
10.7 Intercompany Revolving Loan Agreement dated June 28, 1996
between the Registrant and Seagate Technology, Inc.
10.8 Form of Indemnification Agreement entered into between
the Registrant and its directors and officers
10.9 Support Agreement dated December 26, 1996 between the
Registrant and Seagate Software Information Management
Group, Inc.
13.1 Holistic Systems Limited (now Seagate Software
Information Management Group Limited) Statements of
Consolidated Profits and Cash Flows and Related Notes
Year Ended 31 March 1996
21.1 Subsidiaries of the Registrant
24.1 Power of Attorney (see page 27)
27.1 Financial Data Schedule
</TABLE>
- --------
* Confidential treatment has been requested for a portion of this exhibit
pursuant to a request for confidential treatment filed with the Securities
and Exchange Commission. Omitted portions have been filed separately with
the Commission.
(A) Incorporated by reference to exhibits filed in connection with Seagate
Technology's Registration Statement on Form S-8 (Reg. No. 33-56215) as
declared effective by the Securities and Exchange Commission on November
16, 1994.
<PAGE>
Exhibit 2.1
================================================================================
SEAGATE SOFTWARE, INC.
RESTRUCTURING AND CONTRIBUTION AGREEMENT
APRIL 4, 1996
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. Authorization; Issuance of Stock; Closing................................ 2
2. Contribution of Software Subsidiaries by Seagate and Seagate Peripherals. 3
(a) Contribution of SEMS................................................ 3
(b) Contribution of Palindrome.......................................... 4
(c) Contribution of OnDemand............................................ 4
(d) Contribution of Intellectual Property Subsidiary.................... 5
3. Crystal Restructuring.................................................... 5
4. Conditions to Closing.................................................... 6
(a) Covenants........................................................... 6
(b) Blue Sky............................................................ 6
(c) Option Plan......................................................... 6
(d) Compensation Committee.............................................. 6
(e) Board of Directors.................................................. 6
(f) Officers............................................................ 6
(g) Bylaws.............................................................. 6
(h) Indemnification Agreements.......................................... 6
(i) Board of Stockholder Approval....................................... 6
(j) Subordinated Credit Agreement....................................... 7
5. Investment Representations of Seagate Peripherals........................ 7
6. Miscellaneous............................................................ 7
(a) Governing Law....................................................... 7
(b) Survival............................................................ 7
(c) Successors and Assigns.............................................. 7
(d) Entire Agreement; Amendment......................................... 8
(e) Counterparts........................................................ 8
(f) Severability........................................................ 8
(g) Titles and Subtitles................................................ 8
(h) Benefits of Restructuring Agreement................................. 8
</TABLE>
SCHEDULES
Schedule 1 - Corporate Structure and Capitalization of Seagate Before
Restructuring
Schedule 2 - Corporate Structure and Capitalization of Seagate After
Restructuring
-i-
<PAGE>
EXHIBITS
Exhibit A - Amended and Restated Certificate of Incorporation
Exhibit B - Form of Assignment
Exhibit C - 1996 Stock Option Plan
Exhibit D - Amended and Restated Bylaws
Exhibit E - Indemnification Agreement
-ii-
<PAGE>
RESTRUCTURING AND CONTRIBUTION AGREEMENT
THIS RESTRUCTURING AND CONTRIBUTION AGREEMENT (the "Restructuring
Agreement") is made and entered into as of April 4, 1996, by and among Seagate
Technology, Inc., a Delaware corporation ("Seagate"), Seagate Peripherals, Inc.,
a Delaware corporation and a wholly-owned subsidiary of Seagate ("Seagate
Peripherals"), and Seagate Software, Inc., a Delaware corporation and a wholly-
owned subsidiary of Seagate Peripherals (formerly Arcada Holdings, Inc., a
Delaware corporation) ("Seagate Software").
The following entities are also parties to this Restructuring Agreement for
purposes of Section 3 (Crystal Restructuring) and Section 6 (Miscellaneous)
only: Seagate Technology International Holdings, a Cayman Islands corporation
and an indirect subsidiary of Seagate ("Seagate Holdings Cayman"), and Crystal
Computer Services Inc., a Canadian corporation and a wholly-owned subsidiary of
Seagate Holdings Cayman ("Crystal").
BACKGROUND
A. Seagate (through Seagate Peripherals, its wholly-owned subsidiary)
desires to contribute its software subsidiaries to Seagate Software, in exchange
for shares of Series A Preferred Stock and Common Stock of Seagate Software to
be issued to Seagate Peripherals as described herein.
B. Seagate further desires to cause Seagate Software to establish a stock
option plan with shares of Common Stock of Seagate Software to be reserved for
issuance thereunder to provide employees an opportunity for equity participation
in Seagate Software.
C. Certain of Seagate's software subsidiaries include the following
entities:
(a) Seagate Enterprise Management Software, a California corporation
and a wholly-owned subsidiary of Seagate ("SEMS") (formerly NetLabs Inc.) into
which Network Computing, Inc., Frye Computer Systems, Inc. and Creative
Interaction Technologies, Inc. have been merged;
(b) Palindrome Corporation, a Delaware corporation ("Palindrome"), and
a wholly-owned subsidiary of Seagate;
(c) OnDemand Software, Inc., a Florida corporation ("OnDemand"), and a
wholly-owned subsidiary of Seagate; and
(d) Seagate IP, Inc., a Delaware corporation ("Intellectual Property
Subsidiary"), which owns certain intellectual property and is a wholly-owned
subsidiary of Seagate, and which in turn has the following foreign subsidiaries:
Seagate Software S.A., a corporation organized under the laws of France
("Seagate France") (99.76% owned), Seagate Software Limited, a corporation
organized under the laws of the United Kingdom
<PAGE>
("Seagate U.K.") (100% owned), and Seagate Software GmbH, a corporation
organized under the laws of Germany ("Seagate Germany") (100% owned).
D. Seagate Software is a wholly-owned subsidiary of Seagate Peripherals
and in turn owns all of the outstanding capital stock of Seagate Software
Storage Management Group, Inc. ("SSSM") (formerly Arcada Software, Inc.).
E. On or shortly after the date of this Restructuring Agreement, Seagate
wishes to recapitalize Crystal (the "Crystal Restructuring Agreement"), an
offshore subsidiary of Seagate Holdings Cayman, to provide that Seagate Software
will be able to treat Crystal as a subsidiary on a consolidated financial basis
and thus consolidate Crystal's financial statements with the financial
statements of Seagate Software for solely accounting purposes.
F. Immediately prior to the Restructuring (as defined in Section 1(c)
below), the relevant corporate structure of Seagate, Seagate Peripherals and the
software subsidiaries is as reflected on Schedule 1 hereto.
----------
G. Initially following the date of the Restructuring, the corporate
structure of Seagate, Seagate Peripherals and Seagate Software is intended to be
as reflected on Schedule 2 hereto.
----------
H. As of the date of this Restructuring Agreement Seagate Peripherals
holds 28,268,500 shares of Series A Preferred Stock (the "Old Series A
Preferred") and 300 shares of Common Stock of Seagate Software. The parties
contemplate that effective upon the Closing (defined in Section 1(c) below),
Seagate Peripherals would own an aggregate of 34,500,000 shares of new Series A
Preferred Stock of Seagate Software (the "New Series A Preferred"), with the
amended and restated terms set forth in the Amended and Restated Certificate of
Incorporation substantially in the form attached as Exhibit A (the "Restated
---------
Certificate"), and 62,500 shares of Common Stock of Seagate Software. The New
Series A Preferred would have a fair market value per share equal to $7.50 as of
the date of this Recapitalization Agreement and the Common Stock would have a
fair market value per share equal to $4.00 as of the date of this
Recapitalization Agreement (such fair market value as determined by the Board of
Directors of Seagate Software in its sole discretion).
NOW, THEREFORE, intending to be legally bound hereby and for consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties agree
as follows:
1. Authorization Issuance of Stock Closing.
---------------------------------------
(a) In exchange for the contributions and agreements set forth in
Sections 2 and 3 below, the Board of Directors of Seagate Software (the "Board")
has (i) authorized the amendment and restatement of the Certificate of
Incorporation of Seagate Software to, among other things, (A) increase the
number of authorized shares of capital stock of Seagate Software to 80,000,000
shares of Common Stock and 60,000,000 shares of Preferred Stock, including
2
<PAGE>
41,700,000 shares of Series A Preferred Stock and 18,300,000 shares of Preferred
Stock available for future designation by the Board, (B) amend and restate the
terms of the Series A Preferred Stock outstanding as of the date of this
Restructuring Agreement to read as set forth in the Restated Certificate and
(C) eliminate the currently authorized Series B Preferred Stock (none of which
is outstanding) and (ii) authorized the issuance of the shares described in
Section 1(b) below.
(b) Effective upon the Closing, Seagate Software shall (i) cause the
Restated Certificate to be filed with the Delaware Secretary of State's Office,
with the effect, among other things, that the terms of the Old Series A
Preferred shall be amended to be the New Series A Preferred, and (ii) issue to
Seagate Peripherals an additional 6,231,500 shares of New Series A Preferred and
62,200 shares of Common Stock of Seagate Software, such that immediately
following the Closing, Seagate Peripherals shall hold an aggregate of 34,500,000
shares of New Series A Preferred and 62,500 shares of Common Stock, representing
all of the outstanding capital stock of Seagate Software (such shares in the
aggregate are referred to as the "Shares").
(c) The closing (the "Closing") of the transactions contemplated
hereby shall be held at the offices of Wilson, Sonsini, Goodrich & Rosati, 650
Page Mill Road, Palo Alto, California on April 4, 1996, subject to satisfaction
or waiver of the conditions to closing set forth in Section 3 below. At the
Closing, Seagate Software will deliver to Seagate Peripherals certificates
representing the shares referred to in Section 1(b) above. The transactions
contemplated by this Restructuring Agreement are collectively referred to as the
"Restructuring."
2. Contribution of Software Subsidiaries by Seagate and Seagate
------------------------------------------------------------
Peripherals. Effective upon the Closing, Seagate and Seagate Peripherals shall
- -----------
make the contributions described below.
(a) Contribution of SEMS.
--------------------
(i) Seagate will contribute capital consisting of 4,000 shares
of Common Stock of SEMS representing all of the outstanding shares of SEMS (the
"SEMS Shares"), a wholly-owned subsidiary of Seagate, to Seagate Peripherals.
Seagate shall submit to the transfer agent of SEMS the certificate representing
the SEMS Shares, together with a properly executed form of assignment in
substantially the form attached as Exhibit B (the "Assignment Form"). SEMS
---------
shall cause its transfer agent to cancel such certificate to issue a new
certificate evidencing the SEMS Shares issued in the name of Seagate
Peripherals.
(ii) Seagate Peripherals will contribute capital consisting of
the SEMS Shares to Seagate Software. Seagate Peripherals shall submit the
certificate representing the SEMS Shares to the transfer agent of SEMS, together
with a properly executed Assignment Form. SEMS shall cause its transfer agent
to cancel such certificate and to issue a new certificate representing the SEMS
Shares in the name of Seagate Software.
3
<PAGE>
(b) Contribution of Palindrome.
--------------------------
(i) Seagate will contribute capital consisting of 1,000 shares
of Common Stock of Palindrome representing all of the outstanding capital stock
of Palindrome (the "Palindrome Shares") to Seagate Peripherals. Seagate shall
deliver the certificate representing the Palindrome Shares to the transfer agent
of Palindrome together with a properly executed Assignment Form. Palindrome
shall cause its transfer agent to cancel such certificate and to issue a new
certificate evidencing the Palindrome Shares issued in the name of Seagate
Peripherals.
(ii) Seagate Peripherals will contribute capital consisting of
the Palindrome Shares to Seagate Software. Seagate Peripherals shall deliver
the certificate representing the Palindrome Shares to the transfer agent of
Palindrome, together with a properly executed Assignment Form. Palindrome shall
cause its transfer agent to cancel such certificate and to issue a new
certificate representing the Palindrome Shares in the name of Seagate Software.
(iii) In connection with the corporate restructuring of Seagate
Software (as set forth on Schedule 2), Seagate Software will contribute capital
consisting of the Palindrome Shares to SSSM. Seagate Software shall deliver to
the transfer agent of Palindrome the certificate representing the Palindrome
Shares, together with a properly executed Assignment Form. Palindrome shall
cause its transfer agent to cancel such certificate and to issue a new
certificate evidencing the Palindrome Shares issued in the name of SSSM.
(c) Contribution of OnDemand.
------------------------
(i) Seagate will contribute capital consisting of 1,000 shares
of Common Stock of OnDemand representing all of the outstanding capital stock of
OnDemand (the "OnDemand Shares"), a wholly-owned subsidiary of Seagate, to
Seagate Peripherals. Seagate shall deliver the certificate representing the
OnDemand Shares to the transfer agent of OnDemand, together with a properly
executed Assignment Form. OnDemand shall cause its transfer agent to cancel
such certificate and to issue a new certificate and to issue a new certificate
evidencing the OnDemand Shares issued in the name of Seagate Peripherals.
(ii) Seagate Peripherals will contribute capital consisting of
the OnDemand Shares to Seagate Software. Seagate Peripherals shall deliver the
certificate representing the OnDemand Shares to the transfer agent of OnDemand,
together with a properly executed Assignment Form. OnDemand shall cause its
transfer agent to cancel such certificate and to issue a new certificate
representing OnDemand Shares in the name of Seagate Software.
(iii) In connection with the corporate restructuring of Seagate
Software (as set forth on Schedule 2), Seagate Software will contribute capital
consisting of the OnDemand Shares to SEMS. Seagate Software shall deliver the
certificate representing the OnDemand Shares to the transfer agent of OnDemand,
together with a properly executed Assignment Form.
4
<PAGE>
OnDemand shall cause its transfer agent to cancel such certificate and to issue
a new certificate representing the OnDemand Shares in the name of SEMS.
(iv) After the date of this Restructuring Agreement. OnDemand
shall be merged with and into SEMS and the separate corporate existence of
OnDemand shall cease.
(d) Contribution of Intellectual Property Subsidiary
------------------------------------------------
(i) Seagate will contribute capital consisting of 1,000 shares
of Commons Stock of Intellectual Property Subsidiary representing all of the
outstanding capital stock of Intellectual Property Subsidiary (the "IP Shares")
to Seagate Peripherals. Seagate shall deliver the certificate representing the
IP Shares to the transfer agent of Intellectual Property Subsidiary, together
with a properly executed Assignment Form. Intellectual Property Subsidiary
shall cause its transfer agent to cancel such certificate and to issue a new
certificate evidencing the IP Shares issued in the name of Seagate Peripherals.
(ii) Seagate Peripherals will contribute capital consisting of
the IP Shares to Seagate Software. Seagate Peripherals shall deliver the
certificate representing the IP Shares to the transfer agent of Intellectual
Property Subsidiary, together with a properly executed Assignment Form.
Intellectual Property Subsidiary shall cause its transfer agent to cancel such
certificate and to issue a new certificate representing the IP Shares in the
name of Seagate Software.
(iii) Promptly after the date of this Restructuring Agreement,
Intellectual Property Subsidiary shall be merged with and into Seagate Software
(the "IP Merger") and the separate corporate existence of Intellectual Property
Subsidiary shall cease. Upon effectiveness of the IP Merger, Seagate France,
Seagate U.K. and Seagate Germany will become wholly-owned subsidiaries of
Seagate Software.
3. Crystal Restructuring.
---------------------
(a) Following the date of this Restructuring Agreement, Seagate,
Seagate Holdings Cayman, Crystal and Seagate Software will enter into the
Crystal Restructuring Agreement pursuant to which, among other things, the
capitalization structure of Crystal will be restructured such that (i) Seagate
Holdings Cayman will receive shares of non-voting Common Stock of Crystal,
exchangeable, at the option of Seagate Holdings Cayman, into 7,200,000 shares of
Series A Preferred Stock of Seagate Software (valued at a price of $7.50 per
share of Series A Preferred Stock of Seagate Software, for an aggregate value of
$54 million), and (ii) Seagate Software will receive shares of voting Common
Stock of Crystal (the "Crystal Restructuring").
(b) As a result of the of Crystal Restructuring, Crystal will be
treated as a subsidiary of Seagate Software and Seagate Software will be able to
consolidate Crystal's financial statements with its own financial statements for
accounting purposes only.
5
<PAGE>
4. Conditions to Closing. The obligations of the parties under this
---------------------
Restructuring Agreement are subject to the fulfillment or waiver of the
following conditions:
(a) Covenants. All covenants, agreements and conditions contained in
---------
this Restructuring Agreement to be performed by the parties on or prior to the
Closing shall have been performed or complied with in all material respects.
(b) Blue Sky. Seagate Software shall have obtained all necessary blue
--------
Sky law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and exchange of the Shares.
(c) Option Plan. The Board of Directors of Seagate Software shall have
-----------
approved the implementation of the 1996 Stock Option Plan for the employees of
Seagate Software substantially in the form attached as Exhibit C (the "Stock
---------
Option Plan"). Seagate Software shall have reserved 10 million shares of Common
Stock of Seagate Software for issuance upon exercise of stock options to be
granted under the Stock Option Plan.
(d) Compensation Committee. The Board of Directors of Seagate
----------------------
Software shall have approved the formation of a Compensation Committee
consisting of Alan F. Shugart, Donald L. Waite, Stephen J. Luczo and Gary
Filler.
(e) Board of Directors. The Board of Directors of Seagate Software
------------------
as of the Closing will consist of Alan F. Shugart, Donald L. Waite, Stephen J.
Luczo, Gary Filler and Lawrence Perlman.
(f) Officers. The offers of Seagate Software as of the Closing will
--------
be as follows:
Alan F. Shugart, President
Donald L. Waite. Vice President, Treasurer and Secretary
Stephen J. Luczo, Vice President and Assistant Secretary
Ellen Chamberlain, Vice President and Assistant Treasurer
(g) Bylaws. The Board of Directors and sole stockholder of Seagate
------
Software shall have approved the Amended and Restated Bylaws of Seagate
Software, Inc, substantially in the form attached as Exhibit D.
---------
(h) Indemnification Agreements. The officers of Seagate Software
--------------------------
shall have executed Indemnification Agreements substantially in the form
attached as Exhibit E.
---------
(i) Board and Stockholder Approval. Each of the parties to this
------------------------------
Restructuring Agreement shall have obtained all necessary consents and approvals
by its respective Board of Directors or stockholders, if any, necessary to
perform the transactions contemplated by this Restructuring Agreement.
6
<PAGE>
(j) Subordinated Credit Agreement. The obligations of Seagate
-----------------------------
Software and Seagate Peripherals under the Subordinated Credit Agreement (the
"Subordinated Credit Agreement"), dated January 5, 1994, among SSSM, as
Borrower, Seagate Software, as Guarantor and Seagate Peripherals, as Lender,
shall have been terminated as of the Closing.
5. Investment Representations of Seagate Peripherals. Seagate Peripherals
-------------------------------------------------
represents and warrants to Seagate Software as follows:
(a) Seagate Peripherals is acquiring the Shares in the Restructuring
for investment for its own account only and not with a view to, or for resale in
connection with, any "distribution" thereof within the meaning of the Securities
Act of 1933, as amended (the "Securities Act").
(b) Seagate Peripherals acknowledges and understands that the Shares
constitute "restricted securities" under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Seagate Peripheral's investment intent as expressed herein.
(c) The certificates evidencing the Shares will be imprinted with the
following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OF OR, IN THE OPINION OF COUNSEL IN FORM AND
SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER,
SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
(d) Seagate Peripherals acknowledge that there are no Warrants for
Series B Preferred Stock of Seagate Software outstanding pursuant to the
terminated Subordinated Credit Agreement and relinquishes any rights to such
Warrants.
6. Miscellaneous.
-------------
(a) Governing Law. This Restructuring Agreement shall be governed
-------------
in all respects by the internal laws of the State of Delaware.
(b) Survival. The representations, warranties, covenants and
--------
agreements made herein shall survive any investigation made by any of the
parties hereto and the closing of the transactions contemplated hereby.
(c) Successors and Assigns. Except as otherwise provided herein, the
----------------------
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
7
<PAGE>
(d) Entire Agreement Amendment. This Restructuring Agreement and the other
--------------------------
documents delivered pursuant hereto at the Closing constitute the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof, and no party shall be liable or bound to any other
party in any manner by any warranties, representations or covenants except as
specifically set forth herein or therein. Except as expressly provided herein,
neither this Restructuring Agreement nor any term hereof may be amended, waived,
discharged or terminated other than by a written instrument signed by the party
against whom enforcement of any such amendment, waiver, discharge or termination
is sought.
(e) Counterparts. This Restructuring Agreement may be executed in any
------------
number of counterparts, each of which shall be enforceable against the parties
actually executing such counterparts, and all of which together shall constitute
one instrument.
(f) Severability. In the event that any provision of this Restructuring
------------
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Restructuring Agreement shall continue in
full force and effect without said provision, provided that no such severability
shall be effective if it materially changes the economic benefit of this
Restructuring Agreement to any party.
(g) Titles and Subtitles. The titles and subtitles used in this
--------------------
Restructuring Agreement are used for convenience only and are not considered in
construing or interpreting this Restructuring Agreement.
(h) Benefits of Restructuring Agreement. Nothing in this Restructuring
-----------------------------------
Agreement, express or implied, shall give to any person, other than the parties
hereto and their successors hereunder any benefit or any legal or equitable
right, remedy or claim under this Restructuring Agreement.
8
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Restructuring Agreement
as of the date first written above.
SEAGATE TECHNOLOGY, INC.
By: /s/ Alan F. Shugart
---------------------------
Alan F. Shugart
Title: President
SEAGATE PERIPHERALS, INC. SEAGATE SOFTWARE, INC.
By: /s/ Donald L. Waite By: /s/ Donald L. Waite
--------------------------- -----------------------------
Donald L. Waite Donald L. Waite
Title: President Title: Vice President
SEAGATE TECHNOLOGY INTER-
NATIONAL HOLDINGS (CAYMAN)* CRYSTAL COMPUTER SERVICES INC.*
By: /s/ Stephen J. Luczo By: /s/ Stephen J. Luczo
--------------------------- -----------------------------
Stephen J. Luczo Stephen J. Luczo
Title: President Title: Vice President
* Signatories for purposes of Section 3 (Crystal Restructuring) and Section 6
(miscellaneous) only.
9
<PAGE>
SCHEDULE 1
CORPORATE STRUCTURE BEFORE RESTRUCTURING
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
--------------------
Seagate
Technology,
Inc.
---------------------
---------------------------------------------------------------------------------------------------------------
Seagate Seagate Seagate
OnDemand Palindrome SEMS Technology Peripherals, IP,
Software, Inc. Corporation International Inc. Inc.
(Cayman)
-------------- ------------ ---- -------------- ------------ -------
--------------- ----------
Seagate Seagate
Technology Software,
International Inc.
Holdings (formerly
(Cayman) Arcada
Holdings,
Inc.)
--------------- ----------
------- -------- --------
Seagate Seagate Seagate
Software Software Software
S.A. Limited GmbH
(France) (U.K.) (Germany)
------- -------- --------
--------------- ----------
Crystal Seagate
Computer Software
Services Storage
Inc. Management
(formerly
Arcada
Software)
--------------- ----------
</TABLE>
<PAGE>
CURRENT CAPITALIZATION
OnDemand Software, Inc.
- -----------------------
Authorized: 1,000 shares of common stock, $0.01 par value
Outstanding: 1,000 shares issued to Seagate Technology, Inc.
Palindrome Corporation
- ----------------------
Authorized: 1,000 shares of common stock, $0.0001 par value
Outstanding: 1,000 shares issued to Seagate Technology, Inc.
Seagate Enterprise Management Systems (consists of: NetLabs, Inc., Network
- -------------------------------------
Computing, Inc., Frye Computer Systems, Inc. and Creative Interaction
Technologies, Inc.)
Authorized: 10,000 shares of common stock, no par value
Outstanding: 4,000 shares issued to Seagate Technology, Inc.
Seagate Peripherals, Inc.
- -------------------------
Authorized: 1,000 shares of common stock, $0.001 par value
Outstanding: 100 shares issued to Seagate Technology, Inc.
Seagate Software, Inc. (formerly Arcada Holdings, Inc.)
- ----------------------
Authorized: 200,000,000 shares consisting of-
120,000,000 shares of common stock, $0.001 par value
40,000,000 shares of Series A preferred stock,
$0.001 par value
40,000,000 shares of Series B preferred stock,
$0.001 par value
Outstanding: 300 shares of common stock issued to Seagate Peripherals, Inc.
28,268,500 shares of Series A preferred stock issued to Seagate
Peripherals, Inc.
Seagate Software Storage Management Group, Inc. (formerly Arcada Software)
- -----------------------------------------------
Authorized: 1,000 shares of common stock, $1.00 par value
Outstanding: 736 shares issued to Arcada Holdings, Inc. (not certificated)
<PAGE>
Seagate IP, Inc.
- ----------------
Authorized: 1,000 shares of common stock, $0.01 par value
Outstanding: 1,000 shares issued to Seagate Technology, Inc.
Seagate Software S.A. (France)
- ------------------------------
Authorized: 2,500 shares of common stock, 100 FRF par value
Outstanding: 2,500 shares issued consisting of -
1 share issued to Hans-Dieter Blaser
1 share issued to Stephen J. Luczo
1 share issued to Michael A. Montandon
1 share issued to Alan F. Shugart
1 share issued to Jose Vasco
1 share issued to Donald L. Waite
2,494 shares issued to Seagate Software, Inc.
Seagate Software Limited (U.K.)
- -------------------------------
Authorized: 1,000 shares of ordinary stock, GB 1.00 par value
Outstanding: 100 shares issued to Seagate Software, Inc.
Seagate Software GmbH (Germany)
- -------------------------------
Authorized: 50,000 shares of capital stock, no par value
Outstanding: 50,000 shares issued to Seagate Software, Inc.
<PAGE>
SCHEDULE 2
CORPORATE STRUCTURE AFTER RESTRUCTURING
<TABLE>
<CAPTION>
-----------
Seagate
Technology,
Inc.
-----------
<S> <C> <C> <C> <C> <C>
- -------------- -------------------
Seagate Seagate
Technology Peripherals, Inc.
International
(Cayman)
- ------------- -------------------
- --------------- -------------------
Seagate Seagate Software,
Technology Inc. (formerly
International Arcada Holdings)
Holdings (Cayman)
- ---------------- -------------------
non- voting stock
voting
stock*
- ---------- ------ -------------- ------------- ------------ ------------
Seagate
Crystal Computer SEMS Software Seagate Seagate Seagate
Services Storage Software Software Software
Inc. Management S.A. Limited GmbH
(formerly (France) (U.K.) (Germany)
Arcada **** **** ****
Software)
- ---------- ------ -------------- ------------- ------------ ------------
------------------ -------------
OnDemand Palindrome
Software, Inc.*** Corporation**
------------------ -------------
</TABLE>
*Exchangeable for shares of Seagate Software, Inc.
**May be merged into Seagate Software Storage Management.
***May be merged into SEMS.
****Currently a subsidiary of Seagate IP, Inc. (Seagate IP, Inc. will be merged
into Seagate Software, Inc. promptly after the closing of this
restructuring).
<PAGE>
PROPOSED CAPITALIZATION
Seagate Peripherals, Inc.
- -------------------------
Authorized: 1,000 shares of common stock, $0.001 par value
Outstanding: 100 shares issued to Seagate Technology, Inc.
Seagate Software, Inc. (formerly Arcada Holdings, Inc.)
- ----------------------
Authorized: 140,000,000 shares consisting of-
80,000,000 shares of common stock, $0.001 par value
60,000,000 shares of preferred stock, $0.001 par value
41,700,000 shares of Series A preferred stock
18,300,000 shares of undesignated preferred stock
Outstanding: 62,500 shares of common stock issued to Seagate Peripherals, Inc.
34,500,000 shares of Series A preferred stock issued to Seagate
Peripherals, Inc.
Seagate Enterprise Management Systems (consists of: NetLabs, Inc., Network
- -------------------------------------
Computing, Inc., Frye Computer Systems, Inc. and Creative Interaction
Technologies, Inc.)
Authorized: 10,000 shares of common stock, no par value
Outstanding: 4,000 shares issued to Seagate Software, Inc.
OnDemand Software, Inc.
- -----------------------
Authorized: 1,000 shares of common stock, $0.01 par value
Outstanding: 1,000 shares issued to Seagate Enterprise Management Systems
Seagate Software Storage Management Group, Inc. (formerly Arcada Software)
- -----------------------------------------------
Authorized: 1,000 shares of common stock, $1.00 par value
Outstanding: 736 shares issued to Seagate Software, Inc.
Palindrome Corporation
- ----------------------
Authorized: 1,000 shares of common stock, $0.0001 par value
Outstanding: 1,000 shares issued to Seagate Software Storage Management Group,
Inc.
<PAGE>
Seagate Software S.A. (France)
- ------------------------------
Authorized: 2,500 shares of common stock, 100 FRF par value
Outstanding: 2,500 shares issued consisting of -
1 share issued to Hans-Dieter Blaser
1 share issued to Stephen J. Luczo
1 share issued to Michael A. Montandon
1 share issued to Alan F. Shugart
1 share issued to Jose Vasco
1 share issued to Donald L. Waite
2,494 shares issued to Seagate Software, Inc.
Seagate Software Limited (U.K.)
- -------------------------------
Authorized: 1,000 shares of ordinary stock, GB 1.00 par value
Outstanding: 100 shares issued to Seagate Software, Inc.
Seagate Software GmbH (Germany)
- -------------------------------
Authorized: 50,000 shares of capital stock, no par value
Outstanding: 50,000 shares issued to Seagate Software, Inc.
<PAGE>
EXHIBIT 2.2
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (the "Agreement") is made and entered into as of
June 29, 1996, by and among Seagate Technology, Inc., a Delaware corporation
("Seagate"), Seagate Peripherals, Inc., a Delaware corporation and a wholly-
owned subsidiary of Seagate ("Seagate Peripherals"), and Seagate Software, Inc.,
a Delaware corporation and a wholly-owned subsidiary of Seagate Peripherals
("Seagate Software").
BACKGROUND
A. On May 3, 1996, Seagate acquired Calypso Software Systems, Inc., a New
Hampshire corporation ("Calypso"), through the merger of its wholly-owned
subsidiary, Gulfstream Acquisition Corporation, a New Hampshire corporation,
with and into Calypso such that Calypso became a wholly-owned subsidiary of
Seagate. On June 18, 1996, Seagate acquired Holistic Systems Limited, a
corporation organized and existing under the laws of the United Kingdom
("Holistic Systems"), by acquiring 33,550 B shares of ten pence each and 66,450
A shares of ten pence each and 33,550 dollar denominated bearer B shares of
fifteen cents each and 66,450 dollar denominated bearer A shares of fifteen
cents each, being all of the issued and outstanding share capital of Holistic
Systems.
B. The Board of Directors of Seagate Software (the "Board") has
determined that the fair market value of the Series A Preferred Stock, par value
$.001 per share, of Seagate Software (the "Series A Preferred") as of the date
hereof is $7.50 per share.
C. Seagate desires to contribute Calypso to Seagate Peripherals, which in
turn desires to contribute Calypso to Seagate Software, in exchange for
1,733,333 shares of Series A Preferred to be issued to Seagate Peripherals as
described herein.
D. Seagate Software owns all of the outstanding capital stock of Seagate
Enterprise Management Software, a California corporation ("SEMS"), and desires
to merge Calypso with and into SEMS as described herein, with SEMS as the
surviving corporation.
E. Seagate desires to contribute Holistic Systems to Seagate Peripherals,
which in turn desires to contribute Holistic Systems to Seagate Software, in
exchange for an additional 11,200,000 shares of Series A Preferred to be issued
to Seagate Peripherals as described herein.
NOW, THEREFORE, intending to be legally-bound hereby and for consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties agree
as follows:
1. Authorization; Issuance of Stock; Closing.
-----------------------------------------
(a) In connection with the transactions contemplated by this
Agreement, the Board has (i) authorized the amendment and restatement of the
Amended and Restated Certificate of Incorporation of Seagate Software, in the
form attached hereto as Exhibit A (the "Restated Certificate"), to increase the
---------
authorized number of shares of Common Stock to 95,600,000 shares and to increase
the number of authorized shares of Series A Preferred to 54,633,333 shares; (ii)
authorized the issuance of the shares described in Section 1(b) below; and (iii)
approved the merger of SEMS and Calypso.
<PAGE>
(b) Prior to Closing (as defined below), Seagate Software shall cause
the Restated Certificate to be filed with the Delaware Secretary of State's
Office. At Closing, Seagate Software shall issue to Seagate Peripherals an
aggregate 12,933,333 shares of Series A Preferred (the "Shares") for the
following consideration: (i) 1,733,333 Shares, with an aggregate value of
$13,000,000, in exchange for the contribution of all of the outstanding stock of
Calypso pursuant to Section 2 below, and (ii) 11,200,000 Shares, with an
aggregate value of $84,000,000, in exchange for the contribution of all of the
outstanding share capital stock of Holistic Systems pursuant to Section 3 below.
(c) The closing (the "Closing") of the transactions contemplated
hereby shall be held at the offices of Wilson, Sonsini, Goodrich & Rosati, 650
Page Mill Road, Palo Alto, California on June 29, 1996, subject to satisfaction
or waiver of the conditions to closing set forth in Section 3 below. At the
Closing, Seagate Software will deliver to Seagate Peripherals certificates
representing the Shares.
2. Contribution of Calypso. Effective upon the Closing, Seagate and
-----------------------
Seagate Peripherals shall make the contributions described below:
(a) Seagate will contribute capital consisting of 100 shares of Common
Stock, no par value, of Calypso, representing all of the outstanding shares of
Calypso (the "Calypso Shares"), to Seagate Peripherals and shall receive no
additional shares of Seagate Peripherals in exchange therefor. Seagate shall
submit to the transfer agent of Calypso the certificate representing the Calypso
Shares, together with a properly executed form of assignment in substantially
the form attached as Exhibit B (the "Assignment Form"). Calypso shall cause its
---------
transfer agent to cancel such certificate and to issue a new certificate
evidencing the Calypso Shares issued in the name of Seagate Peripherals.
(b) Seagate Peripherals will contribute capital consisting of the
Calypso Shares to Seagate Software, and in exchange, Seagate Software shall
issue to Seagate Peripherals 1,733,333 Shares. Seagate Peripherals shall submit
the certificate representing the Calypso Shares to the transfer agent of
Calypso, together with a properly executed Assignment Form. Calypso shall cause
its transfer agent to cancel such certificate and to issue a new certificate
representing the Calypso Shares in the name of Seagate Software.
(c) On or after the date of this Agreement, Calypso shall be merged
with and into SEMS, and the separate corporate existence of Calypso shall cease.
3. Contribution of Holistic Systems. Effective upon the Closing, Seagate
--------------------------------
and Seagate Peripherals shall make the contributions described below:
(a) Seagate will contribute capital consisting of 33,550 B shares of
ten pence each, and 66,450 A shares of ten pence each (together the "Sterling
Shares") and 33,550 dollar denominated bearer B shares of fifteen cents each and
66,450 dollar denominated bearer A shares of fifteen cents each (together the
"Dollar Shares" and together with the Sterling Shares, the "HS Shares") being
all of the issued and outstanding share capital of Holistic Systems, to Seagate
Peripherals and shall receive no additional shares of Seagate Peripherals in
exchange therefor. Seagate shall submit to the transfer agent of Holistic
Systems the certificate representing the Sterling
2
<PAGE>
Shares and shall deliver the Dollar Shares to the transfer agent, together with
a properly executed assignment form substantially in the form attached as
Exhibit C. Holistic Systems shall cause its transfer agent to cancel such
certificate evidencing the Sterling Shares and to issue a new certificate in the
name of Seagate Peripherals.
(b) Seagate Peripherals will contribute capital consisting of the HS
Shares to Seagate Software and in exchange, Seagate Software shall issue to
Seagate Peripherals 11,200,000 Shares. Seagate Peripherals shall submit the
certificate representing the Sterling Shares and shall deliver the Dollar Shares
to the transfer agent of Holistic Systems, together with a properly executed
assignment form substantially in the form attached as Exhibit D. Holistic
Systems shall cause its transfer agent to cancel such certificate evidencing the
Sterling Shares and to issue a new certificate in the name of Seagate Software.
4. Conditions to Closing. The obligations of the parties under this
---------------------
Agreement are subject to the fulfillment or waiver of the following conditions:
(a) Covenants. All covenants, agreements and conditions contained in
---------
this Agreement to be performed by the parties on or prior to the Closing shall
have been performed or complied with in all material respects.
(b) Blue Sky. Seagate Software shall have obtained all necessary Blue
--------
Sky law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and exchange of the Shares.
(c) Board and Stockholder Approval. Each of the parties to this
------------------------------
Agreement shall have obtained all necessary consents and approvals by its
respective Board of Directors or stockholders, if any, necessary to perform the
transactions contemplated by this Agreement.
5. Investment Representations of Seagate Peripherals. Seagate
-------------------------------------------------
Peripherals represents and warrants to Seagate Software as follows:
(a) Seagate Peripherals is acquiring the Shares for investment for its
own account only and not with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the Securities Act of 1933, as
amended (the "Securities Act").
(b) Seagate Peripherals acknowledges and understands that the Shares
constitute "restricted securities" under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Seagate Peripheral's investment intent as expressed herein.
(c) The certificates evidencing the Shares will be imprinted with the
following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR, IN
3
<PAGE>
THE OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE
ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR
HYPOTHECATION IS IN COMPLIANCE THEREWITH.
6. Miscellaneous.
-------------
(a) Governing Law. This Agreement shall be governed in all respects
-------------
by the internal laws of the State of Delaware, with the exception of Exhibits C
and D hereto which shall be governed by and construed in accordance with English
Law.
(b) Survival. The representations, warranties, covenants and
--------
agreements made herein shall survive any investigation made by any of the
parties hereto and the closing of the transactions contemplated hereby.
(c) Successors and Assigns. Except as otherwise provided herein, the
----------------------
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
(d) Entire Agreement; Amendment. This Agreement and the other
---------------------------
documents delivered pursuant hereto at the Closing constitute the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof, and no party shall be liable or bound to any other
party in any manner by any warranties, representations or covenants except as
specifically set forth herein or therein. Except as expressly provided herein,
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought.
(e) Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
(f) Severability. In the event that any provision of this Agreement
------------
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
(g) Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
(h) Benefits of Agreement. Nothing in this Agreement, express or
---------------------
implied, shall give to any person, other than the parties hereto and their
successors hereunder any benefit or any legal or equitable right, remedy or
claim under this Agreement.
4
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Exchange Agreement as of
the date first written above.
SEAGATE TECHNOLOGY, INC.
By: /s/ Alan F. Shugart
-----------------------
Alan F. Shugart
Title: President
SEAGATE PERIPHERALS, INC.
By: /s/ Donald L. Waite
-----------------------
Donald L. Waite
Title: President
SEAGATE SOFTWARE, INC.
By: /s/ Alan F. Shugart
-----------------------
Alan F. Shugart
Title: President
5
<PAGE>
EXHIBIT A
---------
SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
(Filed separately as Exhibit 3.1)
<PAGE>
EXHIBIT B
---------
FORM OF ASSIGNMENT
The undersigned does hereby assign and transfer unto ______________________
________________________________, ________________________________ shares of
Common Stock, Par Value $_____________, being all of the issued and outstanding
stock of _____________________________________________________ (the
"Corporation"), registered in the name of _____________________________________
____ on the books of the Corporation, represented by Certificate No. _________,
and does hereby irrevocably constitute and appoint Wilson, Sonsini, Goodrich &
Rosati as Attorney to transfer the said shares in the name of the undersigned on
the books of the Corporation with full power of substitution in the premises.
Dated: _____________, 1996 ___________________________
By:_____________________________
Name:
Title:
<PAGE>
EXHIBIT C
---------
Assignment Form
<PAGE>
FORM OF ASSIGNMENT
The undersigned does hereby assign and transfer to Seagate Peripherals,
Inc. 33,550 B Shares of ten pence each, 66,450 A shares of ten pence each
(together the STERLING SHARES), 33,550 dollar denominated bearer B shares of 15
cents each and 66,450 dollar denominated bearer A shares of 15 cents each,
(together the DOLLAR SHARES) being all of the issued and outstanding share
capital of Holistic Systems Limited (the CORPORATION), held by Seagate
Technology, Inc. together with all its rights, title and interest, present and
future pursuant to an agreement for the sale and purchase of the issued share
capital of the Corporation between Seagate Technology Inc. and certain vendors
dated 18 June 1996 (the AGREEMENT), including, without limitation, the benefit
of any Claims, any claim under the Tax Covenant, all rights in respect of the
Settlors' Undertakings and the Trustee Undertakings (in each case as defined in
the Agreement) and the resrictive covenants, (as set out in clause 5 of the
Agreement), and does hereby irrevocably constitute and appoint Freshfields as
Attorney to transfer the registered shares in the name of the undersigned in the
statutory books of the Corporation and to take delivery of the Dollar Shares on
behalf of the undersigned.
Dated: June 29, 1996
-------
/s/ Donald L. Waite
- ----------------------------
for and on behalf of
Seagate Technology, Inc.
DONALD L. WAITE, EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
<PAGE>
EXHIBIT D
---------
Assignment Form
<PAGE>
FORM OF ASSIGNMENT
The undersigned does hereby assign and transfer to Seagate Software, Inc. 33,550
B Shares of ten pence each. 66,450 A shares of ten pence each (together the
STERLING SHARES), 33,550 dollar denominated bearer B shares of 15 cents each and
66,450 dollar denominated bearer A shares of 15 cents each, (together the DOLLAR
SHARES) being all of the issued and outstanding share capital of Holistic
Systems Limited (the CORPORATION), held by Seagate Peripherals, Inc. together
with all its rights, title and interest, present and future pursuant to an
agreement for the sale and purchase of the issued share capital of the
Corporation between Seagate Technology Inc. and certain vendors dated 18 June
1996 (the AGREEMENT), including, without limitation, the benefit of any Claims,
any claim under the Tax Covenant, all rights in respect of the Settlors'
Undertakings and the Trustee Undertakings (in each case as defined in the
Agreement) and the restrictive covenants, (as set out in clause 5 of the
Agreement), and does hereby irrevocably constitute and appoint Freshfields as
Attorney to transfer the registered shares in the name of the undersigned in the
statutory books of the Corporation and to take delivery of the Dollar Shares on
behalf of the undersigned.
Dated: June 29 , 1996
----------------
/s/ Donald L. Waite
- -----------------------------------
for and on behalf of
Seagate Peripherals, Inc.
DONALD L. WAITE, PRESIDENT
<PAGE>
Exhibit 3.1
SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
SEAGATE SOFTWARE, INC.
Alan F. Shugart and Donald L. Waite certify that:
1. They are the President and Secretary, respectively, of Seagate
Software, Inc., a Delaware corporation (the "Corporation").
2. The Certificate of Incorporation of the Corporation, under the name of
ConnerSoft, Inc., was filed on November 10, 1993. This Second Amended and
Restated Certificate of Incorporation restates and integrates and further amends
the Amended and Restated Certificate of Incorporation of the Corporation filed
April 4, 1996. The text of the Amended and Restated Certificate of
Incorporation is hereby amended and restated in its entirety to read as follows:
ARTICLE I.
The name of the Corporation (the "Corporation") is Seagate Software, Inc.
ARTICLE II.
The address, including street, number, city, and county, of the registered
office of the Corporation in the State of Delaware is The Corporation Trust
Center, 1209 Orange Street, City of Wilmington, County of New Castle; and the
name of the registered agent of the Corporation in the State of Delaware at such
address is The Corporation Trust Company.
ARTICLE III.
The nature of the business or purposes to be conducted or promoted by the
Corporation is to engage in any lawful business, promote any lawful purpose, and
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware.
<PAGE>
ARTICLE IV
The Corporation is authorized to issue two classes of shares to be
designated, respectively, "Common Stock" and "Preferred Stock". The number of
shares of Common Stock authorized to be issued is Ninety-Five Million Six
Hundred Thousand (95,600,000), par value $.001 per share, and the number of
shares of Preferred Stock authorized to be issued is Seventy-Three Million
(73,000,000), par value $0.001. Of the Preferred Stock, 54,633,333 shall be
designated Series A Preferred Stock.
The undesignated 18,366,667 shares of Preferred Stock may be issued from
time to time in one or more series. The Board of Directors is authorized to
determine the number of shares of any such series. The Board of Directors is
also authorized to determine or alter the powers, designations, preferences,
rights and restrictions to be imposed upon any wholly unissued series of
Preferred Stock and, within the limits and restrictions stated in any resolution
or resolutions of the Board of Directors originally fixing the number of shares
constituting any series, to increase (but not above the total number of
authorized shares of the class) or decrease (but not below the number of shares
of such series then outstanding) the number of shares of any series subsequent
to the issue of shares of that series.
The authority of the Board of Directors with respect to each series shall
include, but not be limited to, determination of the following: (a) the number
of shares constituting that series and the distinctive designation of that
series; (b) the dividend rate on the shares of that series, whether dividends
shall be cumulative, and, if so, from which date or dates, and the relative
rights of priority, if any, of payment of dividends on shares of that series;
(c) whether that series shall have voting rights, in addition to the voting
rights provided by law, and, if so, the terms of such voting rights; (d) whether
that series shall have conversion privileges, and, if so, the terms and
conditions of such conversion, including provision for adjustment of the
conversion rate or conversion price in such events as the Board of Directors
shall determine; (e) whether or not the shares of that series shall be
redeemable, and, if so, the terms and conditions of such redemption, including
the date or date upon or after which they shall be redeemable, and the amount
per share payable in case of redemption, which amount may vary under different
conditions and at different redemption dates; (f) whether that series shall have
a sinking fund for the redemption or purchase of shares of that series, and, if
so, the terms and amount of such sinking fund; (g) the rights of the shares of
that series in the event of voluntary or involuntary liquidation, dissolution or
winding up of the corporation, and the relative rights of priority, if any, of
payment of shares of that series; and (h) any other relative rights, preferences
and limitations of that series.
The relative designations, rights, preferences and restrictions granted to
or imposed upon the Common Stock and the Preferred Stock are as follows:
-2-
<PAGE>
1. Dividends
---------
(a) Non-Cumulative Dividends. Subject to the provisions set forth
------------------------
below, the holders of shares of Series A Preferred Stock shall be entitled to
receive, when, as and if declared by the Board of Directors (the "Board") out of
funds legally available for the purpose, an annual cash dividend in the amount
of $0.45 per share (as adjusted to reflect any stock split, stock dividend,
combination, recapitalization and the like (collectively, a "Recapitalization")
with respect to the Series A Preferred Stock), prior and in preference to any
declaration or payment of any dividend (payable other than in Common Stock) on
the Common Stock of the Corporation. Such dividends shall not be cumulative,
and no right shall accrue to holders of Series A Preferred Stock by reason of
the fact that dividends on such shares are not declared or paid in any year.
(b) Cumulative Dividend. On the date that is the end of the first
-------------------
fiscal year in which the Corporation recognizes net income after taxes, as
determined in accordance with Generally Accepted Accounting Principles ("GAAP")
and as set forth in the Corporation's audited year-end financial statements (the
"Cumulate Dividend Date"), the holders of shares of Series A Preferred Stock
shall be entitled to receive, out of funds legally available for the purpose, an
annual cash dividend in the amount of $0.45 per share (as adjusted to reflect
any Recapitalization) prior and in preference to any declaration or payment of
any dividend (payable other than in Common Stock) on the Common Stock of the
Corporation (the "Cumulative Dividend"). The Cumulative Dividend shall accrue
from the Cumulative Dividend Date and shall be payable only when, as and if
determined by the Board, provided, that if the Cumulative Dividend shall not
--------
have been paid and a sum sufficient for the payment thereof set apart, the
deficiency shall first be fully paid before any dividend or other distribution
(other than dividends payable solely in Common Stock) shall be paid or declared
and set apart for the Common Stock of the Corporation.
(c) Notwithstanding the provisions of Section 2(a) or Section 2(b),
the Corporation may at any time, out of funds legally available therefor,
repurchase shares of Common Stock of the Corporation (i) issued to or held by
employees, directors or consultants of the Corporation or its subsidiaries upon
termination of their employment or services, pursuant to any agreement providing
for such right of repurchase, or (ii) issued to or held by any person subject to
the Corporation's right of first refusal to purchase such shares where the
purchase is pursuant to the exercise of such right of first refusal, in either
case whether or not dividends on the Preferred Stock shall have been declared
and paid or funds set aside therefor.
(d) Notwithstanding the provisions of Section 2 set forth above, in
the event any dividend shall be paid to the holders of Common Stock such
dividend shall be distributed among the holders of the Common Stock and the
Series A Preferred Stock in proportion to the shares of Common Stock then held
by them and the shares of Common Stock which they then have the right to acquire
upon the conversion of the Series A Preferred Stock held by them.
2. Liquidation Rights. In the event of any liquidation, dissolution
------------------
or winding up of the Corporation, whether voluntary or involuntary (a
"Liquidation Event"), a distribution shall be
-3-
<PAGE>
made to the holders of Series A Preferred Stock in respect of such Series A
Preferred Stock before any amount shall be paid to the holders of Common Stock
in respect of such Common Stock, in the following manner:
(a) Series A Preferred Stock. The holders of the Series A
------------------------
Preferred Stock shall be entitled to receive prior and in preference to any
distribution of the assets of the Corporation to the holders of the Common Stock
by reason of their ownership thereof as a result of a Liquidation Event, an
amount per share equal to (i) $7.50, as adjusted to reflect any Recapitalization
of the Series A Preferred Stock, plus (ii) all accrued or declared but unpaid
dividends, if any. If, upon the occurrence of a Liquidation Event, the assets
and funds thus distributed among the holders of the Series A Preferred Stock
shall be insufficient to permit the payment to such holders of their full
liquidation preference, then the entire assets and funds of the Corporation
legally available for distribution to the holders of capital stock shall be
distributed ratably among the holders of the Series A Preferred Stock.
(b) Series A Preferred Stock and Common Stock. After payment has
-----------------------------------------
been made to the holders of the Series A Preferred Stock of the full amounts to
which they shall be entitled as set forth in Section 3(a) above, then the entire
remaining assets and funds of the Corporation shall be distributed among the
holders of the Common Stock and the Series A Preferred Stock in proportion to
the shares of Common Stock then held by them and the shares of Common Stock
which they then have the right to acquire upon the conversion of the Series A
Preferred Stock held by them.
(c) Events Deemed a Liquidation. A consolidation or merger of the
---------------------------
Corporation with or into any other corporation or the sale or other transfer in
a single transaction or a series of related transactions of all or substantially
all of the assets of this Corporation, or any other reorganization of this
Corporation shall be deemed a Liquidation Event of the Corporation for purposes
of this Section 3; provided that the merger or consolidation of the Corporation
with or into a wholly-owned subsidiary of the Corporation or into another
corporation or person or entity in which the holders of the capital stock of the
Corporation hold at least 50% of the voting securities of the surviving entity
shall not be deemed to be a Liquidation Event of the Corporation.
(d) Valuation of Property. In the event the Corporation proposes
---------------------
to distribute assets other than cash in connection with any Liquidation Event of
the Corporation, the value of the assets to be distributed upon the occurrence
of a Liquidation Event shall be determined in good faith by the Board of
Directors of the Corporation.
3. Voting Rights.
-------------
(a) Subject to the provision for adjustment hereinafter set
forth, the holder of each share of Preferred Stock shall be entitled to the
number of votes equal to the number of shares of Common Stock into which such
share of Preferred Stock could be converted at the record date for the
determination of the stockholders entitled to vote on such matters, or, if no
such record date is established, at the date such vote is taken or any written
consent of the stockholders is solicited.
-4-
<PAGE>
Holders of Preferred Stock shall be entitled to notice of any stockholders'
meeting in accordance with the Bylaws of the Corporation. Fractional votes by
the holders of Preferred Stock shall not, however, be permitted and any
fractional voting rights shall (after aggregating all shares into which shares
of Preferred Stock held by each holder could be converted) be rounded down to
the nearest whole number.
(b) Except as otherwise provided herein or by law, the holders of
shares of Series A Preferred Stock and the holders of shares of Common Stock
shall vote together as one class on all matters submitted to a vote of
stockholders of the Corporation, and except as required by law, holders of
Series A Preferred Stock shall have no special voting rights.
4. Conversion. The holders of the Series A Preferred Stock have
----------
conversion rights as follows:
(a) Right to Convert. Each share of Series A Preferred Stock
----------------
shall initially be convertible, at the option of the holder thereof, at any time
after the date of issuance of such share, at the office of the Corporation or
any transfer agent for the Series A Preferred Stock, into such number of fully
paid and nonassessable shares of Common Stock as is determined by dividing $7.50
by the Conversion Price, determined as provided below, at the time of
conversion. The price at which shares of Common Stock shall be deliverable upon
conversion of the shares of Series A Preferred Stock without the payment of any
additional consideration by the holders thereof, shall initially be $7.50 per
share of Common Stock (the "Conversion Price"). Such initial Conversion Price
shall be subject to adjustment, in order to adjust the number of shares of
Common Stock into which the Series A Preferred Stock is convertible, as provided
below. Upon conversion, the holder's right to any accrued or declared but unpaid
dividends on such shares to be converted shall be forfeited and the holder shall
no longer be entitled to any such dividends.
(b) Automatic Conversion. Each share of Series A Preferred Stock
--------------------
shall automatically be converted into shares of Common Stock at the then
effective Conversion Price upon the closing of a firm commitment underwritten
public offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended, covering the offer and sale of securities
for the account of the Corporation to the public. Upon conversion, the holder's
right to any accrued or declared but unpaid dividends on such shares to be
converted shall be forfeited and the holder shall no longer be entitled to any
such dividends.
(c) Mechanics of Conversion. No fractional shares of Common Stock
-----------------------
shall be issued upon conversion of the Series A Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
Corporation at its election shall either (i) pay cash equal to such fraction
multiplied by the then effective Conversion Price, or (ii) issue one whole share
of Common Stock for each fractional share to which the holder would otherwise be
entitled.
Before any holder of Series A Preferred Stock shall be entitled to convert
the same into shares of Common Stock and to receive certificates therefor, he or
she shall surrender the certificate or
-5-
<PAGE>
certificates therefor, duly endorsed, at the office of the Corporation or of any
transfer agent for the Series A Preferred Stock and shall give written notice to
the Corporation at such office that he or she elects to convert the same;
provided, however, that in the event of an automatic conversion pursuant to
Section 4(b) hereof, the outstanding shares of Series A Preferred Stock shall be
converted automatically without any further action by the holders of such shares
and whether or not the certificates representing such shares are surrendered to
the Corporation or its transfer agent; and provided further that the Corporation
shall not be obligated to issue certificates evidencing the shares of Common
Stock issuable upon such automatic conversion unless and until the certificates
evidencing such shares of Series A Preferred Stock are either delivered to the
Corporation or its transfer agent as provided above, or the holder notifies the
Corporation or its transfer agent that such certificates have been lost, stolen
or destroyed and executes an agreement satisfactory to the Corporation to
indemnify the Corporation from any loss incurred by it in connection with such
certificates. The Corporation shall, as soon as practicable after such delivery,
or after such agreement and indemnification, issue and deliver at such office to
such holder of Series A Preferred Stock, a certificate or certificates for the
number of shares of Common Stock to which he or she shall be entitled as
aforesaid and a check payable to the holder in the amount of any cash amounts
payable as the result of a conversion into fractional shares of Common Stock.
Such conversion shall be deemed to have been made immediately prior to the close
of business on the date of such surrender of the shares of Series A Preferred
Stock to be converted, or, in the case of automatic conversion, immediately
prior to the occurrence of the event leading to such automatic conversion, and
the person or persons entitled to receive the shares of Common Stock issuable
upon such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on such date.
(d) Adjustments to Conversion Price for Diluting Issues.
---------------------------------------------------
(i) Special Definitions. For purposes of this Section
-------------------
4(d), the following definitions shall apply:
(1) "Option" shall mean rights, options or warrants
------
to subscribe for, purchase or otherwise acquire either Common Stock or
Convertible Securities.
(2) "Original Issue Date" shall mean April 4, 1996.
-------------------
(3) "Convertible Securities" shall mean any
----------------------
evidences of indebtedness, shares or other securities convertible into or
exchangeable for Common Stock.
(4) "Additional Shares of Common Stock" shall mean
---------------------------------
all shares of Common Stock issued (or, pursuant to Section 4(d)(iii), deemed to
be issued) by the Corporation after the Original Issue Date, other than shares
of Common Stock issued or issuable:
(A) upon conversion of shares of Series A
Preferred Stock;
-6-
<PAGE>
(B) as a dividend or distribution on Series A
Preferred Stock or any event for which adjustment is made pursuant to Section
4(d)(vi) hereof;
(C) pursuant to equipment lease financing
transactions approved by the Board of Directors;
(D) to directors and employees of, and
consultants to, the Corporation in a manner determined by the Board of Directors
including, without limitation, any options or Common Stock issuable pursuant to
the 1996 Stock Option Plan, as such plan may be amended from time to time by the
Board of Directors of the Corporation; or
(E) by way of dividend or other distribution on
shares of Common Stock excluded from the definition of Additional Shares of
Common Stock by the foregoing clause(s) (A), (B), (C), (D) or this clause (E).
(ii) No Adjustment of Conversion Price. No adjustment in
---------------------------------
the number of shares of Common Stock into which the Series A Preferred Stock is
convertible shall be made, by adjustment in the Conversion Price of such Series
A Preferred Stock in respect of the issuance of Additional Shares of Common
Stock or otherwise, unless the consideration per share (determined pursuant to
Section 4(d)(v) below) for an Additional Share of Common Stock issued or deemed
to be issued by the Corporation is less than the Conversion Price of such Series
A Preferred Stock in effect on the date of, and immediately prior to, the issue
of such Additional Share of Common Stock.
(iii) Deemed Issuances of Additional Shares of Common
-----------------------------------------------
Stock.
- -----
(1) Options and Convertible Securities. Except as
----------------------------------
otherwise provided in Section 4(d)(ii), in the event the Corporation at any time
or from time to time after the Original Issue Date shall issue any Options or
Convertible Securities, then the maximum number of shares (as set forth in the
instrument relating thereto without regard to any provisions contained therein
for a subsequent adjustment of such number) of Common Stock issuable upon the
exercise of such Options or, in the case of Convertible Securities and Options
therefor, the conversion or exchange of such Convertible Securities, shall be
deemed to be Additional Shares of Common Stock issued as of the time of such
issue, provided that in any such case in which Additional Shares of Common Stock
are deemed to be issued:
(A) no further adjustment in the Conversion
Price shall be made upon the subsequent issue of Convertible Securities or
shares of Common Stock upon the exercise of such Options or conversion or
exchange of such Convertible Securities;
(B) if such Options or Convertible Securities by
their terms provide, with the passage of time or otherwise, for any increase or
decrease in the consideration payable to the Corporation, or decrease or
increase in the number of shares of Common Stock
-7-
<PAGE>
issuable, upon the exercise, conversion or exchange thereof, the Conversion
Price computed upon the original issue thereof (or upon the occurrence of a
record date with respect thereto), and any subsequent adjustments based thereon,
shall, upon any such increase or decrease becoming effective, be recomputed to
reflect such increase or decrease insofar as it affects such Options or the
rights of conversion or exchange under such Convertible Securities;
(C) upon the expiration of any such Options or
any rights of conversion or exchange under such Convertible Securities which
shall not have been exercised, the Conversion Price computed upon the original
issue thereof (or upon the occurrence of a record date with respect thereto) and
any subsequent adjustments based thereon shall, upon such expiration, be
recomputed as if:
(x) in the case of Convertible Securities or
Options for Common Stock, the only Additional Shares of Common Stock issued were
the shares of Common Stock, if any, actually issued upon the exercise of such
Options or the conversion or exchange of such Convertible Securities and the
consideration received therefor was the consideration actually received by the
Corporation for the issue of such exercised Options plus the consideration
actually received by the Corporation upon such exercise or for the issue of all
such Convertible Securities which were actually converted or exchanged, plus the
additional consideration, if any, actually received by the Corporation upon such
conversion or exchange, and
(y) in the case of Options for Convertible
Securities only the Convertible Securities, if any, actually issued upon the
exercise thereof were issued at the time of issue of such Options, and the
consideration received by the Corporation for the Additional Shares of Common
Stock deemed to have been then issued was the consideration actually received by
the Corporation for the issue of such exercised Options, plus the consideration
deemed to have been received by the Corporation (determined pursuant to Section
4(d)(v), upon the issue of the Convertible Securities with respect to which such
Options were actually exercised;
(D) no readjustment pursuant to clauses (B) or
(C) above shall have the effect of increasing the Conversion Price to an amount
which exceeds the lower of (i) the Conversion Price on the original adjustment
date, or (ii) the Conversion Price that would have resulted from any issuance of
Additional Shares of Common Stock between the original adjustment date and such
readjustment date; and
(E) in the case of any Options which expire by
their terms not more than 30 days after the date of issue thereof, no adjustment
of the Conversion Price shall be made until the expiration or exercise of all
such Options issued on the same date, whereupon such adjustment shall be made in
the same manner provided in clause (C) above.
(2) Stock Dividends, Stock Distributions and
----------------------------------------
Subdivisions. In the event the Corporation at any time or from time to time
- ------------
after the Original Issue Date shall declare or pay any dividend or make any
other distribution on the Common Stock payable in
-8-
<PAGE>
Common Stock, or effect a subdivision of the outstanding shares of Common Stock
(by reclassification or otherwise than by payment of a dividend in Common
Stock), then and in any such event, Additional Shares of Common Stock shall be
deemed to have been issued:
(A) in the case of any such dividend or
distribution, immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to receive such
dividend or distribution, or
(B) in the case of any such subdivision, at the
close of business on the date immediately prior to the date upon which such
corporate action becomes effective.
If such record date shall have been fixed and such dividend shall not have
been paid on the date fixed therefor, the adjustment previously made in the
Conversion Price which became effective on such record date shall be canceled as
of the close of business on such record date, and thereafter the Conversion
Price shall be adjusted pursuant to this Section 4(d)(iii) as of the time of
actual payment of such dividend.
(iv) Adjustment of Conversion Price Upon Issuance of
-----------------------------------------------
Additional Shares of Common Stock. In the event the Corporation shall issue
- ---------------------------------
Additional Shares of Common Stock (including Additional Shares of Common Stock
deemed to be issued pursuant to Section 4(d)(iii)(1), but excluding Additional
Shares of Common Stock issued pursuant to Section 4(d)(iii)(2), which event is
dealt with in Section 4(d)(vi) hereof), without consideration or for a
consideration per share less than the Conversion Price in effect on the date of
and immediately prior to such issue, then and in such event, the Conversion
Price shall be reduced, concurrently with such issue, to a price (calculated to
the nearest cent) determined by multiplying the Conversion Price by a fraction
(x) the numerator of which shall be (1) the number of shares of Common Stock
outstanding immediately prior to such issue, plus (2) the number of shares of
Common Stock which the aggregate consideration received by the Corporation for
the total number of Additional Shares of Common Stock so issued would purchase
at that Conversion Price, and (y) the denominator of which shall be (1) the
number of shares of Common Stock outstanding immediately prior to such issue
plus (2) the number of such Additional Shares of Common Stock so issued,
provided that for the purposes of this Section 4(d)(iv), all shares of Common
Stock issuable upon exercise, conversion or exchange of outstanding Options or
Convertible Securities, as the case may be, shall be deemed to be outstanding,
and immediately after any Additional Shares of Common Stock are deemed issued
pursuant to Section 4(d)(iii) above, such Additional Shares of Common Stock
shall be deemed to be outstanding, and provided further that the Conversion
Price shall not be so reduced at such time if the amount of such reduction would
be an amount less than $0.01, but any such amount shall be carried forward and
reduction with respect thereto made at the time of and together with any
subsequent reduction which, together with such amount and any other amount or
amounts so carried forward, shall aggregate $0.01 or more.
-9-
<PAGE>
(v) Determination of Consideration. For purposes of this
------------------------------
Section 4(d), the consideration received by the Corporation for the issue of any
Additional Shares of Common Stock shall be computed as follows:
(1) Cash and Property. Such consideration shall:
-----------------
(A) insofar as it consists of cash, be computed
at the aggregate amount of cash received by the Corporation excluding amounts
paid or payable for accrued interest or accrued dividends and prior to any
commissions or expenses paid by the Corporation;
(B) insofar as it consists of property other
than cash, be computed at the fair value thereof at the time of such issue, as
determined in good faith by the Board of Directors; and
(C) in the event Additional Shares of Common
Stock are issued together with other shares or securities or other assets of the
Corporation for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (A) and (B) above, as
determined in good faith by the Board.
(2) Options and Convertible Securities. The
----------------------------------
consideration per share received by the Corporation for Additional Shares of
Common Stock deemed to have been issued pursuant to Section 4(d)(iii)(1),
relating to Options and Convertible Securities, shall be determined by dividing
(A) the total amount, if any, received or
receivable by the Corporation as consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment of such
consideration) payable to the Corporation upon the exercise of such Options or
the conversion or exchange of such Convertible Securities, or in the case of
Options for Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible Securities, by
(B) the maximum number of shares of Common Stock
(as set forth in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such number) issuable
upon the exercise of such Options or the conversion or exchange of such
Convertible Securities, as determined in Section 4(d)(iii) above.
(vi) Subdivisions, Combinations, or Consolidations of
------------------------------------------------
Common Stock. In the event the outstanding shares of Common Stock shall be
- ------------
subdivided, combined or consolidated, by stock split, stock dividend, reverse
stock split, combination or like event, into a greater or lesser number of
shares of Common Stock, the Conversion Price then in effect shall
-10-
<PAGE>
concurrently with the effectiveness of such subdivision, combination or
consolidation, be proportionately adjusted.
(vii) Distributions Other Than Cash Dividends Out of
----------------------------------------------
Retained Earnings. In case the Corporation shall declare a cash dividend upon
- -----------------
its Common Stock payable otherwise than out of retained earnings or shall
distribute to holders of its Common Stock shares of its capital stock (other
than Common Stock), stock or other securities of other persons, evidences of
indebtedness issued by the Corporation or other persons, assets (excluding cash
dividends out of retained earnings) or options or rights (excluding options to
purchase and rights to subscribe for Common Stock or other securities of the
Corporation convertible into or exchangeable for Common Stock), then, in each
such case, the holders of shares of Series A Preferred Stock shall, concurrently
with the distribution to holders of Common Stock, receive a like distribution
based upon the number of shares of Common Stock into which such share of Series
A Preferred Stock is then convertible.
(viii) Adjustments for Reclassification, Exchange and
----------------------------------------------
Substitution. If the Common Stock issuable upon conversion of the Series A
- ------------
Preferred Stock shall be changed into the same or a different number of shares
of any other class or classes of stock, whether by capital reorganization,
reclassification or otherwise (other than a subdivision or combination of shares
provided for above), the Conversion Price then in effect shall, concurrently
with the effectiveness of such reorganization or reclassification, be
proportionately adjusted such that the Series A Preferred Stock shall be
convertible into, in lieu of the number of shares of Common Stock which the
holders would otherwise have been entitled to receive, a number of shares of
such other class or classes of stock equivalent to the number of shares of
Common Stock that would have been subject to receipt by the holders upon
conversion of the Series A Preferred Stock immediately before that change.
(ix) Reorganization, Mergers, Consolidations, or Sales of
----------------------------------------------------
Assets. Subject to Section 2 hereof, if at any time or from time to time there
- ------
shall be a capital reorganization of the Common Stock (other than a subdivision,
combination, reclassification, or exchange of shares provided for elsewhere in
this Section 4) or a merger or consolidation of this Corporation with or into
another corporation, or the sale of all or substantially all of this
Corporation's properties and assets to any other person, then, as a part of such
reorganization, merger, consolidation, or sale, provision shall be made so that
the holders of the Series A Preferred Stock shall thereafter be entitled to
receive upon conversion of the Series A Preferred Stock held by them, the number
of shares of stock or other securities or property of this Corporation, or of
the successor corporation resulting from such merger or consolidation or sale,
to which a holder of Common Stock deliverable upon conversion would have been
entitled upon such capital reorganization, merger, consolidation, or sale. In
any such case, appropriate adjustment shall be made in the application of the
provisions of this Section 4 with respect to the rights of the holders of the
Series A Preferred Stock after the reorganization, merger, consolidation, or
sale to the end that the provisions of this Section 4 (including adjustment of
the Conversion Price then in effect and the number of shares purchasable upon
conversion of the Series A Preferred Stock) shall be applicable after that event
as nearly equivalent as may be practicable.
-11-
<PAGE>
(e) Status of Converted Stock. In case any shares of Series A
-------------------------
Preferred Stock shall be converted pursuant to Section 4 hereof, the shares so
converted shall be canceled, shall not be reissuable and shall cease to be a
part of the authorized capital stock of the Corporation.
(f) Reservation of Stock Issuable Upon Conversion. The
---------------------------------------------
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of Series A Preferred Stock, such number of its shares
of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of Series A Preferred Stock. If at any time
the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then-outstanding shares of Series A
Preferred Stock, the Corporation will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose.
(g) No Impairment. The Corporation will not, by amendment of
-------------
its Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Corporation but
will at all times in good faith assist in the carrying out of all the provisions
of this Section 4 and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights of the holders of the
Series A Preferred Stock against impairment.
(h) Certificate as to Adjustments. Upon the occurrence of each
-----------------------------
adjustment or readjustment of the Conversion Price pursuant to this Section 4,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder of
Series A Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of any holder of Series A Preferred Stock, furnish or cause to be furnished
to such holder a like certificate setting forth (i) such adjustments and
readjustments, (ii) the Conversion Price at the time in effect, and (iii) the
number of shares of Common Stock and the amount, if any, of other property which
at the time would be received upon the conversion of Series A Preferred Stock.
(i) Notices of Record Date. In the event of any taking by the
----------------------
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, the Corporation
shall mail to each holder of Series A Preferred Stock, at least twenty (20) days
prior to the date specified therein, a notice specifying the date on which any
such record is to be taken for the purpose of such dividend, distribution or
right, and the amount and character of such dividend, distribution or right.
-12-
<PAGE>
5. Covenants. In addition to any other rights provided by law, so
---------
long as any Series A Preferred Stock shall be outstanding, the Corporation shall
not, without first obtaining the affirmative vote or written consent of the
holders of not less than a majority of such outstanding shares of Series A
Preferred Stock:
(a) amend or repeal any provision of, or add any provision to,
the Corporation's Certificate of Incorporation or Bylaws if such action would
alter or change the rights, preferences, privileges or powers of, or the
restrictions provided for the benefit of, any Series A Preferred Stock, or
increase or decrease the number of shares of Series A Preferred Stock authorized
hereby;
(b) authorize or reclassify any Common Stock or other stock of
the Corporation into shares having any preference or priority as to dividends or
assets superior to or on a parity with any such preference or priority of the
Series A Preferred Stock;
(c) pay or declare any dividend on any Common Stock (except
dividends payable solely in shares of Common Stock) while the Series A Preferred
Stock remains outstanding;
(d) repurchase, acquire or retire any shares of Common Stock
other than pursuant to the terms of any stock repurchase agreement between the
Corporation and any stockholder in connection with the employment of, or the
rendering of consulting services by, such stockholder;
(e) enter into any agreement for, or engage in, any merger or
consolidation of the Corporation with or into any other corporation (other than
a merger or consolidation where the stockholders of the Corporation immediately
prior to such merger of consolidation hold one hundred percent (100%) of the
outstanding capital stock of the Corporation immediately following such merger
or consolidation);
(f) enter into any agreement for, or engage in, any sale, lease,
exchange or distribution (in one transaction or a series of transactions) of all
or substantially all of the property and assets of the Corporation; or
(g) authorize or adopt any plan or proposal for the liquidation,
dissolution or winding up of the Corporation.
ARTICLE V
To the fullest extent permitted by the General Corporation Law of Delaware
as the same exists or as may hereafter be amended, a director of the Corporation
shall not be personally liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director.
-13-
<PAGE>
The Corporation shall indemnify to the fullest extent permitted by law any
person made or threatened to be made a party to an action or proceeding, whether
criminal, civil, administrative or investigative, by reason of the fact that
such person, such person's testator or intestate is or was a director or officer
of the Corporation or any predecessor of the Corporation or serves or served at
any other enterprise as a director, officer or employee at the request of the
Corporation or any predecessor to the Corporation.
Neither any amendment nor repeal of this Article V, nor the adoption of any
provision of this Certificate of Incorporation inconsistent with this Article V,
shall eliminate or reduce the effect of this Article V, in respect of any matter
occurring, or any cause of action, suit, claim or proceeding that, but for this
Article V, would accrue or arise, prior to such amendment, repeal or adoption of
an inconsistent provision.
ARTICLE VI
This Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute or this Certificate of Incorporation, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
ARTICLE VII
In furthermore and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, alter, amend or repeal
the Bylaws of the Corporation.
ARTICLE VIII
The number of directors which constitute the entire Board of Directors of
the Corporation shall be as specified in the Bylaws of the Corporation. At each
annual meeting of stockholders, directors of the Corporation shall be elected to
hold office until the expiration for the term for which they are elected and
until their successors have been duly elected and qualified; except that if any
such election shall not be so held, such election shall take place at a
stockholders' meeting called and held in accordance with the General Corporation
Law of Delaware.
ARTICLE IX
This Corporation is to have perpetual existence.
-14-
<PAGE>
3. The total number of outstanding shares of the Corporation is 62,500
shares of Common Stock and 34,500,000 shares of Series A Preferred Stock. The
foregoing amendment and restatement of the Amended and Restated Certificate of
Incorporation of the Corporation has been duly approved in an action by written
consent by the sole stockholder of the Corporation's 62,500 shares of Common
Stock and 34,500,000 shares of Series A Preferred Stock in accordance with
Sections 228 and 242 of the General Corporation Law of Delaware.
4. The foregoing amendment and restatement of the Amended and Restated
Certificate of Incorporation of the Corporation has been adopted in accordance
with the provisions of Section 242 of the General Corporation Law of Delaware.
-15-
<PAGE>
IN WITNESS WHEREOF, said Seagate Software, Inc. has duly caused this
Certificate to be signed by its President, and attested to by its Secretary,
this 21st day of June, 1996.
SEAGATE SOFTWARE, INC.
a Delaware Corporation
By: /s/ Alan F. Shugart
------------------------------------
Alan F. Shugart, President
ATTEST:
By: /s/ Donald L. Waite
------------------------------------
Donald L. Waite, Secretary
[SIGNATURE PAGE TO SECOND AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION OF SEAGATE SOFTWARE, INC.]
<PAGE>
CERTIFICATE OF THE POWERS, DESIGNATIONS,
PREFERENCES AND RIGHTS OF THE
SPECIAL VOTING PREFERRED STOCK
($.001 PAR VALUE)
OF
SEAGATE SOFTWARE, INC.
----------------
PURSUANT TO SECTION 151(G) OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
----------------
THE UNDERSIGNED, being, respectively, the President and the Secretary of
Seagate Software, Inc., a Delaware corporation (the "Corporation"), DO HEREBY
CERTIFY that, pursuant to the provisions of Section 151(g) of the General
Corporation Law of the State of Delaware the following resolutions were duly
adopted by the Board of Directors of the Corporation and pursuant to authority
conferred upon the Board of Directors by the provisions of the Second Amended
and Restated Certificate of Incorporation of the Corporation (the "Certificate
of Incorporation"), the Board of Directors of the Corporation, by unanimous
written consent, effective for all purposes as of December__, 1996, adopted
resolutions provided for the issuance of a series of its preferred stock and
fixing the relative powers, preferences, rights, qualifications, limitations and
restrictions of such stock. These resolutions are as follows:
"RESOLVED, that pursuant to authority expressly granted to and vested in
the Board of Directors of the Corporation by the provisions of the Certificate
of Incorporation, the issuance of a series of preferred stock, par value $.001
per share, which shall consist of one of the undesignated 18,366,667 shares of
preferred stock that the Corporation now has authority to issue, be and the same
hereby is authorized, and the Board hereby fixes the powers, designations,
preferences and restrictions thereof, of the share of such series (in addition
to the powers, designations, preferences and restrictions thereof, set forth in
the Certificate of Incorporation which may be applicable to the preferred stock
of this series) as follows:
1. Authorized Number and Designation. One share of the preferred stock,
---------------------------------
$.001 par value per share, of the Corporation is hereby constituted as a series
of the preferred stock designated Special Voting Preferred Stock, $.001 par
value (the "Special Voting Preferred Stock").
2. Dividends. The holder of the Special Voting Preferred Stock shall not
---------
be entitled to receive any dividends declared and paid by the Corporation.
<PAGE>
3. Liquidation Rights. In the event of any Liquidation Event, as defined
------------------
in the Certificate of Incorporation, and subject to any prior rights of holders
of shares of preferred stock ranking senior to the Special Voting Preferred
Stock, a distribution shall be made to the holder of the share of Special Voting
Preferred Stock in respect of such Special Voting Preferred Stock in an amount
equal to $1.00, together with payment to any class of stock ranking equally with
the Special Voting Preferred Stock, and before payment shall be made to holders
of any stock ranking on liquidation junior to the Special Voting Preferred
Stock. The ranking of the Special Voting Preferred Stock shall be as set forth
in Section 6 below.
4. Voting Rights.
-------------
(a) Except as otherwise required by law and notwithstanding Section
3(a) of Article V of the Certificate of Incorporation, so long as Seagate
Technology International Holdings, a Cayman Island corporation ("Seagate Cayman
Holdings"), is the holder of record of the share of Special Voting Preferred
Stock, then Seagate Cayman Holdings shall have a number of votes equal to the
number of votes that Seagate Cayman Holdings, as holder of outstanding Class B
Exchangeable Shares (the "Exchangeable Shares") of Seagate Software Information
Management Group, Inc. ("Seagate Canada"), from time to time would be entitled
to if all such Exchangeable Shares were exchanged by Seagate Cayman Holdings, at
the record date for the determination of the stockholders entitled to vote on
such matters or, if no such record date is established, at the date such vote is
taken or any written consent of the stockholders is solicited, for shares of the
Series A Preferred Stock (as hereinafter defined) pursuant to the terms of the
Exchangeable Shares, in each case for the election of directors and on all
matters submitted to a vote of the stockholders of the Corporation. "Series A
Preferred Stock" means the Series A Preferred Stock of the Corporation, as
constituted from time to time as set forth in the Certificate of Incorporation,
and as the same may be affected by any subdivision, consolidation,
reclassification or other change or by any reorganization, amalgamation, merger,
sale of assets or by any distribution in respect of Series A Preferred Stock,
including any automatic or voluntary conversion of the same into Common Stock or
other capital stock of the Corporation.
(b) Except as otherwise provided by law or in the Certificate of
Incorporation, Seagate Cayman Holdings, as holder of the Special Voting
Preferred Stock, and the holders of the shares of Common Stock shall vote
together as one class on all matters submitted to a vote of stockholders of the
Corporation.
5. Conversion. The holder of the Special Voting Preferred Stock shall
----------
have no conversion rights.
6. Ranking. The Special Voting Preferred Stock shall rank pari passu
-------
with the Series A Preferred Stock of the Corporation in all respects.
7. Other Provisions.
----------------
(a) Pursuant to the terms of that certain Exchange Agreement by and
among the Corporation and Seagate Canada, one share of Special Voting Preferred
Stock is being issued to Seagate
-2-
<PAGE>
Cayman Holdings, which share of Special Voting Preferred Stock is subject to the
terms of the Voting Agreement among the Corporation, Seagate Canada and Seagate
Cayman Holdings. Seagate Cayman Holdings, as the holder of the share of Special
Voting Preferred Stock, is entitled to exercise the voting rights attendant
thereto in such manner as Seagate Cayman Holdings desires.
(b) At such time as the Special Voting Preferred Stock has no votes
attached to it because there are no Exchangeable Shares of Seagate Canada
outstanding which are owned of record by Seagate Cayman Holdings, the share of
Special Voting Preferred Stock shall automatically be deemed canceled."
-3-
<PAGE>
IN WITNESS WHEREOF, Seagate Software, Inc. has duly caused this Certificate
to be executed by its President and attested to by its Secretary, this 20th day
of December 1996.
SEAGATE SOFTWARE, INC.
By: /s/ Alan F. Shugart
----------------------------
Alan F. Shugart, President
Attest:
By: /s/ Donald L. Waite
----------------------------
Donald L. Waite, Secretary
-4-
<PAGE>
Exhibit 3.2
AMENDED AND RESTATED BYLAWS
OF
SEAGATE SOFTWARE, INC.
<PAGE>
AMENDED AND RESTATED BYLAWS OF
SEAGATE SOFTWARE, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - CORPORATE OFFICES................................................ 1
1.1 REGISTERED OFFICE................................................. 1
1.2 OTHER OFFICES..................................................... 1
ARTICLE II - MEETINGS OF STOCKHOLDERS........................................ 1
2.1 PLACE OF MEETINGS................................................. 1
2.2 ANNUAL MEETING.................................................... 1
2.3 SPECIAL MEETING................................................... 2
2.4 NOTICE OF STOCKHOLDERS' MEETINGS.................................. 2
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE...................... 2
2.6 QUORUM............................................................ 2
2.7 ADJOURNED MEETING; NOTICE......................................... 3
2.8 VOTING............................................................ 3
2.9 WAIVER OF NOTICE.................................................. 3
2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING........... 4
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING
CONSENTS.......................................................... 4
2.12 PROXIES........................................................... 5
2.13 LIST OF STOCKHOLDERS ENTITLED TO VOTE............................. 5
ARTICLE III - DIRECTORS...................................................... 5
3.1 POWERS............................................................ 5
3.2 NUMBER OF DIRECTORS............................................... 6
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS........... 6
3.4 RESIGNATION AND VACANCIES......................................... 6
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE.......................... 7
3.6 REGULAR MEETINGS.................................................. 7
3.7 SPECIAL MEETINGS; NOTICE.......................................... 7
3.8 QUORUM............................................................ 8
3.9 WAIVER OF NOTICE.................................................. 8
3.10 ADJOURNED MEETING; NOTICE......................................... 8
3.11 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING................. 8
</TABLE>
-i-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
Page
----
<S> <C>
3.12 FEES AND COMPENSATION OF DIRECTORS................................ 8
3.13 APPROVAL OF LOANS TO OFFICERS..................................... 9
3.14 REMOVAL OF DIRECTORS.............................................. 9
ARTICLE IV - COMMITTEES...................................................... 9
4.1 COMMITTEES OF DIRECTORS........................................... 9
4.2 MEETINGS AND ACTION OF COMMITTEES................................. 10
ARTICLE V - OFFICERS......................................................... 10
5.1 OFFICERS.......................................................... 10
5.2 ELECTION OF OFFICERS.............................................. 10
5.3 SUBORDINATE OFFICERS.............................................. 11
5.4 REMOVAL AND RESIGNATION OF OFFICERS............................... 11
5.5 VACANCIES IN OFFICES.............................................. 11
5.6 CHAIRMAN OF THE BOARD............................................. 11
5.7 PRESIDENT......................................................... 11
5.8 VICE PRESIDENT.................................................... 12
5.9 SECRETARY......................................................... 12
5.10 TREASURER......................................................... 12
5.11 ASSISTANT SECRETARY............................................... 13
5.12 ASSISTANT TREASURER............................................... 13
5.13 AUTHORITY AND DUTIES OF OFFICERS.................................. 13
ARTICLE VI - INDEMNIFICATION................................................. 13
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS......................... 13
6.2 INDEMNIFICATION OF OTHERS......................................... 14
6.3 INSURANCE......................................................... 14
ARTICLE VII - RECORDS AND REPORTS............................................ 14
7.1 MAINTENANCE AND INSPECTION OF RECORDS............................. 14
7.2 INSPECTION BY DIRECTORS........................................... 15
7.3 ANNUAL STATEMENT TO STOCKHOLDERS.................................. 15
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS.................... 15
</TABLE>
-ii-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE VIII - GENERAL MATTERS............................................... 16
8.1 CHECKS............................................................ 16
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS.................. 16
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES............................ 16
8.4 SPECIAL DESIGNATION ON CERTIFICATES............................... 17
8.5 LOST CERTIFICATES................................................. 17
8.6 CONSTRUCTION; DEFINITIONS......................................... 17
8.7 DIVIDENDS......................................................... 17
8.8 FISCAL YEAR....................................................... 18
8.9 SEAL.............................................................. 18
8.10 TRANSFER OF STOCK................................................. 18
8.11 STOCK TRANSFER AGREEMENTS......................................... 18
8.12 REGISTERED STOCKHOLDERS........................................... 18
ARTICLE IX - AMENDMENTS...................................................... 19
ARTICLE X - DISSOLUTION...................................................... 19
ARTICLE XI - CUSTODIAN....................................................... 20
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES....................... 20
11.2 DUTIES OF CUSTODIAN............................................... 20
</TABLE>
-iii-
<PAGE>
AMENDED AND RESTATED BYLAWS
OF
SEAGATE SOFTWARE, INC.
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE
The registered office of the corporation shall be Corporation Trust Center,
1209 Orange Street, Wilmington, New Castle County, Delaware 19801. The name of
the registered agent of the corporation at such location is The Corporation
Trust Company.
1.2 OTHER OFFICES
The board of directors may at any time establish other offices at any place
or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place, within or outside the
State of Delaware, designated by the board of directors. In the absence of any
such designation, stockholders' meetings shall be held at the registered office
of the corporation.
2.2 ANNUAL MEETING
The annual meeting of stockholders shall be held each year on a date and at
a time designated by the board of directors. In the absence of such
designation, the annual meeting of stockholders shall be held on the last
Tuesday in October in each year at 10:00 a.m. However, if such day falls on a
legal holiday, then the meeting shall be held at the same time and place on the
next succeeding full business day. At the meeting, directors shall be elected
and any other proper business may be transacted.
<PAGE>
2.3 SPECIAL MEETING
A special meeting of the stockholders may be called at any time by the
board of directors, or by the chairman of the board of directors, or by the
president, or by one or more stockholders holding shares in the aggregate
entitled to cast not less than a majority of the votes at that meeting.
If a special meeting is called by any person or persons other than the
board of directors or the president or the chairman of the board, then the
request shall be in writing, specifying the time of such meeting and the general
nature of the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or telegraphic or other facsimile
transmission to the chairman of the board, the president, any vice president, or
the secretary of the corporation. The officer receiving the request shall cause
notice to be promptly given to the stockholders entitled to vote, in accordance
with the provisions of Sections 2.4 and 2.5 of these bylaws, that a meeting will
be held at the time requested by the person or persons calling the meeting, so
long as that time is not less than thirty-five (35) nor more than sixty (60)
days after receipt of the request. If the notice is not given within twenty
(20) days after receipt of the request, then the person or persons requesting
the meeting may give the notice. Nothing contained in this paragraph of this
Section 2.3 shall be construed as limiting, fixing or affecting the time when a
meeting of stockholders called by action of the board of directors may be held.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
All notices of meetings with stockholders shall be in writing and shall be
sent or otherwise given in accordance with Section 2.5 of these bylaws not less
than ten (10) nor more than sixty (60) days before the date of the meeting to
each stockholder entitled to vote at such meeting. The notice shall specify the
place, date, and hour of the meeting, and, in the case of a special meeting, the
purpose or purposes for which the meeting is called.
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders, if mailed, is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at such stockholder's address as it appears on the records of the
corporation. An affidavit of the secretary or an assistant secretary or of the
transfer agent of the corporation that the notice has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated therein.
2.6 QUORUM
The holders of a majority of the stock issued and outstanding and entitled
to vote thereat, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders for the transaction of business
except as otherwise provided by statute or by the certificate of incorporation.
If, however, such quorum is not present or represented at any meeting of the
stockholders, then the stockholders entitled to vote thereat, present in person
or represented by proxy, shall have power to adjourn the meeting from time to
time, without notice other than
-2-
<PAGE>
announcement at the meeting, until a quorum is present or represented. At such
adjourned meeting at which a quorum is present or represented, any business may
be transacted that might have been transacted at the meeting as originally
noticed.
When a quorum is present at any meeting, the vote of the holders of a
majority of the stock having voting power present in person or represented by
proxy shall decide any question brought before such meeting, unless the question
is one upon which, by express provisions of the statutes or of the certificate
of incorporation, a different vote is required, in which case such express
provision shall govern and control the decision of the question.
2.7 ADJOURNED MEETING; NOTICE
When a meeting is adjourned to another time or place, unless these bylaws
otherwise require, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may transact any business that
might have been transacted at the original meeting. If the adjournment is for
more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
2.8 VOTING
The stockholders entitled to vote at any meeting of stockholders shall be
determined in accordance with the provisions of Section 2.11 of these bylaws,
subject to the provisions of Sections 217 and 218 of the General Corporation Law
of Delaware (relating to voting rights of fiduciaries, pledgors and joint owners
of stock and to voting trusts and other voting agreements).
Except as may be otherwise provided in the certificate of incorporation,
each stockholder shall be entitled to one vote for each share of capital stock
held by such stockholder for all matters presented to the stockholders for vote.
2.9 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the certificate of incorporation or these
bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders need be specified in any written waiver of notice unless so
required by the certificate of incorporation or these bylaws.
-3-
<PAGE>
2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise provided in the certificate of incorporation, any action
required by this chapter to be taken at any annual or special meeting of
stockholders of a corporation, or any action that may be taken at any annual or
special meeting of such stockholders, may be taken without a meeting, without
prior notice, and without a vote if a consent in writing, setting forth the
action so taken, is signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted.
Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing. If the action which is consented to is such as
would have required the filing of a certificate under any section of the General
Corporation Law of Delaware if such action had been voted on by stockholders at
a meeting thereof, then the certificate filed under such section shall state, in
lieu of any statement required by such section concerning any vote of
stockholders, that written notice and written consent have been given as
provided in Section 228 of the General Corporation Law of Delaware.
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
In order that the corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or entitled to express consent to corporate action in writing without a meeting,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the board of directors may fix, in advance, a record date, which shall
not be more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action.
If the board of directors does not so fix a record date:
(i) The record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the close of business on
the day next preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held.
(ii) The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no prior
action by the board of directors is necessary, shall be the day on which the
first written consent is expressed.
(iii) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.
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A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
2.12 PROXIES
Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for such stockholder by a written
proxy, signed by the stockholder and filed with the secretary of the
corporation, but no such proxy shall be voted or acted upon after three (3)
years from its date, unless the proxy provides for a longer period. A proxy
shall be deemed signed if the stockholder's name is placed on the proxy (whether
by manual signature, typewriting, telegraphic transmission or otherwise) by the
stockholder or the stockholder's attorney-in-fact. The revocability of a proxy
that states on its face that it is irrevocable shall be governed by the
provisions of Section 212(c) of the General Corporation Law of Delaware.
2.13 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the General Corporation Law of Delaware and
any limitations in the certificate of incorporation or these bylaws relating to
action required to be approved by the stockholders or by the outstanding shares,
the business and affairs of the corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the board of directors.
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3.2 NUMBER OF DIRECTORS
The authorized number of directors shall be five (5). This number may be
changed by a duly adopted amendment to the certificate of incorporation or by an
amendment to this bylaw adopted by the vote or written consent of the holders of
a majority of the stock issued and outstanding and entitled to vote or by
resolution of a majority of the board of directors.
No reduction of the authorized number of directors shall have the effect of
removing any director before that director's term of office expires.
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
Except as provided in Section 3.4 of these bylaws, directors shall be
elected at each annual meeting of stockholders to hold office until the next
annual meeting. Directors need not be stockholders unless so required by the
certificate of incorporation or these bylaws, wherein other qualifications for
directors may be prescribed. Each director, including a director elected to
fill a vacancy, shall hold office until the director's successor is elected and
qualified or until the director's earlier resignation or removal. Elections of
directors need not be by written ballot.
3.4 RESIGNATION AND VACANCIES
Any director may resign at any time upon written notice to the corporation.
When one or more directors so resigns and the resignation is effective at a
future date, a majority of the directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become effec
tive, and each director so chosen shall hold office as provided in this section
in the filling of other vacancies.
Unless otherwise provided in the certificate of incorporation or these
bylaws:
(i) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(ii) Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the provisions of the
certificate of incorporation, vacancies and newly created directorships of such
class or classes or series may be filled by a majority of the directors elected
by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
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of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created directorship,
the directors then in office constitute less than a majority of the whole board
(as constituted immediately prior to any such increase), then the Court of
Chancery may, upon application of any stockholder or stockholders holding at
least ten (10) percent of the total number of the shares at the time outstanding
having the right to vote for such directors, summarily order an election to be
held to fill any such vacancies or newly created directorships, or to replace
the directors chosen by the directors then in office as aforesaid, which
election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
The board of directors of the corporation may hold meetings, both regular
and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or these
bylaws, members of the board of directors, or any committee designated by the
board of directors, may participate in a meeting of the board of directors, or
any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
3.6 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice at
such time and at such place as shall from time to time be determined by the
board.
3.7 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or purposes may
be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two (2) directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. If the notice is mailed, it
shall be deposited in the United States mail at least four (4) days before the
time of the holding of the meeting. If the notice is delivered personally or by
telephone or by telegram, it shall be delivered personally or by telephone or to
the telegraph company at least forty-eight (48) hours before the time of the
holding of the meeting. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the director
who the person giving
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the notice has reason to believe will promptly communicate it to the director.
The notice need not specify the purpose or the place of the meeting, if the
meeting is to be held at the principal executive office of the corporation.
3.8 QUORUM
At all meetings of the board of directors, a majority of the authorized
number of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the board of directors, except as may be
otherwise specifically provided by statute or by the certificate of
incorporation. If a quorum is not present at any meeting of the board of
directors, then the directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
is present.
3.9 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the certificate of incorporation or these
bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the directors, or members of a committee of directors, need be specified in
any written waiver of notice unless so required by the certificate of
incorporation or these bylaws.
3.10 ADJOURNED MEETING; NOTICE
If a quorum is not present at any meeting of the board of directors, then
the directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum is present.
3.11 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise restricted by the certificate of incorporation or these
bylaws, any action required or permitted to be taken at any meeting of the board
of directors, or of any committee thereof, may be taken without a meeting if all
members of the board or committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the board or committee.
3.12 FEES AND COMPENSATION OF DIRECTORS
Unless otherwise restricted by the certificate of incorporation or these
bylaws, the board of directors shall have the authority to fix the compensation
of directors.
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3.13 APPROVAL OF LOANS TO OFFICERS
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the board of
directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
3.14 REMOVAL OF DIRECTORS
Unless otherwise restricted by statute, by the certificate of incorporation
or by these bylaws, any director or the entire board of directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors.
No reduction of the authorized number of directors shall have the effect of
removing any director prior to the expiration of such director's term of office.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution passed by a majority of the whole
board, designate one or more committees, with each committee to consist of one
or more of the directors of the corporation. The board may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not such
member or members constitute a quorum, may unanimously appoint another member of
the board of directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the board of directors or in the bylaws of the corporation, shall
have and may exercise all the powers and authority of the board of directors in
the management of the business and affairs of the corporation, and may authorize
the seal of the corporation to be affixed to all papers that may require it; but
no such committee shall have the power or authority to (i) amend the certificate
of incorporation (except that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock adopted
by the board of directors as provided in Section 151(a) of the General
Corporation Law of Delaware, fix any of the preferences or rights of such shares
relating to dividends, redemption, dissolution, any distribution of assets of
the corporation
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or the conversion into, or the exchange of such shares for, shares of any other
class or classes or any other series of the same or any other class or classes
of stock of the corporation), (ii) adopt an agreement of merger or consolidation
under Sections 251 or 252 of the General Corporation Law of Delaware, (iii)
recommend to the stockholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets, (iv) recommend to
the stockholders a dissolution of the corporation or a revocation of a
dissolution, or (v) amend the bylaws of the corporation; and, unless the board
resolution establishing the committee, the bylaws or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to adopt
a certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law of Delaware.
4.2 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and taken
in accordance with, the provisions of Article III of these bylaws, Section 3.5
(place of meetings and meetings by telephone), Section 3.7 (regular meetings),
Section 3.8 (special meetings and notice), Section 3.9 (quorum), Section 3.10
(waiver of notice), Section 3.11 (adjournment and notice of adjournment), and
Section 3.12 (action without a meeting), with such changes in the context of
those bylaws as are necessary to substitute the committee and its members for
the board of directors and its members; provided, however, that the time of
regular meetings of committees may also be called by resolution of the board of
directors and that notice of special meetings of committees shall also be given
to all alternate members, who shall have the right to attend all meetings of the
committee. The board of directors may adopt rules for the government of any
committee not inconsistent with the provisions of these bylaws.
ARTICLE V
OFFICERS
5.1 OFFICERS
The officers of the corporation shall be a president, one or more vice
presidents, a secretary, and a treasurer. The corporation may also have, at the
discretion of the board of directors, a chairman of the board, one or more
assistant vice presidents, assistant secretaries, assistant treasurers, and any
such other officers as may be appointed in accordance with the provisions of
Section 5.3 of these bylaws. Any number of offices may be held by the same
person.
5.2 ELECTION OF OFFICERS
The officers of the corporation, except such officers as may be appointed
in accordance with the provisions of Sections 5.3 or 5.5 of these bylaws, shall
be chosen by the board of directors, subject to the rights, if any, of an
officer under any contract of employment.
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5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or empower the president to appoint,
such other officers and agents as the business of the corporation may require,
each of whom shall hold office for such period, have such authority, and perform
such duties as are provided in these bylaws or as the board of directors may
from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the board of directors at any regular or
special meeting of the board or, except in the case of an officer chosen by the
board of directors, by any officer upon whom such power of removal may be
conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.5 VACANCIES IN OFFICES
Any vacancy occurring in any office of the corporation shall be filled by
the board of directors.
5.6 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to such
officer by the board of directors or as may be prescribed by these bylaws. If
there is no president, then the chairman of the board shall also be the chief
executive officer of the corporation and shall have the powers and duties
prescribed in Section 5.7 of these bylaws.
5.7 PRESIDENT
Subject to such supervisory powers, if any, as may be given by the board of
directors to the chairman of the board, if there be such an officer, the
president shall be the chief executive officer of the corporation and shall,
subject to the control of the board of directors, have general supervision,
direction, and control of the business and the officers of the corporation. The
president shall preside at all meetings of the shareholders and, in the absence
or nonexistence of a chairman of the board, at all meetings of the board of
directors. The president shall have the general powers and duties of management
usually vested in the office of president of a corporation and shall have such
other powers and duties as may be prescribed by the board of directors or these
bylaws.
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5.8 VICE PRESIDENT
In the absence or disability of the president, the vice presidents, if any,
in order of their rank as fixed by the board of directors or, if not ranked, a
vice president designated by the board of directors, shall perform all the
duties of the president and when so acting shall have all the powers of, and be
subject to all the restrictions upon, the president. The vice presidents shall
have such other powers and perform such other duties as from time to time may be
prescribed for them respectively by the board of directors, these bylaws, the
president or the chairman of the board.
5.9 SECRETARY
The secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors, and shareholders. The minutes shall show the time and place of
each meeting, whether regular or special (and, if special, how authorized and
the notice given), the names of those present at directors' meetings or
committee meetings, the number of shares present or represented at shareholders'
meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive
office of the corporation or at the office of the corporation's transfer agent
or registrar, as determined by resolution of the board of directors, a share
register, or a duplicate share register, showing the names of all shareholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares, and the number and date of
cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of
the shareholders and of the board of directors required to be given by law or by
these bylaws. The secretary shall keep the seal of the corporation, if one be
adopted, in safe custody and shall have such other powers and perform such other
duties as may be prescribed by the board of directors or by these bylaws.
5.10 TREASURER
The treasurer shall keep and maintain, or cause to be kept and maintained,
adequate and correct books and records of accounts of the properties and
business transactions of the corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, retained earnings,
and shares. The books of account shall at all reasonable times be open to
inspection by any director.
The treasurer shall deposit all money and other valuables in the name and
to the credit of the corporation with such depositaries as may be designated by
the board of directors. The treasurer shall disburse the funds of the
corporation as may be ordered by the board of directors, shall render to the
president and directors, whenever they request it, an account of all of the
treasurer's transactions as treasurer and of the financial condition of the
corporation, and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or these bylaws.
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5.11 ASSISTANT SECRETARY
The assistant secretary, or, if there is more than one, the assistant
secretaries in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the secretary or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the secretary
and shall perform such other duties and have such other powers as the board of
directors or the stockholders may from time to time prescribe.
5.12 ASSISTANT TREASURER
The assistant treasurer, or, if there is more than one, the assistant
treasurers, in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election),
shall, in the absence of the treasurer or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the treasurer
and shall perform such other duties and have such other powers as the board of
directors or the stockholders may from time to time prescribe.
5.13 AUTHORITY AND DUTIES OF OFFICERS
In addition to the foregoing authority and duties, all officers of the
corporation shall respectively have such authority and perform such duties in
the management of the business of the corporation as may be designated from time
to time by the board of directors or the stockholders.
ARTICLE VI
INDEMNIFICATION
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the maximum extent and in the manner permitted by
the General Corporation Law of Delaware, indemnify each of its directors and
officers against expenses (including attorneys' fees), judgments, fines,
settlements, and other amounts actually and reasonably incurred in connection
with any proceeding, arising by reason of the fact that such person is or was an
agent of the corporation. For purposes of this Section 6.1, a "director" or
"officer" of the corporation includes any person (i) who is or was a director or
officer of the corporation, (ii) who is or was serving at the request of the
corporation as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, or (iii) who was a director or officer of a
corporation which was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation.
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6.2 INDEMNIFICATION OF OTHERS
The corporation shall have the power, to the maximum extent and in the
manner permitted by the General Corporation Law of Delaware, to indemnify each
of its employees and agents (other than directors and officers) against expenses
(including attorneys' fees), judgments, fines, settlements, and other amounts
actually and reasonably incurred in connection with any proceeding, arising by
reason of the fact that such person is or was an agent of the corporation. For
purposes of this Section 6.2, an "employee" or "agent" of the corporation (other
than a director or officer) includes any person (i) who is or was an employee or
agent of the corporation, (ii) who is or was serving at the request of the
corporation as an employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, or (iii) who was an employee or agent of a
corporation which was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation.
6.3 INSURANCE
The corporation may purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against such person and incurred
by such person in any such capacity, or arising out of such person's status as
such, whether or not the corporation would have the power to indemnify such
person against such liability under the provisions of the General Corporation
Law of Delaware.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS
The corporation shall, either at its principal executive office or at such
place or places as designated by the board of directors, keep a record of its
shareholders listing their names and addresses and the number and class of
shares held by each shareholder, a copy of these bylaws as amended to date,
accounting books, and other records.
Any stockholder of record, in person or by attorney or other agent, shall,
upon written demand under oath stating the purpose thereof, have the right
during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent
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to so act on behalf of the stockholder. The demand under oath shall be directed
to the corporation at its registered office in Delaware or at its principal
place of business.
The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
7.2 INSPECTION BY DIRECTORS
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to the director's position as a director. The Court
of Chancery is hereby vested with the exclusive jurisdiction to determine
whether a director is entitled to the inspection sought. The Court may summarily
order the corporation to permit the director to inspect any and all books and
records, the stock ledger, and the stock list and to make copies or extracts
therefrom. The Court may, in its discretion, prescribe any limitations or
conditions with reference to the inspection, or award such other and further
relief as the Court may deem just and proper.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS; WAIVER
The board of directors shall present at each annual meeting, and at any
special meeting of the stockholders when called for by vote of the stockholders,
a full and clear statement of the business and condition of the corporation.
The foregoing requirement of an annual report shall be waived so long as
the shares of the corporation are held by fewer than one hundred (100) holders
of record.
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, the president, any vice president, the
treasurer, the secretary or assistant secretary of this corporation, or any
other person authorized by the board of directors or the president or a vice
president, is authorized to vote, represent, and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority granted
herein may be exercised either by such person directly or by any other person
authorized to do so by proxy or power of attorney duly executed by such person
having the authority.
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ARTICLE VIII
GENERAL MATTERS
8.1 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS
The board of directors, except as otherwise provided in these bylaws, may
authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES
The shares of a corporation shall be represented by certificates, provided
that the board of directors of the corporation may provide by resolution or
resolutions that some or all of any or all classes or series of its stock shall
be uncertificated shares. Any such resolution shall not apply to shares
represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the board of
directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or in the name of the corporation by the chairman or vice-chairman of
the board of directors, or the president or vice-president, and by the treasurer
or an assistant treasurer, or the secretary or an assistant secretary of such
corporation representing the number of shares registered in certificate form.
Any or all of the signatures on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate has ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if such person were such officer, transfer
agent or registrar at the date of issue.
The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, upon the books and records of the corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on
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<PAGE>
fully paid shares, the corporation shall declare a dividend upon partly paid
shares of the same class, but only upon the basis of the percentage of the
consideration actually paid thereon.
8.4 SPECIAL DESIGNATION ON CERTIFICATES
If the corporation is authorized to issue more than one class of stock or
more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, the designations,
the preferences, and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
8.5 LOST CERTIFICATES
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and cancelled at the same time. The corporation
may issue a new certificate of stock or uncertificated shares in the place of
any certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate, or the owner's legal representative, to give the
corporation a bond sufficient to indemnify it against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate or uncertificated shares.
8.6 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these bylaws. Without limiting the generality of this
provision, the singular number includes the plural, the plural number includes
the singular, and the term "person" includes both a corporation and a natural
person.
8.7 DIVIDENDS
The directors of the corporation, subject to any restrictions contained in
the certificate of incorporation, may declare and pay dividends upon the shares
of its capital stock pursuant to the General Corporation Law of Delaware.
Dividends may be paid in cash, in property, or in shares of the corporation's
capital stock.
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<PAGE>
The directors of the corporation may set apart out of any of the funds of
the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not be
limited to equalizing dividends, repairing or maintaining any property of the
corporation, and meeting contingencies.
8.8 FISCAL YEAR
The fiscal year of the corporation shall be fixed by resolution of the
board of directors and may be changed by the board of directors.
8.9 SEAL
The corporation may adopt a corporate seal, which may be altered at
pleasure, and may use the same by causing it or a facsimile thereof to be
impressed or affixed or in any other manner reproduced.
8.10 TRANSFER OF STOCK
Upon surrender to the corporation or the transfer agent of the corporation
of a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignation or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate, and record the transaction in its books.
8.11 STOCK TRANSFER AGREEMENTS
The corporation shall have power to enter into and perform any agreement
with any number of shareholders of any one or more classes of stock of the
corporation to restrict the transfer of shares of stock of the corporation of
any one or more classes owned by such stockholders in any manner not prohibited
by the General Corporation Law of Delaware.
8.12 REGISTERED STOCKHOLDERS
The corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends and
to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
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<PAGE>
ARTICLE IX
AMENDMENTS
The original or other bylaws of the corporation may be adopted, amended or
repealed by the stockholders entitled to vote; provided, however, that the
corporation may, in its certificate of incorporation, confer the power to adopt,
amend or repeal bylaws upon the directors. The fact that such power has been so
conferred upon the directors shall not divest the stockholders of the power, nor
limit their power to adopt, amend or repeal bylaws.
ARTICLE X
DISSOLUTION
If it should be deemed advisable in the judgment of the board of directors
of the corporation that the corporation should be dissolved, the board, after
the adoption of a resolution to that effect by a majority of the whole board at
any meeting called for that purpose, shall cause notice to be mailed to each
stockholder entitled to vote thereon of the adoption of the resolution and of a
meeting of stockholders to take action upon the resolution.
At the meeting a vote shall be taken for and against the proposed
dissolution. If a majority of the outstanding stock of the corporation entitled
to vote thereon votes for the proposed dissolution, then a certificate stating
that the dissolution has been authorized in accordance with the provisions of
Section 275 of the General Corporation Law of Delaware and setting forth the
names and residences of the directors and officers shall be executed,
acknowledged, and filed and shall become effective in accordance with Section
103 of the General Corporation Law of Delaware. Upon such certificate's
becoming effective in accordance with Section 103 of the General Corporation Law
of Delaware, the corporation shall be dissolved.
Whenever all the stockholders entitled to vote on a dissolution consent in
writing, either in person or by duly authorized attorney, to a dissolution, no
meeting of directors or stockholders shall be necessary. The consent shall be
filed and shall become effective in accordance with Section 103 of the General
Corporation Law of Delaware. Upon such consent's becoming effective in
accordance with Section 103 of the General Corporation Law of Delaware, the
corporation shall be dissolved. If the consent is signed by an attorney, then
the original power of attorney or a photocopy thereof shall be attached to and
filed with the consent. The consent filed with the Secretary of State shall
have attached to it the affidavit of the secretary or some other officer of the
corporation stating that the consent has been signed by or on behalf of all the
stockholders entitled to vote on a dissolution; in addition, there shall be
attached to the consent a certification by the secretary or some other officer
of the corporation setting forth the names and residences of the directors and
officers of the corporation.
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<PAGE>
ARTICLE XI
CUSTODIAN
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES
The Court of Chancery, upon application of any stockholder, may appoint one
or more persons to be custodians and, if the corporation is insolvent, to be
receivers, of and for the corporation when:
(i) at any meeting held for the election of directors the
stockholders are so divided that they have failed to elect successors to
directors whose terms have expired or would have expired upon qualification of
their successors; or
(ii) the business of the corporation is suffering or is threatened
with irreparable injury because the directors are so divided respecting the
management of the affairs of the corporation that the required vote for action
by the board of directors cannot be obtained and the stockholders are unable to
terminate this division; or
(iii) the corporation has abandoned its business and has failed
within a reasonable time to take steps to dissolve, liquidate or distribute its
assets.
11.2 DUTIES OF CUSTODIAN
The custodian shall have all the powers and title of a receiver appointed
under Section 291 of the General Corporation Law of Delaware, but the authority
of the custodian shall be to continue the business of the corporation and not to
liquidate its affairs and distribute its assets, except when the Court of
Chancery otherwise orders and except in cases arising under Sections 226(a)(3)
or 352(a)(2) of the General Corporation Law of Delaware.
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<PAGE>
CERTIFICATE OF ADOPTION OF AMENDED BYLAWS
OF
SEAGATE SOFTWARE, INC.
Certificate by Secretary of Adoption by Sole Stockholder
The undersigned hereby certifies that he is the duly elected, qualified,
and acting Secretary of Seagate Software, Inc., a Delaware corporation, and that
the foregoing Amended Bylaws, comprising twenty (20) pages, were adopted,
pursuant to Delaware General Corporation Law Section 109, by the Sole
Stockholder of the Corporation effective April 4, 1996 as the Bylaws of the
Corporation to replace the existing Bylaws of the Corporation in their entirety.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and affixed
the corporate seal this 4th day of April, 1996.
/s/ Donald L. Waite
-------------------------------
Donald L. Waite, Secretary
<PAGE>
CERTIFICATE OF AMENDMENT NO. 1
OF THE BYLAWS OF
SEAGATE SOFTWARE, INC.
Article II, Meetings of Stockholders, Section 2.3 of the Bylaws of this
corporation was amended, effective April 4, 1996, by the Board of Directors to
read in its entirety as follows:
2.3 SPECIAL MEETING
A special meeting of the stockholders may be called at any time by the
board of directors, or by the chairman of the board of directors, or by the
president, or by one or more stockholders holding at least ten (10) percent of
the voting power of the corporation.
If a special meeting is called by any person or persons other than the
board of directors or the president or the chairman of the board, then the
request shall be in writing, specifying the time of such meeting and the general
nature of the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or telegraphic or other facsimile
transmission to the chairman of the board, the president, any vice president, or
the secretary of the corporation. The officer receiving the request shall cause
notice to be promptly given to the stockholders entitled to vote, in accordance
with the provisions of Sections 2.4 and 2.5 of these bylaws, that a meeting will
be held at the time requested by the person or persons calling the meeting, so
long as that time is not less than thirty-five (35) nor more than sixty (60)
days after receipt of the request. If the notice is not given within twenty
(20) days after receipt of the request, then the person or persons requesting
the meeting may give the notice. Nothing contained in this paragraph of this
Section 2.3 shall be construed as limiting, fixing or affecting the time when a
meeting of stockholders called by action of the board of directors may be held.
<PAGE>
EXHIBIT 4.1
VOTING AGREEMENT
This VOTING AGREEMENT ("Agreement") is made as of this 26th day of December
---------
1996, among SEAGATE SOFTWARE, INC., a Delaware corporation ("Seagate Software"),
----------------
SEAGATE SOFTWARE INFORMATION MANAGEMENT GROUP, INC., a British Columbia
corporation ("Seagate Canada") and SEAGATE TECHNOLOGY INTERNATIONAL HOLDINGS, a
--------------
Cayman Islands corporation ("Seagate Cayman Holdings"), with reference to the
-----------------------
following:
RECITALS
A. Pursuant to an Exchange Agreement dated as of December __, 1996,
Seagate Canada and Seagate Cayman Holdings agreed to reorganize the capital of
Seagate Canada as set forth therein (the "Exchange"), and in connection
--------
therewith, Seagate Cayman Holdings and Seagate Canada required Seagate Software,
Seagate Canada and Seagate Cayman Holdings to enter into a Voting Agreement on
the terms and conditions set forth herein.
B. Following the consummation of the transactions contemplated by the
Exchange, Seagate Canada issued to Seagate Software 10,000 Common Shares of
Seagate Canada (the "Seagate Canada Common Shares"), constituting all of the
----------------------------
issued and outstanding Seagate Canada Common Shares, and Seagate Canada issued
to Seagate Cayman Holdings 7,200,000 Class B Exchangeable Shares of Seagate
Canada (the "Seagate Canada Exchangeable Shares"), constituting all of the
----------------------------------
issued and outstanding Seagate Canada Exchangeable Shares.
C. In connection with the Exchange, Seagate Software has agreed to
provide voting rights in Seagate Software to the holder of the Seagate Canada
Exchangeable Shares, such voting rights per Seagate Canada Exchangeable Share to
be equivalent to the voting rights per each issued and outstanding share of the
Seagate Software Series A Shares (as hereinafter defined), assuming each such
Seagate Software Series A Share had been converted by its terms into Common
Stock of Seagate Software (the "Seagate Software Common Stock").
-----------------------------
D. The parties hereto desire to make appropriate provision and to
establish a procedure whereby voting rights in Seagate Software shall be
exercisable from time to time by Seagate Cayman Holdings, as holder of the
Seagate Canada Exchangeable Shares, by and through Seagate Cayman Holdings'
legal title to one share of Special Voting Preferred Stock of Seagate Software,
to which voting rights in Seagate Software attach for the benefit of
International Holdings.
NOW THEREFORE, in consideration of the respective covenants and agreements
provided in this Agreement and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
<PAGE>
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 Definitions.
-----------
"Business Day" means a day other than a Saturday, a Sunday or a
------------
statutory holiday in San Francisco, California and Vancouver, British Columbia.
"Seagate Software Consent" has the meaning ascribed thereto in
------------------------
section 3.2.
"Seagate Software Meeting" has the meaning ascribed thereto in
------------------------
section 3.2.
"Seagate Software Series A Shares" means the Series A Preferred Stock
--------------------------------
of Seagate Software, as such shares may be constituted from time to time as set
forth in the Certificate of Incorporation of Seagate Software and as the same
may be affected by any subdivision, consolidation, reclassification or other
change or by any reorganization, amalgamation, merger, sale of assets or by any
distribution in respect of such Seagate Software Series A Shares, including any
automatic or voluntary conversion of such Seagate Software Series A Shares into
Seagate Software Common Stock or other capital stock of Seagate Software.
"Seagate Software Votes" mean a number of votes equal to the number of
----------------------
votes in respect of Seagate Software to which Seagate Cayman Holdings would be
entitled if (i) the Seagate Canada Exchangeable Shares then held by Seagate
Cayman Holdings were exchanged for Seagate Software Series A Shares in
accordance with the Special Rights and Provisions attached to the Seagate Canada
Exchangeable Shares set forth in the Articles of Seagate Canada, and (ii) if
such Seagate Software Series A Shares were, in turn, converted by Seagate Cayman
Holdings into shares of Seagate Software Common Stock in accordance with the
provisions of the Certificate of Incorporation of Seagate Software, as the same
may be amended from time to time.
"Support Agreement" means that certain support agreement dated as of
-----------------
even date herewith between Seagate Canada and Seagate Software.
"Voting Rights" means the voting rights attached to the Voting Share.
-------------
"Voting Share" means the one share of Special Voting Preferred Stock
------------
of Seagate Software, U.S. $.001 par value, issued by Seagate Software to Seagate
Cayman Holdings, which entitles Seagate Cayman Holdings to a number of votes at
meetings of stockholders of Seagate Software equal to the number of Seagate
Software Votes.
1.2 Interpretation Not Affected by Headings, etc. The division of this
---------------------------------------------
Agreement into articles, sections and paragraphs and the insertion of headings
are for convenience of reference only and shall not affect the construction or
interpretation of this Agreement.
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<PAGE>
1.3 Number, Gender, etc. Words importing the singular number only shall
--------------------
include the plural and vice versa. Words importing the use of any gender shall
include all genders.
1.4 Date for any Action. If any date on which any action is required to
-------------------
be taken under this Agreement is not a Business Day, such action shall be
required to be taken on the next succeeding Business Day.
ARTICLE 2
VOTING SHARE
2.1 Issuance of the Voting Share. In consideration of Seagate Cayman
----------------------------
Holdings' and Seagate Canada's agreement to enter into the Exchange, Seagate
Software hereby issues the Voting Share to Seagate Cayman Holdings, in
accordance with the provisions of this Agreement.
ARTICLE 3
EXERCISE OF VOTING SHARE
3.1 Voting Share. Seagate Cayman Holdings shall be entitled to all of the
------------
Voting Rights, including the right to consent to or to vote in person or by
proxy the Voting Share, on any matter, question or proposition whatsoever that
may properly come before the stockholders of Seagate Software at a Seagate
Software Meeting or in connection with a Seagate Software Consent.
3.2 Number of Votes. With respect to all meetings of stockholders of
---------------
Seagate Software at which its stockholders are entitled to vote (a "Seagate
Software Meeting") and with respect to all written consents sought by Seagate
Software from its stockholders (a "Seagate Software Consent"), Seagate Cayman
Holdings shall be entitled to cast and exercise a number of votes equal to the
Seagate Software Votes in respect of each matter, question or proposition to be
voted on at such Seagate Software Meeting or to be consented to in connection
with such Seagate Software Consent. For the purpose of determining the Seagate
Software Votes to which Seagate Cayman Holdings is entitled in respect of any
such Seagate Software Meeting or Seagate Software Consent, the number of Seagate
Canada Exchangeable Shares owned of record by Seagate Cayman Holdings, and the
number of shares of Seagate Software Common Stock into which such Seagate Canada
Exchangeable Shares are convertible, shall be determined at the close of
business on the record date established by Seagate Software or by applicable law
for purposes of determining stockholders entitled to vote at such Seagate
Software Meeting or to give written consent in connection with such Seagate
Software Consent. Each of Seagate Canada and Seagate Cayman Holdings agrees to
provide immediate notice to Seagate Software of any change in the number of
Seagate Canada Exchangeable Shares held by Seagate Cayman Holdings, and in the
event of any dispute between any such notice provided by Seagate Canada and any
such notice provided by Seagate Cayman Holdings, the notice provided by Seagate
Canada shall control.
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<PAGE>
3.3 Copies of Stockholder Information. Seagate Software will deliver to
---------------------------------
Seagate Cayman Holdings copies of all proxy materials, information statements,
reports (including without limitation all interim and annual financial
statements) and other written communications that are to be distributed from
time to time to holders of Seagate Software Common Stock at the same time as
such materials are first sent to holders of Seagate Software Common Stock.
3.4 Other Materials. Immediately after receipt by Seagate Software or any
---------------
stockholder of Seagate Software of any material sent or given to the holders of
Seagate Software Common Stock by or on behalf of a third party, including
without limitation dissident proxy and information circulars (and related
information and material) and tender and exchange offer circulars (and related
information and material), Seagate Software shall obtain and deliver the same to
Seagate Cayman Holdings (unless the same has been provided directly to Seagate
Cayman Holdings by such third party).
3.5 Termination of Voting Rights. All of the rights of Seagate Cayman
----------------------------
Holdings with respect to the Seagate Software Votes exercisable in respect of
any Seagate Canada Exchangeable Shares held by Seagate Cayman Holdings shall
automatically be deemed to be surrendered by Seagate Cayman Holdings to Seagate
Software, and the Seagate Software Votes and the Voting Rights represented
thereby shall automatically cease, immediately upon the delivery by Seagate
Cayman Holdings to Seagate Canada of the certificates representing such Seagate
Canada Exchangeable Shares following the exchange or retraction of such Seagate
Canada Exchangeable Shares, or otherwise, in accordance with the Special Rights
and Provisions attached to such Seagate Canada Exchangeable Shares set forth in
the Articles of Seagate Canada. The parties hereto acknowledge that the Seagate
Canada Exchangeable Shares may be exchanged or retracted in whole or in part,
and that the number of Seagate Software Votes exercisable in respect of the
Seagate Canada Exchangeable Shares shall be reduced accordingly.
ARTICLE 4
RESTRICTIONS ON ISSUANCE; CHANGES IN CAPITAL
4.1 Issue of Additional Shares. During the term of this Agreement,
--------------------------
Seagate Software will not create, issue or allot (or make any agreement to date)
any shares of Seagate Software Special Voting Preferred Stock in addition to the
Voting Share. Nothing herein shall preclude Seagate Software from issuing any
other class or series of capital stock.
4.2 Changes in Capital. At all times after the occurrence of any event
------------------
effected pursuant to section 2.7 or section 2.8 of the Support Agreement, as a
result of which either shares of the Seagate Software Series A Shares or the
Seagate Canada Exchangeable Shares, or either of them, are in any way changed,
this Agreement shall forthwith be amended and modified as necessary in order
that it shall apply with full force and effect, mutatis mutandis, to all new
securities into which the Seagate Software Series A Shares or the Seagate Canada
Exchangeable Shares, as applicable, are so changed
-4-
<PAGE>
and the parties hereto shall execute and deliver any necessary supplemental
agreements giving effect to and evidencing such necessary amendments and
modifications.
ARTICLE 5
TERM; TERMINATION
5.1 Term. This Agreement shall be effective upon the issuance of the
----
Seagate Canada Exchangeable Shares by Seagate Canada to Seagate Cayman Holdings
under the Exchange and shall continue until the earlier to occur of the
following events:
(a) no outstanding Seagate Canada Exchangeable Shares are held by
Seagate Cayman Holdings; and
(b) each of Seagate Canada, Seagate Software and Seagate Cayman
Holdings elects in writing to terminate this Agreement.
ARTICLE 6
GENERAL
6.1 Amendments, Modifications, etc. This Agreement may not be amended or
------------------------------
modified except by an agreement in writing executed by Seagate Canada, Seagate
Software and Seagate Cayman Holdings.
6.2 Severability. If any provision of this Agreement is held to be
------------
invalid, illegal or unenforceable, the validity, legality or enforceability of
the remainder of this Agreement shall not in any way be affected or impaired
thereby and the agreement shall be carried out as nearly as possible in
accordance with its original terms and conditions.
6.3 No Assignment. The rights and obligations of each party hereunder may
-------------
not be assigned, and any attempt to assign any of such rights or obligations
shall be null and void.
6.4 Notices to Parties. All notices and other communications between the
------------------
parties hereunder shall be in writing and shall be deemed to have been given if
delivered personally or by confirmed telecopy to the parties at the following
addresses (or at such other address for such party as shall be specified in like
notice):
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<PAGE>
(a) if to Seagate Software at:
Seagate Software, Inc.
920 Disc Drive
Scotts Valley, California 95066
Attn: President
(b) if to Seagate Canada at:
Seagate Software Information Management Group, Inc.
1095 West Pender Street, Suite 400
Vancouver, British Columbia, Canada
Attn: President
(c) if to Seagate Cayman Holdings at:
Seagate Technology International Holdings
920 Disc Drive
Scotts Valley, California 95066
Attn: President
Any notice or other communication given personally shall be deemed to have been
given and received upon delivery thereof and if given by telecopy shall be
deemed to have been given and received on the date of receipt thereof unless
such day is not a Business Day in which case it shall be deemed to have been
given and received upon the immediately following Business Day.
6.5 Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
6.6 Jurisdiction. This Agreement shall be construed and enforced in
------------
accordance with the laws of the State of Delaware. Each of the parties hereto
agrees that any action or proceeding arising out of or relating to this
Agreement may be instituted in the courts of Delaware, waives any objection
which it may have now or hereafter to the venue of any such action or
proceeding, irrevocably submits to the jurisdiction of the said courts in any
such action or proceeding, agrees to be bound by any judgment of the said courts
and not to seek, and hereby waives, any review of the merits of any such
judgment by the courts of any other jurisdiction. In addition, Seagate Canada
hereby appoints Seagate Software at its registered office in the State of
Delaware as its attorney for service of process.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
SEAGATE SOFTWARE, INC.
By: /s/ Alan F. Shugart
----------------------------
Name: Alan F. Shugart
Title: President
SEAGATE SOFTWARE INFORMATION
MANAGEMENT GROUP, INC.
By: /s/ Greg Kerfoot
----------------------------
Name: Greg Kerfoot
Title: President
SEAGATE SOFTWARE INFORMATION
MANAGEMENT GROUP, INC.
By: /s/ Donald L. Waite
----------------------------
Name: Donald L. Waite
Title: Vice President,
Secretary and Treasurer
SEAGATE TECHNOLOGY INTERNATIONAL
HOLDINGS
By: /s/ Stephen J. Luczo
----------------------------
Name: Stephen J. Luczo
Title: President
-7-
<PAGE>
Exhibit 10.1
SEAGATE SOFTWARE, INC.
1996 STOCK OPTION PLAN
(AMENDED AND RESTATED, EFFECTIVE JUNE 28, 1996)
1. Purposes of the Plan. The purposes of this Stock Option Plan are to
--------------------
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or nonstatutory stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Board or any of its Committees appointed
-------------
pursuant to Section 4 of the Plan.
(b) "Board" means the Board of Directors of the Company.
-----
(c) "Code" means the Internal Revenue Code of 1986, as amended.
----
(d) "Committee" means a Committee appointed by the Board of Directors
---------
in accordance with Section 4 of the Plan.
(e) "Common Stock" means the Common Stock of the Company.
------------
(f) "Company" means Seagate Software, Inc., a Delaware corporation.
-------
(g) "Consultant" means any person who is engaged by the Company or any
----------
Parent or Subsidiary to render consulting or advisory services and is
compensated for such services, and any director of the Company whether
compensated for such services or not. If and in the event the Company registers
any class of any equity security pursuant to the Exchange Act, the term
Consultant shall thereafter not include directors who are not compensated for
their services or are paid only a director's fee by the Company.
(h) "Continuous Status as an Employee or Consultant" means that the
----------------------------------------------
employment or consulting relationship with the Company, any Parent, or
Subsidiary, is not interrupted or terminated. Continuous Status as an Employee
or Consultant shall not be considered interrupted in the case of (i) any leave
of absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor. A
leave of absence approved by the Company shall include sick leave, military
leave, or any other personal leave approved by an authorized representative of
the Company. For purposes of Incentive
<PAGE>
Stock Options, no such leave may exceed 90 days, unless reemployment upon
expiration of such leave is guaranteed by statute or contract, including Company
policies. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 181st day of such leave any Incentive Stock
Option held by the Optionee shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option.
(i) "Employee" means any person, including Officers and directors,
--------
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(k) "Fair Market Value" means, as of any date, the value of Common
-----------------
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
Ihe Wall Street Journal or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common Stock
on the last market trading day prior to the day of determination, or;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(l) "Incentive Stock Option" means an Option intended to qualify as an
----------------------
incentive stock option within the meaning of Section 422 of the Code.
(m) "Nonstatutory Stock Option" means an Option not intended to
-------------------------
qualify as an Incentive Stock Option.
(n) "Officer" means a person who is an officer of the Company within
-------
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(o) "Option" means a stock option granted pursuant to the Plan.
------
(p) "Optioned Stock" means the Common Stock subject to an Option.
--------------
(q) "Optionee" means an Employee or Consultant who receives an Option.
--------
-2-
<PAGE>
(r) "Parent" means a "parent corporation", whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(s) "Plan" means this 1996 Stock Option Plan.
----
(t) "Section 16(b)" means Section 16(b) of the Exchange Act.
-------------
(u) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 11 below.
(v) "Subsidiary" means a "subsidiary corporation", whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 11 of
-------------------------
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is Twelve Million Six Hundred Thousand (12,600,000) Shares. The
Shares may be authorized, but unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable without having been
exercised in full, or is surrendered pursuant to an option exchange program, the
unpurchased Shares which were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated); provided,
--------
however, that Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan, except that if unvested Shares are repurchased by the Company at
their original purchase price, and the original purchaser of such Shares did not
receive any benefits of ownership of such Shares, such Shares shall become
available for future grant under the Plan. For purposes of the preceding
sentence, voting rights shall not be considered a benefit of Share ownership.
4. Administration of the Plan.
--------------------------
(a) Initial Plan Procedure. Prior to the date, if any, upon which the
----------------------
Company becomes subject to the Exchange Act, the Plan shall be administered by
the Board or a committee appointed by the Board.
(b) Plan Procedure after the Date, if any, upon Which the Company
-------------------------------------------------------------
becomes Subject to the Exchange Act.
- -----------------------------------
(i) Administration with Respect to Directors and Officers. With
-----------------------------------------------------
respect to grants of Options to Employees who are also Officers or directors of
the Company, the Plan shall be administered by (A) the Board if the Board may
administer the Plan in compliance with the rules under Rule 16b-3 promulgated
under the Exchange Act or any successor thereto ("Rule 16b-3") relating to the
disinterested administration of employee benefit plans under which Section 16(b)
exempt discretionary grants and awards of equity securities are to be made, or
(B) a Committee designated by the Board to administer the Plan, which Committee
shall be constituted to comply
-3-
<PAGE>
with the rules under Rule 16b-3 relating to the disinterested administration of
employee benefit plans under which Section 16(b) exempt discretionary grants and
awards of equity securities are to be made. Once appointed, such Committee shall
continue to serve in its designated capacity until otherwise directed by the
Board. From time to time the Board may increase the size of the Committee and
appoint additional members thereof, remove members (with or without cause) and
appoint new members in substitution therefor, fill vacancies, however caused,
and remove all members of the Committee and thereafter directly administer the
Plan, all to the extent permitted by the rules under Rule 16b-3 relating to the
disinterested administration of employee benefit plans under which Section 16(b)
exempt discretionary grants and awards of equity securities are to be made.
(ii) Multiple Administrative Bodies. If permitted by Rule
------------------------------
16b-3, the Plan may be administered by different bodies with respect to
directors, non-director Officers and Employees who are neither directors nor
Officers.
(iii) Administration With Respect to Consultants and Other
----------------------------------------------------
Employees. With respect to grants of Options to Employees or Consultants who are
- ---------
neither directors nor Officers of the Company, the Plan shall be administered by
(A) the Board or (B) a committee designated by the Board, which committee shall
be constituted in such a manner as to satisfy the legal requirements relating to
the administration of incentive stock option plans, if any, of state corporate
and securities laws, of the Code, and of any applicable stock exchange (the
"Applicable Laws"). Once appointed, such Committee shall continue to serve in
its designated capacity until otherwise directed by the Board. From time to
time the Board may increase the size of the Committee and appoint additional
members thereof, remove members (with or without cause) and appoint new members
in substitution therefor, fill vacancies, however caused, and remove all members
of the Committee and thereafter directly administer the Plan, all to the extent
permitted by the Applicable Laws.
(c) Powers of the Administrator. Subject to the provisions of the
---------------------------
Plan and, in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any stock exchange upon which the Common
Stock is listed, the Administrator shall have the authority, in its discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(k) of the Plan;
(ii) to select the Consultants and Employees to whom Options
may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options are
granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each such award granted hereunder;
-4-
<PAGE>
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions of any award
granted hereunder;
(vii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option has declined since the date the Option was granted; and
(viii) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan.
(d) Effect of Administrator's Decision. All decisions, determinations
----------------------------------
and interpretations of the Administrator shall be final and binding on all
Optionees and any other holders of any Options.
5. Eligibility.
-----------
(a) Nonstatutory Stock Options may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if otherwise
eligible, be granted additional Options.
(b) Each Option shall be designated in the written option agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 5(b), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(c) The Plan shall not confer upon any Optionee any right with respect
to continuation of employment or consulting relationship with the Company, nor
shall it interfere in any way with his or her right or the Company's right to
terminate his or her employment or consulting relationship at any time, with or
without cause.
(d) Upon the Company or a successor corporation issuing any class of
common equity securities required to be registered under Section 12 of the
Exchange Act or upon the Plan being assumed by a corporation having a class of
common equity securities required to be registered under Section 12 of the
Exchange Act, the following limitations shall apply to grants of Options to
Employees:
(i) No Employee shall be granted, in any fiscal year of the
Company, Options to purchase more than 5,000,000 Shares.
-5-
<PAGE>
(ii) In connection with his or her initial employment, an
Employee may be granted Options to purchase up to an additional 3,000,000 Shares
which shall not count against the limit set forth in subsection (i) above.
(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 11.
(iv) If an Option is cancelled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 11), the cancelled Option will be counted against the limit
set forth in subsection (i) above. For this purpose, if the exercise price of
an Option is reduced, the transaction will be treated as a cancellation of the
Option and the grant of a new Option.
6. Term of Plan. The Plan shall become effective upon the earlier to
------------
occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company, as described in Section 17 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 13 of the Plan.
7. Term of Option. The term of each Option shall be the term stated in
--------------
the Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof However, in the case of an Incentive
Stock Option granted to an Optionee who, at the time the Option is granted, owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the term of the
Option shall be five (5) years from the date of grant thereof or such shorter
term as may be provided in the Option Agreement.
8. Option Exercise Price and Consideration.
---------------------------------------
(a) The per share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by the
Administrator, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the
grant of such Incentive Stock Option, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be no less than (10%)
of the Fair Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee
described in the preceding paragraph, the per Share exercise price shall be no
less than 100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option
-6-
<PAGE>
(A) granted to a person who, at the time of the grant
of such Option, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the per Share exercise price shall be no less than 110% of the Fair Market
Value per Share on the date of the grant.
(B) granted to any person, the per Share exercise
price shall be no less than 85% of the Fair Market Value per Share on the date
of grant.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option have been owned by the Optionee for more
than six months on the date of surrender and (y) have a Fair Market Value on the
date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised, (5) delivery of a properly executed
exercise notice together with such other documentation as the Administrator and
the broker, if applicable, shall require to effect an exercise of the Option and
delivery to the Company of the sale or loan proceeds required to pay the
exercise price, or (6) any combination of the foregoing methods of payment. In
making its determination as to the type of consideration to accept, the
Administrator shall consider if acceptance of such consideration may be
reasonably expected to benefit the Company.
9. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Stockholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator, including performance criteria with respect
to the Company and/or the Optionee, and as shall be permissible under the terms
of the Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Administrator, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan,
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a stockholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause
to be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section II of the Plan.
-7-
<PAGE>
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Employment or Consulting Relationship. In the
----------------------------------------------------
event of termination of an Optionee's Continuous Status as an Employee or
Consultant with the Company (but not in the event of an Optionee's change of
status from Employee to Consultant (in which case an Employee's Incentive Stock
Option shall automatically convert to a Nonstatutory Stock Option on the date
three (3) months and one day from the date of such change of status) or from
Consultant to Employee), such Optionee may, but only within such period of time
as is determined by the Administrator, of at least thirty (30) days, with such
determination in the case of an Incentive Stock Option not exceeding three (3)
months after the date of such termination (but in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), exercise his or her Option to the extent that Optionee was entitled
to exercise it at the date of such termination. To the extent that Optionee was
not entitled to exercise the Option at the date of such termination, or if
Optionee does not exercise such Option to the extent so entitled within the time
specified herein, the Option shall terminate.
(c) Disability of Optionee. In the event of termination of an
----------------------
Optionee's consulting relationship or Continuous Status as an Employee as a
result of Its or her disability, Optionee may, but only within twelve (12)
months from the date of such termination (and in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), exercise the Option to the extent otherwise entitled to exercise it
at the date of such termination; provided, however, that if such disability is
not a "disability" as such term is defined in Section 22(e)(3) of the Code, in
the case of an Incentive Stock Option such Incentive Stock Option shall
automatically convert to a Nonstatutory Stock Option on the day three months and
one day following such termination. To the extent that Optionee is not entitled
to exercise the Option at the date of termination, or if Optionee does not
exercise such Option to the extent so entitled within the time specified herein,
the Option shall terminate, and the Shares covered by such Option shall revert
to the Plan.
(d) Death of Optionee. In the event of the death of an Optionee, the
-----------------
Option may be exercised at any time within twelve (12) months following the date
of death (but in no event later than the expiration of the term of such Option
as set forth in the Notice of Grant), by the Optionee's estate or by a person
who acquired the right to exercise the Option by bequest or inheritance, but
only to the extent that the Optionee was entitled to exercise the Option at the
date of death. if, at the time of death, the Optionee was not entitled to
exercise his or her entire Option, the Shares covered by the unexercisable
portion of the Option shall immediately revert to the Plan. If, after death,
the Optionee's estate or a person who acquired the right to exercise the Option
by bequest or inheritance does not exercise the Option within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
-8-
<PAGE>
(e) Rule 16b-3. Options granted to persons subject to Section 16(b)
----------
of the Exchange Act must comply with Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
10. Non-Transferability of Options. Options may not be sold, pledged,
------------------------------
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
11. Adjustments Upon Changes in Capitalization or Merger.
----------------------------------------------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the
Administrator, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Administrator shall notify the
Optionee at least fifteen (15) days prior to such proposed action. To the
extent it has not been previously exercised, the Option will terminate
immediately prior to the consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company
--------------------
with or into another corporation, or the sale of substantially all of the assets
of the Company, the Option may be assumed or an equivalent option may be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation. If, in such event, the Option is not assumed or
substituted, the Option shall terminate as of the date of the closing of the
merger or sale of assets. For the purposes of this paragraph, the Option shall
be considered assumed if, following the merger or sale of assets, the Option
confers the right to purchase, for each Share of Optioned Stock subject to the
Option immediately prior to the merger or sale of assets, the consideration
(whether stock, cash, or other securities or property) received in the merger or
sale of assets by holders of Common Stock for each Share held on the effective
date of the transaction (and if holders were offered a choice of consideration,
the type of consideration chosen by the holders of a majority of the outstanding
-9-
<PAGE>
Shares); provided, however, that if such consideration received in the merger or
sale of assets was not solely common stock of the successor corporation or its
Parent, the Administrator may, with the consent of the successor corporation,
provide for the consideration to be received upon the exercise of the Option for
each Share of Optioned Stock subject to the Option to be solely common stock of
the successor corporation or its Parent equal in fair market value to the per
share consideration received by holders of Common Stock in the merger or sale of
assets.
12. Time of Granting Options. The date of grant of an Option shall, for
------------------------
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board. Notice
of the determination shall be given to each Employee or Consultant to whom an
Option is so granted within a reasonable time after the date of such grant.
13. Amendment and Termination of the Plan. The Board may at any time
-------------------------------------
amend, alter, suspend or discontinue the Plan, but no amendment, alteration,
suspension or discontinuation shall be made which would impair the rights of any
Optionee under any grant theretofore made, without his or her written consent.
In addition, to the extent necessary and desirable to comply with Rule 16b-3
under the Exchange Act or with Sections 162(m) or 422 of the Code (or any other
applicable law or regulation, including the requirements of the NASD or an
established stock exchange), the Company shall obtain stockholder approval of
any Plan amendment in such a manner and to such a degree as required.
14. Conditions Upon Issuance of Shares. Shares shall not be issued
----------------------------------
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
15. Reservation of Shares. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. The inability of the
Company to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
16. Agreements. Options shall be evidenced by written agreements in such
----------
form as the Administrator shall approve from time to time.
-10-
<PAGE>
17. Stockholder Approval. Continuance of the Plan shall be subject to
--------------------
approval by the stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such stockholder approval shall be obtained
in the degree and manner required under applicable state and federal law and the
rules of any stock exchange upon which the Common Stock is listed.
18. Information to Optionees and Purchasers. The Company shall provide to
---------------------------------------
each Optionee, not less frequently than annually, copies of annual financial
statements. The Company shall also provide such statements to each individual
who acquires Shares pursuant to the Plan while such individual owns such Shares.
The Company shall not be required to provide such statements to key employees
whose duties in connection with the Company assure their access to equivalent
information.
-11-
<PAGE>
SEAGATE SOFTWARE, INC.
1996 STOCK PLAN
STOCK OPTION AGREEMENT
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED UNDER THIS CHAPTER WITH THE STATE OF NEW HAMPSHIRE NOR
THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN
THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT
ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING.
NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE
FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN
ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL
TO, ANY PERSON, SECURITY, OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO
BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION
INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
----------------------------
[Optionee's Name and Address]
- -----------------------------
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:
Grant Number _________________________
Date of Grant _________________________
Vesting Commencement Date _________________________
Exercise Price per Share $________________________
Total Number of Shares Granted _________________________
Total Exercise Price $_________________________
Type of Option: ___ Incentive Stock Option
___ Nonstatutory Stock Option
Term/Expiration Date: _________________________
<PAGE>
Vesting Schedule:
----------------
You may exercise this Option, in whole or in part, according to the
following vesting schedule:
20%, 20%, 30% and 30% of the Shares subject to the Option shall vest on
each anniversary of the Vesting Commencement Date.
Termination Period:
------------------
You may exercise this Option for thirty (30) days after your employment or
consulting relationship with the Company terminates, or for such longer period
upon your death or disability as provided in this Option Agreement. If your
status changes from Employee to Consultant or Consultant to Employee, this
Option Agreement shall remain in effect. In no case may you exercise this
Option after the Term/Expiration Date as provided above.
II. AGREEMENT
---------
1. Grant of Option. Seagate Software, Inc. a Delaware corporation (the
---------------
"Company"), hereby grants to the Optionee named in the Notice of Grant (the
"Optionee"), an option (the "Option") to purchase the total number of shares of
Common Stock (the "Shares") set forth in the Notice of Grant, at the exercise
price per share set forth in the Notice of Grant (the "Exercise Price") subject
to the terms, definitions and provisions of the 1996 Stock Option Plan (the
"Plan") adopted by the Company, which is incorporated herein by reference.
Unless otherwise defined herein, the terms defined in the Plan shall have the
same defined meanings in this Option Agreement.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option as
defined in Section 422 of the Code. Nevertheless, to the extent that it exceeds
the $100,000 rule of Code Section 422(d), this Option shall be treated as a
Nonstatutory Stock Option ("NSO").
2. Exercise of Option.
------------------
(a) Right to Exercise. This Option shall be exercisable during its
-----------------
term in accordance with the Vesting Schedule set out in the Notice of Grant and
with the applicable provisions of the Plan and this Option Agreement. In the
event of Optionee's death, disability or other termination of the employment or
consulting relationship, this Option shall be exercisable in accordance with the
applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option shall be exercisable by written
------------------
notice (in the form attached as Exhibit A) which shall state the election to
---------
exercise the Option, the number of Shares in respect of which the Option is
being exercised, and such other representations and agreements as to the
holder's investment intent with respect to such shares of Common Stock as may be
required by the Company pursuant to the provisions of the Plan. Such written
notice shall be signed by the Optionee and shall be delivered in person or by
certified mail to the Secretary of the
-2-
<PAGE>
Company. The written notice shall be accompanied by payment of the Exercise
Price. This Option shall be deemed to be exercised upon receipt by the Company
of such written notice accompanied by the Exercise Price.
No Shares will be issued pursuant to the exercise of an Option unless
such issuance and such exercise shall comply with all relevant provisions of law
and the requirements of any stock exchange upon which the Shares may then be
listed. Assuming such compliance, for income tax purposes the Shares shall be
considered transferred to the Optionee on the date on which the Option is
exercised with respect to such Shares.
3. Optionee's Representations. In the event the Shares purchasable
--------------------------
pursuant to the exercise of this Option have not been registered under the
Securities Act of 1933, as amended, at the time this Option is exercised,
Optionee shall, if required by the Company, concurrently with the exercise of
all or any portion of this Option, deliver to the Company his or her Investment
Representation Statement in the form attached hereto as Exhibit B[, and shall
---------
read the applicable rules of the Commissioner of Corporations attached to such
Investment Representation Statement.]
4. Lock-Up Period. Optionee hereby agrees that if so requested by the
--------------
Company or any representative of the underwriters (the "Managing Underwriter")
in connection with any registration of the offering of any securities of the
Company under the Securities Act, Optionee shall not sell or otherwise transfer
any Shares or other securities of the Company during the 180-day period (or such
longer period as may be requested in writing by the Managing Underwriter and
agreed to in writing by the Company) (the "Market Standoff Period") following
the effective date of a registration statement of the Company filed under the
Securities Act; provided, however, that such restriction shall apply only to
the first registration statement of the Company to become effective under the
Securities Act that includes securities to be sold on behalf of the Company to
the public in an underwritten public offering under the Securities Act. The
Company may impose stop-transfer instructions with respect to securities subject
to the foregoing restrictions until the end of such Market Standoff Period.
5. Method of Payment. Payment of the Exercise Price shall be by any of
-----------------
the following, or a combination thereof, at the election of the Optionee:
(a) cash;
(b) check;
(c) surrender of other shares of Common Stock of the Company which
(A) in the case of Shares acquired pursuant to the exercise of a Company option,
have been owned by the Optionee for more than six (6) months on the date of
surrender, and (B) have a Fair Market Value on the date of surrender equal to
the Exercise Price of the Shares as to which the Option is being exercised; or
-3-
<PAGE>
(d) delivery of a properly executed exercise notice together with
such other documentation as the Administrator and the broker, if applicable,
shall require to effect an exercise of the Option and delivery to the Company of
the sale or loan proceeds required to pay the Exercise Price.
6. Restrictions on Exercise. This Option may not be exercised until such
------------------------
time as the Plan has been approved by the stockholders of the Company, or if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G") as
promulgated by the Federal Reserve Board.
7. Termination of Relationship. In the event an Optionee's Continuous
---------------------------
Status as an Employee or Consultant terminates, Optionee may, to the extent
otherwise so entitled at the date of such termination (the "Termination Date"),
exercise this Option during the Termination Period set out in the Notice of
Grant. To the extent that Optionee was not entitled to exercise this Option at
the date of such termination, or if Optionee does not exercise this Option
within the time specified herein, the Option shall terminate.
8. Disability of Optionee. Notwithstanding the provisions of Section 7
----------------------
above, in the event of termination of an Optionee's consulting relationship or
Continuous Status as an Employee as a result of his or her disability, Optionee
may, but only within twelve (12) months from the date of such termination (and
in no event later than the expiration date of the term of such Option as set
forth in the Option Agreement), exercise the Option to the extent otherwise
entitled to exercise it at the date of such termination; provided, however, that
if such disability is not a "disability" as such term is defined in Section
22(e)(3) of the Code, in the case of an Incentive Stock Option such Incentive
Stock Option shall cease to be treated as an Incentive Stock Option and shall be
treated for tax purposes as a Nonstatutory Stock Option on the day three months
and one day following such termination. To the extent that Optionee was not
entitled to exercise the Option at the date of termination, or if Optionee does
not exercise such Option to the extent so entitled within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
9. Death of Optionee. In the event of termination of Optionee's
-----------------
Continuous Status as an Employee or Consultant as a result of the death of
Optionee, the Option may be exercised at any time within twelve (12) months
following the date of death (but in no event later than the date of expiration
of the term of this Option as set forth in Section 11 below), by Optionee's
estate or by a person who acquired the right to exercise the Option by bequest
or inheritance, but only to the extent the Optionee could exercise the Option at
the date of death.
10. Non-Transferability of Option. This Option may not be transferred in
-----------------------------
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by Optionee. The terms of
this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
-4-
<PAGE>
11. Term of Option. This Option may be exercised only within the term set
--------------
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option. The limitations set out
in Section 7 of the Plan regarding Options designated as Incentive Stock Options
and Options granted to more than ten percent (10%) stockholders shall apply to
this Option.
12. Tax Consequences. Set forth below is a brief summary as of the date
----------------
of this Option of some of the federal and state tax consequences of exercise of
this Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY
INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE
SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE
SHARES.
(a) Exercise of ISO. If this Option qualifies as an ISO, there will
---------------
be no regular federal income tax liability or state income tax liability upon
the exercise of the Option, although the excess, if any, of the Fair Market
Value of the Shares on the date of exercise over the Exercise Price will be
treated as an adjustment to the alternative minimum tax for federal tax purposes
and may subject the Optionee to the alternative minimum tax in the year of
exercise.
(b) Exercise of ISO Following Disability. If the Optionee's
------------------------------------
Continuous Status as an Employee or Consultant terminates as a result of
disability that is not total and permanent disability as defined in Section
22(e)(3) of the Code, to the extent permitted on the date of termination, the
Optionee must exercise an ISO within three months of such termination for the
ISO to be qualified as an ISO.
(c) Exercise of Nonstatutory Stock Option. There may be a regular
-------------------------------------
federal income tax liability and state income tax liability upon the exercise of
a Nonstatutory Stock Option. The Optionee will be treated as having received
compensation income (taxable at ordinary income tax rates) equal to the excess,
if any, of the Fair Market Value of the Shares on the date of exercise over the
Exercise Price. If Optionee is an Employee or a former Employee, the Company
will be required to withhold from Optionee's compensation or collect from
Optionee and pay to the applicable taxing authorities an amount in cash equal to
a percentage of this compensation income at the time of exercise, and may refuse
to honor the exercise and refuse to deliver Shares if such withholding amounts
are not delivered at the time of exercise.
(d) Disposition of Shares. In the case of an NSO, if Shares are held
---------------------
for at least one year, any gain realized on disposition of the Shares will be
treated as long-term capital gain for federal and state income tax purposes. In
the case of an ISO, if Shares transferred pursuant to the Option are held for at
least one year after exercise and are disposed of at least two years after the
Date of Grant, any gain realized on disposition of the Shares will also be
treated as long-term capital gain for federal and state income tax purposes. If
Shares purchased under an ISO are disposed of within such one-year period or
within two years after the Date of Grant, any gain realized on such disposition
will be treated as compensation income (taxable at ordinary income rates) to the
extent of the difference between the Exercise Price and the lesser of (1) the
Fair Market Value of the Shares on the date of exercise, or (2) the sale price
of the Shares.
-5-
<PAGE>
(e) Notice of Disqualifying Disposition of ISO Shares. If the Option
-------------------------------------------------
granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO on or before the
later of (1) the date two years after the Date of Grant, or (2) the date one
year after the date of exercise, the Optionee shall immediately notify the
Company in writing of such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company on the compensation income
recognized by the Optionee.
13. Entire Agreement; Governing Law. The Plan is incorporated herein by
-------------------------------
reference. The Plan and this Option Agreement constitute the entire agreement
of the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee. This agreement is governed by California law except for that body of
law pertaining to conflict of laws.
SEAGATE SOFTWARE, INC.,
a Delaware corporation
By: ___________________________________________
Executive Vice President, Corporate Development,
Chief Operating Officer, Seagate Software, Inc.
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE
OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE WILL
OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR
ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT
NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S STOCK OPTION PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT
CAUSE.
-6-
<PAGE>
Optionee acknowledges receipt of a copy of the Plan and represents that
Optionee is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option.
Optionee further agrees to notify the Company upon any change in the residence
address indicated below.
Dated: ____________________ _____________________________
Optionee (Print Name)
SS#: ______________________ _____________________________
Optionee (Signature)
Employee ID#: _____________ Residence Address:
Work Phone#:
______________ _____________________________
Home Phone#:
______________ _____________________________
_____________________________
DESIGNATION OF BENEFICIARY
--------------------------
In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all of my options that are unexercised at that time.
NAME: (Please Print)___________________________________________________________
(First) (Middle) (Last)
___________________________ _____________________________
Relationship
_____________________________
(Address)
Dated:_____________________ _____________________________
Signature of Employee
-7-
<PAGE>
CONSENT OF SPOUSE
-----------------
The undersigned spouse of Optionee has read and hereby approves the terms
and conditions of the Plan and this Option Agreement. In consideration of the
Company's granting his or her spouse the right to purchase Shares as set forth
in the Plan and this Option Agreement, the undersigned hereby agrees to be
irrevocably bound by the terms and conditions of the Plan and this Option
Agreement and further agrees that any community property interest shall be
similarly bound. The undersigned hereby appoints the undersigned's spouse as
attorney-in-fact for the undersigned with respect to any amendment or exercise
of rights under the Plan or this Option Agreement.
---------------------------------------
Spouse of Optionee
-8-
<PAGE>
EXHIBIT A
---------
SEAGATE SOFTWARE, INC.
1996 STOCK OPTION PLAN
EXERCISE NOTICE
Seagate Software, Inc.
Attn: Stock Plan Administration
P.O. Box 66360
Scotts Valley, CA 95067-0360
1. Exercise of Option. Effective as of today, ___________, 19__, the
------------------
undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase
_________ shares of the Common Stock (the "Shares") of Seagate Software, Inc.
(the "Company") under and pursuant to the 1996 Stock Option Plan, including all
amendments thereto (the "Plan") and the [ ] Incentive [ ] Nonstatutory Stock
Option Agreement dated ________, 19___ (the "Option Agreement").
2. Representations of Optionee. Optionee acknowledges that Optionee has
---------------------------
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.
3. Rights as Stockholder. Until the stock certificate evidencing such
---------------------
Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to vote
or receive dividends or any other rights as a stockholder shall exist with
respect to the Optioned Stock, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such stock certificate promptly
after the Option is exercised. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock certificate
is issued, except as provided in Section 11 of the Plan.
Optionee shall enjoy rights as a stockholder until such time as
Optionee disposes of the Shares or the Company and/or its assignee(s) exercises
the Right of First Refusal hereunder. Upon such exercise, Optionee shall have
no further rights as a holder of the Shares so purchased except the right to
receive payment for the Shares so purchased in accordance with the provisions of
this Agreement, and Optionee shall forthwith cause the certificate(s) evidencing
the Shares so purchased to be surrendered to the Company for transfer or
cancellation.
4. Company's Right of First Refusal. Before any Shares held by Optionee
--------------------------------
or any transferee (either being sometimes referred to herein as the "Holder")
may be sold or otherwise transferred (including transfer by gift or operation of
law), the Company or its assignee(s) shall have a right of first refusal to
purchase the Shares on the terms and conditions set forth in this Section (the
"Right of First Refusal").
<PAGE>
(a) Notice of Proposed Transfer. The Holder of the Shares shall
---------------------------
deliver to the Company a written notice (the "Notice") stating: (i) the
Holder's bona fide intention to sell or otherwise transfer such Shares; (ii) the
name of each proposed purchaser or other transferee ("Proposed Transferee");
(iii) the number of Shares to be transferred to each Proposed Transferee; and
(iv) the bona fide cash price or other consideration for which the Holder
proposes to transfer the Shares (the "Offered Price"), and the Holder shall
offer the Shares at the Offered Price to the Company or its assignee(s).
(b) Exercise of Right of First Refusal. At any time within thirty (30)
----------------------------------
days after receipt of the Notice, the Company and/or its assignee(s) may, by
giving written notice to the Holder, elect to purchase all, but not less than
all, of the Shares proposed to be transferred to any one or more of the Proposed
Transferees, at the purchase price determined in accordance with subsection (c)
below.
(c) Purchase Price. The purchase price ("Purchase Price") for the
--------------
Shares purchased by the Company or its assignee(s) under this Section shall be
the Offered Price. If the Offered Price includes consideration other than cash,
the cash equivalent value of the non-cash consideration shall be determined by
the Board of Directors of the Company in good faith.
(d) Payment. Payment of the Purchase Price shall be made, at the
-------
option of the Company or its assignee(s), in cash (by check), by cancellation of
all or a portion of any outstanding indebtedness of the Holder to the Company
(or, in the case of repurchase by an assignee, to the assignee), or by any
combination thereof within 30 days after receipt of the Notice or in the manner
and at the times set forth in the Notice.
(e) Holder's Right to Transfer. If all of the Shares proposed in the
--------------------------
Notice to be transferred to a given Proposed Transferee are not purchased by the
Company and/or its assignee(s) as provided in this Section, then the Holder may
sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price, provided that such sale or other transfer is
consummated within 120 days after the date of the Notice and provided further
that any such sale or other transfer is effected in accordance with any
applicable securities laws and the Proposed Transferee agrees in writing that
the provisions of this Section shall continue to apply to the Shares in the
hands of such Proposed Transferee. If the Shares described in the Notice are
not transferred to the Proposed Transferee within such period, a new Notice
shall be given to the Company, and the Company and/or its assignees shall again
be offered the Right of First Refusal before any Shares held by the Holder may
be sold or otherwise transferred.
(f) Exception for Certain Family Transfers. Anything to the contrary
--------------------------------------
contained in this Section notwithstanding, the transfer of any or all of the
Shares during the Optionee's lifetime or on the Optionee's death by will or
intestacy to the Optionee's immediate family or a trust for the benefit of the
Optionee's immediate family shall be exempt from the provisions of this Section.
"Immediate Family" as used herein shall mean spouse, lineal descendant or
antecedent, father, mother, brother or sister. In such case, the transferee or
other recipient shall receive and hold the
-2-
<PAGE>
Shares so transferred subject to the provisions of this Section, and there shall
be no further transfer of such Shares except in accordance with the terms of
this Section.
(g) Termination of Right of First Refusal. The Right of First Refusal
-------------------------------------
shall terminate as to any Shares 90 days after the first sale of Common Stock of
the Company to the general public pursuant to a registration statement filed
with and declared effective by the Securities and Exchange Commission under the
Securities Act of 1933, as amended.
5. Optionee's Right to Sell to the Company.
---------------------------------------
(a) In the event that Optionee's employment with the Company terminates
for any reason, Optionee shall have the right to sell to the Company all (but
not less than all) of the Optionee's Shares, at a per share purchase price equal
to Optionee's Exercise Price (the "Repurchase Price"). No payment shall be made
for the unexercised portion of any outstanding Option. Optionee shall give the
Company written notice of Optionee's intent to sell Optionee's Shares to the
Company within thirty (30) days of the termination of Optionee's employment with
the Company.
(b) Within thirty (30) days of receiving the written notice required by
Section 5(a), the Company shall notify Optionee in writing (the "Notice") of the
closing and shall specify in the Notice the date and place for closing, which
closing shall occur not more than sixty (60) days after the Company's receipt of
the Optionee's notice. At the closing, the Company shall deliver the aggregate
Repurchase Price for the Shares (pursuant to Section 5(c)) and Optionee shall
deliver to the Company the respective Shares.
(c) Payment of the aggregate Repurchase Price shall be made, at the
option of the Company in cash (by check), by cancellation of all or a portion of
any outstanding indebtedness of the Optionee to the Company or by any
combination of the two. In addition, at its option, the Company may elect to
pay the aggregate Repurchase Price to an account in the Optionee's name at a
bank selected by the Company. The Company shall avail itself of this option by
a notice in writing to the Optionee stating the name and address of the bank,
date of payment, and waiving the closing at the Company's office.
(d) Upon delivery of the Notice and the payment of the aggregate
Repurchase Price in any of the ways described above, the Company shall become
the legal and beneficial owner of the Shares being repurchased and all rights
and interests therein or relating thereto, and the Company shall have the right
to retain and transfer to its own name the number of Shares being repurchased by
the Company.
(e) Whenever the Company shall be required to repurchase Shares
hereunder, the Company may designate and assign one or more employees, officers,
directors or shareholders of the Company or other persons or organizations to
fulfill all or a part of the Company's repurchase obligations under this
Agreement and purchase all or a part of such Shares.
-3-
<PAGE>
6. Tax Consultation. Optionee understands that Optionee may suffer
----------------
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
7. Restrictive Legends and Stop-Transfer Orders.
--------------------------------------------
(a) Legends. Optionee understands and agrees that the Company shall
-------
cause the legends set forth below or legends substantially equivalent thereto,
to be placed upon any certificate(s) evidencing ownership of the Shares together
with any other legends that may be required by the Company or by state or
federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR, IN THE OPINION OF COMPANY COUNSEL
SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR
TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AND A RIGHT OF FIRST REFUSAL HELD BY THE
ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE BETWEEN
THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY
BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER
RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING ON TRANSFEREES OF
THESE SHARES.
[IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR
ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT
THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE
STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.
Optionee understands that transfer of the Shares may be restricted by
Section 260.141.11 of the Rules of the California Corporations Commissioner, a
copy of which is attached to Exhibit B, the Investment Representation
Statement.]
-4-
<PAGE>
(b) Stop-Transfer Notices. Optionee agrees that, in order to ensure
---------------------
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
-------------------
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
8. Successors and Assigns. The Company may assign any of its rights under
----------------------
this Agreement to single or multiple assignees, and this Agreement shall inure
to the benefit of the successors and assigns of the Company. Subject to the
restrictions on transfer herein set forth, this Agreement shall be binding upon
Optionee and his or her heirs, executors, administrators, successors and
assigns.
9. Interpretation. Any dispute regarding the interpretation of this
--------------
Agreement shall be submitted by Optionee or by the Company forthwith to the
Company's Board of Directors or the committee thereof that administers the Plan,
which shall review such dispute at its next regular meeting. The resolution of
such a dispute by the Board or committee shall be final and binding on the
Company and on Optionee.
10. Governing Law; Severability. This Agreement shall be governed by and
---------------------------
construed in accordance with the laws of California excluding that body of law
pertaining to conflicts of law. Should any provision of this Agreement be
determined by a court of law to be illegal or unenforceable, the other
provisions shall nevertheless remain effective and shall remain enforceable.
11. Notices. Any notice required or permitted hereunder shall be given in
-------
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States mail by certified mail, with postage and fees
prepaid, addressed to the other party at its address as shown below beneath its
signature, or to such other address as such party may designate in writing from
time to time to the other party.
12. Further Instruments. The parties agree to execute such further
-------------------
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement.
13. Delivery of Payment. Optionee herewith delivers to the Company the
-------------------
full Exercise Price for the Shares.
14. Entire Agreement. The Plan and Notice of Grant/Option Agreement are
----------------
incorporated herein by reference. This Agreement, the Plan, the Option
Agreement and the Investment Representation Statement constitute the entire
agreement of the parties with respect to the subject
-5-
<PAGE>
matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Optionee with respect to the subject matter
hereof, and may not be modified adversely to the Optionee's interest except by
means of a writing signed by the Company and Optionee.
Submitted by: Accepted by:
OPTIONEE: Seagate Software, Inc.
_________________________________
(Print Name) By:_______________________________
Its:______________________________
_________________________________
(Signature)
Address: Address:
- ------- -------
___________________________ Seagate Software Inc.
Attn: Stock Plan Administration
___________________________ P.O. Box 66360
Scotts Valley, CA 95067-0360
-6-
<PAGE>
EXHIBIT B
---------
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE :
COMPANY : SEAGATE SOFTWARE, INC.
SECURITY : COMMON STOCK
AMOUNT :
DATE :
In connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:
(a) Optionee is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Securities. Optionee is
acquiring these Securities for investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").
(b) Optionee acknowledges and understands that the Securities
constitute "restricted securities" under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Optionee's investment intent as expressed herein. In this connection,
Optionee understands that, in the view of the Securities and Exchange
Commission, the statutory basis for such exemption may be unavailable if
Optionee's representation was predicated solely upon a present intention to hold
these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future. Optionee further understands that the Securities must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available. Optionee further
acknowledges and understands that the Company is under no obligation to register
the Securities. Optionee understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities unless they are registered or such registration is not required in
the opinion of counsel satisfactory to the Company, a legend prohibiting their
transfer without the consent of the Commissioner of Corporations of this state
and any other legend required under applicable state securities laws.
-1-
<PAGE>
(c) Optionee is familiar with the provisions of Rule 701 and Rule 144,
each promulgated under the Securities Act, which, in substance, permit limited
public resale of "restricted securities" acquired, directly or indirectly from
the issuer thereof, in a non-public offering subject to the satisfaction of
certain conditions. Rule 701 provides that if the issuer qualifies under Rule
701 at the time of the grant of the Option to the Optionee, the exercise will be
exempt from registration under the Securities Act. In the event the Company
becomes subject to the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, ninety (90) days thereafter (or such longer
period as any market stand-off agreement may require) the Securities exempt
under Rule 701 may be resold, subject to the satisfaction of certain of the
conditions specified by Rule 144, including: (1) the resale being made through a
broker in an unsolicited "broker's transaction" or in transactions directly with
a market maker (as said term is defined under the Securities Exchange Act of
1934); and, in the case of an affiliate, (2) the availability of certain public
information about the Company, (3) the amount of Securities being sold during
any three month period not exceeding the limitations specified in Rule 144(e),
and (4) the timely filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the time
of grant of the Option, then the Securities may be resold in certain limited
circumstances subject to the provisions of Rule 144, which requires the resale
to occur not less than two years after the later of the date the Securities were
sold by the Company or the date the Securities were sold by an affiliate of the
Company, within the meaning of Rule 144; and, in the case of acquisition of the
Securities by an affiliate, or by a non-affiliate who subsequently holds the
Securities less than three years, the satisfaction of the conditions set forth
in sections (1), (2), (3) and (4) of the paragraph immediately above.
(e) Optionee further understands that in the event all of the
applicable requirements of Rule 701 or 144 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rules 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk. Optionee understands that no assurances can be given that any
such other registration exemption will be available in such event.
[(f) Optionee understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities without the consent of the Commissioner of Corporations of
California. Optionee has read the applicable Commissioner's Rules with respect
to such restriction, a copy of which is attached.]
Signature of Optionee:
_____________________________________
-2-
<PAGE>
Date:__________________________, 19___
ATTACHMENT 1
STATE OF CALIFORNIA - CALIFORNIA ADMINISTRATIVE CODE
----------------------------------------------------
Title 10. Investment - Chapter 3. Commissioner of Corporations
260.141.11: Restriction on Transfer. (a) The issuer of any security upon
---------- -----------------------
which a restriction on transfer has been imposed pursuant to Sections 260.102.6,
260.141.10 or 260.534 shall cause a copy of this section to be delivered to each
issuee or transferee of such security at the time the certificate evidencing the
security is delivered to the issuee or transferee.
(b) It is unlawful for the holder of any such security to consummate a sale
or transfer of such security, or any interest therein, without the prior written
consent of the Commissioner (until this condition is removed pursuant to Section
260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in Subdivision (i) of Section 25102 of the
Code or Section 260.105.14 of these rules;
(4) to the transferor's ancestors, descendants or spouse, or any
custodian or trustee for the account of the transferor or the transferor's
ancestors, descendants, or spouse; or to a transferee by a trustee or
custodian for the account of the transferee or the transferee's ancestors,
descendants or spouse;
(5) to holders of securities of the same class of the same issuer;
(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker-dealer licensed under the Code (either acting
as such or as a finder) to a resident of a foreign state, territory or
country who is neither domiciled in this state to the knowledge of the
broker-dealer, nor actually present in this state if the sale of such
securities is not in violation of any securities law of the foreign state,
territory or country concerned;
(8) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or member of an underwriting syndicate or
selling group;
(9) if the interest sold or transferred is a pledge or other lien given
by the purchaser to the seller upon a sale of the security for which the
Commissioner's written consent is obtained or under this rule not required;
(10) by way of a sale qualified under Sections 25111, 25112, 25113 or
25121 of the Code, of the securities to be transferred, provided that no
order under Section 25140 or subdivision (a) of Section 25143 is in effect
with respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such corporation,
or by a wholly owned sub sidiary of a corporation to such corporation;
(12) by way of an exchange qualified under Section 25111, 25112 or 25113
of the Code, provided that no order under Section 25140 or subdivision (a) of
Section 25143 is in effect with respect to such quali fication;
(13) between residents of foreign states, territories or countries who
are neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed Property Law or to
the administrator of the unclaimed property law of another state; or
(15) by the State Controller pursuant to the Unclaimed Property Law or by
the administrator of the unclaimed property law of another state if, in
either such case, such person (i) discloses to potential purchasers at the
sale that transfer of the securities is restricted under this rule, (ii)
delivers to each purchaser a copy of this rule, and (iii) advises the
Commissioner of the name of each purchaser;
(16) by a trustee to a successor trustee when such transfer does not
involve a change in the beneficial ownership of the securities;
-3-
<PAGE>
(17) by way of an offer and sale of outstanding securities in an issuer
transaction that is subject to the qualification requirement of Section 25110
of the Code but exempt from that qualification requirement by subdivision (f)
of Section 25102; provided that any such transfer is on the condition that
any certificate evidencing the security issued to such transferee shall
contain the legend required by this section.
(c) The certificates representing all such securities subject to such a
restriction on transfer, whether upon initial issuance or upon any transfer
thereof, shall bear on their face a legend, prominently stamped or printed
thereon in capital letters of not less than 10-point size, reading as follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
-4-
<PAGE>
AMENDMENT TO STOCK OPTION AGREEMENT
This Amendment is made this ____ day of September, 1997, by and between
Seagate Software, Inc. (the "Company") and _____________________ (the
"Optionee").
WHEREAS, the Optionee was granted a stock option by the Company under the
-------
1996 Stock Plan (the "Plan") on __________________, pursuant to the Plan and the
Stock Option Agreement dated _________________ (the "Option").
WHEREAS, the Company and the Optionee desire to amend the Stock Option
-------
Agreement to provide for the early exercise of options.
NOW, THEREFORE, the parties agree as follows:
1. The "Vesting Schedule" under Part I of the Stock Option Agreement, the
"Notice of Stock Option Grant," shall read, in its entirety, as follows:
"Exercise and Vesting Schedule:
-----------------------------
This Option is exercisable immediately, in whole or in part, conditioned
upon the Optionee signing a Restricted Stock Purchase Agreement (attached hereto
as Exhibit C-1) with respect to any unvested Optioned Stock. The Shares subject
to this Option shall vest or be released from the Company's repurchase option,
as set forth in the Restricted Stock Purchase Agreement, according to the
following schedule:
20%, 20%, 30% and 30% of the Shares subject to the Option shall vest on
each anniversary of the Vesting Commencement Date, subject to Optionee's
continuing to be a Service Provider on such dates."
2. The "Termination Period" under Part I of the Stock Option Agreement,
the "Notice of Stock Option Grant," shall read, in its entirety, as follows:
"Termination Period:
------------------
You may exercise this Option (with respect to the vested portion of this
Option) for thirty (30) days after your employment or consulting relationship
with the Company terminates, or for such longer period upon your death or
disability as provided in this Option Agreement. If your status changes from
Employee to Consultant or Consultant to Employee, this Option Agreement shall
remain in effect. In no case may you exercise this Option after the
Term/Expiration Date as provided above."
<PAGE>
3. Section 2(a), "Right to Exercise," shall be amended to read, in its
entirety, as follows:
"a. Right to Exercise.
-----------------
(i) Subject to Sections 2(a)(ii) through 2(a)(iii) below, this
Option shall be exercisable cumulatively according to the vesting schedule set
out in the Notice of Stock Option Grant. Alternatively, at the election of the
Optionee, this option may be exercised in whole or in part at any time as to
unvested Shares. For purposes of this Stock Option Agreement, Shares subject to
the Option shall vest based on the Optionee continuing to be an employee or
consultant of the Company. Vested Shares shall not be subject to the Company's
repurchase right (as set forth in the Restricted Stock Purchase Agreement).
(ii) As a condition to exercising this Option for unvested Shares,
the Optionee shall execute a Restricted Stock Purchase Agreement.
(iii) This Option may not be exercised for a fraction of a Share."
4. The Restricted Stock Purchase Agreement and related documents attached
to this Amendment as Exhibits C-1 through C-6 shall be incorporated into the
Stock Option Agreement.
IN WITNESS WHEREOF, this Amendment has been entered into as of the date
first set forth above.
SEAGATE SOFTWARE, INC. OPTIONEE
_____________________________ _____________________________
By Signature
_____________________________ _____________________________
Title Printed Name
2
<PAGE>
EXHIBIT C-1
-----------
SEAGATE SOFTWARE, INC.
1996 STOCK PLAN
RESTRICTED STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made between ____________________________________ (the
"Purchaser") and Seagate Software, Inc. (the "Company") as of September ___,
1997.
RECITALS
--------
(1) Pursuant to the exercise of the stock option (grant number ____)
granted to Purchaser under the Company's 1996 Stock Plan (the "Plan") and
pursuant to the Stock Option Agreement (the "Option Agreement") dated
___________ by and between the Company and Purchaser with respect to such grant,
which Plan and Option Agreement are hereby incorporated by reference, Purchaser
has elected to purchase _________ of those shares which have not become vested
under the vesting schedule set forth in the Option Agreement ("Unvested
Shares"). The Unvested Shares and the shares subject to the Option Agreement
which have become vested are sometimes collectively referred to herein as the
"Shares".
(2) As required by the Option Agreement, as a condition to Purchaser's
election to exercise the option, Purchaser must execute this Restricted Stock
Purchase Agreement, which sets forth the rights and obligations of the parties
with respect to Shares acquired upon exercise of the Option.
1. Repurchase Option.
-----------------
(a) If Purchaser's status as an employee or consultant is terminated
for any reason, including for cause, death, and disability, the Company shall
have the right and option to purchase from Purchaser, or Purchaser's personal
representative, as the case may be, all of the Purchaser's Unvested Shares as of
the date of such termination at the price paid by the Purchaser for such Shares
(the "Repurchase Option").
(b) Upon the occurrence of a termination, the Company may exercise its
Repurchase Option by delivering personally or by registered mail, to Purchaser
(or his transferee or legal representative, as the case may be), within ninety
(90) days of the termination, a notice in writing indicating the Company's
intention to exercise the Repurchase Option and setting forth a date for closing
not later than thirty (30) days from the mailing of such notice. The closing
shall take place at the Company's office. At the closing, the holder of the
certificates for the Unvested Shares
<PAGE>
being transferred shall deliver the stock certificate or certificates evidencing
the Unvested Shares, and the Company shall deliver the purchase price therefor.
(c) At its option, the Company may elect to make payment for the
Unvested Shares to a bank selected by the Company. The Company shall avail
itself of this option by a notice in writing to Purchaser stating the name and
address of the bank, date of closing, and waiving the closing at the Company's
office.
(d) If the Company does not elect to exercise the Repurchase Option
conferred above by giving the requisite notice within ninety (90) days following
the termination, the Repurchase Option shall terminate.
(e) The Repurchase Option shall terminate in accordance with the
Exercise and Vesting Schedule in Optionee's Option Agreement.
2. Transferability of the Shares; Escrow.
-------------------------------------
(a) Purchaser hereby authorizes and directs the secretary of the
Company, or such other person designated by the Company, to transfer the
Unvested Shares as to which the Repurchase Option has been exercised from
Purchaser to the Company.
(b) To insure the availability for delivery of Purchaser's Unvested
Shares upon repurchase by the Company pursuant to the Repurchase Option under
Section 1, Purchaser hereby appoints the secretary, or any other person
designated by the Company as escrow agent, as its attorney-in-fact to sell,
assign and transfer unto the Company, such Unvested Shares, if any, repurchased
by the Company pursuant to the Repurchase Option and shall, upon execution of
this Agreement, deliver and deposit with the secretary of the Company, or such
other person designated by the Company, the share certificates representing the
Unvested Shares, together with the stock assignment duly endorsed in blank,
attached hereto as Exhibit C-2. The Unvested Shares and stock assignment shall
-----------
be held by the secretary in escrow, pursuant to the Joint Escrow Instructions of
the Company and Purchaser attached as Exhibit C-3 hereto, until the Company
-----------
exercises its purchase right as provided in Section 1, until such Unvested
Shares are vested, or until such time as this Agreement no longer is in effect.
As a further condition to the Company's obligations under this Agreement, the
spouse of the Purchaser, if any, shall execute and deliver to the Company the
Consent of Spouse attached hereto as Exhibit C-4. Upon vesting of the Unvested
-----------
Shares, the escrow agent shall promptly deliver to the Purchaser the certificate
or certificates representing such Shares in the escrow agent's possession
belonging to the Purchaser, and the escrow agent shall be discharged of all
further obligations hereunder; provided, however, that the escrow agent shall
nevertheless retain such certificate or certificates as escrow agent if so
required pursuant to other restrictions imposed pursuant to this Agreement.
-2-
<PAGE>
(c) The Company, or its designee, shall not be liable for any act it
may do or omit to do with respect to holding the Shares in escrow and while
acting in good faith and in the exercise of its judgment.
(d) Transfer or sale of the Shares is subject to restrictions on
transfer imposed by any applicable state and federal securities laws. Any
transferee shall hold such Shares subject to all the provisions hereof and the
Exercise Notice executed by the Purchaser with respect to any Unvested Shares
purchased by Purchaser and shall acknowledge the same by signing a copy of this
Agreement.
3. Ownership, Voting Rights, Duties. This Agreement shall not affect in
--------------------------------
any way the ownership, voting rights or other rights or duties of Purchaser,
except as specifically provided herein.
4. Legends. The share certificate evidencing the Shares issued hereunder
-------
shall be endorsed with the following legend (in addition to any legend required
under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS UPON TRANSFER AND RIGHTS OF REPURCHASE AS SET FORTH IN AN AGREEMENT
BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY.
5. Adjustment for Stock Split. All references to the number of Shares
--------------------------
and the purchase price of the Shares in this Agreement shall be appropriately
adjusted to reflect any stock split, stock dividend or other change in the
Shares which may be made by the Company after the date of this Agreement.
6. Notices. Notices required hereunder shall be given in person or by
-------
registered mail to the address of Purchaser shown on the records of the Company,
and to the Company at their respective principal executive offices.
7. Survival of Terms. This Agreement shall apply to and bind Purchaser
-----------------
and the Company and their respective permitted assignees and transferees, heirs,
legatees, executors, administrators and legal successors.
8. Section 83(b) Election. Purchaser hereby acknowledges that he or she
----------------------
has been informed that, with respect to the exercise of an Option for unvested
Shares, an election may be filed by the Purchaser with the Internal Revenue
Service, within 30 days of the purchase of the Shares, electing pursuant to
--------------
Section 83(b) of the Code to be taxed currently on any difference between the
purchase price of the Shares and their Fair Market Value on the date of
purchase. In the case of a Nonstatutory Stock Option, this will result in a
recognition of taxable income to the Purchaser on the date of exercise, measured
by the excess, if any, of the fair market value of the Shares, at the time the
Option is exercised over the purchase price for the Shares. Absent such an
election, taxable income
-3-
<PAGE>
will be measured and recognized by Purchaser at the time or times on which the
Company's Repurchase Option lapses. In the case of an Incentive Stock Option,
such an election will result in a recognition of income to the Purchaser for
alternative minimum tax purposes on the date of exercise, measured by the
excess, if any, of the fair market value of the Shares, at the time the option
is exercised, over the purchase price for the Shares. Absent such an election,
alternative minimum taxable income will be measured and recognized by Purchaser
at the time or times on which the Company's Repurchase Option lapses. Purchaser
is strongly encouraged to seek the advice of his or her own tax consultants in
connection with the purchase of the Shares and the advisability of filing of the
Election under Section 83(b) of the Code. A form of Election under Section 83(b)
is attached hereto as Exhibit C-5 for reference. A form of cover letter
-----------
addressed to the Internal Revenue Service to accompany such Election under
Section 83(b) is attached to this Agreement as Exhibit C-6.
-----------
PURCHASER ACKNOWLEDGES THAT IT IS PURCHASER'S SOLE RESPONSIBILITY AND NOT
THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b), EVEN IF PURCHASER
REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO MAKE THIS FILING ON PURCHASER'S
BEHALF. PURCHASER FURTHER ACKNOWLEDGES THAT PURCHASER HAS RECEIVED A FORM OF
ELECTION UNDER SECTION 83(b) AND A FORM OF COVER LETTER TO ACCOMPANY SUCH
ELECTION AS EXHIBITS TO THIS AGREEMENT.
9. Representations. Purchaser has reviewed with his own tax advisors the
---------------
federal, state, local and foreign tax consequences of this investment and the
transactions contemplated by this Agreement. Purchaser is relying solely on
such advisors and not on any statements or representations of the Company or any
of its agents. Purchaser understands that he (and not the Company) shall be
responsible for his own tax liability that may arise as a result of this
investment or the transactions contemplated by this Agreement.
10. Governing Law. This Agreement shall be governed by the internal
-------------
substantive laws, but not the choice of law rules, of California.
Purchaser represents that he has read this Agreement and is familiar with
its terms and provisions. Purchaser hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Board upon any
questions arising under this Agreement.
-4-
<PAGE>
IN WITNESS WHEREOF, this Agreement is deemed made as of the date first set
forth above.
"COMPANY"
SEAGATE SOFTWARE, INC.
_____________________________
By
_____________________________
Title
"PURCHASER"
_____________________________
Signature
_____________________________
Printed Name
_____________________________
Soc. Sec. No.
Address:
-------
_____________________________
_____________________________
-5-
<PAGE>
EXHIBIT C-2
-----------
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, __________________________, hereby sell, assign and
transfer unto Seagate Software, Inc. (__________) shares of the Common Stock of
Seagate Software, Inc. standing in my name of the books of said corporation
represented by Certificate No. ________ herewith and do hereby irrevocably
constitute and appoint ______________________________________________
____________ to transfer the said stock on the books of the within named
corporation with full power of substitution in the premises.
This Stock Assignment may be used only in accordance with the Restricted
Stock Purchase Agreement of Seagate Software, Inc. and the undersigned dated
______________, 1997.
Date: _______________
Signature:_________________________________
- --------------------------------------------------------------------------
INSTRUCTIONS TO PURCHASER: Please do not fill in any blanks other than the
signature line. The purpose of this assignment is to enable the Company to
exercise its "repurchase option," as set forth in the Agreement, without
requiring additional signatures on the part of the Purchaser.
- --------------------------------------------------------------------------
<PAGE>
EXHIBIT C-3
-----------
JOINT ESCROW INSTRUCTIONS
-------------------------
September ___, 1997
Seagate Software, Inc.
Attn: Stock Plan Administration
P.O. Box 66360
Scotts Valley, CA 95067-0360
Dear [____________]:
As Escrow Agent for both Seagate Software, Inc. (the "Company"), and the
undersigned purchaser of Common Stock of the Company (the "Purchaser"), you are
hereby authorized and directed to hold the documents delivered to you pursuant
to the terms of that certain Restricted Stock Purchase Agreement ("Agreement")
between the Company and the undersigned, in accordance with the following
instructions:
1. In the event the Company and/or any assignee of the Company (referred
to collectively for convenience herein as the "Company") exercises the Company's
repurchase option set forth in the Agreement, the Company shall give to
Purchaser and you a written notice specifying the number of shares of stock to
be purchased, the purchase price, and the time for a closing hereunder at the
principal office of the Company. Purchaser and the Company hereby irrevocably
authorize and direct you to close the transaction contemplated by such notice in
accordance with the terms of said notice.
2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company or its
assignee, against the simultaneous delivery to you of the purchase price (by
cash, a check, or some combination thereof) for the number of shares of stock
being purchased pursuant to the exercise of the Company's repurchase option.
3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as Purchaser's
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities all documents necessary or appropriate to make such
securities negotiable and to complete any transaction herein contemplated,
including but not limited to the filing with any applicable state blue sky
authority of any required applications for consent to, or notice of transfer of,
the securities.
<PAGE>
Subject to the provisions of this paragraph 3, Purchaser shall exercise all
rights and privileges of a stockholder of the Company while the stock is held by
you.
4. Upon written request of the Purchaser, but no more than once per
calendar year, unless the Company's repurchase option has been exercised, you
will deliver to Purchaser a certificate or certificates representing so many
shares of stock as are not then subject to the Company's repurchase option.
Within 120 days after cessation of Purchaser's continuous employment by or
services to the Company, or any parent or subsidiary of the Company, you will
deliver to Purchaser a certificate or certificates representing the aggregate
number of shares held or issued pursuant to the Agreement and not purchased by
the Company or its assignees pursuant to exercise of the Company's repurchase
option.
5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Purchaser,
you shall deliver all of the same to Purchaser and shall be discharged of all
further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties.
You shall not be personally liable for any act you may do or omit to do
hereunder as Escrow Agent or as attorney-in-fact for Purchaser while acting in
good faith, and any act done or omitted by you pursuant to the advice of your
own attorneys shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court.
In case you obey or comply with any such order, judgment or decree, you shall
not be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall not be liable for the outlawing of any rights under the
Statute of Limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
-2-
<PAGE>
11. You shall be entitled to employ such legal counsel and other experts
as you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.
12. Your responsibilities as Escrow Agent hereunder shall terminate if you
shall cease to be an officer or agent of the Company or if you shall resign by
written notice to each party. In the event of any such termination, the Company
shall appoint a successor Escrow Agent.
13. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the securities held
by you hereunder, you are authorized and directed to retain in your possession
without liability to anyone all or any part of said securities until such
disputes shall have been settled either by mutual written agreement of the
parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.
15. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties thereunto entitled at the
following addresses or at such other addresses as a party may designate by ten
days' advance written notice to each of the other parties hereto.
COMPANY: SEAGATE SOFTWARE, INC.
P.O. Box 66360
Scotts Valley, CA 95067-0360
Attention: Stock Plan Administration
PURCHASER: _____________________________________________
_____________________________________________
_____________________________________________
-3-
<PAGE>
ESCROW AGENT: SEAGATE SOFTWARE, INC.
P.O. Box 66360
Scotts Valley, CA 95067-0360
Attention: Stock Plan Administration
16. By signing these Joint Escrow Instructions, you become a party hereto
only for the purpose of said Joint Escrow Instructions; you do not become a
party to the Agreement.
17. This instrument shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and permitted assigns.
18. These Joint Escrow Instructions shall be governed by the internal
substantive laws, but not the choice of law rules, of California.
SEAGATE SOFTWARE, INC.
___________________________________
By
___________________________________
Title
PURCHASER
___________________________________
Signature
___________________________________
Typed or Printed Name
ESCROW AGENT
___________________________________
Signature
-4-
<PAGE>
EXHIBIT C-4
-----------
CONSENT OF SPOUSE
-----------------
I, ____________________, spouse of ___________________, have read and
approve the foregoing Restricted Stock Purchase Agreement. In consideration of
granting of the right to my spouse to purchase shares of Seagate Software, Inc.,
as set forth in the Agreement, I hereby appoint my spouse as my attorney-in-fact
in respect to the exercise of any rights under the Agreement and agree to be
bound by the provisions of the Agreement insofar as I may have any rights in
said Agreement or any shares issued pursuant thereto under the community
property laws or similar laws relating to marital property in effect in the
state of our residence as of the date of the signing of the foregoing Agreement.
Dated: _______________, 1997
___________________________________
Signature
<PAGE>
EXHIBIT C-5
-----------
ELECTION UNDER SECTION 83(b)
----------------------------
OF THE INTERNAL REVENUE CODE OF 1986
------------------------------------
The undersigned taxpayer hereby elects, pursuant to Sections 55 and 83(b) of the
Internal Revenue Code of 1986, as amended, to include in taxpayer's gross income
or alternative minimum taxable income, as the case may be, for the current
taxable year the amount of any compensation taxable to taxpayer in connection
with taxpayer's receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of the
undersigned are as follows:
NAME: TAXPAYER: SPOUSE:
ADDRESS:
IDENTIFICATION NO.: TAXPAYER: SPOUSE:
TAXABLE YEAR:
2. The property with respect to which the election is made is described as
follows: _____________________________ shares (the "Shares") of the Common
Stock of Seagate Software, Inc. (the "Company").
3. The date on which the property was transferred is: ________________________,
19 ____.
4. The property is subject to the following restrictions:
The Shares may not be transferred and are subject to forfeiture under the
terms of an agreement between the taxpayer and the Company. These
restrictions lapse upon the satisfaction of certain conditions contained in
such agreement.
5. The fair market value at the time of transfer, determined without regard to
any restriction other than a restriction which by its terms will never
lapse, of such property is:
$______________________.
6. The amount (if any) paid for such property is:
$______________________.
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
- --------------------------------------------------------------------------
except with the consent of the Commissioner.
- -------------------------------------------
<PAGE>
Dated: ___________________, 1997
_______________________________________________
Taxpayer
The undersigned spouse of taxpayer joins in this election.
Dated: ___________________, 1997
_______________________________________________
<PAGE>
INFORMATION RE: FILING OF SECTION 83(b) ELECTION
-------------------------------------------------
This information is supplied to you in connection with your recent purchase
of shares of Common Stock of Seagate Software, Inc. (the "COMPANY").
One executed copy of the 83(b) election form must be filed with the Internal
-------------------------------
Revenue Service within 30 days of the purchase of the shares. The steps
- ------------------------------------------------------------
outlined below should be followed to ensure the election is filed correctly and
timely:
1) Complete 83(b) election form, attached as Exhibit C-5 of the Agreement;
-----------
2) Prepare cover letter to the IRS (sample letter attached as Exhibit C-6);
-----------
3) Send cover letter with originally executed 83(b)form and one (1)
additional copy via certified mail or Federal Express to the IRS, within
------
30 days of the date of purchase, with a self-addressed stamped envelope;
-------------------------------
retain receipt of mailing;
4) One copy should be returned to the Company for its records and one copy
should be filed along with your federal income tax return for this year;
and
5) Retain IRS file stamped copy in records when returned.
For your information, the address of the IRS is as follows:
Internal Revenue Service
5045 East Butler Avenue
Fresno, CA 93888
<PAGE>
EXHIBIT C-6
-----------
May __, 1997
Internal Revenue Service
5045 East Butler Avenue
Fresno, California 93888
RE: 83(b) ELECTION FOR PURCHASE OF SEAGATE SOFTWARE, INC. COMMON STOCK
Ladies and Gentlemen:
Enclosed is a completed form of election pursuant to Section 83(b) of the
Internal Revenue Code of 1986 relating to my recent purchase of ______________
shares of Common Stock of Seagate Software, Inc.
Please acknowledge receipt of the enclosed by date-stamping the additional
enclosed copy of this election and returning it in the envelope provided.
Sincerely,
______________________
Enclosure
<PAGE>
EXHIBIT 10.3
NET LEASE
---------
BETWEEN:
CLOVER INVESTMENTS INC.
Landlord
AND:
CRYSTAL COMPUTER SERVICES INC.
Tenant
AND:
SEAGATE TECHNOLOGY INC.
Indemnifier
in respect of premises at
1095 West Pender Street
Vancouver, B.C.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE 1 - BASIC TERMS, SCHEDULES, DEFINITIONS
<S> <C> <C>
1.1 Basic Terms 1
1.2 Schedules 2
1.3 Definitions 2
ARTICLE 2 - PREMISES
2.1 Premises 2
ARTICLE 3 - TERM
3.1 Term 2
ARTICLE 4 - RENT
4.1 Rent 2
(a) Annual Rent 2
(b) Additional Rent 2
4.2 Payment of Rent 2
(b) Additional Rent payments 2
(c) Basis of Determining Rent 3
(d) Deleted
4.3 Rent for Irregular periods 3
4.4 Waiver of Offset 3
4.5 Application of Payments 3
4.6 Deleted
4.7 Deleted
4.8 Net Lease 3
ARTICLE 5 - TENANT'S COVENANTS
5.1 Tenant's Covenants 3
5.2 Rent 3
5.3 Permitted Use 3
5.4 Waste and Nuisance 3
5.5 Insurance Risks 4
5.6 Cleanliness 4
5.7 Compliance with Laws 4
5.8 Fire Exit Doors 4
5.9 Rules and Regulations 4
5.10 Overholding 4
5.11 Signs 4
5.12 Inspection and Access 4
5.13 Showing Leased Premises 5
ARTICLE 6 - LANDLORD'S COVENANTS
6.1 Landlord's Covenants 5
6.2 Quiet Enjoyment 5
6.3 Interior Climate Control 5
6.4 Elevators 5
6.5 Entrances, Lobbies and other Common Areas 5
6.6 Washrooms 5
6.7 Janitorial Service 5
6.8 Maintenance of Common Areas 5
6.9 Building Directory 5
6.10 Base Building Construction 6
ARTICLE 7 - REPAIR, DAMAGE AND DESTRUCTION
7.1 Landlord's Repairs 6
7.2 Tenant's Repairs 6
7.3 Abatement and Termination 6
7.4 Service Interruptions 7
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
ARTICLE 8 - TAXES AND OPERATING COSTS
<S> <C> <C>
8.1 Landlord's Tax Obligations 7
8.2 Tenant's Tax Obligations 7
8.3 Goods and Services Taxes 7
8.4 Receipts for Payment 8
8.5 Postponement of Payment of Taxes 8
8.6 Receipts of Payment 8
8.7 Operation Cost 8
8.8 Allocation to Particular Tenant 8
ARTICLE 9 - UTILITIES AND ADDITIONAL SERVICES
9.1 Water and Telephone 9
9.2 Additional Services 9
9.3 Extra Operating Cost 9
9.4 Energy Conservation 9
ARTICLE 10 - LICENSES, ASSIGNMENTS AND SUBLETTINGS
10.1 Licenses, Franchises and Concessions 9
10.2 (a) Assignment and Subletting 10
(b) Request for Landlord's Consent 10
(c) Conditions of Landlord's Consent 10
(d) Landlord not to Unreasonably Withhold Consent 11
(e) Terms of Consent 11
10.3 Change in Control of Tenant 12
10.4 Permitted Assignment or Change of Control 12
ARTICLE 11 - FIXTURES, IMPROVEMENTS, RELOCATION AND ALTERATIONS
11.1 Installation of Fixtures and Improvements 12
11.2 Liens and Encumbrances on Fixtures and Improvements 13
11.3 Removal of Fixtures and Improvements 13
11.4 Deleted
11.5 Alterations by Landlord 13
ARTICLE 12 - INSURANCE AND LIABILITY
12.1 Landlord's Insurance 14
12.2 Tenant's Insurance 14
12.3 Limitation of Landlord's Liability 14
12.4 Limitation of Tenant's Liability 15
12.5 Indemnity of Landlord 15
ARTICLE 13 - SUBORDINATION, ATTORNMENT, REGISTRATION AND CERTIFICATES
13.1 Tenant's Covenants 15
13.2 Sale or Financing of Building 15
13.3 Subordination and Attornment 15
13.4 Registration 15
13.5 Certificates 16
13.6 Assignment by Landlord 16
ARTICLE 14 - OCCURRENCE OF DEFAULT
14.1 Unavoidable Delay 16
14.2 No Admission 16
14.3 Part Payment 16
ARTICLE 15 - TENANT'S DEFAULT, REMEDIES OF LANDLORD AND SURRENDER
15.1 Remedying by Landlord, Non-payment and Interest 16
15.2 Remedies Cumulative 17
15.3 Right of Re-entry on Default 17
15.4 Termination and Re-entry 17
15.5 Certain Consequences of Termination and Re-entry 17
15.6 Waiver of Distress 18
15.7 Re-letting and Sale of Personalty 18
15.8 Surrender on Termination 18
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
ARTICLE 16 - EVENTS TERMINATING LEASE
<S> <C>
16.1 Cancellation of Insurance 18
16.2 Prohibited Occupancy, Bankruptcy and Other Events 18
ARTICLE 17 - MISCELLANEOUS
17.1 Notices 19
17.2 Extraneous Agreements 19
17.3 Time of Essence 19
17.4 Area Determination 19
17.5 Successors and Assigns 19
17.6 Frustration 19
17.7 Waiver 19
17.8 Governing Law and Severability 20
17.9 Captions 20
17.10 Acceptance 20
17.11 Deposit 20
17.12 Expropriation 20
ARTICLE 18 - SPECIAL PROVISIONS
18.1 Option to Renew 20
18.2 Right of First Opportunity to Lease Additional Space 21
</TABLE>
SCHEDULE "A" - FLOOR PLAN (S) OF THE LEASED PREMISES
SCHEDULE "B" - DEFINITIONS
SCHEDULE "C" - RULES AND REGULATIONS
SCHEDULE "D" - CONSTRUCTION PROCEDURES
SCHEDULE "E" - CONSTRUCTION DRAWINGS TO BE ATTACHED UPON APPROVAL BY LANDLORD
(iii)
1095 WEST PENDER STREET. VANCOUVER
----------------------------------
<PAGE>
THIS LEASE, dated for reference December 27, 1994, is made and entered into
by the Landlord and Tenant named herein who, in consideration of the covenants
herein contained, agree as follows:
ARTICLE I
BASIC TERMS, SCHEDULES, DEFINITIONS
1.1 Basic Terms.
-----------
(a) (i) Landlord: Clover Investments Inc.
(ii) Address of Landlord: 200 - 1095 West Pender Street
Vancouver, British Columbia
V6E 2M6
(b) (i) Tenant: Crystal Computer Services Inc., a
company incorporated under the laws
of British Columbia
(Inc. No. 285351)
(ii) Address of Tenant: c/o Seagate Technology Inc.
P.O. Box 66360
970 Disc Drive
Scotts Valley, CA 95067-0360
U.S.A
(bb) (i) Indemnifier: Seagate Technology Inc.
a company incorporated under the
laws of the State of Delaware
(ii) Address of Indemnifier: P.O. Box 66360
970 Disc Drive
Scotts Valley, CA 95067-0360
U.S.A.
(C) Leased premises: Suite No.(s) 400 & 500
4th & 5th Floor(s)
1095 West Pender Street
Vancouver, British Columbia
(d) Rentable Area: 20,098 square feet
(e) (i) Term: 5 years
(ii) Commencement Date: The earlier of March 1, 1995 or the
day the Tenant commence to conduct
business in the Leased Premises
(iii) Lease Expiration Date: February 29, 2000
(f) Annual Base Rent:
Year of the Term (i) Per Square Foot (ii) Per Annum (iii) Per month
1 - 5 $4.80 $96,470.40 $8,039.20
(g) Permitted Use: for the purpose of normal business offices for
the conduct of the Tenant's business of marketing
computer equipment, including the function of
packaging the equipments within
<PAGE>
an area of the Premises that will
not exceed 2,000 s.f. and concealed
from public view
(h) Parking Entitlement: 16 unreserved stalls
(i) Renewal Term (if any): one term of 3 years
(j) Deposit: $55,550.00
to be applied to first and second
month rent
<PAGE>
The foregoing Basic Terms are hereby approved by the parties and each
reference in this Lease to any of the Basic Terms shall be construed to include
the provisions set forth above as well as all of the additional terms and
conditions of the applicable sections of this Lease where such Basic Terms are
more fully set forth.
1.2 Schedules. All Schedules to this Lease are incorporated into and form an
integral part of this Lease.
1.3 Definitions. In this Lease, the words, phrases and expressions set forth in
Schedule "B" are used with the meanings defined therein.
ARTICLE 2
PREMISES
2.1 Premises. In consideration of the rents, covenants and agreements
hereinafter reserved and contained on the part of the Tenant to be paid,
observed and performed, the Landlord hereby demises and leases to the Tenant the
Leased Premises.
ARTICLE 3
TERM
3.1 Term. The Term of this Lease shall be for the period set out in Section
l.0l(e)(i), beginning on the Commencement Date.
ARTICLE 4
RENT
4.1 Rent. YIELDING AND PAYING THEREFOR unto the Landlord, at the office of
the Landlord's building manager, or at such other place as the Landlord may
direct in writing, during the Term in lawful money of Canada without any set
off, abatement, compensation or deduction whatsoever on the days and at the
times hereinafter specified, Rent which shall include the aggregate of the sums
specified in clauses (a) and (b) below;
(a) Annual Base Rent Annual Base Rent in the amount per annum set out in
----------------
section 1.1(f) (ii) for the respective year of the Term, payable in
equal consecutive monthly instalments in advance on the first day of
each month during the Term in the amount set out in section 1.1(f)
(iii) , subject to the adjustment provisions of section 4.2(c);
(b) Additional Rent TOGETHER WITH the aggregate of the following:
---------------
(i) the Tenant's Share of Tax Cost;
(ii) the Tenant's Share of Operating Costs and
(iii) such other amounts, charges, costs and expenses as are required to
be paid by the Tenant to the Landlord pursuant to this Lease in
addition to Annual Base Rents
4.2 Payment of Rent. The Rent provided for in this Article 4 shall be paid
---------------
by the Tenant as follows:
(a) The Annual Base Rent shall be paid in equal consecutive monthly
instalments in advance on the first day of each and every month during
the Term. Unless otherwise provided herein, the first monthly
instalment of the Annual Base Rent shall be paid by the Tenant on the
Commencement Date of the Term. Where the Commencement Date of the Term
is the first day of a month such instalment shall be in respect of
such months where the Commencement Date of the Term is not the first
day of a calendar month, the Annual Base Rent for the period from the
Commencement Date of the Term to the first day of the next ensuing
calendar month shall be pro-rated on a per diem basis and paid on the
first day of such month and the instalment of the Annual Base Rent
paid upon the Commencement Date of the Term shall be in respect of the
Annual Base Rent for the first full calendar month of the Terms
thereafter in either case subsequent monthly instalments shall each
be paid in advance on the first day of each ensuing calendar month
during the Term.
(b) Additional Rent Payments. The amount of any or all of the items of
------------------------
Additional Rent pursuant to section 4.1(b) which the Tenant is
2
<PAGE>
to pay may be estimated by the Landlord for such period as the Landlord
may determine. The Tenant agrees to pay to the Landlord the amount of
such estimate in monthly instalments in advance in amounts and during
the period specified by the Landlord on the dates and at the times for
payment of the Annual Base Rent provided for in this Lease. The Landlord
may make its estimates so that the Tenant's share of Additional Rent
will be payable to the Landlord prior to the time the Landlord is
obliged to pay the costs in respect of which the Additional Rent is
payable. The Landlord may submit to the Tenant at any time during a
period a re-estimate of the amount of Additional Rent payable by the
Tenant pursuant to section 4.1(b) and a revised monthly instalment
amount. As soon as reasonably possible after the end of the period for
which such estimated payments have been made the Tenant shall be advised
of the actual amount required to be paid as Additional Rent pursuant to
section 4.1(b) and if necessary an adjustment shall thereupon be made
between the parties.
(C) Basis of Determining Rent. The Tenant acknowledges that the Annual Base
-------------------------
Rent is calculated on the basis of the Rentable Area of the Leased
Premises being as set out in section 1.01(d) being 20,098 square feet of
Rentable Area and at the rate set out in section l.l(f)(i) being $4.80
per square foot of Rentable Area per annum on a net basis. The Tenant
agrees that the Landlord may adjust the Annual Base Rent and the
Additional Rent in the event that the Rentable Area of the Leased
Premises is found to be different than the Rentable Area stated above.
(d) Deleted.
4.3 Rent for Irregular Periods. All Rent reserved herein shall be deemed to
--------------------------
accrue from day to day, and if for any reason it shall become necessary to
calculate Rent for irregular periods of less than one year an appropriate
pro-rata adjustment shall be made on a daily basis in order to compute Rent
for such irregular period.
4.4 Waiver of Offset. The Tenant hereby waives and renounces any and all
----------------
existing and future claims, offsets and compensation against any Rent and
agrees to pay such Rent regardless of any claim, offset or compensation
which may be asserted by the Tenant or on its behalf.
4.5 Application of Payments. All payments by the Tenant to the Landlord under
-----------------------
this Lease shall be applied toward such amounts then outstanding hereunder
as the Landlord determines and the Landlord may subsequently alter the
application of any such payment.
4.6 Deleted.
4.7 Deleted.
4.8 Net Lease. The Tenant acknowledges and agrees that it is intended that
---------
this Lease shall be a completely net lease for the Landlord except
as shall be otherwise provided in the specific provisions contained in this
Lease, and that the Landlord shall not be responsible during the Term for
any costs, charges, expenses and outlays of any nature whatsoever arising
from or relating to the Leased premises, and the Tenant, except as shall be
otherwise provided in the specific provisions contained in this Lease,
shall pay all charges, impositions and costs of every nature and kind
relating to the Leased premises whether or not referred to herein and
whether or not within the contemplation of the Landlord or the Tenant and
the Tenant covenants with the Landlord accordingly.
ARTICLE 5
TENANT'S COVENANTS
5.1 Tenant's Covenants. The Tenant covenants with the Landlord as follows:
------------------
5.2 Rent. To pay the Annual Base Rent and additional Rent on the days and in
----
the manner provided herein.
5.3 Permitted Use. To use the Leased Premises only for the purpose set out in
-------------
section 1.1(g) and not to use or permit to be used the Leased premises or
any part thereof for any other purpose.
5.4 Waste and Nuisance. Not to commit or permit any waste or injury to the
------------------
Building or the Leased premises including the Leasehold Improvements and
the trade fixtures therein; any overloading of the floors thereof; any
conduct which impedes or in the opinion of the Landlord acting reasonably
could impede the business of any other occupant of the Building or which
constitutes or in the opinion of the Landlord acting reasonably, could
constitute a nuisance to the Landlord, any other occupant of the Building
or anyone else; or any other
3
<PAGE>
use or manner of use which annoys or interferes with the operations of any other
occupant of the Building or in the opinion of the Landlord acting reasonably may
have an adverse impact on the reputation of the Building.
5.5 Insurance Risks. Not to do, omit to do or be done or permit to be done or
---------------
omitted to be done upon the Leased premises anything which would cause the
Landlord's cost of insurance to be increased (and, without waiving the foregoing
prohibition the Landlord may demand, and the Tenant shall pay to the Landlord
upon demand the amount of any such increase of cost caused by anything so done
or omitted to be done) or which shall cause any policy of insurance to be
subject to cancellation.
5.6 Cleanliness. Not to permit the Leased premises to become untidy,
-----------
unsightly or hazardous or permit unreasonable quantities of waste or refuse to
accumulate therein, and at the end of each business day to leave the Leased
premises in a condition such as to reasonably facilitate the performance of the
Landlord's janitorial and cleaning services referred to in section 6.7.
5.7 Compliance with Laws. To comply at its own expense with all municipal,
--------------------
federal, provincial, sanitary, fire and safety laws, by-laws, regulations and
requirements pertaining to the operation and use of the Leased premises, the
condition of the Leasehold Improvements, trade fixtures, furniture and equipment
installed therein and the making by the Tenant of any repairs, changes or
improvements therein. It is understood that the Building and the Leased
Premises in their current state, that is without Leasehold Improvements, comply
with the above laws, by-laws, regulations and requirements, but that the Tenant
will be obliged to comply with all such laws, by-laws, regulations and
requirements pertaining to the construction of its Leasehold Improvements.
5.8 Fire Exit Doors. To permit the installation by the Landlord at the cost
---------------
of the Tenant of any door in any wall of the Leased premises necessary to comply
with the requirements of any statute, law, by-law, ordinance, order or
regulation referred to in section 5.06, and to permit ingress and egress to and
from the Leased Premises by the Landlord or by other tenants of the Landlord or
by their respective employees, servants, workmen and invitees, by use of such
doors in case of fire or emergency. It is understood that the Leased Premises
comply with the above requirements in that they have all required fire doors
leading to exit stairways, but that the tenant will be obliged to comply with
all requirements for fire doors arising out of construction of its Leasehold
Improvements or demising of the Leased Premises.
5.9 Rules and Regulations. To observe, and to cause its employees, invitees
---------------------
and others over whom the Tenant can reasonably be expected to exercise control
to observe the Rules and Regulations attached as Schedule "C" hereto, and such
further and other reasonable rules and regulations and amendments and changes
therein as may hereafter be made by the Landlord of which notice in writing
shall be given to the Tenant and all such rules and regulations shall be deemed
to be incorporated into and form part of this Lease.
5.10 Overholding. That if the Tenant shall continue to occupy the Leased
-----------
premises after the expiration of this Lease without any further written
agreement and without objection by the Landlord, the Tenant shall be a monthly
tenant at a monthly rent equal to one hundred and fifty percent (150%) of the
monthly rent payable by the Tenant as set forth in Article 4 hereof during the
last month of the Term and (except as to length of tenancy) on and subject to
the provisions and conditions herein set out.
5.11 Signs. Not to paint, display, inscribe, place or affix any sign, symbol,
-----
notice or lettering of any kind anywhere outside the Leased premises (whether on
the outside or inside of the Building) or within the Leased premises so as to be
visible from the outside of the Leased premises, with the exception only of a
building standard identification sign at or near the entrance of the Leased
Premises containing only the name of the Tenant or, if one full floor of the
Building is occupied by a single tenant under this Lease, a sign on such floor
identifying such tenant, such sign to be subject to the approval of the Landlord
as to design, size and location, such approval not to be unreasonably withheld.
Such identification sign shall be installed by and at the expense of the Tenant.
5.12 Inspection and Access. To permit the Landlord at any time and from time
---------------------
to time to enter and to have its authorized agents, employees and contractors
enter the Leased Premises for the purpose of inspection, window cleaning,
maintenance, providing janitorial service, making repairs, alterations or
improvements to the Leased premises or the Building, or to have access to
utilities and services (including underfloor header ducts and access panels,
which the Tenant agrees not to obstruct) or to determine the electric light and
power consumption by the Tenant in the Leased Premises and the Tenant shall
provide free and unimpeded access for the purpose, and shall not be entitled to
compensation for any inconvenience, nuisance or discomfort caused thereby, but
the Landlord in exercising its rights hereunder shall proceed to the extent
reasonably possible so as to minimize interference with the
4
<PAGE>
Tenant's use and enjoyment of the Leased premises.
5.13 Showing Leased premises. To permit the Landlord and its authorized agents
-----------------------
and employees to show the Leased Premises upon 24 hours prior notice to
prospective tenants during the Normal Business Hours of the last six (6) months
of the Term.
ARTICLE 6
LANDLORD 'S COVENANTS
6.1 Landlord's Covenants. The Landlord covenants with the Tenant as follows:
--------------------
6.2 Quiet Enjoyment. The Landlord doth hereby, for himself, his heirs,
---------------
executors, administrators, and assigns, covenant with the Tenant, his executors,
administrators, and assigns that he and they, paying the rent hereby reserved,
and performing the covenants on his and their part contained, shall and may
peaceably possess and enjoy the Leased premises for the Term hereby granted,
without any interruption or disturbance from the Landlord, his heirs, executors,
administrators, or assigns, or any other person or persons lawfully claiming by,
from, through, or under him, them, or any of them.
6.3 Interior Climate Control. To provide to the Leased premises during Normal
------------------------
Business Hours, by means of a system for heating and cooling, filtering and
circulating air, processed air in such quantities, at such temperatures as shall
maintain in the Leased premises conditions of reasonable temperature and comfort
in accordance with good standards of interior climate control generally
pertaining at the date of this Lease applicable to similar buildings based on
normal occupancy of premises for office purposes. The Landlord shall have no
responsibility for any inadequacy of performance of the said system unless the
Landlord is negligent in maintaining or operating the said system. The Tenant
acknowledges that the comfort of the Tenant will be reduced if the Leased
premises include installed partitions or other installations in locations which
interfere with the proper operation of the said system or if window coverings on
exterior windows are not fully closed while such windows are exposed to direct
sunlight. The Tenant agrees that the Landlord shall have no responsibility to
provide for the removal of smoke, dust or odours which originate from within the
Leased premises.
6.4 Elevators. Subject to the supervision of the Landlord, to furnish for use
---------
by the Tenant and its employees and invitees in common with other person
entitled thereto passenger elevator service to the Leased Premises similar to
that provided in other first class buildings within Vancouver, and to furnish
for the use of the Tenant in common with others entitled thereto at reasonable
intervals and at such hours as the Landlord may select, elevator service to the
Leased premises for the carriage of furniture, equipment, deliveries and
supplies, provided however, that if the elevators shall become inoperative or
shall be damaged or destroyed the Landlord shall have a reasonable time within
which to repair such damage or replace such elevator and the Landlord shall
repair or replace the same as soon as reasonably possible, but shall in no event
be liable for indirect or consequential damages or other damages for personal
discomfort or illness during such period of repair or replacement.
6.5 Entrances, Lobbies and Other Common Areas. To permit the Tenant and its
-----------------------------------------
employees and invitees to have the use during Normal Business Hours in common
with others entitled thereto of the common entrances, lobbies, stairways and
corridors of the Building giving access to the Leased premises (subject to the
Rules and Regulations referred to in section 5.08 and such other reasonable
limitations as the Landlord may from time to time impose).
6.6 Washrooms. To permit the Tenant and its employees and invitees in common
---------
with others entitled thereto to use the washrooms in the Building on the floor
and floors on which the Leased premises are situate.
6.7 Janitorial Service. To cause when reasonably necessary from time to time
------------------
the floors of the Leased Premises to be swept and cleaned, the windows on the
exterior of the Leased Premises to be cleaned, the desks, tables and other
furniture of the Tenant in the Leased premises to be dusted and such other
janitorial services to be provided similar to those provided in other first
class buildings in Vancouver, but with the exception of the obligation to cause
such work to be done, the Landlord shall not be responsible for any act of
omission or commission on the part of the persons employed to perform such work;
such work to be done at the Landlord's direction without interference by the
Tenant, its agents or employees.
6.8 Maintenance of Common Areas. To cause the elevators, common entrances,
---------------------------
lobbies, stairways, corridors, washrooms and other parts of the Building from
time to time provided for common use and enjoyment to be swept, cleaned or
otherwise properly maintained.
6.9 Building Directory. The Landlord will maintain a directory in the main
------------------
entrance lobby of the Building and will list thereon the name of the Tenant
5
<PAGE>
and the suite number(s) of the Leased premises.
ARTICLE 7
REPAIR, DAMAGE AND DESTRUCTION
7.1 Landlord's Repairs. The Landlord covenants with the Tenant:
------------------
(a) subject to section 7.3(b), to keep in a good and reasonable state of
repair, and consistent with the general standards of office buildings
of similar age, character and location in Vancouver, British Columbia:
(i) the Building (other than the Leased premises and premises of
other tenants) including the foundation, roof, exterior walls
including glass portions thereof, the systems for interior
climate control, the elevators, entrances, stairways, corridors
and lobbies and washrooms from time to time provided for use in
common by the Tenant and other tenants of the Building and the
systems provided for bringing utilities to the Leased premises;
(ii) the structural members or elements of the Leased premises; and
(b) to repair defects in construction performed or installations made by the
Landlord in the Leased premises and Insured Damage.
7.2 Tenant's Repairs. The Tenant covenants with the Landlord:
-----------------
(a) subject to section 7.3(b), to keep in a good and reasonable state of
repair and consistent with the general standards of office buildings
of similar age, character and location in the city in which the
Building is located, the Leased Premises including all Leasehold
Improvements and all trade fixtures therein and all glass therein
other than glass portions of exterior walls thereof, but with the
exception of structural members or elements of the Leased premises,
defects in construction performed or installations made by the
Landlord and Insured Damage therein;
(b) that the Landlord may enter and view the state of repair, and that the
Tenant will repair according to notice in writing, and that the Tenant
will leave the Leased Premises in a good and reasonable state of
repair, subject always to the exceptions referred to in section
7.2(a); and
(c) that if any part of the Building including the systems for interior
climate control and for the provision of utilities becomes out of
repair, damaged or destroyed through the negligence or misuse of the
Tenant or its employees, invitees or others over which the Tenant can
reasonably be expected to exercise control, the expense of repairs or
replacements thereto necessitated thereby shall be reimbursed to the
Landlord promptly upon demand.
7.3 Abatement and Termination. It is agreed between the Landlord and the
-------------------------
Tenant that in the event of damage to the Leased premises or to the Building:
(a) if the damage is such that the Leased premises or any substantial part
thereof is rendered not reasonably capable of use and occupancy by the
Tenant for the purposes of its business for any period of time in excess
of ten (10) days, then:
(i) unless the damage was caused by the fault or negligence of the
Tenant or its employees, invitees or others under its control, from
and after the date of occurrence of the damage and until the Leased
premises are again reasonably capable of use and occupancy as
aforesaid, Rent shall abate from time to time in proportion to the
part or parts of the Leased Premises not reasonably capable of use
and occupancy; and
(ii) unless this Lease is terminated as hereinafter provided, the
Landlord or the Tenant, as the case may be (according to the nature
of the damage and their respective obligations to repair as
provided in sections 7.01 and 7.02 hereof) shall repair such damage
with all reasonable diligence, but to the extent that any part of
the Leased Premises is not reasonably capable of such use and
occupancy by reason of damage which the Tenant is obligated to
repair hereunder, any abatement of rent to which the Tenant is
otherwise entitled hereunder shall not extend later than the time
by which, in the reasonable opinion of the Landlord, repairs by the
Tenant ought to have been completed with reasonable
6
<PAGE>
diligence; and
(b) if either:
(i) the Leased Premises; or
(ii) premises whether of the Tenant or other tenants of the Building
comprising in the aggregate twenty-five percent (25%) or more of
the Rentable Area of the Building;
are substantially damaged or destroyed by any cause to the extent such
that in the reasonable opinion of the Landlord they cannot be repaired
or rebuilt (based on standard hours of construction work) within two
hundred and forty (240) days after the occurrence of the damage or
destruction, the Landlord may at its option, exercisable by written
notice to the Tenant given within sixty (60) days after the occurrence
of such damage or destruction, terminate this Lease, in which event
neither the Landlord nor the Tenant shall be bound to repair as provided
in sections 7.1 and 7.2 hereof, and the Tenant shall instead deliver up
possession of the Leased Premises to the Landlord with reasonable
expedition but in any event within sixty (60) days after delivery of
such notice of termination, and rent shall be apportioned and paid to
the date upon which possession is so delivered up (but subject to any
abatement to which the Tenant may be entitled under section 7.3(a) by
reason of the Leased Premises having been rendered in whole or in part
not reasonably capable of use and occupancy), but otherwise the Landlord
or the Tenant as the case may be (according to the nature of the damage
and their respective obligations to repair as provided in sections 7.1
and 7.2) shall repair such damage with such reasonable diligence.
7.4 Service interruptions. The Tenant acknowledges to the Landlord that the
---------------------
operation of systems and the availability of facilities may be interrupted from
time to time in cases of accident and emergency, in order to carry out
maintenance, repairs, alterations, replacements and upgrading, or for any other
reasonable reason required by the Landlord. During periods of such
interruption, any obligation of the Landlord to provide access to such systems
and facilities or common areas of the Building shall be suspended and the
provisions of section 14.1 shall apply.
ARTICLE 8
TAXES AND OPERATING COSTS
8.1 Landlord's Tax Obligations. The Landlord covenants with the Tenant,
---------------------------
subject to the provisions of section 8.2, to pay to the taxing authority or
authorities having Jurisdiction, all Taxes.
8.2 Tenant's Tax Obligations. The Tenant covenants with the Landlord:
------------------------
(a) to pay when due, all taxes, business taxes, business license fees, and
other taxes, rates, duties or charges levied, imposed or assessed by
lawful authority in respect of the use and occupancy of the Leased
Premises by the Tenant, the business or businesses carried on therein
excluding the income of the Landlord, or the equipment, machinery or
fixtures brought therein by or belonging to the Tenant, or to anyone
occupying the Leased Premises with the Tenant's consent, or from time
to time levied, imposed or assessed in the future in lieu thereof, and
to pay to the Landlord upon demand the portion of any tax, rate, duty
or charge levied or assessed upon the Land and Building that is
attributable to any equipment, machinery or fixtures on the Leased
Premises which are not the property of the Landlord, or which may be
removed by the Tenant;
(b) to pay promptly to the Landlord when demanded or otherwise due
hereunder all Taxes in respect of all Leasehold Improvements in the
Leased Premises;
(c) to pay to the Landlord in the manner specified in section 4.2(b) the
Tenant's Share of the Tax Cost.
8.3 Goods and Service Taxes. The Tenant shall pay to the Landlord an amount
-----------------------
equal to any and all Goods and Services Taxes, it being the intention of the
parties that the Landlord shall be fully reimbursed by the Tenant with respect
to any and all Goods and Services Taxes at the full tax rate applicable from
time to time in respect thereof. The amount of the Goods and Services Taxes so
payable by the Tenant shall be calculated by the Landlord in accordance with
the applicable legislation and shall be paid to the Landlord at the same time as
the amounts to which such Goods and Services Taxes apply
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are payable to the Landlord under the terms of this Lease or upon demand at such
other time or times as the Landlord from time to time determines.
Notwithstanding any other section of this Lease, the amount payable by the
Tenant under this section shall be deemed not to be Rent, but the Landlord shall
have the same remedies for and rights of recovery of such amount as it has for
recovery of Rent under this Lease.
8.4 Tenant's Tax Cost. After the commencement of the Term of this Lease and
-----------------
prior to the commencement of each calendar year thereafter which commences
during the Term the Landlord may estimate the Tax Cost, or any installment on
account thereof, to become due on any date during the ensuing calendar year or
(if applicable) broken portion thereof, as the case may be, and the amount
thereof which will be payable by the Tenant under section 8.2, and notify the
Tenant in writing of such estimate. When the Tax Cost for the calendar year or
broken portion of the calendar year in question becomes finally determined the
Landlord shall recalculate the same. If the Tenant has overpaid such Tax Cost,
the Landlord shall refund any excess paid, but if any balance remains unpaid,
the Landlord shall fix monthly instalments for the then remaining balance of
such calendar year or broken portion thereof such that, after giving credit for
instalments paid by the Tenant hereunder in respect of such calendar year, the
Tenant's entire share of Tax Cost will be fully payable during such calendar
year or broken portion thereof. If for any reason the Tax Cost is not finally
determined within such calendar year or broken portion thereof, the parties
shall make the appropriate readjustment when such Tax Cost becomes finally
determined. Any report of the Landlord's accountant as to the Tax Cost shall be
conclusive as to the amount thereof for any period to which such report relates.
8.5 Postponement of Payment of Taxes. The Landlord may postpone payment of
--------------------------------
any Taxes payable by it pursuant to section 8.01 and the Tenant may postpone
payment of any Taxes, rates, duties, levies and assessments payable by it under
sections 8.02(a) and (b), in each case to the extent permitted by law if
prosecuting in good faith any appeal against the imposition thereof, provided in
the case of a postponement by the Tenant that if the Building or any part
thereof or the Landlord shall become liable to assessment, prosecution, fine or
other liability the Tenant shall have given security in a form and of an amount
satisfactory to the Landlord in respect of such liability and such undertakings
as the Landlord may reasonably require to ensure payment thereof.
8.6 Receipts for Pavment. Whenever requested by the Landlord, the Tenant will
--------------------
deliver to it receipts for payment of all taxes, rates, duties, levies and
assessments payable by the Tenant pursuant to sections 8.2(a) and (b) hereof and
furnish such other information in connection therewith as the Landlord may
reasonably require.
8.7 Operation Cost. During the Term of the Lease the Tenant shall pay to the
--------------
Landlord in the manner set forth in this section the Tenant's Share of the
Operating Cost. Prior to the commencement of the Term of this Lease and the
commencement of each annual fiscal period selected by the Landlord thereafter
which commences during the Term the Landlord shall estimate the amount of
Operating Cost for the ensuing fiscal period or, if applicable, a broken portion
thereof, as the case may be, and notify the Tenant in writing of such estimate
and the Tenant's monthly instalments on account thereof. The Landlord may from
time to time alter the fiscal period selected, in which case, and in the case
where only a broken portion of a fiscal period is included within the Term, the
appropriate adjustment in monthly instalments shall be made. From time to time
during a fiscal period the Landlord may re-estimate the amount of Operating Cost
in which event the Landlord shall notify the Tenant in writing of such re-
estimate and fix monthly instalments for the then remaining balance of such
fiscal period or broken portion thereof such that, after giving credit for
instalments paid by the Tenant on the basis of the previous estimate or
estimates, the estimated portion of Operating Cost payable by the Tenant will be
fully payable during such fiscal period or broken portion thereof. As soon as
practicable after the expiration of each fiscal period the Landlord shall make a
final determination of Operating Cost for such fiscal period or, if applicable,
the broken portion thereof and notify the Tenant providing to the Tenant a
report showing the items comprising Operating Cost in reasonable detail, and the
parties shall make the appropriate readjustment and any money owing by or to one
party by the other upon final determination shall be paid to the other within
thirty (30) days of the final determination. Notices by the Landlord stating
the amount of any estimate, re-estimate or determination of Operating Cost, or
monthly installments payable need not include particulars of Operating Cost.
The Operating Cost for a period of which the Term forms a part shall be reported
by the Landlord's accountant and a copy of such report shall be furnished to the
Tenant upon request. Any report of the accountant appointed by the Landlord as
to the Operating Cost shall be conclusive as to the amount thereof for any
period to which such report relates.
8.8 Allocation to Particular Tenant. Notwithstanding any of the foregoing,
-------------------------------
whenever in the Landlord's reasonable opinion, any Operating Cost or item of
Operating Cost properly relates to a particular tenant or tenants within the
Building, the Landlord may allocate such Operating Cost or item of Operating
Cost to such tenant or tenants. Any amount allocated by the Landlord to the
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Tenant pursuant to this section shall be payable by the Tenant forthwith upon
demand.
ARTICLE 9
UTILITIES AND ADDITIONAL SERVICES
9.1 Water and Telephone. The Landlord shall furnish ducts for bringing
--------------------
telephone services to the Leased premises and shall provide water to washrooms
available for the Tenant's use in common with others entitled thereto.
9.2 Additional Services. The Landlord, if it shall from time to time so elect,
-------------------
shall have the exclusive right, by way of Additional Services, to provide or
have its designated agents or contractors provide any Janitorial or cleaning
services to the Leased Premises required by the Tenant which are additional to
those required to be provided by the Landlord under section 6.7, including the
Additional Services which the Landlord agrees to provide by arrangement and to
supervise the moving of furniture or equipment of the Tenant and the making of
repairs or alterations conducted within the Leased Premises, and to supervise or
make deliveries to the Leased Premises. The Cost of Additional Services
(including the Landlord's administration fee) provided to the Tenant, whether
the Landlord shall be obligated hereunder or shall elect to provide them as
Additional Services, shall be paid to the Landlord by the Tenant from time to
time promptly upon receipt of invoices therefor from the Landlord. Cost of
Additional Services charged directly to the Tenant and other tenants shall be
credited in computing Operating Cost to the extent that they would otherwise
have been included.
9.3 Extra Operation Cost. Upon request by the Tenant, the Landlord may agree
--------------------
from time to time to arrange for extra heating, ventilating and air conditioning
supply, electrical supply or for the supply of other services to the Leased
Premises above those normally provided to tenants of the Building or outside of
Normal Business Hours. The Tenant will pay to the Landlord in the manner in
which Operating Cost is paid from time to time hereunder any and all additional
costs and expenses of the Landlord which may arise in respect of the use by the
Tenant of the Leased Premises for business hours that do not coincide with
Normal Business Hours for the Building generally or that may arise in respect of
extra heating, ventilating and air conditioning supply, electrical supply and
other services which are arranged to be provided to the Tenant as a result of
its activities over and above those normally provided to tenants of the Building
or outside of Normal Business Hours, plus an administration fee equal to fifteen
percent (15%) of each component thereof. The Landlord reserves the right to
install at the Tenant's expense meters to check the Tenant's consumption of
electricity, water or other utilities.
9.4 Energy Conservation. The Tenant covenants with the Landlord:
-------------------
(a) that the Tenant will cooperate with the Landlord in the conservation of
all forms of energy in the Building, including without limitation the
Leased Premises;
(b) that the Tenant will comply with all laws, by-laws, regulations and
orders relating to the conservation of energy and affecting the Leased
Premises or the Building;
(C) that the Tenant will at its own cost and expense comply with all
reasonable requests and demands of the Landlord made with a view to
such energy conservation; and
(d) that any and all costs and expenses paid or incurred by the Landlord in
complying with such laws, by-laws, regulations and orders, so far as
the same shall apply to, or reasonably be apportioned to the Building
by the Landlord, shall be included in Operating Cost.
The Landlord shall not be liable to the Tenant in any way for any loss,
costs, damages or expenses, whether direct or consequential, paid, suffered or
incurred by the Tenant as a result of any reduction in the services provided by
the Landlord to the Tenant or to the Building as a result of the Landlord's
compliance with such laws, by-laws, regulations or orders.
ARTICLE 10
LICENSES, ASSIGNMENTS AND SUBLETTINGS
10.1 Licenses, Franchises and Concessions. The Tenant shall not suffer or
------------------------------------
permit any part of the Leased Premises to be used or occupied by any persons
other than the Tenant, any subtenants permitted under section 10.2 and the
employees of the Tenant and any such permitted subtenant, or suffer or permit
any part of the Leased Premises to be used or occupied by any licensee,
franchisee or concessionaire, or suffer or permit any persons to be upon the
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Leased Premises other than the Tenant, such permitted subtenants and their
respective employees, customers and others having lawful business with them.
10.2 (a) Assignment and Subletting. The Tenant shall not assign this Lease
-------------------------
or sublet the whole or any part of the Leased Premises, unless
(i) if it is an assignment, it is for the entire Lease;
(ii) it shall have received or procured a bona fide written offer to
take an assignment or sublease which is not inconsistent with,
and the acceptance of which would not breach any provision of
this Lease if this section is complied with and which the
Tenant has determined to accept subject to this section being
complied with;
(iii) it shall have first requested and obtained the consent in
writing of the Landlord thereto;
(iv) it is in good standing and not in material default of any terms
or conditions of the Lease; and
(v) it shall have occupied the Leased Premises for the first two
years of the initial Term; provided that if after the first
year of the initial Term the Tenant has requested to lease
additional space in the Building to expand, but the Landlord
has been unable to accommodate the tenant's request and the
Tenant has therefore leased space in another building and
relocated personnel to that building so that it has surplus
space in the Leased Premises, then the Tenant may sublet such
surplus space after the first year of the initial Term, subject
to the other provisions of this Article 10.
(b) Any request for such consent shall be in writing and accompanied by a
true copy of such offer, and the Tenant shall furnish to the Landlord
all information available to the Tenant and requested by the Landlord
as to the responsibility, reputation, financial standing and business
of the proposed assignee or subtenant. Within seven (7) days after
the receipt by the Landlord of such request for consent and of all
information which the Landlord shall have requested hereunder (and if
no such information has been requested, within seven (7) days after
receipt of such request for consent) the Landlord shall have the
right upon written notice to the Tenant to:
(i) in the case of a proposed sublease, either sublet from the
Tenant any portion of the Leased Premises proposed to be sublet
but at the same Annual Base Rent and Additional Rent per square
foot of Rentable Area of such portion as the Tenant is required
to pay to the Landlord under this Lease for such portion or, if
the proposed sublease is for all or substantially all of the
remainder of the Term, terminate this Lease as it pertains to
the portion of the Leased Premises so proposed by the Tenant to
be sublet; or
(ii) in the case of a proposed assignment, terminate this Lease.
If the Landlord terminates this Lease with respect to all or a
portion of the Leased Premises, such termination shall be effective
on the effective date of the proposed sublease or original, and the
Tenant shall surrender the whole or part, as the case may be, of the
Leased Premises in accordance with such notice and Rent shall be
apportioned and paid to the date of surrender and, if a part only of
the Leased Premises is surrendered, Rent payable under section 4.1
shall thereafter abate proportionately.
(c) If the Landlord consents to any proposed assignment or subletting, the
Tenant shall assign or sublet, as the case may be, only upon the terms
set out in the offer submitted to the Landlord as aforesaid and not
otherwise. As a condition of the Landlord's consent, the assignee or
subtenant, as the case may be, shall agree with the Landlord to
observe the obligations of the Tenant under this Lease as the same
relate to the space assigned or sublet (except, in the case of a
sublease, the Tenant's covenant to pay Rent) by entering into an
assumption agreement with the Landlord and the Tenant, in the
Landlord's then standard form, and shall pay the Landlord's reasonable
solicitor's fees and disbursements for preparing such agreement. The
configuration of any sublease space must be approved by the Landlord,
such approval not to be withheld so long as the configuration is not
irregular in layout and complies with the Building grid and with all
applicable by-laws, laws and regulations. The Tenant shall be
responsible for all capital costs for Leasehold Improvements and all
other expenses, Costs and charges with respect to or arising out of
any such assignment or subletting. Notwithstanding any such
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consent being given by the Landlord and such assignment or subletting being
effected, the Tenant hereunder shall remain bound to the Landlord for the
fulfilment of all the terms, covenants, conditions and agreements herein
contained. Any consent by the Landlord to any assignment or subletting
shall not constitute a waiver of the requirement for consent by the Landlord
to any subsequent assignment or subletting by either the Tenant or any
assignee or subtenant.
(d) Landlord Not to Unreasonably Withhold Consent. If the Landlord does not
exercise an option provided to the Landlord under section l0.2(b), then the
Landlord's consent to a proposed assignment or sublet shall not be
unreasonably withheld. Without limiting other instances in which it may be
reasonable for the Landlord to withhold its consent to an assignment or
subletting, it shall be reasonable for the Landlord to withhold its consent
in the following instances:
(i) in the Landlord's reasonable judgement, the use of the Leased Premises
by the proposed assignee or sublessee would involve occupancy by other
than primarily general office personnel or otherwise in violation of
section 5.2 of this Lease, would involve any alterations which would
lessen the value of the Leasehold Improvements in the Leased Premises,
would require increased services, including increased load on elevator
services, by the Landlord or alter the reputation or character of the
Building;
(ii) in the Landlord's reasonable judgement, the proposed assignee or
subtenant is not creditworthy;
(iii) the Landlord has experienced previous defaults by the proposed
assignee or subtenant;
(iv) the Leased Premises or the relevant part will be used as a retail
banking or other retail financial business.
(v) the proposed assignment or sublease will create a vacancy elsewhere in
the Building;
(vi) the proposed assignment or sublease fails to include or provide for
all of the terms and provisions required pursuant to sections 10.2(c)
and 10.2(e);
(vii) the Tenant is in material default of any obligation of the Tenant
under this Lease or has been in material default under this Lease on
two or more occasions during the 12 months preceding the date that the
Tenant requests consent; and
(viii)the proposed assignment or sublease is at less than fair market rent
for a similar transaction having regard to the term and other relevant
factors;
(e) Terms of Consent. If the Landlord consents in writing to an assignment or
sublease as contemplated herein, the Tenant may complete such assignment or
sublease subject to the following covenants and conditions:
All "Excess Rent", as hereinafter defined, derived from such assignment or
sublease shall be payable to the Landlord. The Excess Rent shall be deemed
to be and shall be paid by the Tenant to the Landlord as Rent. The Tenant
shall pay the Excess Rent to the Landlord immediately as and when such
Excess Rent is receivable by the Tenant.
As used herein, "Excess Rent" means the amount by which the total money and
other economic consideration to be paid by the assignee or subtenant as a
result of an assignment or sublease, whether denominated as rent or
otherwise, exceeds, in the aggregate, the total amount of Annual Base Rent
and Additional Rent which the Tenant is obligated to pay to the Landlord
under this Lease, pro rated for the portion of the Leased Premises being
assigned or sublet, less the reasonable costs paid by the Tenant for
additional improvements installed in the portion of the Leased Premises
subject to such assignment or sublease by the Tenant at the Tenant's sole
cost and expense for the specific assignee or subtenant in question,
reasonable leasing costs (such as brokers'
11
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commissions and the fees payable to the Landlord pursuant to section
10.2(a)) paid by the Tenant in connection with such assignment or
sublease, and the amount of Annual Base Rent and Additional rent the
Tenant is obligated to pay the Landlord under this Lease, pro rated for
the portion of the Leased Premises being assigned or sublet that is not
occupied or used by the Tenant, until the date of such assignment or
sublease. In determining the amounts to be deducted from Excess Rent in
each monthly payment period in respect of the Tenant's costs of
assigning or subleasing, such costs shall be amortized without interest
over the Term (in the case of an assignment) or term of the sublease
(in the case of a sublease) on a straight line basis.
10.3 (a) Change in Control of Tenant. If the Tenant is a corporation but
----------------------------
none of its shares are traded on any public stock exchange or in any
public stock market, and if by the sale or other disposition, bequest
or operation of law of its shares or securities the control or the
beneficial ownership of such corporation is changed at any time during
the Term of this Lease, such change shall be deemed to be an assignment
of this Lease within the meaning of section 10.2. If such control or
beneficial ownership is changed without the prior written consent of
the Landlord, the Landlord may, at its option, cancel the Lease and the
Term hereby granted upon the giving of sixty (60) days notice to the
Tenant of its intention to cancel and this Lease and the Term shall
thereupon be cancelled.
(b) If the Tenant is a partnership and, if at any time during the term of
this Lease, any person who at the time of the execution of this Lease
owns a partner's interest ceases (other than through death) to own such
partner's interest or there is a material change in the ownership, in
the opinion of the Landlord, of such partner's interest, such cessation
or change of ownership shall constitute an assignment of this Lease for
all purposes of this Article.
(c) Upon request of the Landlord from time to time, the Tenant shall make
available to the Landlord annual financial records of the Tenant and
Indemnifier as are required to be made public or available under
applicable U.S. securities and other laws.
10.4 Permitted Assignment or Change of Control. Notwithstanding sections
------------------------------------------
10.2 and 10.3, the Tenant may, as long as it is not in default under this
Lease, assign this Lease to an assignee of which Seagate Technology Inc. is the
majority shareholder and over which Seagate Technology Inc. exercises managerial
control or permit control of the Tenant to change provided Seagate Technology
Inc. remains the majority shareholder and still exercises managerial control
over the Tenant, without the Landlord's consent. However, the Tenant shall
notify the Landlord of such assignment or change of control and Seagate
Technology Inc. shall not be released from its indemnity agreement with respect
to this Lease.
ARTICLE 11
FIXTURES AND IMPROVEMENTS
11.1 Installation of Fixtures and Improvements. The Tenant will not make,
-----------------------------------------
erect, install or alter any Leasehold Improvements or trade fixtures in the
Leased premises, any safe or special lock in the Leased premises, or any
apparatus for illumination, air-conditioning, cooling, heating, refrigerating or
ventilating the Leased premises, in any case without having requested and
obtained the Landlord's prior written approval, which the Landlord shall not
unreasonably withhold. In making, erecting, installing or altering any
Leasehold Improvements or trade fixtures the Tenant shall comply with the tenant
construction guidelines as established by the Landlord from time to time, shall
obtain all required building and occupancy permits, shall not alter or interfere
with any installations which have been made by the Landlord without the prior
written approval of the Landlord, and in no event shall alter or interfere with
window coverings installed by the Landlord on exterior windows. The Tenant's
request for any approval hereunder shall be in writing and accompanied by a
reasonably detailed description of the contemplated work and, where appropriate,
plans, working drawings and specifications thereof. Any out of pocket expense
incurred by the Landlord in connection with any such approval shall be deemed
incurred by way of Additional Service. All work to be performed in the Leased
Premises shall be performed by competent contractors and subcontractors of whom
the Landlord shall have approved (such approval not to be unreasonably withheld,
but provided that the Landlord may require that the Landlord's contractors and
subcontractors be engaged for any mechanical or electrical work) and by workmen
whose labour union affiliations are compatible with those of workmen employed by
the Landlord and its contractors and subcontractors. All such work shall be
subject to inspection by and the reasonable supervision of the Landlord as an
Additional Service and shall be performed in accordance with any reasonable
conditions or regulations
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imposed by the Landlord and completed in good and workmanlike manner in
accordance with the description of the work approved by the Landlord.
11.2 Liens and Encumbrances on Fixtures and Improvements. In connection with
---------------------------------------------------
the making, erection, installation or alteration of Leasehold Improvements and
trade fixtures and all other work or installations made by or for the Tenant in
the Leased premises, the Tenant shall comply with all the provisions of the
Builders Lien Act, R.S.B.C. 1979, c.40 and amendments thereto, (including any
- -----------------
provision requiring or enabling the retention of portions of any sums payable by
way of hold-backs), shall permit the Landlord to take all steps to enable the
Landlord to obtain the benefit of the provisions of the Builders Lien Act and
except as to any lawful hold-back, shall promptly pay all accounts relating
thereto. The Tenant shall not create any mortgage, conditional sale agreement ,
general security agreement under the Personal Property Security Act, S.B.C.
1989, c.36 and amendment thereto or other encumbrance in respect of its
Leasehold Improvements or trade fixtures or permit any such mortgage,
conditional sale agreement or other encumbrance to attach to the Leased
Premises. If and when any builder's or other lien for work, labour, services or
materials supplied to or for the Tenant or for the cost of which the Tenant may
be in any way liable or claims therefor shall arise or be filed or any such
mortgage, conditional sale agreement or other encumbrance shall attach, the
Tenant shall within twenty (20) days after receipt of notice thereof procure the
discharge thereof, including any certificate of action registered in respect of
any lien, by payment or giving security or in such other manner as may be
required or permitted by law, and failing which the Landlord may in addition to
all other remedies hereunder avail itself of its remedy under section 15.1 and
may make any payments required to procure the discharge of any such liens or
encumbrances, shall be entitled to be reimbursed by the Tenant as provided in
section 15.1, and its right to reimbursement shall not be affected or impaired
if the Tenant shall then or subsequently establish or claim that any lien or
encumbrance so discharged was without merit or excessive or subject to any
abatement, setoff or defense.
11.3 Removal of Fixtures and Improvements. All Leasehold Improvements in or
------------------------------------
upon the Leased premises shall immediately at the expiry of the initial term of
this Lease be and become the Landlord's property without compensation therefor
to the Tenant. Except to the extent otherwise expressly agreed by the Landlord
in writing, no Leasehold Improvements, trade fixtures, furniture or equipment
shall be removed by the Tenant from the Leased Premises either during or at the
expiration or sooner termination of the Term except that (1) the Tenant shall at
the end of the Term remove its trade fixtures, (2) the Tenant shall at the end
of the Term not be obligated to remove its Leasehold Improvements except that
the Tenant shall at its expense remove special improvements, equipment or rooms
installed by it not generally found in conventional business offices, and the
Landlord and the Tenant will identify such special improvements, equipment or
rooms which are to form part of Tenant's initial Leashold Improvements on the
final Tenant's plans, and (3) the Tenant shall remove its furniture and
equipment at the end of the Term, and also during the Term in the usual and
normal course of its business where such furniture or equipment has become
excess for the Tenant's purposes or the Tenant is substituting therefor new
furniture and equipment. The Tenant shall, in the case of every removal either
during or at the end of the Term, immediately make good any damage caused to the
Leased Premises by the installation and removal.
11.4 Deleted.
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11.5 Alterations by Landlord. The Landlord reserves the right from time to time
-----------------------
to:
(a) make any deletions, changes and additions to the equipment, appliances,
pipes, plumbing, wiring conduits, ducts, shafts, structures and
facilities of every kind throughout the Building, including the Leased
Premises;
(b) alter the location and nature of common areas of the Building,
including Service Areas, make reductions therein, erect additions
thereto and extend any part thereof; and provided that the Landlord
will not reduce the parking allocation of the Tenant or reduce the
amenity/fitness area (but the Landlord may change the location,
furnishings and equipment in such amenity/fitness area).
(c) make alterations and additions to the Building;
and in exercising any of such rights, the Landlord will take reasonable steps to
minimize any interference caused to the Tenant's operations in the Leased
premises, but by exercising any of such rights, the Landlord shall not be deemed
to have constructively evicted the Tenant or otherwise to be in breach of this
Lease, nor shall the Tenant be entitled to any abatement of rent or other
compensation from the Landlord.
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ARTICLE 12
INSURANCE AND LIABILITY
12.1 Landlord's Insurance. The Landlord shall be deemed to have insured (for
--------------------
which purpose it shall be a co-insurer, if and to the extent that it shall not
have insured) the Building and all improvements and installations made by the
Landlord in the Leased premises, except to the extent hereinafter specified, in
respect of perils and to amounts and on terms and conditions which from time to
time are insurable at a reasonable premium and which are normally insured by
reasonably prudent owners of properties similar to the Building, as from time to
time determined at reasonable intervals (but which need not be determined more
often than annually and shall not be determined less often than every three (3)
years) by insurance advisors selected by the Landlord, and whose written
opinion shall be conclusive. Upon the request of the Tenant from time to time
the Landlord will furnish a statement as to the perils in respect of which and
the amounts to which it has insured the Building. The Landlord may maintain
such other insurance in such amounts and upon such terms as would normally be
carried by a prudent owner.
12.2 Tenant's Insurance. The Tenant shall take out and keep in force during the
------------------
Term:
(a) comprehensive commercial general liability (including bodily injury,
including death and property damage) insurance on an occurrence basis
with respect to the business carried on, in or from the Leased premises
and the Tenant's use and occupancy thereof of not less than
US$2,000,000.00 per occurrence which insurance shall include the
Landlord as a named insured and shall protect the Landlord in respect of
claims by the Tenant as if the Landlord were separately insured; and
(b) insurance in such amounts as may be reasonably required by the Landlord
in respect of fire and such other perils, including sprinkler leakage as
are from time to time defined in the usual extended coverage endorsement
covering the Tenant's trade fixtures and the furniture and equipment of
the Tenant and (except as to Insured Damage) all Leasehold Improvements
in the Leased Premises, and which insurance shall include the Landlord
as a named insured as the Landlord's interest may appear with respect to
the insured Leasehold Improvements and provided that any proceeds
recoverable in the event of loss to Leasehold Improvements shall be
payable to the Landlord but the Landlord agrees to make available such
proceeds toward the repair or replacement of the insured property.
All insurance required to be maintained by the Tenant hereunder shall be
on terms and with insurers to which the Landlord has no reasonable objection and
shall provide that such insurers shall provide to the Landlord thirty (30) days'
prior written notice of cancellation or material alteration of such terms. The
Tenant shall furnish to the Landlord certificates or other as to the Insurance
from time to time required to be effected by the Tenant and its renewal or
continuation in force, and endorsements or a certificate from the Tenant's
insurer which, in the case of comprehensive general liability insurance, shall
provide such information as the Landlord reasonably requires. If the Tenant
shall fail to take out, renew and keep in force such insurance the Landlord may
do so as the agent of the Tenant and the Tenant shall repay to the Landlord any
amounts paid by the Landlord as premiums forthwith upon demand.
12.3 Limitation of Landlord's Liability. The Tenant agrees that:
----------------------------------
(a) the Landlord shall, save for any negligence of the Landlord, not be
liable for any bodily injury to or death of, or loss or damage to any
property belonging to, the Tenant or its employees, in, on or about the
Building or the Land, or for any interruption of any business carried on
in the Leased Premises, and, without limiting the generality of the
foregoing, in no event shall the Landlord be liable:
(i) for any damage other than Insured Damage which results from fire,
explosion, earthquake, flood, falling plaster, steam, gas,
electricity, water, rain, snow, dampness or leaks from any part of
the Leased Premises or from the pipes, appliances, electrical
system, plumbing works, roof, subsurface or other part or parts of
the Building or Land or from the streets, lanes and other
properties adjacent thereto;
(ii) for any damage, injury or death caused by anything done or omitted
by the Tenant or any of its servants or agents;
(iii) for the non-observance or the violation of any provision by the
Tenant of any of the rules and regulations of the Landlord in
effect from time to time;
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(iv) for any act or omission (including theft, malfeasance or
negligence) on the part of any agent, contractor or person from
time to time employed by it to perform Janitorial Services,
security services, supervision or any other work in or about the
Leased Premises or the Building provided the Landlord retains
reputable agents, contractors or other persons for such purposes;
(v) for loss or damage, however caused, to money, securities,
negotiable instruments, papers or other valuables of the Tenant or
any of its servants or agents;
(vi) for the failure to supply interior climate control or elevator
service when prevented from doing so by strikes, the necessity of
repairs, any order or regulation of any body having Jurisdiction,
the failure of the supply of any utility required for the
operation thereof or any other cause beyond the Landlord's
reasonable control; or
(vii) for any bodily injury, death or damage to property arising from
the use of, or any happening in or about, any elevator; and
(b) the Tenant releases and discharges the Landlord from any and all
actions, causes of action, claims, damages, demands, expenses and
liabilities which the Tenant now or hereafter may have, suffer or incur
which arise from any matter for which the Landlord is not liable
pursuant to section 12.03(a).
12.4 Limitation of Tenant's Liability. The Landlord releases the Tenant from
--------------------------------
all claims or liabilities in respect of any damage which is Insured Damage, to
the extent of the cost of repairing such damage. The Landlord agrees that the
Tenant shall not be liable for any act or omission (including theft, malfeasance
or negligence) on the part of any agent, contractor or person from time to time
employed by it to provide services for the Tenant in the Leased premises,
provided that the Tenant retains reputable agents, contractors or other persons
for such purposes, and provided this provision shall not limit the Tenant's
obligation to observe and perform the covenants and conditions of this Lease
including, without limitation, section 11.1.
12.5 Indemnity of Landlord. Except as provided in section 12.4, the Tenant
---------------------
agrees to indemnify and save harmless the Landlord in respect of all claims for
bodily injury or death, property damage or other loss or damage arising from the
conduct of any work by or any act or omission of the Tenant or any assignee,
subtenant, agent, employee, contractor, invitee or licensee of the Tenant, and
in respect of all costs, expenses and liabilities incurred by the Landlord in
connection with or arising out of all such claims, including the expenses of any
action or proceeding pertaining thereto, and in respect of any loss, costs,
expense or damage suffered or incurred by the Landlord arising from any breach
by the Tenant of any of its covenants and obligations under this Lease.
ARTICLE 13
SUBORDINATION, ATTORNMENT, REGISTRATION AND CERTIFICATES
13.1 Tenant's Covenants. The Tenant agrees with the Landlord that:
-------- ---------
13.2 Sale or Financing of Building. The rights of the Landlord under this
-----------------------------
Lease may be mortgaged, charged, transferred or assigned to a purchaser or
purchasers or to a mortgagee, or trustee for bond holders and in the event of a
sale or of default by the Landlord under any mortgage, trust deed or trust
indenture and the purchaser, mortgagee or trustee, as the case may be, duly
entering into possession of the Building or the Leased Premises, the Tenant
agrees to attorn to and become the tenant of such purchaser or purchasers,
mortgagee or trustee under the terms of this Lease.
13.3 Subordination and Attornment. If required by any mortgagee or the holder
----------------------------
of any trust deed or trust indenture, this Lease and all rights of the Tenant
hereunder shall be subject and subordinate to all mortgages, trust deeds or
trust indentures now or hereafter existing which may now or hereafter affect the
Building and to all renewals, modifications, consolidations, replacements and
extensions thereof; provided that the Tenant whenever required by any mortgagee
(including any trustee under a trust deed or trust indenture) shall attorn to
such mortgagee as the tenant upon all of the terms of this Lease. The Tenant
agrees to execute and deliver promptly whenever requested by the Landlord or by
such mortgagee an instrument of subordination or attornment, as the case may be,
as may be required of it, and if the Tenant fails to do so within ten (10) days
after receiving the instrument, the Tenant hereby irrevocably and conclusively
authorizes the Landlord to complete, execute and deliver the instrument for, on
behalf of, in the name of and as agent of, the Tenant. Notwithstanding anything
herein contained, the Landlord shall use best efforts to obtain a non-
disturbance agreement from the existing mortgagee of the Building.
<PAGE>
15
13.4 Registration. The Tenant agrees that the Landlord shall not be obliged to
------------
deliver this Lease in form registrable under the Land Title Act and covenants
and agrees with the Landlord not to register this Lease, but the Landlord will
consent to execute and the Tenant may register a short form of this Lease in
registerable form to be prepared by and registered at the expense of the Tenant.
The Tenant shall pay the cost of any plans necessary for such short form lease.
Such short form lease shall state only the parties, the Leased Premises, the
demise, the Term and the options to renew and expand, and shall not refer to any
financial terms. In the event of any conflict between such short form lease and
this Lease, this Lease shall govern.
15a
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expense of the Tenant. The Tenant shall pay the cost of any plans necessary for
such short form lease. Such short form lease shall state only the parties, the
Leased Premises, the demise, the Term and the options to renew and expand, and
shall not refer to any financial terms. In the event of any conflict between
such short form lease and this Lease, this Lease shall govern.
13.5 Certificates. The Tenant agrees with the Landlord that the Tenant shall
------------
promptly whenever requested by the Landlord from time to time execute and
deliver to the Landlord and if required by the Landlord, to any mortgagee
(including any trustee under a trust deed or trust indenture) or prospective
purchaser (as designated by the Landlord) a certificate in writing as to the
status of this Lease at that time, including as to whether it is in full force
and effect, is modified or unmodified, confirming the rental payable hereunder
and the state of the accounts between the Landlord and Tenant, the existence or
non-existence of defaults, and any other matters pertaining to this Lease as to
which the Landlord shall request a certificate. If the Tenant fails to do so
within seven (7) days after the Tenant receives the form of certificate, the
Tenant hereby irrevocably and conclusively authorizes the Landlord to complete,
execute and deliver the certificate for, on behalf of, in the name of and as
agent of, the Tenant.
13.6 Assignment by Landlord. In the event of the sale by the Landlord of the
----------------------
Building or a portion thereof containing the Leased premises or the assignment
by the Landlord of this Lease or any interest of the Landlord hereunder, and to
the extent that such purchaser or assignee has assumed the covenants and
obligations of the Landlord hereunder, the Landlord shall, without further
written agreement, be freed and relieved of liability upon such covenants and
obligations.
ARTICLE 14
OCCURRENCE OF DEFAULT
14.1 Unavoidable Delay. Except as herein otherwise expressly provided, if and
-----------------
whenever and to the extent that either the Landlord or the Tenant shall be
prevented, delayed or restricted in the fulfilment of any obligations hereunder
in respect of the supply or provision of any service or utility, the making of
any repair, the doing of any work or any other thing (other than the payment of
Rent) by reason of strikes or work stoppages, or being unable to obtain any
material, service, utility or labour required to fulfil such obligation or by
reason of any statute, law or regulation of or inability to obtain any
permission from any governmental authority having lawful Jurisdiction
preventing, delaying or restricting such fulfilment, or by reason of other
unavoidable occurrence other than lack of funds, the time for fulfilment of such
obligation shall be extended during the period in which such circumstance
operates to prevent, delay or restrict the fulfillment thereof, and the other
party to this Lease shall not be entitled to compensation for any inconvenience,
nuisance or discomfort thereby occasioned nor shall rent abate but nevertheless
the Landlord will use reasonable efforts to maintain services essential to the
use and enjoyment of the Leased premises.
14.2 No Admission. The acceptance of any rent from or the performance of any
------------
obligation hereunder by a person other than the Tenant shall not be construed as
an admission by the Landlord of any right, title or interest of such person as a
subtenant, assignee, transferee or otherwise in the place and stead of the
Tenant.
14.3 Part Payment. The acceptance by the Landlord of a part payment of any
------------
sums required to be paid hereunder shall not constitute waiver or release of the
right of the Landlord to payment in full of such sums.
ARTICLE 15
TENANT'S DEFAULT, REMEDIES OF LANDLORD AND SURRENDER
15.1 Remedying by Landlord. In addition to all the rights and remedies of the
---------------------
Landlord available to it in the event of any default hereunder by the Tenant
either by any other provision of this Lease or by statute or the general law,
the Landlord:
(a) shall have the right at all times to remedy or attempt to remedy any
default of the Tenant, and in so doing may make any payments due or
alleged to be due by the Tenant to third parties and may enter upon the
Leased premises to do any work or other things therein and in such event
all expenses of the Landlord in remedying or attempting to remedy such
default together with an administrative charge equal to fifteen percent
(15%) of the total of such expenses shall be payable by the Tenant to
the Landlord forthwith upon demand;
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(b) shall have the same rights and remedies in the event of any non-
payment by the Tenant of any amounts payable by the Tenant under any
provision of this Lease as in the case of non-payment of Rent;
(C) if the Tenant shall fail to pay any Rent promptly when due, shall be
entitled, if it shall demand it, to interest thereon at a rate of three
percent (3%) per annum in excess of the rate of interest charged and
published from time to time by the main branch in the City in which the
Building is located, of the Landlord's bank, as its most favourable rate
of interest to its most creditworthy and substantial commercial
customers commonly known as its prime rate, from the date upon which the
same was due until actual payment thereof; and
(d) shall be entitled to be reimbursed by the Tenant, and the Tenant shall
forthwith pay the Landlord, the amount of all costs and expenses
(including, without limitation, legal costs on a solicitor and own
client basis) incurred by the Landlord in connection with the default or
in efforts to enforce any of the rights, or to seek any of the remedies,
to which the Landlord is or may be entitled hereunder.
15.2 Remedies Cumulative. The Landlord may from time to time resort to any or
-------------------
all of the rights and remedies available to it in the event of any default
hereunder by the Tenant, either by any provision of this Lease or by statute or
the general law, all of which rights and remedies are intended to be cumulative
and not alternative, as the express provisions hereunder as to certain rights
and remedies are not to be interpreted as excluding any other or additional
rights and remedies available to the Landlord by statute or the general law.
15.3 Right of Re-entry on Default. Provided and it is expressly agreed that if
----------------------------
and whenever the Rent hereby reserved or other monies payable by the Tenant or
any part thereof, whether lawfully demanded or not, are unpaid and the Tenant
shall have failed to pay such Rent or other monies within ten (10) business days
after the Landlord shall have given to the Tenant notice requiring such payment,
or if the Tenant shall breach or fail to observe and perform any of the
covenants, agreements, provisos, conditions, rules or regulations and other
obligations on the part of the Tenant to be kept, observed or performed
hereunder, or if the Landlord shall have become entitled to terminate this Lease
or to re-enter the Leased premises pursuant to any provision hereof, then and in
every such case it shall be lawful for the Landlord thereafter to enter into and
upon the Leased premises or any part thereof in the name of the whole and the
same to have again, repossess and enjoy as of its former estate, anything in
this Lease contained to the contrary notwithstanding. The Landlord may use such
force as it may deem necessary for the purpose of gaining admittance to and re-
taking possession of the Leased premises and the Tenant hereby releases the
Landlord from all actions, proceedings, claims and demands whatsoever for and in
respect of any such forceable entry or any loss or damage in connection
therewith.
15.4 Termination and Re-entry. If and whenever the Landlord becomes entitled to
------------------------
re-enter upon the Leased premises under any provision of this Lease, the
Landlord, in addition to all other rights and remedies, shall have the right to
terminate this Lease forthwith by leaving upon the Leased Premises notice in
writing of such termination. Upon the giving by the Landlord of a notice in
writing terminating this Lease, this Lease and the Term shall terminate, and the
Tenant shall immediately deliver up possession of the Leased Premises to the
Landlord in accordance with section 15.08, and the Landlord may re-enter and
take possession of them.
15.5 Certain Conseguences of Termination and Re-entry. If the Landlord re-
------------------------------------------------
enters the Leased premises or if this Lease is terminated other than by
affluxion of time, then:
(a) notwithstanding any termination or the Term thereby becoming forfeited
and void, the provisions of this Lease which relate to consequences of
termination, and the provisions of this Lease as they apply with respect
to acts, events and omissions which occurred prior to the termination,
shall all survive such termination; and
(b) at the Landlord's option, but without prejudice to the Landlord's other
rights and remedies with respect to recovery of costs, damages and
expenses which relate to any default by the Tenant, the Tenant shall pay
to the Landlord on demand:
(i) rent and all other amounts payable under this Lease up to the time
of re-entry or the date of termination, whichever is later,
including any accelerated rent payable pursuant to section 16.2;
(ii) such reasonable expenses as the Landlord has incurred, and a
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reasonable estimate of the Landlord of expenses the Landlord expects
to incur, in connection with the re-entering, terminating, re-
letting, collecting sums due or payable by the Tenant and storing
and realizing upon assets seized, Including without limitation,
brokerage fees, legal fees and disbursements, the expenses of
cleaning and making and keeping the Leased Premises in good order,
and the expenses of repairing the Leased Premises and preparing them
for re-letting; and
(iii) In the case of termination, as liquidated damages for the loss of
rental and other income of the Landlord expected to be derived from
the Lease during the period which would have constituted the
unexpired portion of the Term had it not been terminated, the amount
determined by reducing to present value at an assumed rate of six
percent (6%) per annum all Annual Base Rent and Additional Rent
which would have become payable by the Tenant under this Lease
during such period, such determination to be made by the Landlord
and for such purpose the Landlord may make reasonable estimates of
time or times when any amounts would have become payable and such
other assumptions of fact as may be reasonable in the circumstances.
15.6 Waiver of Distress. The Tenant waives and renounces the benefit of any
------------------
present or future statute taking away or limiting the Landlord's right of
distress and covenants and agrees that notwithstanding any such statute none of
the goods and chattels of the Tenant on the Leased Premises at any time during
the Term shall be exempt from levy by distress for rent in arrears. The Tenant
will not sell, dispose of or remove any of the fixtures, goods or chattels of
the Tenant from or out of the Leased Premises during the Term without the
consent of the Landlord, unless the Tenant is substituting new fixtures, goods
or chattels of equal value or is bona fide disposing of individual items which
have become excess for the Tenant's purposes; and the Tenant will be the owner
of its fixtures, goods and chattels and will not permit them to become subject
to any lien, mortgage, charge or encumbrance.
15.7 Re-letting and Sale of Personality. Whenever the Landlord becomes entitled
----------------------------------
to re-enter upon the Leased Premises under any provision of this Lease the
Landlord in addition to all other rights it may have shall have the right as
agent of the Tenant to enter the Leased Premises and re-let them (for a term or
terms shorter or longer than the balanced of the Term, granting reasonable
concessions in connection therewith) and to receive the rent therefor and as the
agent of the Tenant to take possession of any furniture or other property
thereon and to sell the same at public or private sale without not derived form
re-letting the Leased premises upon account of the rent due and to become due
under this Lease and the Tenant shall be liable to the Landlord for the
deficiency, if any.
15.8 Surrender on Termination. Forthwith upon the termination of this Lease,
------------------------
whether by affluxion of time or otherwise, the Tenant shall vacate and deliver
up possession of the Leased Premises in a neat and tidy state and in good and
reasonable repair in accordance with the Tenant's obligation under this Lease to
repair the Leased Premises, but subject to the Tenant's rights and obligations
in respect of removal in accordance with section 11.3. At the same time the
Tenant shall surrender to the Landlord at the place then fixed for the payment
of Rent all keys and other devices which provide access to the Leased premises,
the Building or any part thereof and shall inform the Landlord of all
combinations to locks, safes and vaults, if any, in the Leased Premises.
ARTICLE 16
EVENTS TERMINATING LEASE
16.1 Cancellation of Insurance. If any policy of insurance upon the Building
-------------------------
from time to time effected by the Landlord shall be cancelled or about to be
cancelled by the insurer by reason of the use or occupation of the Leased
premises by the Tenant or any assignee, subtenant or licensee of the Tenant or
anyone permitted by the Tenant to be upon the Leased premises and the Tenant
after receipt of notice in writing from the Landlord shall have failed to take
such immediate steps in respect of such use or occupation as shall enable the
Landlord to reinstate or avoid cancellation of (as the case may be) such policy
of insurance, the Landlord may at its option terminate the Lease by leaving upon
the Leased premises notice in writing of such termination.
16.2 Prohibited Occupancy. Bankruptcy and Other Events. If without the written
-------------------------------------------------
consent of the Landlord the Leased premises shall be used by any other persons
than the Tenant or its permitted assigns or permitted subtenants or for any
purpose other than that for which the Leased premises were leased, or occupied
by any persons whose occupancy is prohibited by this Lease, or if the Leased
Premises shall be vacated or abandoned or remain unoccupied for fifteen (15)
days or more while capable of being occupied, or if the Term or any of the goods
and chattels of the Tenant shall at any time be seized in execution
18
<PAGE>
or attachment, or if a receiver or receiver-manager is appointed of the business
or property of the Tenant, or if the Tenant shall make any assignment for the
benefit of creditors or any bulk sale, become bankrupt or insolvent or take the
benefit of any statute now or hereafter in force for bankrupt or insolvent
debtors or (if a corporation) shall take any steps or suffer any order to be
made for its winding-up or other termination of its corporate existence, then in
any such case the Landlord may at its option terminate this Lease by leaving
upon the Leased Premises notice in writing of such termination and thereupon, in
addition to the payment by the Tenant of Rent and other payments for which the
Tenant is liable under this Lease, Rent for the current month and the next
ensuing three (3) months' Rent shall immediately become due and be paid by the
Tenant, or party then controlling the Tenant's affairs.
ARTICLE 17
MISCELLANEOUS
17.1 Notices. Any notice required or contemplated by any provision of this
-------
Lease shall be given in writing, and if to the Landlord, either delivered to an
executive officer of the Landlord or delivered or mailed (by prepaid registered
mail addressed) to the Landlord at the address set out in Section 1.1(a) (ii),
or if the Landlord has given the Tenant notice of another address in Canada to
which notices to the Landlord under this Lease are to be given, then to the last
such address of which the Tenant has been given notice; and if to the Tenant,
either delivered to the Tenant personally (or to a partner or officer of the
Tenant if the Tenant is a firm or corporation) or delivered or mailed (by
prepaid registered mail addressed) to the Tenant at the Leased Premises. Every
such notice shall be deemed to have been given when delivered or, if mailed as
aforesaid, upon the third business day after the day of mailing thereof in
Canada provided that if mailed, should there be a mail strike, slowdown or other
labour dispute which might affect delivery of such notice between the time of
mailing and the actual receipt of notice, then such notice shall only be
effective if actually delivered.
17.2 Extraneous Agreements. The Tenant acknowledges that there are no
---------------------
covenants, representations, warranties, agreements or conditions expressed or
implied relating to this Lease of the Leased Premises save as expressly set out
in this Lease and in any agreement to lease in writing between the Landlord and
the Tenant pursuant to which this Lease has been executed. This Lease may not be
modified except by an agreement in writing executed by the Landlord and the
Tenant.
17.3 Time of Essence. Time shall be of the essence of this Lease.
---------------
17.4 Area Determination. In the event that any calculation or determination by
------------------
the Landlord of the Rentable Area of any premises (including the Leased
Premises) or the Building is disputed or called into question, it shall be
calculated or determined by the Landlord's architect or surveyor from time to
time appointed (Pounds)or the purpose, whose certificate shall be conclusive.
17.5 Successors and Assigns. This Lease and everything herein contained shall
----------------------
enure to the benefit of and be binding upon the successors and assigns of the
Landlord and its heirs, executors and administrators and the permitted
successors and permitted assigns of the Tenant. References to the Tenant shall
be read with such changes in gender as may be appropriate, depending upon
whether the Tenant is a male or female person or a firm or corporation. If the
Tenant is comprised of more than one person or entity, then each such person and
entity is Joint and severally bound by the representations, warranties,
agreements and covenants of the Tenant herein and any notice given or deemed to
have been given at any time to any such person or entity shall be deemed to have
been given at the same time to each other such person and entity.
17.6 Frustration. The Landlord and the Tenant agree that notwithstanding the
-----------
occurrence or existence of any event or circumstance or the non-occurrence of
any event or circumstance and so often and for so long as the same may occur or
continue which, but for this section, would frustrate or void this Lease, and
notwithstanding any statutory provision to the contrary, the obligations and
liabilities of the Tenant hereunder shall continue in full force and effect as
if such event or circumstance had not occurred or existed.
17.7 Waiver. No condoning, excusing or overlooking by the Landlord or Tenant of
------
any default, breach or non-observance by the Tenant or the Landlord at any time
or times in respect of any covenant, proviso or condition herein contained shall
operate as a waiver of the Landlord's or the Tenant's rights hereunder in
respect of any continuing or subsequent default, breach or non-observance or so
as to defeat or affect in any way the rights of the Landlord or the Tenant
herein in respect of any such continuing or subsequent default or breach, no
acceptance of rent by the Landlord subsequent to a default by the Tenant
(whether or not the Landlord knows of the default) shall operate as a waiver by
the Landlord, and no waiver shall be inferred from or implied by anything done
or omitted by the Landlord or the Tenant save only express waiver in writing.
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17.8 Governing Law and Severability. This Lease shall be governed by and
------------------------------
construed in accordance with the laws in force in the province of British
Columbia. The venue of any proceedings taken in respect of or under this Lease
shall be Vancouver, British Columbia as long as such venue is permitted by law,
and the Tenant will consent to any application by the Landlord to change the
venue to Vancouver, British Columbia of any proceedings taken elsewhere. The
Landlord and the Tenant agree that all of the provisions of this Lease are to be
construed as covenants and agreements as though the words importing such
covenants and agreements were used in each separate section hereof. Should any
provision or provisions of this Lease be illegal or not enforceable, it or they
shall be considered separate and severable from the Lease and its remaining
provisions shall remain in force and be binding upon the parties hereto as
though the said provision or provisions had never been included.
17.9 Captions. The captions appearing in this Lease have been inserted as a
--------
matter of convenience and for reference only and in no way define, limit or
enlarge the scope or meaning of this Lease or of any provision thereof.
17.10 Acceptance. The Tenant accepts this Lease of the Leased Premises, to be
----------
held by it as tenant, and subject to the conditions, restrictions and covenants
above set forth. The acceptance of possession of the Leased Premises shall be
conclusive evidence as against the Tenant that at the Commencement Date of the
Term the Landlord had duly completed all work required to be completed by the
Landlord prior to the Commencement Date of the Term and the Leased premises were
in good order and satisfactory condition for the commencement of the work and
business of the Tenant.
17.11 Deposit. If the Landlord is holding any deposit in connection with this
-------
Lease, then unless the Landlord agreed in writing to different arrangements at
the time the Landlord received the deposit, the deposit shall be held by the
Landlord on a non-interest bearing basis to be applied to the Annual Base Rent
for that month of the term during which Annual Base Rent is first payable
hereunder.
17.12 Expropriation. If at any time during the Term the interest of the Tenant
-------------
under this Lease or the whole or any part of either the Leased Premises or any
other part of the Building shall be taken by any lawful power or authority by
the right of expropriation, the Landlord may at its option, give notice to the
Tenant terminating this Lease on the date when the Tenant or Landlord is
required to yield up possession thereof to the expropriating authority. Upon
such termination, or upon termination by operation of law, as the case may be,
the Tenant shall immediately surrender the Leased Premises and all its interest
therein, the rent shall abate and be apportioned to the date of termination, the
Tenant shall forthwith pay to the Landlord the apportioned rent, all other
amounts which may be due to the Landlord up to the date of termination, and the
provisions of section 15.08 shall apply. The Tenant shall have no claim upon
the Landlord for the value of its property or the unexpired Term of this Lease,
but the parties shall each be entitled to separately advance their claims for
compensation for the loss of their respective interests in the Leased Premises
and the parties shall each be entitled to receive and retain such compensation
as may be awarded to each respectively. If an award of compensation made to the
Landlord specifically includes an award for the Tenant, the Landlord will
account therefor to the Tenant. In this Section the word "expropriation" shall
include a sale by the Landlord to an authority with powers of expropriation, in
lieu of or under threat of expropriation.
ARTICLE 18
SPECIAL PROVISIONS
18.1 Option to Renew. The Landlord covenants with the Tenant that if:
---------------
(a) the Tenant gives notice to the Landlord that the Tenant wishes to
obtain a renewal of this Lease, such notice to be given not earlier
than twelve (12) months, and not later than nine (9) months, if the
Leased Premises comprise one full floor or more of the Building, or,
if the Leased premises comprise less than one full floor of the
Building', not later than six (6) months, before the expiry of the
initial term herein granted;
(b) at the time of giving such notice the Tenant shall not be in breach of
any covenant or condition herein contained; and
(C) the Tenant has duly and regularly throughout the initial term observed
and performed the covenants and conditions herein contained;
then the Landlord shall grant to the Tenant at the Tenant's expense a renewal
lease of the Leased Premises for a further term of that number of years
specified in section 1.1(i) upon the same terms and conditions as are herein
contained, save and except this covenant to, renew and save and except the
20
<PAGE>
Annual Base Rent which shall be the greater of the Current Market Rent for the
Leased premises with its Leasehold Improvements (having regard to the duration
of the renewal term) and the sum of the Annual Base Rent payable for the last
year of the initial term. If the Landlord and the Tenant are unable at least
three (3) months before the expiry of the initial term to agree upon such
Current Market Rent, the determination of such Current Market Rent shall be
referred to a single arbitrator if the parties hereto agree upon one, otherwise
to a board of three (3) arbitrators, one to be appointed by each of the Landlord
and the Tenant and a third arbitrator to be appointed in writing by the first
two-named arbitrators; if the Landlord or the Tenant shall refuse or neglect to
apoint an arbitrator within seven (7) clear days after the other shall have
served a written notice upon the party so refusing or neglecting to make such
appointment, the arbitrator first appointed shall, at the request of the party
appointing him, proceed to determine such rent as if be were a single arbitrator
appointed by both the Landlord and Tenant for the purpose. If two (2)
arbitrators are so appointed within the time prescribed and they do not agree
upon the appointment of the third arbitrator within a period of seven (7) days
from the date of appointment of the second arbitrator, then upon the application
of either the Landlord or the Tenant, the third arbitrator shall be appointed by
a Judge of the Supreme Court in accordance with the procedure set out in the
Commercial Arbitration Act, S.B.C. 1986, c.3, as amended from time to time, or
such similar statute then in force in the province in which the Building is
located. The third arbitrator shall chair the arbitration. The determination
made by the arbitrators or the majority of them, or by the single arbitrator, as
the case may be, shall be final and binding upon the Landlord and the Tenant,
and their respective successors and assigns. The Tenant shall pay the costs of
the arbitration and the arbitrator(s). The provisions of this section shall be
deemed to be a submission to arbitration within the provisions of the
replacement or re-enactment thereof, provided that any limitation on the
remuneration of the arbitrators imposed by such legislation shall not be
applicable.
18.2 Right of First Opportunity to Lease Additional Space. Provided that the
----------------------------------------------------
Tenant duly and promptly complies with all of its obligations under the Lease
and is not in breach of the Lease, and is itself occupying the whole of their
leased premises, and subject to the Landlord's commitment to other tenants under
existing leases or offers, the Landlord agrees during the first one and a half
year of the initial Term of the Lease to notify the Tenant in writing of a third
party's interest in leasing all or part of the 6th Floor of the Building. The
Landlord's notice will specify the space available to the Tenant on Floor 6
which shall not be less than approximately one half of such floor and may be up
to the whole of the Floor 6 ("the Designated Space"). The Tenant will have ten
(10) business days from the date of such notice to make an unconditional Offer
for the Designated Space for a minimum Term of five (5) years at the same terms
and condition as this Lease, save and except for annual rent, and inducement if
any, and renewal options, which will be as negotiated between the parties, and a
further five (5) days to settle the rent, inducement and renewal term and to
execute the Lease Agreement. The Term of the Lease of the Designated Space shall
commence in sixty (60) days from the date of the Landlord's notice. If the
Landlord and the Tenant do not agree to rent or inducement or renewal term, or
if the Lease is not executed within such five-day period, there will be no
agreement regarding the Designated Space and the Tenant will have no further
right with respect to Floor 6. Notwithstanding the foregoing, if the third party
is interested in leasing all of Floor 6 together with additional space in the
Building, then the Landlord will not be obligated to give notice to the Tenant
and the Tenant will not have a right to make an offer in respect of Floor 6. In
that event, or if the Tenant does not so make an Offer to lease the Designated
Space upon the Landlord's notice, the Landlord shall thereafter have the right
to lease all or any part of Floor 6 to any third party. The Tenant's right under
this section are not transferrable or assignable, and will expire after the
first one and a half year of the initial Term.
21
<PAGE>
IN WITNESS WHEREOF the parties have executed this Lease as of the date
first above written.
BY THE LANDLORD
CLOVER INVESTMENTS INC
Per: /s/ Amy Chan
C/S
Title: President
---------------
(Authorized Signatory)
Per:
Title:
-----------------------
(Authorized Signatory)
BY THE TENANT:
CRYSTAL COMPUTER SERVICES INC.
Per: /s/ T.R. Cunningham
Title: President
------------------
(Authorized Signatory)
Per:
C/S
Title: __________________
(Authorized Signatory)
By signing below, SEAGATE TECHNOLOGY INC. confirms that it is the Indemnifier
referred to in this Lease and has executed an indemnity agreement in respect of
this Lease in favour of the Landlord.
SEAGATE TECHNOLOGY INC.
Per: /s/ R. A. Kundtz
Title: Sr. Vice President Admin.
---------------------------
(Authorized Signatory)
Per:
Title:
---------------------------
(Authorized Signatory)
22
<PAGE>
SCHEDULE "A"
To Lease of Premises at 1095 West Pender Street
Vancouver, British Columbia
FLOOR PLAN(S) OF THE LEASED PREMISES
(Attach a plan of the relevant floor(s) of the Building; cross-hatch the
-----------
Leased Premises for identification)
5th Floor, 1095 West Pender Street
<PAGE>
SCHEDULE "A"
To Lease of Premises at 1095 West Pender Street
Vancouver, British Columbia
FLOOR PLAN (S) OF THE LEASED PREMISES
(Attach a plan of the relevant floor(s) of the Building; cross-hatch the Leased
-----------
Premises for identification)
4th Floor, 1095 West Pender Street
<PAGE>
SCHEDULE "B"
To Lease of Premises at 1095 West Pender Street Vancouver, British Columbia
Definitions
- -----------
In this Lease the following expressions shall have the following
meanings:
(a) "Additional Rent" means all sums of money to be paid by the Tenant
whether to the Landlord or otherwise pursuant to this Lease except for
Annual Base Rent;
(b) "Additional Services" means the services and supervision supplied by the
Landlord and referred to in section 9.2 or in any other provision hereof
as Additional Services; any other services which from time to time the
Landlord supplies to the Tenant and which are additional to other
services that the Landlord has agreed to supply pursuant to the
provisions of this Lease and to like provisions of other leases of the
Building or that the Landlord may elect to supply as included within the
standard level of services available to tenants generally and in
addition to those normally supplied; the provision of labour and
supervision in connection with the moving of any furniture or equipment
of the Tenant; the making of any repairs or alterations for the Tenant;
and the provision to the Tenant or the Leased Premised of maintenance or
other services not normally furnished to tenants or other leasable
premises generally;
(c) "Annual Base Rent" means the annual rent set out in section 1.1(f) and
payable by the Tenant as set forth in section 4.1(a);
(d) "Basic Terms" means those terms set out in section 1.1, some of which
are more particularly defined in this Schedule "B";
(e) "Building" means that certain building and those certain areas and
improvements and amenities located on the Land and having the municipal
address of 1095 West Pender Street, Vancouver, British Columbia;
(f) "Capital Tax" means any tax or excise imposed upon the Landlord which is
measured by or based in whole or in part upon the capital employed by
the Landlord at and after the date of the substantial completion of
construction of the Building, computed as if the amount of such tax or
excise were that amount due if the Building were the only real property
of the Landlord and includes the amount of any capital or place of
business tax levied by any applicable taxing authority against the
Landlord with respect to the Building;
(g) "Commencement Date of the Term" means the date that the Term commences
as set forth in or determined pursuant to section 1.1(e) (ii);
(h) "Cost of Additional Services" shall mean in the case of Additional
Services provided by the Landlord a reasonable charge made therefor by
the Landlord which shall not exceed the cost of obtaining such services
from independent contractors and in the case of Additional Services
provided by independent contractors the Landlord's total cost of
providing Additional Services to the Tenant including the cost of all
labour (including salaries, wages and fringe benefits) and materials and
other direct expenses incurred, the cost of supervision and other
indirect expenses capable of being allocated thereto (such allocation to
be made upon a reasonable basis) and all other out-of-pocket expenses
made in connection therewith including amounts paid to independent
contractors, plus an administration fee equal to fifteen percent (15%)
of each component thereof;
(i) "Current Market Rent" means that rent that would be paid for improved
office space in Office buildings of similar age and class in downtown
Vancouver, British Columbia, as between persons dealing in good faith
and at arms' length, without reduction for any cash payment, leasehold
improvement allowance, rent-free period or other inducement;
(j) "Goods and Services Taxes" means and includes any and all goods and
services taxes, sales taxes, value added taxes, business transfer taxes,
or any other taxes imposed on the Landlord or the Tenant from time to
time in respect of the Rent payable by the
1
<PAGE>
Tenant to the Landlord under this Lease or the rental of the Premises or the
provision of any goods, services or utilities, whatsoever by the Landlord to
the Tenant under this Lease, whether characterized as a goods and services
tax, sales tax, value added tax, business transfer tax, or otherwise;
(k) "Insured Damage" means that part of any damage occurring to any portion of
the Leased Premises for which the Landlord is responsible of which the
entire cost of repair is actually recoverable by the Landlord under a policy
of insurance in respect of fire and other perils from time to time effected
by the Landlord or, if and to the extent that the Landlord has not insured
and is deemed to be a co-insurer or self-insurer pursuant to section 12.1,
would have been recoverable had the Landlord effected insurance in respect
of perils, to amounts and on terms for which it is deemed to be insured;
(1) "Land" means all and singular those certain parcels or tracts of land,
situate, lying and being in the city of Vancouver, Province of British
Columbia, more particularly described as:
Parcel Identifier 012-425-401
Lot G
Block 1
District Lot 185
Plan 22016:
(m) "Leased Premises" means that portion of the Building having the municipal
address and located on those floor(s) set out in section 1.1(c), containing
the aggregate number of square feet, more or less, of Rentable Area which is
set out in section 1.1(d) and having the appropriate location and
configuration shown cross-hatched on the plan(s) attached as schedule "A"
hereto. The exterior face of the Building and any space in the Leased
Premises used for stairways or passageways to other premises, stacks,
shafts, pipes, conduits, ducts or other building facilities, heating,
electrical, plumbing, air conditioning and other Building systems supplied
by the Landlord for use in common with other tenants are expressly excluded
from the Leased Premises;
(n) "Leasehold Improvements" means all fixtures, improvements, installations,
alterations and additions now or from time to time hereafter made, erected
or installed, whether by the Tenant, the Landlord or anyone else, in the
Leased Premises or in other premises in the Building with the exception of
trade fixtures and furniture and equipment not of the nature of fixtures,
but includes all partitions however fixed (including movable partitions) and
includes all wall-to-wall carpeting with the exception of such carpeting
where laid over vinyl tile or other finished floor and affixed so as to be
readily removable without damage;
(o) "Normal Business Hours" means the hours from 8:00 am. to 6:00 pm. Monday to
Friday, inclusive, of each week, holidays excepted.
(p) "Operating Cost" means the total of all expenses, without duplication,
incurred in the complete maintenance and operation of the Land, the Building
and the services, systems and other improvements and amenities thereon and
therein, calculated as if the Building was fully occupied and fully
operational at all times during the Term, whether such expenses are incurred
by or on behalf of any owner or owners of parts of or interests in the
Building and the Land with whom the Landlord may from time to time have
agreements for the pooling or sharing of costs or by or on behalf of tenants
of space in the Building with whom the Landlord may from time to time have
agreements whereby in respect of their premises such tenants perform any
cleaning, maintenance or other work or services usually performed by the
Landlord, and which expenses if directly incurred by the Landlord would have
been included in the cost of maintenance and operation of the Land and the
Building. Without limiting the generality of the foregoing, "Operating
Cost":
(i) shall include (but subject to certain deductions as hereinafter provided),
the cost of providing supervisory and all maintenance services, the cost of
operating, servicing and maintaining elevators, the cost of heating, cooling
and ventilating all space including both rentable and non-rentable areas,
the cost of providing hot and cold water, electricity (including lighting),
telephone and other utilities and services to both rentable and non-rentable
areas, the cost of cleaning, maintaining and servicing in all respects all
electric lighting fixtures in the Building (including both rentable and non-
rentable areas) and the
2
<PAGE>
cost of replacement of electric light bulbs, tubes, starters and ballasts
(such cleaning, maintaining, servicing and replacement to be within the
exclusive right of the Landlord), the cost of all repairs (whether or not
the Landlord is obliged to carry them out), the cost of window cleaning, the
cost of providing security and supervision, the cost of all insurance for
liability or fire or other events and casualties (and if the Landlord shall
elect in whole or in part to self-insure, the amount of reasonable
contingency reserves not exceeding the amount of premiums which would
otherwise have been incurred in respect of the risk undertaken), the amount
of deductibles, self-retention amounts and reimbursement requirements
incurred or absorbed by the Landlord in respect of any insurance claim,
Capital Tax, accounting costs incurred in connection with maintenance and
operation including computations required for the imposition of charges to
tenants and audit charges required to be incurred for the conclusive
determination of any costs hereunder, the reasonable rental value (having
regard to the rentals prevailing from time to time for similar space) of
space utilized by the Landlord in connection with the operation or
maintenance of the Land and the Building, the cost of maintaining a
directory board for the Building, the amount of all salaries, wages and
fringe benefits paid to employees engaged in the maintenance or operation of
the Land and the Building, amounts paid to independent contractors for any
services in connection with such maintenance or operation, the cost of
direct supervision and of management and other indirect expenses to the
extent allocatable to the maintenance and operation of the Land and the
Building, the cost (whether of a capital nature or not), amortized over such
period of time as the Landlord reasonably determines of complying with any
law, bylaw or regulation which applies to the Land or the Building or any
part thereof or with a requirement of any insurer of the Building, the cost
of making a capital improvement resulting in the reduction of the "Operating
Cost", depreciation of costs incurred for repairing and replacing fixtures,
equipment and facilities servicing or comprising the Building (including the
heating, ventilating, air conditioning and climate control systems servicing
the Building) which by their nature require periodic repair or replacement
and are not charged fully in the year in which they are incurred at rates
determined from time to time by the Landlord in accordance with sound
accounting principles, a fee for the administration and management of the
Building equal to the amount which the Landlord might reasonably pay to a
third party for the administration and management of the Building, and all
other expenses of every nature incurred in connection with the maintenance
and operation of the Land and the Building; but
(ii) shall exclude Taxes (other than Capital Tax), debt service cost (including
interest, principal and any other amount payable to any mortgagee),
depreciation (except depreciation permitted by clause (i) immediately
preceding), expenses properly chargeable to capital account (except capital
expenditures that are made by the Landlord to reduce "Operating Cost"),
specific costs payable by other tenants, any rent payable upon any ground
lease, leasehold improvement costs of the Tenant's premises and premises of
other tenants, costs determined by the Landlord from time to time to be
fairly allocatable to the correction of construction faults or initial
maladjustments in operating equipment and all management costs not
allocatable to the actual maintenance and operation of the Building (such
as in connection with leasing and rental advertising).
In computing Operating Cost there shall be credited as a deduction the amounts
of proceeds of insurance relating to Insured Damage and other damage actually
recovered by the Landlord (or if the Landlord is deemed to self-insure, a
corresponding application of reserves) applicable to such damage, recovery of
electricity and light bulb and tube and ballast replacement, in each case to the
extent that the cost thereof was included therein. Any report of the accountant
appointed by the Landlord for the purpose shall be conclusive as to the amount
of Operating Cost for any period to which such report relates.
Operating Cost in relation to any period means an amount equal to the aggregate
of all Operating Cost for such period;
(q) "Rent" means and includes the Annual Rent, Additional Rent and all other
sums payable by the Tenant to the Landlord under this Lease;
(r) Deleted.
(s) "Rentable Area" whether in the case of a whole floor of the Building or in
the case of premises comprising part of a floor of the Building shall be
determined by the Landlord's architect or
<PAGE>
land surveyor according to the American National Standard for measuring
floor area in office buildings, as established by the Building Owners and
Managers Association International and in effect as at the commencement
Date;
(t) "Service Areas" shall mean the area of corridors, elevator lobbies, service
elevator lobbies, refuse areas, washrooms, air-cooling rooms, fan rooms,
Janitor's closets, telephone, meter, mechanical and electrical closets and
other closets on the floor serving the Leased Premises and other premises on
such floor should the floor be a multiple tenancy floor;
(u) "Taxes" means all taxes, rates, duties, levies and assessments whatsoever,
whether municipal, parliamentary or otherwise, which are levied, imposed or
assessed against or in respect of the Building, the Land or upon the
Landlord in respect thereof or which are from time to time levied, imposed
or assessed in the future in lieu thereof, including those levied, imposed
or assessed for education, schools and local improvements, and including all
costs and expenses (including legal and other professional fees and interest
and penalties on deferred payments) incurred by the Landlord in good faith
in contesting, resisting or appealing any taxes, rates, duties, levies or
assessments, but excluding taxes and license fees in respect of any business
carried on by tenants and occupants of the Building (including the excluding
taxes and license fees in respect of any business carried on by tenants and
occupants of the Building (including the Landlord) and income or profits
taxes upon the income of the Landlord to the extent such taxes are not
levied in lieu of taxes, rates, duties, levies and assessments against the
Building or the Land or upon the Landlord in respect thereof and shall also
include any and all taxes which may in future be levied in lieu of "Taxes"
as hereinbefore defined;
(v) "Tax Cost" for any calendar year means an amount equal to the aggregate,
without duplication, of all Taxes in respect of such calendar year;
(w) "Tenant's Share" means the fraction, the numerator of which is the Rentable
Area of the Leased premises and the denominator of which is the Total
Rentable Area;
(x) "Term" means the term of this Lease set forth in section 3.1 and any
extension or renewal thereof and any period of permitted overholding; and
(y) "Total Rentable Area" shall mean the total Rentable Area of the Building,
whether rented or not, calculated as nearly as possible as if the Building
were entirely occupied by tenants renting whole floors. The lobby and
entrances on the main street level floor, the areas of the floors below the
main street level which are used or available for use in common by tenants
for storage or other purposes, the areas of the Building containing
mechanical equipment which serves the Building and the areas designated as
amenity areas shall be excluded from the foregoing calculations. The
calculation of the Total Rentable Area, whether rented or not, shall be
adjusted from time to time to give effect to any change.
4
<PAGE>
SCHEDULE "C"
To Lease of Premises at 1095 West Pender Street
Vancover, British Columbia
RULES AND REGULATIONS
The Tenant shall observe the following Rules and Regulations (as
amended, modified or supplemented from time to time by the Landlord as provided
in the Lease):
1. The Tenant shall not use or permit the use of the Leased Premises in
such manner as to create any objectionable noises, odours or other nuisance or
hazard, or breach any applicable provisions of municipal by-law or other lawful
requirements applicable thereto or any requirements of the Landlord's insurers,
shall not permit the Leased Premises to be used for cooking (except with the
Landlord's prior written consent) or for sleeping, shall keep the Leased
Premises tidy and free from rubbish, shall deposit rubbish in receptacles which
are either designated or clearly intended for waste and shall leave the Leased
premises at the end of each business day in a condition such as to facilitate
the performance of the Landlord's janitorial services in the Leased Premises.
2. The Tenant shall not abuse, misuse or damage the Leased Premises or any
of the improvements or facilities therein, and in particular shall not deposit
rubbish in any plumbing apparatus or use it for other than purposes for which it
is intended, and shall not deface or mark any walls or other parts of the Leased
Premises.
3. The Tenant shall not perform, patronize or (to the extent under its
control) permit any canvassing, soliciting or peddling in the Building, shall
not install in the Leased Premises any machines vending or dispensing
refreshments or merchandise and shall not permit food or beverages to be brought
to the Leased premises except by such means, at such times and by such persons
as have been authorized by the Landlord. Coffee makers, microwave oven and
refrigerator are allowed.
4. The entrances, lobbies, elevators, staircases and other facilities of
the Building are for use only for access to the Leased Premises and other parts
of the Building and the Tenant shall not obstruct or misuse such facilities or
permit them to be obstructed or misused by its agents, employees, invitees or
others under its control.
5. No safe or heavy office equipment shall be moved into or about the
Building by or for the Tenant unless the consent of the Landlord is first
obtained and unless all due care is taken. Such equipment shall be moved upon
the appropriate steelbearing plates, skids or platforms and subject to the
Landlord's direction, and at such times, by such means and by such persons as
the Landlord shall have approved. No furniture, freight or bulky matter of any
description shall be moved in or out of the Leased Premises or carried in the
elevators except during such hours as the Landlord shall have approved. Hand
trucks and similar appliances shall be equipped with rubber tires and other
safeguards approved by the Landlord, and shall be used only by prior arrangement
with the Landlord.
6. No furniture, freight, building materials or bulky matter of any
description shall be moved in or out of the Leased Premises or carried in the
elevators except during such hours as the Landlord shall have approved. In
particular, without limiting the generality of the foregoing, nor furniture,
freight, building materials or bulky matter of any description shall be carried
in the fire/freight elevator between 8:00 a.m. and before 4:00 p.m. on any
business day without express prior aproval of the Landlord or its building
manager.
7.0 The Tenant shall permit and facilitate the entry of the Landlord, or
those designated by it, into the Leased premises for the purpose of Inspection,
repair, window cleaning and the performance of other janitorial services, and
shall not permit access to main header ducts, janitorial and electrical closets
and other necessary means of access to
<PAGE>
mechanical, electrical and other facilities to be obstructed by the placement of
furniture or otherwise. The Tenant shall not place any additional locks or other
security devices upon the doors of the Leased Premises without the prior written
approval of the Landlord and subject to any conditions imposed by the Landlord
for the maintenance of necessary access.
8. The Landlord may require that all or any persons entering and leaving
the Building at any time other than the Normal Business Hours satisfactorily
identify themselves and register in books kept for the purpose and may prevent
any person from entering the Leased Premises unless provided with a key thereto
and a pass or other authorization from the Tenant in a form satisfactory to the
Landlord and may prevent any person removing any goods therefrom without written
authorization.
9. The Tenant shall refer to the Building only by the name from time to
time designated by the Landlord for it and shall use such name only for the
business address of the Leased Premises and not for any promotion or other
purpose.
10. The Tenant shall not interfere with window coverings installed upon
exterior windows, and shall close or (if such window coverings are remotely
controlled) permit to be closed such window coverings during such hours from
dusk to dawn as the Landlord may require, and shall not install or operate any
interior drapes installed by the Tenant so as to interfere with the exterior
appearance of the Building.
11. If the Tenant wishes to host a special event within the Leased Premises,
including but not limited to a reception, an open house or a party, it shall
notify the Landlord in writing and request approval no lees than 14 days prior
to the proposed date of the event. The Tenant shall provide details of the
event, including the expected number of people attending and any catering
services involved. The Landlord shall not unreasonably withhold its approval to
a special event within the Leased premises but may, at its sole discretion,
approve or disapprove a special event involving use of other parts of the
Building. The Tenant shall, in any event, obtain all necessary permits for the
special event and shall limit the number of attendees and operate the event in
accordance with the requirements of the fire marshall, the terms of any licences
and all other applicable laws, bylaws or regulations. At its sole cost and
expense, the Tenant will be responsible for all security and clean-up required
by the special event and will not cause or permit a nuisance or disturbance to
other tenants or occupants of the Building or cause or permit odours, noises or
vibrations to escape the Leased Premises. The Tenant will indemnify and save
harmless the Landlord against all claims arising from the event or caused by the
Tenant, its employees or invitees or other attendees at the event.
The foregoing Rules and Regulations, as from time to time amended, are
not necessarily of uniform application, but may be waived in whole or in part in
respect of other tenants without affecting their enforceability with respect to
the Tenant and the Leased Premises, and may be waived in whole or in part with
respect to the Leased Premises without waiving them as to future application to
the Leased Premises, and the imposition of Rules and Regulations shall not
create or imply an obligation of the Landlord to enforce them or create any
liability of the Landlord for their non-enforcement.
2
SCHEDULE D
<PAGE>
CONSTRUCTION PROCEDURES
A. LANDLORD'S WORK
---------------
The Leased Premises is offered to the Tenant as is. The Landlord has
constructed the Building finished to the extent set out below. The Building,
exclusive of work of tenants, was completed in accordance with the original
plans and specifications for the Building prepared by the architect and other
consultants of the Landlord and approved by the City of Vancouver (for
Development, Building and Occupancy Permits). The Landlord shall have exclusive
discretion in respect of materials, colours, quality, quantity, location and
layout, except as provided herein.
1. Ceilings. Existing acoustic mineral tile in exposed inverted T-bar
--------
suspension.
2. Slab. Concrete floor with smooth trowelled finish to receive floor
----
coverings.
3. Windows. Insulated reflective double-glazed tinted glass with window
-------
coverings to building standard.
4. Demising Walls. For multi-tenanted floors only, demising walls
--------------
constructed generally of metal stud faced with gypsum board of 1/2" in the
thickness or other material selected by the Landlord, ready for painting and
with single plane surfaces.
5. Lighting Fixtures. Existing Building Standard recessed fluorescent lighting
-----------------
fixtures supplied at the rate of one fixture per 85 square feet.
6. Washrooms. Two common washrooms will be provided on each floor from the
---------
mezzanine floor to twenty-first floor, finished with ceramic tile walls and
floors, custom made metal toilet partitions and stainless steel accessories.
7. Elevator Systems. Five first-class OTIS high-speed elevators for connection
----------------
from the ground floor to twenty-first floor; mezzanine floor is accessible by
the fire elevator and twenty-second floor accessible by stairs from the
twenty-first floor.
Two separate hydraulic elevators connect the five parking levels to the
ground lobby.
8. Telephone Conduit. One 1" diameter conduit for telephone service terminated
-----------------
at a point within the Leased premises already designated by the Landlord.
9. Electrical Services. Electrical service to the Building is 12.5 KV - 3
-------------------
phase - 4 wire. Distribution through the Building is 347/600 volts - 3 phase -4
wire via a bus duct riser system. System capacity is 5 watts per square foot of
leasable space. Subtransformation is 120/208 volts, 3 phase, 4 wire is provided
with a capacity of 1.5 watts per square foot of leasable space or one receptacle
per 100 square feet. If additional electrical load is required by the Tenant,
the Landlord may supply the additional equipment necessary at the Tenant's
expense. Such additional service will be supplied at 347/600 volts.
10. Heat. Ventilating and Air-Conditioning ("HVAC"). An energy-efficient
----
automated building system is installed for efficient operation of HVAC, supplied
by individual floor fan system with variable air volume design.
11. Fire Protection Systems. The Building is fully sprinklered. Additional
-----------------------
building safety systems are as follows:
(a) A smoke exhaust system.
(b) A supervised, zoned annunciated fire safety system with manualetations,
automatic detectors and voice controlled emergency evacuation.
(c) Stairways below grade will be pressurized for smoke control in an
emergency situation.
(d) A dry sprinkler system will be provided for the parking levels and a wet
sprinkler system will be provided for the remainder Of the Building.
(e) A control system, powered by both batteries and emergency generator
power, linked to an off-site monitoring company.
12. Security Systems. A computerized and monitored security system is in
----------------
place for securing building entry doors at ground level and the elevators after
normal business hours. Access is available only to card key users.
B. TENANT'S WORK
-------------
<PAGE>
1. General. The Tenant will at its expense and subject to the provisions of
this Schedule D provide, furnish and install within the Leased premises all
finishings, fixturing, architectural, electrical, plumbing and mechanical work
in addition to the Landlord's Work described herein to complete the construction
of the Leased premises in accordance with the approved Tenant's plans and
specifications and to equip the Leased Premises ready for occupation.
2.
Procedures for Tenant's Work.
----------------------------
(a) Approvals. The Tenant shall submit to the Landlord for approval plans
---------
and specifications (the "Tenant's Plans") showing the complete Tenant's
Work. No work may commence until such approval has been obtained. All
the Tenant's Work shall be completed in conformity therewith.
The Landlord's approval of the Tenant's Plans shall relate only to
compliance with the Landlord's rules, regulations and specifications and
shall not extend to, and shall not be deemed to signify, compliance with
applicable laws or other requirements or with life safety or emergency
requirements of competent public authorities. The Landlord accepts no
liability for claims against the Tenant in respect of any of these
matters.
The Tenant will be responsible for obtaining all necessary approvals
from authorities having Jurisdiction and the Tenant must submit evidence
of these approvals to the Landlord before commencing work. The Tenant
shall be responsible for payment of all fees and charges incurred in
obtaining said approvals and to obtaining an occupancy permit prior to
opening.
(b) Tenant's plans. The Tenant's Plans shall be professionally prepared and
--------------
include floor plans, interior elevations, details of any special
installations, complete plans of all mechanical, plumbing and electrical
work including details of underfloor services, reflected ceiling plans
and changes to sprinkler head locations, specifications for all material
finishes to be used, approved material samples and performance
characteristics for fixtures and equipment.
(c) Preliminary and Final Tenant's Plans. The Tenant shall submit
------------------------------------
preliminary Tenant's Plans for Landlord's approval consisting of 3
blueline sets and 3 sets of outline specifications for the Tenant's Work
for preliminary review by the Landlord. The Landlord shall provide its
approval or detailed comments for necessary revisions within five (5)
days of receipt of the preliminary Tenant's Plans. Where necessary, the
Tenant shall promptly revise and resubmit its Tenant's Plans in
accordance with the Landlord's comments. After the Landlord's approval
of the preliminary Tenant's Plans, the Tenant shall submit 2 sepia, 3
blueline sets and 5 sets of specifications of the final Tenant's Plans
to the Landlord for approval.
(d) Notwithstanding anything hereafter contained, the final Tenant's Plans
as approved by the Landlord shall be attached to the Lease as Schedule E
to evidence Landlord's approval.
3. General Requirements.
--------------------
(a) Performance Standard. All the Tenant's Work required by the Tenant to
--------------------
complete the Leased Premises for occupancy, shall be carried out in
accordance with the Tenant's Plans as approved by the Landlord and in
accordance with Tenant Guideline as provided by the Landlord, and with
good workmanship and with new materials which shall be of high quality
and conforming to the best standards of practice and shall not be in
contravention to the codes or regulations of the city or any other
authority having Jurisdiction.
(b) Engagements. The Tenant shall utilize and engage professional designers
-----------
and contractors approved by the Landlord, such approval not to be
unreasonably withheld, and acceptable to any labour authority having
jurisdiction in connection with the preparation of the Tenant's Plans
and the construction of the Tenant's Work. The Landlord may provide the
Tenant with a list of approved designers and contractors.
(c) Changes to Building. In the event that changes to the construction or
-------------------
equipment of the Building are contemplated by the Tenant, the Landlord
will have absolute discretion in determining
2
the necessity for such changes, and the Landlord may require such
changes to be carried out by its own contractor and consultants at
Tenant's expense.
<PAGE>
(d) Fixturing Period. The Tenant shall be responsible for completing the
----------------
approved Tenant's Work expeditiously and within the Fixturing Period
agreed to in the Offer to Lease. Any delay in completion of the
Tenant's Work will not affect the Commencement Date.
(e) Landlord's Rules. To ensure Landlord's control over Building
----------------
completion, operation and security, and to minimize inconvenience to
other tenants of the Building, the execution of the Tenant's work is
subject to the rules and regulations of Schedule "C", the Tenant
Guideline and stipulations which the Landlord or its agent may make
from time to time. Arrangements must be made with the Landlord or its
agents in both construction and property management to coordinate and
supervise construction activities including but not limited to garbage
disposal, use of elevators in transportation of building materials or
furniture, etc., ventilation and security after hours, hours of work,
use of the facilities and utilities, and clean-up work.
(f) Cleanliness. The Tenant shall at all times keep the Leased Premises and
-----------
all other areas clear of all waste materials and refuse caused by
itself, its suppliers, contractors or by their work in relation to the
Tenant's Work. Disposition of refuse directly from the Leased Premises
shall be limited to areas designated by the Landlord. The Landlord
shall be entitled to clean up at the Tenant's expense should the Tenant
not comply with the Landlord's requirements in keeping the Leased
Premises and other areas tidy and clean. At the completion of the
tenant's Work, the Leased Premises shall be clean and clear of tools,
equipment, waste and surplus materials caused by the Tenant's Work.
(g) Access by Landlord. The Landlord, its employees, contractors, architect
------------------
and other professional advisors, and public utilities authorized by it
may enter the Leased premises at all times including without
limitation, during the performance of the Tenant's Work for:
(i) the performance of the Landlord's Work;
(ii) the inspection or correction of the Tenant's Work; and
(iii) all other necessary purposes in connection with the construction and
completion of the Building.
(h) Costs. All costs to complete the Tenant's Work will be for the account
-----
of the Tenant, including but not limited to provision of temporary
services such as power, heat, water, 24-hour security, sanitary
facilities, garbage disposal containers, the use of a designated
elevator and supervision and coordination by the Landlord and/or its
consultants during execution of work, fees and disbursements in
connection to reviews and approvals of Tenant's Plans, permit fees
required by authorities having Jurisdiction, and any other costs
involved in completion of Tenant's Work. Any equipment or work other
than that provided for under Tenant's Work, which is supplied or
performed by the Landlord for or at the request of the Tenant,
including but not Limited to changes to the basic Building, shall be
paid for by the Tenant at the Landlord's cost plus an administrative
fee of 15% of such cost.
4. Insurance and Indemnity.
-----------------------
(a) Prior to commencing the Tenant's Work, the Tenant shall furnish written
proof to the Landlord that liability, all risks property, general
workmen's compensation and any other insurance reasonably required by
the Landlord has been effected and is in force to the limits and on the
terms which the Landlord may reasonably approve. The Landlord shall be
named as co-insured in the Tenants insurance.
(b) The Tenant shall indemnify and hold harmless the Landlord from any and
all claims arising out of work done by the Tenant or its contractors
and the Tenant shall promptly cause to be removed any liens filed
against title to the Leased Premises failing which the Landlord may do
so and the Tenant shall pay all the Landlord's costs, including Legal
costs in so doing, within 15 days of invoice with interest of 2% per
month (26.82% per annum compounded monthly) on the outstanding and
unpaid balance until paid in full by the Tenant.
3
(c) Any damage to the Landlord's property and the premises of other tenants
caused by the Tenant or its' contractor or subcontractors or suppliers in
connection with the Tenant's Work shall be repaired by the Landlord's
contractor to the satisfaction of the Landlord at the expense of the
Tenant and the Tenant shall pay all the Landlord's costs, including
<PAGE>
legal costs, in so doing within 15 days of invoice with interest of 2% per
month (26.82% per annum compounded monthly) on the outstanding and unpaid
balance until paid in full by the Tenant.
4
PACIFIC LANDMARK
1095 West Pender Street
Vancouver, British Columbia
LEASE OF ADDITIONAL PREMISES
----------------------------
<PAGE>
THIS AGREEMENT is dated for reference December 13, 1995.
BETWEEN: CLOVER INVESTMENTS INC.
200 - 1095 West Pender Street,
Vancouver, British Columbia, V6E 2M6
(the "Landlord")
AND: CRYSTAL COMPUTER SERVICES INC.
4th Floor - 1095 West Pender Street
Vancouver, B.C.
V6E 2M6
(the "Tenant")
AND: SEAGATE TECHNOLOGY INC.
970 Disc Drive
Scotts Valley CA 95067-0360
U.S.A.
(the "Indemnifier")
WHEREAS:
A. By a lease (the "Lease") dated December 27, 1994, the Landlord leased
to the Tenant certain premises (the "Original Premises") comprising 20,098
square feet of Rentable Area on the 4th and 5th floors of the building (the
"Building") owned by the Landlord and having the civic address of 1095 West
Pender Street, Vancouver, British Columbia;
B. By an indemnity agreement (the "Indemnity Agreement") made the 27th
day of December, 1994, the Indemnifier indemnified the Landlord with respect to
the Tenant's obligations under the Lease;
C. The Term of the Lease commenced on March 1, 1995 and expires on
February 29, 2000, and the Tenant has an option to renew the Lease for one
renewal term of 3 years; and
D. The Landlord has agreed to lease to the Tenant additional premises in
the Building.
THEREFORE, in consideration of the mutual covenants and agreements contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by the parties, the parties agree as
follows:
1. Lease of Additional Premises. The Landlord hereby leases to the Tenant
----------------------------
those premises comprising 20,098 square feet of Rentable Area on the 6th & 7th
floors of the Building (the "Additional Premises") shown outlined in bold on the
plan attached hereto as Schedule "A" to have and to hold for the remainder of
the Term, namely four (4) years, commencing on March 01, 1996 or earlier upon
Tenant's occupancy (the "Effective Date") and expiring on February 29, 2000, and
otherwise on the same terms and conditions as set out in the Lease, save and
except for the Term, Annual Base Rent, any tenant inducement, and any first
right to lease additional space.
2. Rent. Commencing the Effective Date, the Tenant shall pay the Annual
----
Base Rent and Additional Rent for the Additional Premises monthly in advance.
The Annual Base Rent for the Additional Premises shall be $6.80 per square foot
of Rentable Area per annum.
3. Tenant Improvement Work. The Tenant accepts the Additional
------------------------
Premises in their current condition. The Tenant will be responsible for
completing any necessary improvement work in the Additional Premises in
accordance with Schedule D of the Lease at its sole cost. The Tenant shall
provide the Landlord with a copy of Occupancy Permit and "As-Built" drawings for
the Additional Premises upon occupancy.
1
4. Terms of Lease Apply. Except as set out herein, all of the terms and
--------------------
conditions of the Lease shall apply, amended accordingly, to the Additional
Premises and this Agreement and
<PAGE>
the Lease shall henceforth be read together as one lease. The following changes
are made to the Lease:
(a) The Additional Premises and the original Premises will together form the
Leased Premises as defined in the Lease.
(b) The Parking Entitlement as set out in section 1.1(h) of the Lease will
be changed from 16 unreserved stalls to 32 unreserved stalls at
Landlord's prevailing parking rates.
(C) Section 18.2 of the Lease on Right of First Opportunity to Lease
Additional Space has been exercised and will no longer apply.
5. Indemnifier. The Indemnifier hereby:
-----------
(a) confirms and agrees with the terms of this Agreement;
(b) covenants and agrees with the Landlord that the Indemnity Agreement
shall apply with full force and effect to the obligations of the Tenant
with respect to the Additional Premises pursuant to this Agreement and
that from now on in the Indemnity Agreement all references to "Lease"
shall be deemed to refer to the Lease and this Agreement together as one
lease and all references to "Leased Premises" shall be deemed to refer
to the original Premises and the Additional Premises together; and
(c) ratifies and confirms the Indemnity Agreement.
6. Defined Terms. Capitalized terms not defined in this Agreement have the
-------------
meaning defined in the Lease.
7. Enurement. This Agreement shall enure to the benefit of and be binding upon
---------
the parties hereto and their respective successors and permitted assigns.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the
date first above written.
BY THE LANDLORD:
CLOVER INVESTMENTS INC.
Amy Chan, President
BY THE TENANT:
CRYSTAL COMPUTER SERVICES INC.
Per:
Title:
BY THE INDEMNIFIER:
SEAGATE TECHNOLOGY INC.
Per:
Title:
2
SCHEDULE "A"
6th Floor, 1095 West Pender Street
<PAGE>
SCHEDULE "A"
7th Floor, 1095 West Pender Street
<PAGE>
EXHIBIT 10.4
HEATHROW
400 INTERNATIONAL PARKWAY
LEASE AGREEMENT
Between
400 INTERNATIONAL PARKWAY DEVELOPMENT COMPANY
("Landlord")
and
SEAGATE SOFTWARE STORAGE MANAGEMENT GROUP
("Tenant")
<PAGE>
<TABLE>
<CAPTION>
LEASE SUMMARY
-------------
<S> <C> <C>
A. DATE OF EXECUTION OF LEASE: March 8, 1996
B. LANDLORD: 400 International Parkway Development Company
A Florida general partnership
C. ADDRESS OF LANDLORD: c/o Pizzuti Management Inc.
255 South Orange Avenue
Suite 1350
Orlando, Florida 32801
D. TENANT: Seagate Software Storage Management Group
E. ADDRESS OF TENANT: 708 Fiero Commerce Park
Suite 5
San Luis Obispo, California 93401
F. BUILDING: The four story office building located at 400
International Parkway, Heathrow, Florida,
together with the approximately 6.7 acre
tract of land on which the building is
located. The Building contains 100,821 square
feet of rentable space rentable square feet
(based on a common area factor of 8.11%).
G. LEASED PREMISES: The entire Building containing 100,821 square
feet of rentable space.
H. PERMITTED USE: General office use and any activities related
to the marketing, sales or development of
software.
I. LEASE TERM: Ten years commencing on the Commencement Date
and terminating on the Termination Date,
subject to early cancellation options after
five and seven years, respectively, per the
terms set forth in (S)34 of this Lease.
J. COMMENCEMENT DATE: October 15, 1996 (subject to adjustment per
(S)9 of this Lease).
K. TERMINATION DATE: October 14, 2006 (subject to adjustment per
(S)9 of this Lease).
L. BASE RENT: See the Base Rent Schedule attached as
Exhibit A to the Lease.
</TABLE>
<PAGE>
M. BASE EXPENSES: Actual Operating Expenses incurred by
Landlord during the 1997 calendar year - see
(S)2 of this Lease.
The following exhibits are attached to and made a part of the Lease:
Exhibit A - Base Rent Schedule
Exhibit B - List of Operating Expenses
Exhibit C - Heathrow Rules and Regulations
Exhibit D - List of Building Plans and Specifications
Exhibit E - Construction Milestone Dates
Exhibit F - Form of Subordination, Nondisturbance and Attornment Agreement
Exhibit G - Agency Discourse Statement
Exhibit H - Radon Notice
Exhibit I - Signage Specifications
Exhibit J - Janitorial Specifications
Exhibit K - Example of Base Rent Adjustment per (S)9 of Lease
Exhibit L - Standard Construction Program
THE PROVISIONS OF THIS LEASE SUMMARY ARE INCORPORATED BY THIS REFERENCE INTO THE
LEASE.
-3-
<PAGE>
LEASE AGREEMENT
---------------
Landlord hereby leases the Leased Premises to Tenant for the duration of the
Lease Term (subject to any early cancellation options granted to Tenant
hereunder). All reference herein to the Lease Term will mean both the initial
ten-year term and any renewal terms exercised by Tenant under this Lease. The
leasing of the Leased Premises to Tenant will be upon the terms and conditions
set forth in this Lease.
(S)1. BASE RENT. Tenant will pay Base Rent in the amount set forth in
---------
the Base Rent Schedule attached hereto as Exhibit A.
(S)2. EXCESS EXPENSE PAYMENTS. Tenant will pay the increase, if any,
-----------------------
of the Operating Expenses incurred by Landlord during the Lease Term over the
Base Expenses ("Excess Expenses"). For the purposes of this Lease, "Base
Expenses" will mean the actual Operating Expenses incurred by Landlord during
the calendar year 1997. A list of those expenses which are included within the
definition of "Operating Expenses" is set forth in Exhibit B. Any such Excess
Expenses will be paid by Tenant in advance based upon Landlord's estimate of the
Excess Expenses which will be incurred during each calendar year during the
Lease Term, beginning with the 1998 calendar year. Landlord will use its best
efforts to notify Tenant by December 1 of each year during the Lease Term,
beginning with the 1998 calendar year, of the amount of the estimated Excess
Expense payment which Tenant will be required to make for each month of the
upcoming calendar year.
Notwithstanding anything to the contrary contained herein, Tenant's obligation
to pay any Excess Expenses related to "Controllable Expenses" (as that term is
hereinafter defined) will be limited to an amount equal to the actual
Controllable Expenses incurred by Landlord during the calendar year 1997, with
increases capped at the rate of 7% per year for each calendar year thereafter.
For the purposes of this Lease, "Controllable Expenses" will have the meaning
set forth in Exhibit B.
As soon as reasonably practicable after the end of each calendar year (beginning
with the 1998 calendar year), Landlord will deliver to Tenant a written
statement showing its actual Operating Expenses for such calendar year and the
amount of the Excess Expenses, if any. If the sum of the estimated Excess
Expense payments paid by Tenant during such calendar year exceeds the actual
Excess Expenses incurred during such year, then, at Landlord's election,
Landlord will either refund the excess to Tenant or apply the same toward the
next succeeding monthly estimated Excess Expense payment due from Tenant. If
the sum of the estimated Excess Expense payments paid by Tenant during such
calendar year is less than the actual Excess Expenses incurred during such year,
then Tenant will pay the deficiency to Landlord within ten days after Tenant's
receipt of Landlord's written demand for the payment thereof. If the Lease Term
expires on a date other than December 31, then the Excess Expenses for the last
calendar year during which the Lease Term is in effect will be prorated to take
into consideration the number of days during such calendar year in which the
Lease Term is in effect.
Tenant will have the right, upon reasonable prior written notice to Landlord, to
audit and make copies of Landlord's books, records and computations with respect
to its Operating Expenses. Landlord will retain such books, records and
computations for at least three years following the end of the calendar year to
which they relate. If any audit conducted by Tenant discloses an average in the
amount billed to Tenant over the amount actually due from Tenant hereunder, then
Landlord will reimburse Tenant for such overpayment and all reasonable costs and
professional fees incurred by Tenant in connection with its auditing of
Landlord's books, records and computations. The payments referred to in the
immediately
<PAGE>
preceding sentence will be made by Landlord to Tenant within ten days after
Landlord's receipt of a detailed invoice identifying the amounts of such
Payments.
At Tenant's request, Landlord will provide Tenant with copies of any invoice
received by Landlord with respect to the imposition of any assessments against
the Building by any property owner's association (specifically, the Heathrow
International Business Center owner's association). Landlord will further, at
Tenant's request, assign and delegate to Tenant the right to contest the amount
of any such assessment granted to Landlord as the owner of the Building pursuant
to the applicable owner's association documents, a copy of which documents have
been previously furnished to Tenant by Landlord. Finally, if Tenant believes a
change is necessary in the identity of any on-site personnel assigned to the
Building by Landlord to perform property management or maintenance services,
Tenant will so notify Landlord and Landlord and Tenant will promptly meet to
address Tenant's concerns and, if appropriate, assign new personnel to perform
such services al the Building.
If Landlord obtains a refund or abatement of any real estate taxes or
assessments attributable to the Building, the amount of which has previously
been contributed to by Tenant, then, at Landlord's election, Landlord will
either pay Tenant's Proportionate Share of such refund or abatement to Tenant or
apply the amount thereof toward the next succeeding monthly estimated Excess
Expense payment(s) due from Tenant hereunder. Tenant will have the right, at
its own expense and in its name, to contest the amount, propriety, accuracy or
validity of any real estate taxes or assessments imposed against the Building.
Any refund or abatement of any real estate taxes or assessments which is
received by Landlord and which is attributable to Tenant's contesting of the
same pursuant to the immediately preceding sentence will be disbursed for
Tenant's benefit in the manner set forth in the first sentence of this
paragraph.
(S)3. MANNER AND TIMING OF RENT PAYMENTS. Monthly installments of Base
----------------------------------
Rent and estimated Excess Expense payments, if any, will be due and payable in
advance on or before the first day of each calendar month during the Lease Term.
Each such installment will be paid to Landlord at its address set forth in the
Lease Summary (or such other address as Landlord may designate from time to
time). If the Lease Term commences on a day other than the first day of the
month or terminates on a day other than the last day of the month, then the
installments of Base Rent and estimated Excess Expense payments for such
month(s) will be adjusted accordingly. If any installment of Base Rent or any
Excess Expense payment is not received by Landlord within ten days after
Tenant's receipt of written notice from Landlord that any such payment is due
and unpaid, then a late payment charge of 5% of such past due amount will be
assessed and will be immediately due and payable from Tenant. All installments
of Base Rent and estimated Excess Expense payments will be paid by Tenant
without demand and without any rights of reduction, counterclaim or offset.
Tenant hereby agrees to pay as additional rent any sales, use or other tax
(other than income taxes) now or hereafter imposed by any governmental authority
upon the rent and other sums payable by Tenant hereunder. The sales tax on Base
Rent initially payable by Tenant is set forth in the Base Rent Schedule attached
hereto as Exhibit A. Landlord will notify Tenant of any change in any tax
payable by Tenant as additional rent hereunder. Landlord's acceptance of any
payment which constitutes less than all of the balance then owed to it by Tenant
hereunder will be treated as its receipt of a payment "on account" and not as an
accord and satisfaction and Landlord may accept any such payment (regardless of
the existence of any endorsement or statement to the contrary contained on any
check or letter accompanying such payment) without prejudice to
-2-
<PAGE>
Landlord's right to recover the balance of the amount owed to it or pursue any
other remedy provided for in this Lease.
(S)4. SERVICES. Landlord will provide all utility, HVAC and elevator
--------
services which are required for the use of the Leased Premises for general
office purposes during normal business hours (8:00 a.m. to 8:00 p.m. Monday
through Friday, and 8:00 a.m. to 1:00 p.m. on Saturday, holidays excepted). HVAC
service will be provided to the Leased Premises outside of the normal business
hours set forth above at a surcharge to Tenant of $22 per hour. To the extent
Tenant requires any such additional HVAC service, it will notify Landlord of its
need therefor by noon of the day prior to the day of its required additional
service. Notwithstanding the foregoing, Tenant will pay directly to the service
provider all costs related to the provision of telephone service to the Leased
Premises. If utility services to the Leased Premises are interrupted for a
period of three successive business days, such that Tenant cannot reasonably
operate its business in the Leased Premises, then, unless any such interruption
is attributable to the occurrence of any event beyond Landlord's reasonable
control, Tenant will be entitled to an abatement of Base Rent and Excess Expense
payments from the date of such interruption, until the provision of such utility
services to the Leased Premises is restored such that Tenant can operate its
business in the Leased Premises. Landlord will not be liable to Tenant, nor
will Tenant be relieved of any obligation hereunder if any service to the Leased
Premises is interrupted for any reason beyond Landlord's reasonable control. If
the interruption in the provision of utility services to the Leased Premises is
caused by any event beyond Landlord's reasonable control, Landlord will provide
written notice to such effect to Tenant.
The Building and the Leased Premises will be equipped with an ESP after-hours
exits proxy card reader system. Any other security system which may be
installed or upgraded in the Leased Premises by Tenant will be managed and paid
for by Tenant, subject to Landlord's prior approval as to the nature and extent
of such system.
Landlord will provide as part of the base Building improvements two 150 ton air
cooled water chillers; 2,500 amp, 480-277 V3 phase, 4W main electrical service
distributions and a 200 kilowatt emergency power generator. Any upgrade in the
aforementioned facilities resulting in increased construction costs will be
applied against the TI Allowance being provided to Tenant pursuant to (S)9
hereof.
(S)5. MAINTENANCE AND REPAIR. Landlord will maintain the Building
----------------------
(including all common areas which serve the Building) and all structural
elements and mechanical systems located within the Leased Premises in a first
class condition, with all systems properly functioning; provided, however, that
Tenant (and not Landlord) will be required to pay all costs of maintaining the
same (over and above any insurance proceeds received by Landlord to reimburse it
for the cost of maintaining the same) if the need therefor arises due to the
fault or negligence of Tenant or its agents, employees or guests. Landlord will
also provide janitorial service to the Leased Premises five days per week in
accordance with the Janitorial Specifications attached hereto as Exhibit J.
Except as otherwise expressly set forth in this (S)5, Tenant will be responsible
and pay for all costs associated with maintaining and repairing the interior of
the Leased Premises, including, without limitation, all costs associated with
the painting of interior walls, the cleaning or replacing of wallcoverings and
floorcoverings and the replacing of light bulbs and light fixtures. Landlord
will not be liable to Tenant, nor will Tenant be relieved of any obligation
hereunder if Tenant's use of the Leased Premises is interrupted as a result of
Landlord's required entry into the Leased Premises
-3-
<PAGE>
for the purpose of making any repairs, alterations or improvements to the
structural elements or mechanical systems located within the Leased Premises
(including, without limitation, the HVAC system).
Landlord will be required to purchase, install, maintain and replace all
Building and Leased Premises heating, ventilating and air conditioning systems,
equipment and installations, including, without limitation, mechanical plant for
chilled water and hot water, energy management systems (if any), supply and
return fans, supply and return ductwork, diffusers, heat pumps, VAV boxes and
all attendant piping, wiring, thermostats, sensors and other conduits and
appurtenances thereto required by the terms of this Lease and the Building Plans
attached hereto as Exhibit D, other than any of the same which are hereunder
defined in the next paragraph as "Equipment Room HVAC Systems" (collectively the
"HVAC Systems"). The purchase, installation, maintenance, repair and
replacement of the HVAC Systems will be at Landlord's sole cost and expense,
except that Landlord will have the right to pass-through to Tenant all Excess
Expenses and any Operating Expenses attributable to the HVAC systems, as the
term "Operating Expense" is otherwise defined in this Lease.
Except as otherwise expressly provided in this paragraph, Tenant will be solely
responsible, at its expense, for purchasing, installing, maintaining, repairing
and replacing: (i) all HVAC Systems that Tenant may need to supplement the HVAC
Systems described in the immediately preceding paragraph; and (ii) all HVAC
systems and equipment that are dedicated solely for use in, or service to, any
special equipment room that is used solely by Tenant and which requires 24 hours
per day, seven days per week, air conditioning (the equipment and systems
referred to in clauses (i) and (ii), above, are hereinafter collectively
referred to as the "Equipment Room HVAC Systems"). All or a portion of any TI
Allowance provided for in (S)9 of this Lease may be used by Tenant to pay the
expenses associated with the Equipment Room HVAC Systems described above.
Notwithstanding anything to the contrary contained herein, in the event that
portions of the Equipment Room HVAC System are an integral part of the
Building's overall HVAC Systems for which Landlord has responsibility as
described in the immediately preceding paragraph of this (S)5, then Tenant will
request that Landlord install, maintain, repair and replace such portions of the
Equipment Room HVAC System and Landlord will thereafter proceed to purchase,
install, maintain, repair and replace such portions of the Equipment Room HVAC
Systems. Upon completion of Landlord's purchase, installation, maintenance,
repair or replacement of any such portions of the Equipment Room HVAC Systems
pursuant to Tenant's request, Tenant will, within ten days after its receipt of
a written payment demand from Landlord, promptly reimburse Landlord for all
reasonable costs incurred by Landlord in connection with such work.
(S)6. USE OF LEASED PREMISES. Tenant will use the Leased Premises
----------------------
solely for the Permitted Use. Tenant will not cause or permit any waste or
damage to the Leased Premises or the Building and will not occupy or use the
Leased Premises for any business or purpose which is unlawful, hazardous,
unsanitary, noxious or offensive or which unreasonably interferes with the
business operations of other tenants in the Building. Tenant will comply with
the Rules and Regulations for the Building which are set forth in Exhibit C (and
any reasonable modifications thereto which are consistent with the provisions of
this Lease). Tenant will also have the non-exclusive right to use the common
areas which serve the Building, including, without limitation, the Building's
common lobbies, hallways, elevators, restrooms and parking areas.
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(S)7. COMPLIANCE WITH LAW. Tenant will at its sole expense comply
-------------------
with all laws, governmental requirements and recommended covenants or conditions
which are now or hereafter in force pertaining to the Leased Premises and
Tenant's occupancy and use therefor, including, without limitation, the
Americans with Disabilities Act of 1990, as amended. Landlord (and not Tenant)
will, at its initial expense, make any and all structural or extraordinary
alterations (including without limitation, the installation of a sprinkler
system in the Leased Premises) which are required to be made to the Leased
Premises by law, ordinance or regulation of any governmental or quasi-
governmental authority (including, without limitation, any such governmental
authority charged with enforcing the Americans with Disabilities Act
requirements), board of fire insurance underwriters, Landlord's insureds or any
other similar authority, if such alterations are not necessitated by Tenant's
particular use or occupancy of the Leased Premises. Landlord hereby represents
and warrants to Tenant that, as of the Commencement Date, the Building will be
in compliance with the Americans with Disabilities Act.
(S)8. SIGNS. Tenant will be identified on monument signage located at
-----
the front of the tract of land on which the Building is located. In addition,
to the extent the park covenants for the Heathrow International Business Center
and any applicable zoning or building codes permit the erection of signage on
the Building itself, Landlord will provide Building signage identifying Tenant.
The cost of any such Building signage will be part of the tenant improvement
allowance being granted to Tenant pursuant to (S)9. The location, design and
composition of the monument sign, as well as any permitted Building sign, will
be consistent with the signage specifications attached hereto as Exhibit J. To
the extent Tenant requests any variance from the attached signage
specifications, then any such variance will be subject to Landlord's prior
review and approval. Except as otherwise provided above, Tenant will not place
any other sign or advertising material on the exterior of the Building, without
the prior written consent of Landlord.
(S)9. LEASEHOLD IMPROVEMENTS. Landlord will construct the Building in
----------------------
substantial accordance with the building plans and specifications previously
furnished to Tenant ("Building Plans"), which Building Plans are identified in
Exhibit D. Landlord will use its best efforts to substantially complete the
construction of the Building in such a time frame, so as to facilitate the
substantial completion of the improvements to the Leased Premises by the
targeted Commencement Date set forth in the Lease Summary (subject to the
occurrence of the "Delay Events" defined later in this (S)9).
Landlord will provide a tenant improvement allowance of $2,016,420 ("TI
Allowance") for the construction of leasehold improvements to the Leased
Premises below a finished ceiling ("Improvements"). To the extent the cost of
the improvements ultimately approved by Landlord and Tenant is more or less than
the aforementioned TI Allowance, then the annual Base Rent payable by Tenant
during each year of the initial ten-year Lease Term will be increased (in the
case of excess costs) or decreased (in the case of diminished costs), as the
case may be, by an amount equal to 16.5% of such excess or diminished costs.
Landlord and Tenant agree that, promptly following the parties' execution of
this Lease, they will meet to develop approved preliminary specifications for
the Improvements. Once Landlord and Tenant have approved preliminary
specifications for the Improvements, Landlord will proceed with the preparation
of the final architectural and engineering drawings, plans and specifications
for the Improvements. Once those drawings, plans and specifications are
completed, Landlord will deliver a full set thereof to Tenant
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for its review and approval. The approved final drawings, plans and
specifications ("Final Plans") will be deemed incorporated herein by its
reference.
If, following the approval of the Final Plans, Tenant expresses a desire to make
any revisions thereto, Tenant will so notify Landlord and Landlord will then ask
its general contractor to prepare a cost estimate for the making of such
changes. Landlord will promptly notify Tenant of any increased costs or savings
resulting from such changes and Tenant will have the right to require Landlord
to cause such changes to be made to the final Plans; provided, however, that
such changes will not unreasonably affect the structurally integrity or value of
the Building. If the aggregate of all such changes results in a net increase or
decrease in the cost of the construction of the Improvements, then any such
difference will be taken into consideration in adjusting the Base Rent in the
manner contemplated in the second paragraph of this (S)9.
Tenant will have the right to select a bonded, licensed contractor to
participate in open bidding for the contract to construct the Improvements.
Landlord will keep Tenant fully apprised of and invite Tenant's participation in
and review of all general contractor bids for the construction of the
Improvements. Landlord will consult with Tenant with regard to the final
selection of a general contractor to construct the Improvements. The general
contractor ultimately selected to construct the Improvements will be a general
contractor, which is reasonably acceptable to both Landlord and Tenant. If all
of the bids received with respect to the construction of the Improvements are
substantially higher than the TI Allowance, then Tenant will have the right to
cause Landlord to revise the Final Plans and resubmit the same to the designated
general contractors, asking them for a revised bid, so as to try to reduce the
ultimate cost of such Improvements; provided, however, that any delay in
Landlord's construction of the Improvements caused by the revision of such Final
Plans and the resubmission thereof to the designated general contractors will be
treated as a Tenant-caused delay within the meaning of this (S)9. Landlord
agrees that all bids solicited by it from general contractors with respect to
the construction of the Improvements will be required to include a schedule of
values so as to facilitate the identification and computation of change orders
and cost modifications. Finally, Tenant will have the right to select an
independent construction management firm to supervise construction of the
Improvements on Tenant's behalf, with all fees to be paid to such construction
manager to be included in the TI Allowance.
Landlord will cause the improvements to be constructed in accordance with the
Final Plans. Landlord will conduct a "walk-through" of the Leased Premises with
Tenant, so as to permit Tenant the right and opportunity to confirm that the
improvements have been constructed in accordance with the Final Plans. Landlord
will use its best efforts to substantially complete construction of the
Improvements on or before the targeted Commencement Date set forth in the Lease
Summary, subject to delays caused by the occurrence of events beyond its
reasonable control, including, without limitation, labor troubles, inability to
procure materials, restrictive governmental laws, actions and pronouncements,
acts of God, unseasonable weather, Tenant's failure to timely respond to any
matter submitted for its review, and Tenant's requested change orders ("Delay
Events"). The establishment of the substantial completion date referred to in
the immediately preceding sentence is predicated upon the various Construction
Milestone Dates referred to in Exhibit E being met in a timely manner with
respect to the preparation, submission and approval of all preliminary
specifications and Final Plans. Tenant agrees that it will review and either
review or specify its objections to any documents or drawings submitted to it
for its review and approval hereunder within ten days after its receipt of the
same. If Tenant fails to respond to any submission to
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it within ten days after its receipt of the same, then it will be deemed to have
approved the same for all purposes of this Lease. Notwithstanding anything to
the contrary contained herein, if Landlord's inability to substantially complete
the improvements on or before the targeted Commencement Date set forth in the
Lease Summary is attributable to Tenant-caused delays (including, without
limitation, Tenant's failure to timely respond to any matter submitted for its
review, delays caused by Tenant' s requested change orders or Tenant's failure
to meet the Construction Milestone Dates referred to in Exhibit E), then the
Commencement Date will remain as set forth in the Lease Summary, notwithstanding
the fact that the Improvements are not yet substantially completed, and Tenant
will, from and after the Commencement Date, have an obligation to pay Base Rent
and perform all of its other obligations and duties set forth in this Lease. If
Landlord's failure to substantially complete the improvements to the Leased
Premises by the targeted Commencement Date set forth in the Lease Summary is
attributable to any reason other than a Tenant-caused delay (as that term is
defined above), then, subject to the remaining provisions of this (S)9 with
respect to the imposition of per diem penalties and the grant to Tenant of a
right to terminate the Lease, the Commencement Date and the Termination Date
will each be deferred by the number of days of the delay in substantially
completing the improvements to the Leased Premises and Tenant's obligation to
pay Base Rent and perform all of its other obligations and duties set forth in
this Lease will be similarly deferred until the deferred Commencement Date
hereunder.
If the Leased Premises are not substantially completed by November 1, 1996, for
any reason other than the occurrence of any Delay Event, then Landlord will be
obligated to pay a per diem penalty to Tenant equal to $967 per day for each day
after November 1, 1996 until the Leased Premises are so substantially completed.
If the Leased Premises are not substantially completed by January 1, 1997, for
any reason other than the occurrence of any Delay Event, then Tenant will have
the right to terminate this Lease by delivering written notice of the
termination thereof to Landlord on or before January 31, 1997.
For the purposes of this Lease, the improvements will be deemed "substantially
completed" on the earlier of the date on which Tenant occupies the Leased
Premises or the date on which a certificate of occupancy for the Improvements is
issued by the appropriate governmental authority. To the extent Tenant occupies
a part, but not all of the Leased Premises prior to the Commencement Date as it
relates to the entire Leased Premises, then all of the terms and conditions of
this Lease will nonetheless apply to Tenant's occupancy of such part of the
Leased Premises prior to such Commencement Date and Tenant will pay Base Rent
hereunder in an amount equal to the Base Rent payable hereunder for the entire
Leased Premises, multiplied by a fraction having as its numerator the number of
rentable square feet so occupied by Tenant and having as its denominator the
total number of rentable square feet contained within the Leased Premises.
(S)10. ALTERATIONS. Except for "Minor Alterations" (as that term is
-----------
hereinafter defined), Tenant may not at any time during the Lease Term make any
alterations, additions or improvements to the Leased Premises, without the prior
written consent of Landlord. For the purposes of this (S)10, "Minor
Alterations" will mean any alteration, addition or improvement to the Leased
Premises which cost less than $50,000 and which does not alter the exterior
aesthetics or structural integrity of the Building. All improvements,
alterations and additions made at one time in connection with any one job will
be aggregated for the purposes of determining whether the $50,000 limit has been
exceeded. Any alterations, additions or improvements made to the Leased
Premises in accordance with this (S)10 will at
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all times remain the property of Landlord. If Landlord consents to any proposed
alteration, addition or improvement, the same will be made by Landlord at
Tenant's sole expense.
(S)11. MECHANICS LIENS. Tenant will indemnify and hold Landlord
---------------
harmless from any liability or expense associated with its construction of any
alteration, addition or improvement to the Leased Premises. In particular,
Tenant will execute and record an appropriate notice of commencement pursuant to
Chapter 713, Florida Statutes, identifying Tenant's interest in the Leased
Premises as a leasehold interest only. Tenant will immediately discharge any
mechanics lien filed against the Leased Premises or the Building in connection
with any work performed by Tenant.
(S)12. ASSIGNMENT AND SUBLETTING. Except as otherwise expressly
-------------------------
provided herein, Tenant will not assign this Lease or sublet all or any part of
the Leased Premises without the prior written consent of Landlord. Unless
otherwise agreed to by Landlord, Landlord's consent to any such assignment or
sublease will not relieve Tenant from its obligations under this Lease. The
consent of Landlord to any assignment of Tenant's interest in any part of this
Lease or the subletting of any part of the Leased Premises will not be
unreasonably withheld. Notwithstanding the above, Tenant may assign this Lease
or sublet the Leased Premises or any part thereof to a subsidiary, affiliate or
parent of Tenant, provided that any such permitted assignment or subletting will
not relieve Tenant from any liability under this Lease and provided further that
Tenant provides Landlord with written notice of its intention to so assign or
sublet to its subsidiary, affiliate or parent corporation no later than ten days
prior to its effecting of such assignment or subletting.
If Landlord fails to respond to any written request made by Tenant under the
terms of this (S)12 within 30 days after its receipt of such written request,
then it will conclusively be deemed to have given its consent to such request by
Tenant. Landlord also agrees to exempt from the foregoing assignment and
subletting clause, Tenant's duty to obtain Landlord's consent for any assignment
resulting from a merger, consolidation, takeover or sale of Tenant's entire
business. Assignments of this Lease or the Leased Premises arising from any
such merger, consolidation, takeover or sale of Tenant's entire business will
not constitute a default under terms of this Lease. Tenant will, however, be
required to provide Landlord with at least ten days prior written notice of the
occurrence of any such merger, consolidation, takeover or sale of Tenant's
entire business.
(S)13. SUBORDINATION AND NONDISTURBANCE AGREEMENT. The priority of this
------------------------------------------
Lease and the leasehold estate of Tenant created hereunder are and will be
subject and subordinate to the lien of any mortgage or ground lease, which may
now or hereafter affect the Building and to all renewals, modifications,
consolidations, replacements and extensions thereof, and all advances
thereunder, effective upon the date the mortgagee or ground lessor, as the case
may be, delivers to Tenant a subordination, nondisturbance and attornment
agreement in recordable form and otherwise in the form attached hereto as
Exhibit F, which agreement has been executed and acknowledge by and on behalf of
the mortgage or ground lessor. The subordination, nondisturbance and attornment
agreement will provide, among other things, that so long as Tenant is not in
default hereunder, Tenant may remain in possession of the Leased Premises
pursuant to the terms hereof, and without any diminution of Tenant's rights
should Landlord become in default with respect to such mortgage or ground lease
or should the Leased Premises become the subject of any action to foreclose any
mortgage or to dispossess Landlord of its interest in the
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Building. Any fee which Landlord's lender or ground lessor may charge with
respect to any such subordination, nondisturbance and attornment agreement will
be paid by Landlord.
(S)14. LIMITATION OF LANDLORD'S PERSONAL LIABILITY. Tenant will look
-------------------------------------------
solely to Landlord's interest in the Leased Premises and the Building (and, to
the extent appropriate, to the proceeds of insurance required to be maintained
by Landlord under (S)(S)15 and 16 hereof) for the recovery of any judgment
against Landlord; it being the express intent of the parties hereto that neither
Landlord, nor any of its partners will ever be personally liable for any such
judgment.
(S)15. INDEMNIFICATION AND INSURANCE. Landlord will not be liable for
-----------------------------
and Tenant hereby releases Landlord from any liability or expense associated
with any damage or injury to any person or property (including any person or
property of Tenant or anyone claiming under Tenant) which arises directly or
indirectly in connection with the Leased Premises or Tenant's use or occupancy
of the Leased Premises or any common areas serving the Building, provided,
however, that the foregoing release will not extend to any liability or expense
occasioned by the fault or negligence of Landlord. Tenant will indemnify and
hold Landlord harmless from any of the above-described liabilities and expenses;
provided, however, that Tenant will not be obligated to indemnify Landlord as to
any liability or expense occasioned by the fault or negligence of Landlord.
Landlord will indemnify, hold harmless and defend Tenant from and against any
and all claims, demands, damages, judgments, fines, penalties, losses, costs and
expenses (including, without limitation, any of the same related to appeals),
incurred by Tenant as the result of the negligent or willful acts or omissions
of Landlord, its agents, contractors or employees or as a result of a material
breach of the provisions of this Lease by Landlord. Except as otherwise
provided in (S)16 hereof, nothing contained in this Lease will be construed or
interpreted to excuse Landlord from having to pay damages caused to Tenant as
the result of the negligence or willful misconduct of Landlord or Landlord's
agents, contractors or employees.
All property stored or placed by Tenant in or about the Leased Premises will be
so stored or placed at the sole risk of Tenant. Tenant will at its sole expense
maintain in full force and effect at all times during the Lease Term: (a)
commercial general liability insurance for personal injury and property damage
with liability limits of not less than $1,000,000 combined single limit and
$2,000,000 general aggregate for property damage; and (b) fire and extended
coverage insurance on all property stored or placed by Tenant in or about the
Leased Premises in an amount equal to the full replacement value thereof. Each
insurance policy required to be maintained by Tenant hereunder will name
Landlord as an additional insured and will specifically provide that such
insurance policy cannot be terminated without giving at least 30 days prior
written notice to Landlord.
(S)16. WAIVER OF SUBROGATION. Landlord and Tenant each hereby waives
---------------------
its right to receive damages against the other party with respect to any loss or
claim occasioned by the occurrence of any casualty to the Building or the Leased
Premises which is covered under a valid and collectible fire and extended
coverage insurance policy. Any insurance policy procured by either Tenant or
Landlord hereunder will contain an express waiver of any right of subrogation by
the insurance company against Landlord or Tenant, as the case may be.
Landlord will maintain in full force and effect at all times during the Lease
Term: (a) comprehensive public liability insurance for personal injury and
property damage with liability limits of not less than
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$5,000,000 for injury to one person, $10,000,000 for injury from one occurrence
and $2,000,000 for property damage; and (b) fire and extended coverage insurance
on the Building in an amount equal to the full replacement value thereof. Each
insurance policy required to be maintained by Landlord hereunder will name
Tenant as an additional insured. Tenant acknowledges that Landlord's cost of
maintaining such insurance will be an Operating Expense for the purposes of (S)2
of this Lease. Tenant reserves the right to periodically review the expense
associated with Landlord's maintenance of the foregoing insurance coverages and
to substitute comparable coverages and conditions of insurance with other
carriers of Tenant's choice in the event the expense is deemed by Tenant to be
excessive.
(S)17. HAZARDOUS SUBSTANCES. Tenant will not use, store or dispose of
--------------------
any "hazardous substance," "hazardous material" or "toxic substance" (as those
terms are defined or used in the context of Comprehensive Environmental
Response, Compensation and Liability Act or any other federal, state or local
environmental law, regulation or requirement) on or about the Leased Premises,
except for immaterial amounts that are exempt from or do not give rise to any
violation of applicable law. Tenant will indemnify and hold Landlord harmless
from any liability or expense (including, without limitation, reasonable
attorney's fees and expenses, court costs, expenses and costs incurred in the
investigation, settlement and defense of claims and any cost or expense incurred
in connection with any environmental clean-up) incurred by or claimed against
Landlord as a result of Tenant's breach of the covenant contained in this
section. The foregoing indemnification (as well as the indemnification set
forth in (S)15 of this Lease) will survive the expiration or sooner termination
of the Lease Term.
Landlord hereby represents and warrants that the Building does not contain any
Hazardous Substance, underground storage tank or asbestos-containing material in
violation of any Federal, state or local laws, ordinances or regulations.
Landlord agrees to indemnify, defend and hold Tenant harmless from and against
any liability, loss, claim, action or expense incurred by or claimed against
Tenant (including, without limitation, reasonable attorney's fees) related to or
arising out of a breach of the foregoing representation or warranty.
(S)18. SURRENDER OF PREMISES. Upon the termination of Tenant's right of
---------------------
possession under this Lease, Tenant will immediately surrender possession of the
Leased Premises to Landlord in good repair and "broom clean" condition,
excepting reasonable wear and tear and any damages caused by the elements,
casualty or any other cause for which Tenant is not liable hereunder. Tenant
will have the option, but not the obligation, to remove any or all of the
improvements and alterations made to the Leased Premises by Tenant at Tenant's
expense. Any damage to the Leased Premises resulting from the removal of such
improvements or alterations will be repaired by Tenant at Tenant's sole expense.
Tenant will at the same time remove all of its trade fixtures from the Leased
Premises. Tenant will promptly repair any damage caused to the Leased Premises
by the removal of any of such trade fixtures.
(S)19. CASUALTY. If the Leased Premises is damaged by fire or other
--------
casualty, the Landlord will promptly give written notice to Tenant whether the
damaged area can reasonably be repaired within 180 days after the date on which
all requisite permits and licenses for the repair thereof are obtained from the
appropriate governmental authorities. If Landlord notifies Tenant that it does
not believe that the damaged area can reasonably be repaired within such 180-day
period, then both Landlord and Tenant will have the option of terminating this
Lease by giving written notice thereof to the other at any time within 30 days
after the date of Tenant's receipt of the aforementioned notice from Landlord.
If Landlord
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determines that the damaged area can reasonably be repaired within such 180-day
period or if neither party elects to terminate this Lease despite the fact that
Landlord has determined that the damaged area cannot be reasonably repaired
within such 180-day period, then Landlord will proceed to repair the damaged
area at its sole expense; provided, however, that Landlord will in no event be
required to repair any improvements previously made to the Leased Premises by or
at the request of Tenant pursuant to (S)10 hereof. If the Leased Premises are
rendered untenantable in whole or in part as a result of a fire or other
casualty which was not caused by Tenant, then all rent and other payments
accruing after the occurrence of any such fire or other casualty and prior to
the completion of the repair of the Leased Premises will be equitably and
proportionately abated to reflect the untenantable portion of the Leased
Premises. Landlord will not be liable to Tenant for any inconvenience or
interruption to Tenant's business occasioned by such fire or other casualty or
the concomitant repair of the damaged area.
In addition to the termination rights given to Landlord and Tenant in the
immediately preceding paragraph of this (S)19, Tenant will also have the right
to terminate this Lease upon the occurrence of any of the following events: (a)
the occurrence of any fire or other casualty during the last two years of the
Lease Term it at least 50% of the rentable square feet contained within the
Leased Premises are rendered untenantable as a result of the occurrence of such
fire or other casualty; (b) Landlord's failure to begin its repair of any
damaged area in the Leased Premises caused by such fire or other casualty within
60 days after the occurrence thereof, subject to the occurrence of any Delay
Event (as that term is defined in (S)9 hereof); or (c) Landlord's failure
(subject to the occurrence of any Delay Event) to complete the repair of any
damaged area within 180 days after the date on which all requisite permits and
licenses for the repair thereof are obtained from the appropriate governmental
authorities, notwithstanding the fact that Landlord had earlier given written
notice to Tenant that the damaged area could reasonably be repaired within the
aforementioned 180 day period. Tenant will exercise any termination right
granted to it in this paragraph by giving written notice of such termination to
Landlord at any time within thirty days after the date of the occurrence of the
event giving rise to Tenant's termination right hereunder. If this Lease is
terminated in accordance with the provisions of this (S)19, all Base Rent,
Excess Expense payments and other monetary obligations of Tenant hereunder will
be prorated effective as of the date of Tenant's delivery of any such
termination notice to Landlord.
(S)20. CONDEMNATION. If all or any substantial portion of the Leased
------------
Premises is taken by or under threat of condemnation so as to render the Leased
Premises wholly untenantable, then this Lease will automatically terminate as of
the date of the vesting of title to such property in the condemning authority.
If such taking does not render the Leased Premises wholly untenantable, then
this Lease will not terminate but will continue in full force and effect in
accordance with its terms, except that the Base Rent and Tenant's Proportionate
Share will be adjusted to fairly reflect the portion of the Leased Premises
which was so taken. Landlord will not be liable to Tenant for any inconvenience
or interruption to Tenant's business occasioned by any such taking. Landlord
will be entitled to receive the entire award made by the condemning authority
for any such taking. Landlord will promptly notify Tenant of the institution of
any condemnation proceeding affecting the Leased Premises.
(S)21. HOLDING OVER. Tenant will have the right to hold over in its
------------
occupancy of the Leased Premises after the expiration of the Lease Term for a
period of 90 days, provided that it has given written notice of its intention to
so hold over to Landlord at least 120 days prior to the expiration of the Lease
Term, and provided further that the monthly Base Rent payable by Tenant during
the holdover term will
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be 125% of the Base Rent in effect for the last month of the Lease Term. Except
as otherwise provided above, Tenant will not hold over in its occupancy of the
Leased Premises after the expiration of the Lease Term, without the prior
written consent of Landlord.
(S)22. DEFAULT. If Tenant fails to pay any installment of Base Rent or
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any other sum payable by it hereunder within ten days after its receipt (and the
receipt thereof by any guarantor of Tenant's obligations hereunder) of written
notice from Landlord that any such sum is due and unpaid hereunder, or if Tenant
defaults in the performance of any of its other obligations under this Lease and
such default continues for 30 days after written notice thereof is given to
Tenant (and any guarantor of Tenant's obligations hereunder) (unless such
default is not capable of being cured within the aforementioned 30-day period,
in which event, Tenant will have such longer grace period as is reasonably
required to cure such default, provided that Tenant commences the cure thereof
within the aforementioned 30-day period and at all times thereafter diligently
pursue such cure to completion), then, in addition to any other legal rights and
remedies available to Landlord at law or in equity, Landlord may: (a) terminate
Tenant's right of possession under this Lease and declare all Base Rent and
estimated Excess Expense payments payable over the remainder of the Lease Term
to be immediately due and payable; or (b) reenter and attempt to relet the
Leased Premises without terminating this Lease, in which event Tenant will
remain obligated to pay to Landlord any deficiency between all sums payable by
Tenant pursuant to this Lease and any sums collected by Landlord from any
reletting of the Leased Premises (net of any sums paid by Landlord in connection
with such reletting, including, without limitation, leasing commissions,
attorneys' fees and costs of improvements to the Leased Premises).
If Landlord defaults in the performance of any of its obligations under this
Lease and such default continues for thirty days after its receipt of written
notice (unless such default is not capable of being cured within the
aforementioned 30-day period, in which event, Landlord will have such longer
grace period as is reasonably required to cure such default, provided that
Landlord commences the cure thereof within the aforementioned 30-day period and
at all times thereafter diligently pursues such cure to completion), then, in
addition to any other legal rights and remedies available to Tenant at law or in
equity, Tenant will have the right to take all reasonable actions required to
cure such default and Tenant may thereafter offset the reasonable out-of-pocket
expenses incurred by Tenant in curing such default against any Base Rent payable
by Tenant hereunder.
(S)23. PREVAILING PARTY'S FEES. If any legal action is commenced by
-----------------------
either Landlord or Tenant, to enforce its rights hereunder, then all attorneys'
fees, paralegal fees and other expenses incurred by the prevailing party in such
action shall be promptly paid by the non-prevailing party.
(S)24. SUCCESSORS AND ASSIGNS. This Lease shall be binding upon and
----------------------
inure to the benefit of the successors and assigns of Landlord and the
successors and permitted assigns of Tenant.
(S)25. NO WAIVER. No waiver of any covenant or condition of this Lease
---------
by either party will be deemed to constitute a future waiver of the same or any
other covenant or condition of this Lease. In order to be effective, any such
waiver must be in writing and must be delivered to other party to this Lease.
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(S)26. BROKERAGE COMMISSIONS. Each of Landlord and Tenant hereby
---------------------
represents and warrants that it has not dealt or consulted with any real estate
broker or agent in connection with this Lease other than those real estate
brokers and agents specifically identified in the Agency Disclosure Statement
attached hereto as Exhibit G. Each of Landlord and Tenant agrees to indemnify
and hold the other harmless from and against any liability or expense occasioned
by a breach of the foregoing representation.
(S)27. REASONABLENESS OF CONSENT. Landlord shall not unreasonably
-------------------------
withhold any consent or approval which is required to be given by it pursuant to
the terms of this Lease.
(S)28. AMENDMENT. This Lease may not be amended except by a written
---------
instrument signed by both Landlord and Tenant.
(S)29. GOVERNING LAW. This Lease will be governed by and construed in
-------------
accordance with the laws of the State of Florida.
(S)30. NOTICES. All notices required or permitted under this Lease must
-------
be in writing and must be delivered to Landlord and Tenant at their addresses
set forth in the Lease Summary (or such other address as may hereafter be
designated by such party). Any such notice must be personally delivered or sent
by registered or certified mail, overnight courier or facsimile transmission.
Any such notice will be deemed effective when received (if sent by hand
delivery, overnight courier or facsimile transmission) or on the date which is
three days after such notice of deposit in the United States mail (if sent by
registered or certified mail).
(S)31. RENEWAL OPTIONS. Tenant will have the option to renew this Lease
---------------
for two renewal terms of five years each. Each such renewal option must be
exercised, if at all, by Tenant's delivery of written notice of exercise to
Landlord at least 150 days prior to the scheduled expiration of the then
existing term (be it the initial lease term or the first renewal term).
Tenant's right to renew this Lease will be conditioned upon the Lease being in
full force and effect, without any default on the part of Tenant, both at the
time of Tenant's exercise of such option and at the time of the scheduled
commencement of such renewal term. Each such renewal term will be upon all of
the same terms and conditions set forth in this Lease with respect to the
initial lease term, except that the Base Rent for each year during each such
renewal term will be equal to the Base Rent payable during the immediately
preceding year, plus $.25 for every rentable square foot contained within the
Leased Premises. With respect to each renewal term exercised by Tenant
hereunder, Landlord will provide to Tenant a refurbishment allowance equal to
$302,463 ($3.00 per rentable square foot contained within the Leased Premises).
The amount of the refurbishment allowance will be paid to Tenant within ten days
after Landlord's approval of the refurbishing plans for the Leased Premises
submitted to it by Tenant.
(S)32. RIGHT OF FIRST REFUSAL. If at any time during the Lease Term any
----------------------
space becomes available either in the 300 International Parkway Building or the
500 International Parkway Building ("Vacant Space"), then Landlord will promptly
give written notice to Tenant of the existence of such Vacant Space. Tenant
will have ten calendar days after its receipt of such written notice from
Landlord in which to exercise its option to lease the Vacant Space at a rental
rate and upon such other terms and conditions as are specified in this Lease
with respect to the Leased Premises (including, without limitation, a provision
that the term of its leasing of any such vacant space will be co-terminus with
the expiration of
-13-
<PAGE>
the lease term for the Leased Premises). Tenant will exercise such right of
first option or first offer, if at all, by delivering written notice of its
exercise of the same to Landlord within the aforementioned ten calendar day
period. If Tenant fails to provide Landlord with such written notice within the
aforementioned ten calendar day period or if Tenant expressly declines to
exercise its right hereunder, then, in either such event, Landlord will
thereafter have the unrestricted right to lease the Vacant Space to any third
party at such rental rate and upon such terms and conditions as Landlord deems
appropriate. If Tenant leases any additional space pursuant to this section,
Landlord and Tenant will enter into an addendum to this Lease reflecting the
terms and conditions specified herein for the leasing of such additional space.
(S)33. EXPANSION OPTION. Effective as of the first anniversary of the
----------------
Commencement Date and as of the first day of the seventh, thirteenth, nineteenth
and twenty-fifth calendar months thereafter, Tenant will have the right to lease
additional space (to the extent the same is vacant and available) in either the
300 International Parkway Building, the 500 International Parkway Building or
any other building owned by Landlord (or any affiliate of Landlord) in the
Heathrow International Business Center ("Expansion Space"). Tenant will
exercise any such expansion option, if at all, by delivering written notice of
the exercise of such option to Landlord by no later than ninety days prior to
the scheduled commencement date of its rental of such expansion space (as such
dates are specified in the first sentence of this (S)33). Any exercise of the
expansion option by Tenant hereunder must be in increments of at least 5,000
rentable square feet of space. If Tenant exercises any such expansion option,
its leasing of such Expansion Space will be upon all of the same terms and
conditions set forth in this Lease with respect to the Leased Premises
(including, without limitation, a provision that the term of its leasing of
such Expansion Space will be coterminous with the expiration of the Lease Term
for the Leased Premises), except that the Base Rent will be equal to 95% of the
fair market rent for comparable buildings in comparable locations and any tenant
improvement allowance to be provided to Tenant will be equal to the fair market
tenant improvement allowance for comparable buildings in comparable locations.
If Tenant leases any additional space pursuant to this section, Landlord and
Tenant will enter into an addendum to this Lease reflecting the terms and
conditions specified herein for the leasing of such additional space.
(S)34. CANCELLATION OPTION. Tenant will have the right to cancel this
-------------------
Lease effective as of the end of the fifth year of the Initial Lease Term or
effective as of the end of the seventh year of the Initial Lease Term. Tenant's
exercise of any such option will be exercised, if at all, by its delivery of
written notice to Landlord on or before the date which is at least 180 days
prior to the scheduled effective date of such cancellation. Tenant's right to
cancel this Lease will be conditioned upon the Lease being in full force and
effect, without any default on the part of Tenant, both at the time of Tenant's
exercise of such option and at the time of the scheduled cancellation of this
Lease. It will be a condition to Tenant's exercise of either such cancellation
option (that is, the cancellation option effective as of the end of the fifth
year of the initial Lease Term or the cancellation option effective as of the
seventh year of the Initial Lease Term) that Tenant pay to Landlord at the same
time as it delivers its written notice of the exercise of such cancellation
option cash in a sum equal to $2,424,520 (if the exercise of such option is
effective as of the end of the fifth year of the initial Lease Term) of
$1,789,970 (if the cancellation is effective as of the end of the seventh year
of the initial Lease Term). To the extent the Base Rent payable by Tenant
hereunder is adjusted pursuant to the provisions of (S)9, 32 or 33 of this
Lease, the amount of the aforementioned cancellation penalties will also be
adjusted to reflect such Base Rent adjustment in a
-14-
<PAGE>
manner which is consistent with the mode of the initial calculation of the
aforementioned cancellation penalties.
(S)35. RELOCATION AND PLANNING EXPENSES. Landlord will provide Tenant
--------------------------------
with the following allowances: (a) an amount equal to $2.00 per rentable square
foot contained within the Leased Premises to defray Tenant's costs of relocating
to the Leased Premises; and (b) an amount equal to $1.50 per rentable square
foot of space contained within the Leased Premises to defray Tenant's costs of
the preparation of space plans and all services and documentation necessary for
the completion of construction documents with respect to the Leased Premises.
The relocation allowance referred to in clause (a), above, will be paid by
Landlord to Tenant on or before September 1, 1996. The space planning allowance
referred to in clause (b), above, will be paid by Landlord to Tenant
periodically after the date of the parties' execution of this Lease, upon
Tenant's presentation to Landlord of invoices indicating the amount of the
expenses incurred by Tenant in connection with the preparation of space plans
and all construction documents related to the Leased Premises.
(S)36. PARKING. Landlord will provide Tenant with 403 parking spaces,
-------
of which 25 spaces will be reserved parking spaces for the senior management of
Tenant. All such parking will be provided at no additional cost to Tenant. The
location of the reserved spaces will be subject to mutual agreement by Landlord
and Tenant. The signage identifying the existence of any reserved parking
spaces will be consistent in use with the reserved parking signage presently in
use at the 300 International Parkway building.
(S)37. NONCOMPETITION CLAUSE. From and after the date of the parties
---------------------
execution of this Lease and throughout the Lease Term so long as Tenant remains
in possession of the Leased Premises without any default on Tenant's part,
should Landlord lease any other space in the Building to any person, firm or
corporation engaged in the same or similar type of business as that of Tenant
(including vendors or distributors of products of any such person or
corporation), then Tenant will have the option at any time thereafter to cancel
and terminate this Lease and Tenant will have no further obligation to Landlord
hereunder.
(S)38. ROOFTOP ANTENNA. Tenant will have the right, at its expense, to
---------------
install, maintain and remove a satellite dish-type antenna on the roof of the
Building, so long as the installation thereof does not violate any applicable
zoning or building codes or any restrictive covenants applicable to the business
park in which the Building is located. The location of any such antennae on the
roof of the Building will be subject to the prior approval of Landlord.
(S)39. ZONING. Landlord represents, warrants and covenants as follows:
------
(a) the Leased Premises are presently zoned so as to permit the construction and
lawful use of the Leased Premises in accordance with the provisions hereof; (b)
there are sufficient parking spaces dedicated to the Building so as to comply
with all applicable zoning codes; and (c) Landlord's title to the Leased
Premises is not subject to any covenant, agreement, reservation, lien, easement,
restriction or encumbrance, which would prohibit Tenant from using the Leased
Premises in accordance with the terms of this Lease.
(S)40. RIGHT OF FIRST REFUSAL TO PURCHASE BUILDING. If at any time
-------------------------------------------
during the Lease Term, Landlord receives a bona fide written offer from a third
party to purchase the Building ("Third Party
-15-
<PAGE>
Offer"), which Landlord is willing to accept, then Landlord will notify Tenant
thereof and will afford Tenant a period of thirty days in which to elect to
purchase the Building on the identical terms and conditions set forth in the
Third Party Offer. If Tenant gives Landlord written notice within the
aforementioned thirty day period that Tenant so elects to purchase the Building,
then Tenant will proceed to purchase the Building from Landlord upon the
identical terms and conditions set forth in the Third Party Offer; provided that
Landlord can convey good and marketable title thereto, by full warranty deed,
such title being insurable by a nationally-known title company at standard rates
for an ALTA policy. If Tenant declines to purchase the Building or fails to
respond to Landlord's notice within the aforementioned thirty-day period, then
Landlord will be free to sell the Building on the terms and conditions set forth
in the Third Party Offer; provided, however, that if the Building is not sold
within 90 days after the outside date for closing specified in such Third Party
Offer, then Landlord will be again obligated to offer the Building for sale to
Tenant as hereinabove provided. Notwithstanding anything to the contrary
contained herein, Tenant hereby acknowledges and agrees that if the Third Party
Offer involves the purchase by such third party of any properly owned by
Landlord or any affiliate thereof in addition to the Building, then Tenant, as a
condition precedent to its exercise of its right of first refusal hereunder,
will similarly be obligated to purchase both the Building and such additional
property on identical terms and conditions set forth in the Third Party Offer.
In addition, if any brokerage commission is due from Landlord to Commercial
First Properties, Inc. as a result of Tenant's purchase of the Building pursuant
to the rights granted to it pursuant to this (S)40, then the purchase price
payable by Tenant for its acquisition of the Building will be increased by the
excess, if any, of any commission so payable by Landlord to Commercial First
Properties, Inc., less the amount of any commission payable by Landlord to any
unaffiliated real estate broker representing the Buyer under the Third Party
Offer, and such excess amount will be paid in cash at closing by Tenant.
(S)41. SELF-FUNDING OF TENANT IMPROVEMENTS. Tenant will have the
-----------------------------------
option, if it so elects, to directly pay all costs associated with the
construction of the improvements to the Leased Premises pursuant to (S)9 hereof.
If Tenant desires to self-fund the cost of the construction of such
Improvements, it will deliver written notice of such election to Landlord within
30 days after the parties' execution of this Lease. If Tenant fails to deliver
such a written election to Landlord within the aforementioned 30-day period,
then it will be deemed to have elected not to exercise such option.
If Tenant exercises its option to self-fund the cost of constructing such
Improvements within the aforementioned 30-day period, then it will thereafter be
obligated to pay all such costs directly to the general contractor constructing
such Improvements at the same time and upon the same terms and conditions set
forth in the general contractor's contract for the construction thereof, a copy
of which will be furnished by Landlord to Tenant. If Tenant so elects to self-
fund the cost of constructing such Improvements, the following adjustments will
be made in the economics of this Lease:
(a) Relocation and Planning Expenses. Landlord will have no
--------------------------------
obligation to pay the relocation and planning expense allowances to Tenant
pursuant to (S)35 hereof, and, to the extent any portion thereof has already
been paid to Tenant by Landlord, Tenant will, coincident with its exercise of
its self-funding option, reimburse Landlord for the full amount of such previous
payments.
-16-
<PAGE>
(b) Base Rent. The Base Rent payable by Tenant pursuant to the Base
---------
Rent Schedule attached hereto as Exhibit A will be reduced by $1.75 per rentable
square foot for each period of the lease term specified in such Base Rent
Schedule
(c) Cancellation Option. The cash payments required to be made to
-------------------
Landlord by Tenant upon its exercise of the cancellation option pursuant to
(S)34 will be reduced to $353,102 (if the exercise of such option is effective
as of the end of the fifth year of the initial Lease Term) of $353,633 (if the
cancellation is effective as of the end of the seventh year of the initial Lease
Term).
Except as otherwise expressly provided herein, all of the terms and conditions
of the Lease will remain in full force and effect in accordance with their
terms, notwithstanding Tenant's exercise of its self-funding option pursuant to
this (S)41.
(Signatures and Acknowledgments Appear on Next Page)
-17-
<PAGE>
SIGNATURES AND ACKNOWLEDGMENTS
------------------------------
Landlord and Tenant have executed this Lease as of the date specified in the
Lease Summary.
Signed and acknowledged in
the presence of:
LANDLORD:
400 INTERNATIONAL PARKWAY
DEVELOPMENT COMPANY
/s/ Nova S. Witte By: Pizzuti Management Inc.
- ----------------------------------
/s/ Cindy L. Smith By: /s/ Richard C. Daley
- ---------------------------------- -------------------------------
(Name)
Title: Vice President
------------------------------
TENANT:
- ----------------------------------
SEAGATE SOFTWARE STORAGE
- ---------------------------------- MANAGEMENT GROUP
STATE OF Ohio By: /s/ Christopher R. Gibson
--------------- -------------------------------
COUNTY OF Franklin (Name)
---------------
Title: Vice President, Worldwide
Operations
------------------------------
Before me, a notary public in and for said state and county, personalty appeared
Richard C. Daley, the Vice President of Pizzuti Management Inc., the managing
agent of 400 International Parkway Development Company, the Landlord in the
foregoing Lease, who acknowledged the signing of the Lease to be his free act
and deed on behalf of the Landlord.
Date: 3/13/96 Notary Public: Nova S. Witte
----------------
STATE OF Florida
-------------
COUNTY OF Seminole
---------------------
<PAGE>
Before me, a notary public in and for said state and county, personally appeared
Christopher R. Gibson, the Vice President, Worldwide Operations of Seagate
Software Storage Management Group, the Tenant in the foregoing Lease, who
acknowledged the signing of the Lease to be his free act and deed on behalf of
Tenant. (personally known)
Date: Feb. 13, 1996 Notary Public: Cynthia D. Griffin
----------------
TENANT:
SEAGATE SOFTWARE STORAGE
- --------------------------------- MANAGEMENT GROUP
By: /s/ Donald L. Waite
- --------------------------------- ------------------------------------
Donald L. Waite
Executive Vice President, CFO, CAO
-19-
<PAGE>
EXHIBIT A
---------
BASE RENT SCHEDULE
------------------
The monthly and per rentable square foot Base Rent payable by Tenant during
the Lease Term will be as set forth in the following schedule:
<TABLE>
<CAPTION>
BASE RENT
MONTHLY PER RENTABLE
LEASE PERIOD BASE RENT SQUARE FOOT
---------------------------------------- ------------- ---------------
<S> <C> <C>
A. Initial Lease Term
10/15/96-10/14/97 $158,372 $18.85
10/15/97-10/14/98 $160,473 $19.10
10/15/98-10/14/99 $162,573 $19.35
10/15/99-10/14/2000 $164,674 $19.60
10/15/00-10/14/01 $166,774 $19.85
10/15/01-10/14/02 $168,875 $20.10
10/15/02-10/14/03 $170,975 $20.35
10/15/03-10/14/04 $173,076 $20.60
10/15/04-10/14/05 $175,176 $20.85
10/15/05-10/15/06 $177,277 $21.10
B. First Renewal Term
10/15/06-10/14/07 $179,377 $21.35
10/15/07-10/14/08 $181,478 $21.60
10/15/08-10/14/09 $183,578 $21.85
10/15/09-10/15/10 $185,679 $22.10
10/15/10-10/14/11 $187,779 $22.35
C. Second Renewal Term
10/15/11-10/14/12 $189,880 $22.60
10/15/12-10/14/13 $191,980 $22.85
10/15/13-10/14/14 $194,080 $23.10
10/15/14-10/15/15 $196,181 $23.35
10/15/15-10/14/16 $198,281 $23.60
</TABLE>
<PAGE>
The total monthly payment due from Tenant during the first twelve months of the
Lease Term will be $169,458.04 (consisting of Base Rent of $158,372 and sales
tax thereon of $11,086.04).
Initialed and Approved by Tenant:
/s/ CRG 2/12/96
-----------------------------------------
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<PAGE>
EXHIBIT B
---------
LIST OF OPERATING EXPENSES
--------------------------
The following are those expenses which are included within the definition of
"Operating Expenses":
1. Costs of maintaining and repairing (but not replacing) the Building and
all common areas serving the Building;
2. The cost of providing janitorial services to the Building;
3. The cost of providing security for the Building;
4. Real estate taxes and assessments on the Building, provided, however, that
Tenant will not be responsible for the payment as an Operating Expense of
the incremental increase in real estate taxes and assessments which is
directly attributable to Landlord's sale of the Building to a third party,
which, in turn, leads to an increase in the valuation of the Building for
tax purposes;
5. Costs related to the provision of utility services to the Building;
6. The cost of any Building improvement (amortized over the useful life of
such improvement in a manner as is consistent with generally accepted
accounting principles) which Landlord is required to make as a result of
the enactment of any governmental law after the date of the execution of
this Lease;
7. The cost of any cost-saving utility devise installed in the Building, but
only to the extent of the actual cost-savings obtained therefrom;
8. Insurance premiums for liability and extended coverage insurance policies
maintained by Landlord on the Building;
9. Salaries and related costs (including fringe benefits, payroll taxes and a
labor overhead charge of not more than 15%) of personnel spending time
directly associated with the operation, management and maintenance of the
Building, including, without limitation, those paid to any on-site
assistant property management or maintenance personnel;
10. Any assessments imposed by any property owners association;
11. A property management fee of 1.5% of all Base Rent and Excess Expense
Payments payable by Tenant hereunder;
<PAGE>
12. A contingency/replacement reserve of $.05 per rentable square foot
contained within the Leased Premises;
13. Accounting, legal and other professional services rendered in connection
with the operation, management and maintenance of the Building; and
14. All other costs related to the operation, management and maintenance of
the Building which are considered to be operating expenses under generally
accepted accounting principles.
For the purposes of this Lease, "Controllable Expenses" will mean those expenses
referred to in (P)(P)'s 8 through 13, above.
The following are those expenses which are excluded from the definition of
"Operating Expenses":
A. Landlord's debt service on any financing related to the Building;
B. Franchise or income taxes payable by Landlord;
C. Salaries, employee benefits and payroll taxes for offsite, executive or
managerial personnel of Landlord;
D. Costs of all tenant improvements;
E. Leasing commissions;
F. Attorney's fees incurred by Landlord in prosecuting any eviction or other
legal action against any tenant in the Building; and
G. The portion of any cost or expense for which Landlord is entitled to
reimbursement by insurance proceeds, condemnation awards, payments by
other tenants or any other sources;
H. The cost of performing additions, alterations, improvements or individual
services for other tenants or vacant or vacated space (including, without
limitation, the repair and/or replacement of the roof over other tenant's
premises;
I. Any payments required in connection with any ground lease encumbering the
Building;
J. Costs and expenses of enforcing lease provisions against other tenants in
the Building, including, without limitation, legal fees associated with
such enforcement efforts;
K. Costs and expenses resulting from a violation by Landlord of the terms of
any lease of space in the Building or of any ground lease or a mortgage to
which this Lease is subordinate;
L. Costs for the repair of any part of the Building which was defectively
designed or constructed;
-2-
<PAGE>
M. Costs associated with the removal and clean-up of hazardous waste and
toxic substances or compliance with hazardous waste laws if such costs are
not attributable to the activities of Tenant or anyone claiming by,
through or under Tenant;
N. Any increase in insurance premiums to the extent that such increase is
caused by or attributable to the use, occupancy or act of another tenant
in the Building;
O. The cost of any repair to the building made by Landlord because of the
total or partial destruction of the Building or the condemnation of a
portion of the Building;
P. The cost of any additions or capital improvements made to the Building
relating to Landlord's responsibility to comply with the Americans with
Disabilities Act, including all regulations relating thereto;
Q. Except for the management fee referred to in subparagraph 12 of this
Exhibit B, any overhead, managerial, administrative or supervisory costs
or expenses related to the operation and maintenance of the Building; and
R. All costs for any items which, under generally accepted accounting
principles, would be capitalized, depreciated or amortized, regardless
whether said items are leased, financed or purchased (other than those
specifically included within the definition of "Operating Expenses" in
this Exhibit C).
Operating Expenses shall be computed for each calendar year during the Lease
Term based upon the accrual method of accounting. If the Building is ever less
than 95% occupied, then Operating Expenses shall be calculated as if the
Building had been 95% occupied and the results shall constitute Landlord's
Operating Expenses for such calendar year for all purposes of this Lease. In
order to be treated as an Operating Expense for the purposes of this Lease, any
cost or expense incurred by Landlord must be reasonably incurred and must be
reasonable in amount for comparable buildings and comparable services in the
greater Orlando metropolitan area.
Initialed and Approved by Tenant:
/s/ CRG 2/12/96
--------------------------------------------
-3-
<PAGE>
EXHIBIT C
---------
RULES AND REGULATIONS
---------------------
1. No sign, placard, picture, advertisement, name or notice visible from
outside the Premises shall be installed or displayed on any part of the
outside or inside of the Building without the prior written consent of
Landlord. Landlord shall have the right to remove, at Tenant's expense and
without notice, any sign installed or displayed in violation of this rule.
All approved signs or lettering on doors and walls shall be printed,
painted, affixed or inscribed at the expense of Tenant by a person chosen
by Landlord, using materials of Landlord's choice and in a style and format
approved by Landlord.
2. Tenant must use Landlord's blinds in all exterior and atrium window
offices. No awning shall be permitted on any part of the Premises. Tenant
shall not place anything against or near glass partitions or doors or
windows which may appear unsightly from outside the Premises.
3. Tenant shall not obstruct any sidewalks, halls, passages, exits, entrances,
elevators, escalators or stairways of the Building. The halls, passages,
exits, entrances, shopping malls, elevators, escalators and stairways are
not for the general public, and Landlord shall in all cases retain the
right to control and prevent access thereto of all persons whose presence
in the judgment of Landlord would be prejudicial to the safety, character,
reputation and interests of the Building and its tenants; provided that
nothing herein contained shall be construed to prevent such access to
persons with whom any tenant normally deals in the ordinary course of its
business, unless such persons are engaged in illegal activities. No tenant
and no employee or invitee of any tenant shall go upon the roof of the
Building.
4. The directory of the Building will be provided by Landlord and shall
consist exclusively of the display of the name and location of tenants
only; Landlord reserves the right to exclude any other names therefrom.
5. All cleaning and janitorial services for the Building and the Premises
shall be provided exclusively through Landlord, and except with the written
consent of Landlord, no person or persons other than those approved by
Landlord shall be employed by Tenant or permitted to enter the Building for
the purpose of cleaning the same. Landlord shall not in any way be
responsible to any Tenant for any loss of property on the Premises, however
occurring, or for any damage to any Tenant's property by the Janitor or any
other employee or any other person.
6. Landlord will furnish Tenant, free of charge, with two keys to each door
lock in the Premises. Landlord may make a reasonable charge for any
additional keys. Tenant shall not make or have made additional keys, and
Tenant shall not alter any lock or install a new additional lock or bolt on
any door of its Premises. Tenant, upon the termination of its tenancy,
shall deliver to Landlord
<PAGE>
the keys of all doors which have been furnished to Tenant, and in the event
of loss of any keys so furnished, shall pay Landlord therefor.
7. If Tenant requires telegraphic, telephonic, burglar alarm or similar
services, it shall first obtain, and comply with, Landlord's instructions
in their installation.
8. Any freight elevator shall be available for use by all tenants in the
Building, subject to such reasonable scheduling as Landlord in its
discretion shall deem appropriate. No equipment, materials, furniture,
packages, supplies, merchandise or other property will be received in the
Building or carried in the elevators except between such hours and in such
elevators as may be designated by Landlord.
9. Tenant shall not place a load upon any floor of the Premises which exceeds
the load per square foot which such floor was designed to carry and which
is allowed by law. Landlord shall have the right to prescribe the weight,
size and position of all equipment, materials, furniture or other property
brought into the Building. Heavy objects, if such objects are considered
necessary by Tenant, as determined by Landlord, shall stand on such
platforms as determined by Landlord to be necessary to properly distribute
the weight. Business machines and mechanical that may be transmitted to
the structure of the Building or to any space therein to such degree as to
be objectionable to Landlord or to any tenants in the Building, shall be
placed and maintained by Tenant, at Tenant's expense, on vibration
eliminators or other devices sufficient to eliminate noise or vibration.
The persons employed to move such equipment in or out of the Building must
be acceptable to Landlord. Landlord will not be responsible for loss of,
or damage to, any such equipment or other property from any cause, and all
damage done to the Building by maintaining or moving such equipment or
other property shall be repaired at the expense of Tenant.
10. Tenant shall not use or keep in the Premises any kerosene, gasoline or
inflammable or combustible fluid or material other than those limited
quantities necessary for the operation or maintenance of office equipment.
Tenant shall not use or permit to be used in the Premises any foul or
noxious gas or substance, or permit or allow the Premises to be occupied or
used in a manner offensive or objectionable to Landlord or other occupants
of the Building by reason of noise, odors or vibrations, nor shall Tenant
bring into or keep in or about the Premises any birds or animals.
11. Tenant shall not use any method of heating or air conditioning other than
supplied by Landlord.
12. Tenant shall not waste electricity, water on air conditioning and agrees to
cooperate fully with Landlord to assure the most effective operation of the
Building's heating, air conditioning and lighting to comply with any
governmental energy saving rules, laws or regulations of which Tenant has
actual notice, and shall refrain from attempting to adjust control. Tenant
shall keep corridor doors closed, and shall close window coverings at the
end of each business day.
13. Landlord reserves the right, exercisable without notice and without
liability to Tenant, to change the name and street address of the Building.
-2-
<PAGE>
14. Landlord reserves the right to exclude from the Building between the hours
of 8 p.m. and 7 a.m. the following day, or such other hours as may be
established from time to time by Landlord, and on Sundays and legal
holidays, any person unless that person is known to the person or employee
in charge of the Building and has a pass or is properly identified. Tenant
shall be responsible for all persons for whom it requests passes and shall
be liable to Landlord for all acts of such persons. Tenant shall pay the
cost of replacing any security cards provided by Landlord. Landlord shall
not be liable for damages for any error with regard to the admission to or
exclusion from the Building of any person, Landlord reserves the right to
prevent access to the Building in case of invasion, mob, riot, public
excitement or other commotion by closing the doors or by other appropriate
action.
15. Tenant shall close and lock the doors of its Premises and entirety shut off
all water faucets or other water apparatus, and electricity, gas or air
outlets before Tenant and its employees leave the Premises. Tenant shall
be responsible for any damage or injuries sustained by other tenants or
occupants of the Building or by Landlord for noncompliance with this rule.
16. Tenant shall not obtain for use on the Premises ice, drinking water, food,
beverage, towel or other similar services or accept barbering or
bootblacking services upon the Premises, except at such hours and under
such regulations as may be fixed by Landlord.
17. The toilet rooms, toilets, urinals, wash bowls and other apparatus shall
not be used for any purpose other than that for which they were constructed
and no foreign substance of any kind whatsoever shall be thrown therein.
The expense of any breakage, stoppage or damage resulting from the
violation of this rule shall be borne by the tenant who, or whose employees
or invitees, shall have caused it.
18. Tenant shall not sell, or permit the sale at retail, of newspapers,
magazines, periodicals, theater tickets or any other goods of merchandise
to the general public in or on the Premises. Tenant shall not make any
room-to-room solicitation of business from other tenants in the Building.
Tenant shall not use the Premises for any business or activity other than
that specifically provided for in Tenant's Lease.
19. Tenant shall not install any radio or television antenna, loudspeaker or
other device on the roof or exterior walls of the Building. Tenant shall
not interfere with radio or television broadcasting or reception from or in
the Building or elsewhere.
20. Tenant shall not mark, drive nails, screw or drill into the partitions,
woodwork or plaster or in any way deface the Premises or any part thereof,
except to install normal wall hangings. Landlord reserves the right to
direct electricians as to where and how telephone and telegraph wires are
to be introduced to the Premises. Tenant shall not cut or bore holes for
wires. Tenant shall not affix any floor covering to the floor of the
Premises in any manner except as approved by Landlord. Tenant shall repair
any damage resulting from noncompliance with this rule.
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<PAGE>
21. Tenant shall not install, maintain or operate upon the Premises any vending
machine without the written consent of Landlord.
22. Canvassing, soliciting and distribution of handbills or any other written
material, and peddling in the Building are prohibited, and each tenant
shall cooperate to prevent same.
23. Landlord reserves the right to exclude or expel from the Building any
person who, in Landlord's judgment, is intoxicated or under the influence
of liquor or drugs or who is in violation of any of the Rules and
Regulations of the Building.
24. Tenant shall store all its trash and garbage within its Premises. Tenant
shall not place in any trash box or receptacle any material which cannot be
disposed of in the ordinary and customary manner of trash and garbage
disposal. All garbage and refuse disposal shall be made in accordance with
directions issued from time to time by Landlord.
25. The Premises shall not be used for the storage of merchandise held for sale
to the general public, or for lodging or for manufacturing of any kind, nor
shall the Premises be used for any improper, immoral or objectionable
purpose. No cooking shall be done or permitted by any tenant on the
Premises, except that use by Tenant of Underwriters' Laboratory approved
equipment for brewing coffee, tea, hot chocolate and similar beverages
shall be permitted, and the use of microwave shall be permitted, provided
that such equipment and its use is in accordance with all applicable
federal, state, county and city laws, codes, ordinances, rules and
regulations.
26. Tenant shall not use in any space or in the public halls of the Building
any hand trucks except those equipped with rubber tires and side guards or
such other material handling equipment as Landlord may approve. Tenant
shall not bring any other vehicles of any kind into the Building.
27. Without the written consent of Landlord, Tenant shall not use the name of
the Building in connection with or in promoting or advertising the business
of Tenant except as Tenant's address.
28. Tenant shall comply with all safety, fire protection and evacuation
procedures and regulations established by Landlord or any governmental
agency.
29. Tenant assumes any and all responsibility for protecting its Premises from
theft, robbery and pilferage, which includes keeping doors locked and other
means of entry to the Premises closed.
30. The requirements of Tenant will be attended to only upon appropriate
application to the office of the Building by an authorized individual.
Employees of Landlord shall not perform any work or do anything outside of
their regular duties unless under special instructions from landlord, and
no employee of Landlord will admit any person (Tenant or otherwise) to any
office without specific instructions from Landlord.
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31. In the event Tenant fails to deliver to Landlord its keys to the Premises
upon termination of Tenant's right to possession under the Lease, or
Tenant's vacating of the Premises, the cost of replacing the locks and keys
shall be borne by Tenant.
32. Bicycles, motorbikes and motorcycles are prohibited within the Building and
must be keep in designated parking areas.
33. No pets or other animals of any type whatsoever are permitted in the
Building at any time.
34. Landlord may waive any one or more of these Rules and Regulations for the
benefit of Tenant or any other tenant, but no such waiver by Landlord shall
be construed as a waiver of such Rules and Regulations in favor of Tenant
or any other tenant, nor prevent Landlord from thereafter enforcing any
such Rules and Regulations against any or all of the tenants of the
Building.
35. These Rules and Regulations are in addition to, and shall not be construed
to in any way modify or amend, in whole or in part, the terms, covenants,
agreements and conditions of any lease of premises in the Building.
36. Landlord reserves the right to make such other and reasonable Rules and
Regulations as, in its judgment, may from time to time be needed for safety
and security, for care and cleanliness of the Building and for the
preservation of good order therein. Tenant agrees to abide by all such
Rules and Regulations hereinabove stated and any additional rules and
regulations which are adopted.
37. Tenant shall be responsible for the observance of all of the foregoing
rules by Tenant's employees, agents, clients, customers, invitees and
guests.
Initialed and Approved by Tenant:
/s/ CRG 2/12/96
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EXHIBIT D
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BUILDING SPECIFICATIONS
PIZZUTI HEATHROW
PROPOSED OFFICE BUILDING
1.00 PROPOSAL PARAMETERS
2.00 SITE WORK
3.00 CONCRETE
4.00 MASONRY (N.I.C.)
5.00 METALS
6.00 WOOD AND PLASTICS
7.00 THERMAL AND MOISTURE PROTECTION
8.00 DOORS, WINDOWS AND GLASS
9.00 FINISHES
10.00 SPECIALTIES
11.00 EQUIPMENT
12.00 FURNISHINGS
13.00 SPECIAL CONSTRUCTION (N.I.C.)
14.00 CONVEYING SYSTEMS
15.00 MECHANICAL
16.00 ELECTRICAL
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EXHIBIT D
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1.00 PROPOSAL PARAMETERS FOR 400 INTERNATIONAL PARKWAY
1.03 BUILDING LAYOUT
A. Site Planning
1. The building has been situated to maximize the use of the site
and provide maximum visibility from the entrance roads.
2. 403 employee parking spaces have been provided on grade for the
Heathrow site.
3. A loading dock area and 2 short term service vehicle spaces will
be provided.
B. Footprint
1. The total leasable square footage is 100,821 sq. ft. The gross
square footage is 104,497.
2. The building has allowed for maximum efficiency in the layout.
Bay spacing is 30'-0".
2.00 SITE WORK
2.01 EARTHWORK
A. The proposed Heathrow site does not require any significant
import/export of earth material and is therefore balanced. The site
should not require any significant dewatering.
B. The excavation, stripping and stockpiling of topsoil and compaction
of soils will be performed in accordance with standard building
codes.
C. A standard spread footing foundation system has been included.
2.02 SITE DRAINAGE AND UTILITIES
A. The storm drainage system is a sheet drain system, which will flow
to several catch basins located in the drive lanes and then will be
distributed to the retention pond located to the northwest of the
property.
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EXHIBIT D
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2.03 PAVING AND SURFACING
A. The vehicular drives and parking surfaces were priced with 1"
asphalt in parking stalls and 2" asphalt in roadway areas. Included
is 6" header curb. Concrete shall be 3,000 PSI.
B. A 5' wide sidewalk has been included at appropriate walkpaths around
the building as required for egress. Concrete shall be 3,000 PSI
with non-slip broom finishes.
2.04 LANDSCAPING & IRRIGATION
A. The Pizzuti team has included landscaping and irrigation system.
3.00 CONCRETE
3.01 BUILDING FRAME
A. The Pizzuti team has included structural concrete for the building
frame. Concrete shall be 4000 psi. The building shall be supported
by a shallow footing foundation system.
B. We have included a 4" slab-on-grade with 6 x 6 10/10 wire mesh.
3.02 ARCHITECTURAL PRECAST
A. The Pizzuti team has included architectural precast concrete panels
for the exterior skin of the proposed building. The panels will have
returns at the curtainwall and punched window openings.
B. The proposal included 6" thick panels with 3/4" deep reveals. The
face mix will provide a color to compliment the Heathrow site.
4.00 MASONRY (N.I.C.)
5.00 METALS
5.01 MISCELLANEOUS IRON
A. Miscellaneous iron supports necessary for toilet partitions, precast
panels etc. have been included in this proposal.
B. Decorative handrails have been included at the second floor balcony
as well as at the exterior balconies.
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EXHIBIT D
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6.00 WOOD AND PLASTICS
6.01 CARPENTRY
Carpentry Materials: All carpentry materials included are appropriate for
the application within industry guidelines and common Class "A" office
criteria.
6.02 ARCHITECTURAL WOODWORK
A. General Woodwork Requirements:
1. General Standard Comply with applicable Architectural Woodwork
Quality Standards" by AWI. "Premium Grade".
2. Interior Woodwork:
a. Comply with AWI 300, 600, 700 and 800 series standards, as
applicable to standing and running trim, shelving,
ornamental and miscellaneous items.
b. Backprime woodwork which is to be painted, on surfaces
concealed after installation, with oil-base wood primer
paint.
3. The Pizzuti team has included granite vanity tops at each men's
and women's public restroom.
4. Hardware; Cabinet and Miscellaneous: Provide hardware as
required for architectural woodwork.
7.00 THERMAL AND MOISTURE PROTECTION
7.01 WATERPROOFING AND DAMPROOFING
A. Damproofing and Moisture Barriers:
The proposal contains a water repellant coating applied to the
architectural precast.
7.02 THERMAL INSULATION
A. General Building Insulation:
1. Extruded Polystyrene Insulation Board: Provide Styrofoam or
equal.
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EXHIBIT D
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2. Mineral Fiber Insulation Blanket: 1.5 lb. minimum density, R11
minimum, flexible blanket or semi-rigid sheet.
a) Tape joints, ruptures and thermal edges of vapor-barrier
faces with adhesive vapor-barrier type, to form a
completed sealed vapor barrier.
3. Building insulation to be provided to meet requirements of the
1991 Florida energy code.
B. Roof Insulation:
1. An average R value of 20 will be provided which will be
achieved with light weight insulating concrete.
7.03 ROOFING
A. Built-Up Roofing System:
1. Guarantee: Manufacturers standard 10-year guarantee of water
tightness.
2. A 4 ply Build-Up roof has been included in the proposal.
Applied per manufacturer recommendations to comply with local
codes and wind uplift requirements to include:
a) Flashing: Metal flashing as provided by roofing
manufacturer.
b) R-20 insulating light weight concrete.
B. Metal Roofing
1. A standing seam metal roof has been included at the rotunda.
8.00 DOORS, WINDOWS AND GLASS
8.02 ALUMINUM WINDOW WALL
A. The Pizzuti team has provided a punched window and curtainwall
system with a 2-coat (non-XL) paint finish. The system is composed
of 1/4" tinted, reflective glass at all glazing systems with 1/4"
spandrel glass, as required.
B. The glazing and installation of the window wall system will be
completed in accordance with the standard building codes.
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EXHIBIT D
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8.03 HOLLOW METAL WORK
A. Standards: Comply with the requirements of Steel Door Institute
"Recommended Specification for Standard Steel Doors and Frames"
(SDI-1000).
B. Manufacturer: A recognized producer of hollow metal work complying
with the requirements probable manufacturers include CERCO Corp.,
Republic Steel and Steelcraft.
C. Fire-Rated Assemblies: Units that display appropriate UL or FM
labels for fire-rating indicated.
D. Hollow metal units will be prepared to receive mortised and
concealed finish hardware, including cutouts, reinforcing, drilling
and tapping, complying with ANSI A 115 "Specifications for Door and
Frame Preparation for Hardware".
E. Shop paint exposed surfaces to hollow metal units, including
galvanized surfaces, using manufacturer's standard baked-on rust
inhibitive primer.
F. Doors: Provide 18 gauge, flush type 1-3/4" doors.
G. Frames:
1) Provide hollow metal frames for doors, transoms, sidelights,
borrowed lights, and other openings as indicated.
2) Prepare frames to receive 2 silencers on strike jambs of
single-swing frames and on heads of double-swing frames.
3) Interior door frames shall be 18 gauge hollow metal with
corners welded, mitered and ground smooth.
4) Exterior door frames shall be hollow metal, 16 gauge welded,
mitered and ground smooth.
8.04 WOOD DOORS
A. The Pizzuti team has included plain sliced, red oak 5-ply wood doors
and associated hardware for the project as follows:
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EXHIBIT D
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8.05 ENTRANCE DOORS
A. Standards: "Entrance Manual" by NAAMM and other standards and
recommendation by NAAMM, AAMA, AA and NBHA apply to the work, except
as otherwise indicated.
B. The lobby entry will be provided with entrance doors.
8.06 BUILDERS HARDWARE
General Hardware Requirements
A. The tenant doors will be furnished with latch sets only.
B. Finished Hardware:
Provide closers, kick and push plates where required by code.
9.00 FINISHES
9.01 GYPSUM DRYWALL
A. Interior Partitions: Minimum 5/8" drywall both sides on metal studs.
Partitions shall extend from floor to finish ceiling except fire
rated assemblies which shall extend to underside of roof. Partitions
on all sides of public restrooms shall extend to underside of
ceiling above.
B. Sound attenuation blankets: Semi-rigid mineral fiber without
membrane.
C. All drywall on the tenant floors will be finished ready for paint.
Painting of tenant floor drywall will be performed under tenant
buildout.
9.02 ACOUSTICAL CEILINGS
A. Acoustical ceiling grid and tile will be considered in base
building.
B. Materials
1) Lay-in Acoustical Panels: Ceilings shall be 24" x 24" lay in
mineral fiber tile, regular edge, "Cirrus" on exposed regressed
tee suspension system as manufactured by Armstrong or approved
equal.
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EXHIBIT D
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2) Provide one layer of three pound density batt type insulation,
2' each side of partitions.
3) Clear Ceiling Height: 9'-0" A.F.F. (concrete).
4) Suspension System: As required to support acoustical units,
fixtures and other components.
9.03 TILE WORK
A. Ceramic tile is to be installed at all wet walls (full height) and
floors in public restrooms.
B. A segmented granite floor is to be installed at entrance lobby.
9.04 RESILIENT FLOORING (To Be Provided In Tenant Buildout)
A. The building shall have 12" x 12" VCT tile equal to Armstrong
Stonetex. The VCT tile was included at paper storage, lunch/vending,
loading area, storage & trash areas.
B. Rubber Base shall be 2 1/2" high, 1/8" gauge, equal to Roppe rubber
base.
9.05 PAINTING
A. Painting and finishing of interior and exterior items and surfaces.
1. All exposed surfaces are to be painted. A total dry film
thickness of not less than 2.5 mil. for the entire coating
system of prime and finish coat for 2-coat work will be
provided.
2. Walls to be painted are to receive a flat latex finish coating
system.
3. Trim to be painted is to receive a semigloss finish.
4. Floor sealer shall be applied to mechanical rooms.
9.07 CARPETING (To be provided in tenant buildout)
A. Carpet has been included in the first floor exit corridors.
10.00 SPECIALTIES
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EXHIBIT D
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10.01 LAMINATED PLASTIC TOILET PARTITIONS
A. Toilet partitions shall be laminated plastic ceiling hung-type by
Mid-South Manufacturing Company or equal.
B. Hardware and Accessories: Manufacturer's standard, heavy duty
operating hardware and accessories, not-ferrous cast alloy with
chrome finish.
C. The toilet partitions are to be installed with toilet accessories at
all restrooms.
10.02 TOILET ACCESSORIES
A. Manufacturer: Provide toilet accessories as manufactured by Bobrick
Corporation.
B. Materials: Furnish units fabricated of materials and finished as
follows:
1. Stainless Steel, AISI Type 302/304.
C. Accessory Schedule:
1. For each lavatory-undercounter soap dispenser.
2. In each toilet stall - dual toilet tissue dispenser.
3. In each women's toilet - recessed mounted feminine napkin
disposal.
4. In each women's restroom - recessed feminine napkin-tampon
dispenser.
5. Above each lavatory counter - 3/8" polished plate glass full
length wall mounted mirror.
6. In each public restroom - combination towel dispense and waster
receptacle.
10.04 FIRE EXTINGUISHER CABINETS
A. Cabinets: Fire extinguisher cabinets as required by local fire
department regulations.
10.05 IDENTIFYING DEVICES
A. Site Signage: Monument sign at site entry. Site directional signage
as required to insure proper traffic distribution.
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EXHIBIT D
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B. Building Signage: Lobby Directory.
C. Identifying devices will be provided under the tenant buildout.
11.00 EQUIPMENT
11.01 LOADING DOCK EQUIPMENT
A. Scissor Lift: Manufacturer's standard units.
1. A on-grade scissor lift has been provided for a means to
load/unload delivery trucks.
12.00 FURNISHING
12.01 WINDOW TREATMENTS
A. Horizontal Blinds:
1. Manufacturer's standard vertical lifting and horizontal tilting
unit, Provide 1" narrow slats.
2. Blinds to be Levelor or equal.
B. Blinds to be installed at all tenant windows.
14.00 CONVEYING SYSTEMS
14.01 PASSENGER ELEVATORS
A. General: Two (2) 3,500 lb. capacity hydraulic passenger elevators,
equal to a Dover Seville 35, shall be provided.
B. Included are the following features for the passenger elevators:
a. Speed: 125 FPM
b. Car Platform: 7'-0" x 6'3"
c. Door Size: 3'-6" x 7'-0" (center opening)
d. Hoistway Entrance: Baked enamel
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EXHIBIT D
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C. Signals:
a. Car Position indicator in car (2)
b. Corridor car direction indicator with gon hall lantern each
door.
c. Car call registered lights.
d. Corridor call registered lights (2) risers.
e. Two operator swing front return panels inside each car.
f. Alarm button in each car.
g. Emergency stop switch in each car.
h. Locked panel for independent operation.
14.02 SERVICE ELEVATOR
A. General: Service elevator to open to a service vestible shielded
from main circulation. One (1) 4,500 lb. capacity hydraulic service
elevator, equal to a Dover Continental 45, to be provided.
B. Included are the following features for the service elevator:
<TABLE>
<CAPTION>
<S> <C> <C>
a. Speed: 125 FPM
b. Car Platform: 6'-0" x 8'-9"
c. Door Size: 4'-0" x 7'-0" (2 speed/side opening)
d. Hoistway Entrance: Baked enamel
</TABLE>
C. Elevator Car:
1. Code: The elevator car shall be in strict conformity with the
regulation of the ANSI Code and shall have Fire Safety
Controls.
2. Applied Panels: Removable wall panels.
3. Floor: Bolted aluminum diamond-plate floor.
15.00 MECHANICAL
15.01 MECHANICAL GENERAL
A. Regulations and Requirements:
1. All work will comply with all applicable local, state and
federal regulations.
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EXHIBIT D
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2. Work shall comply with the appropriate requirements of the
following standards: ASHRAE, NEC (NFPA 70), Life Safety (NFPA
101), handicapped Code (ANSI A1171), Installation of Air
Conditioning & Ventilating Systems (NFPA 90A) and 1985 Edition
of the SMACNA HVAC Duct Construction Standards and the 1982
Edition of the SMACNA Testing, Adjusting and Balancing of HVAC
Systems.
3. All work shall comply with the building codes, mechanical
codes, and plumbing codes currently in effect, as well as with
local amendments to and interpretation of these codes.
15.02 HVAC
A. Mechanical System Requirements
1. The mechanical system shall meet and comply with all applicable
codes and standards.
a. Included in the proposal is an air-cooled water chilled
HVAC system for the project. The two (2) 150 ton air-
cooled water chillers will be located on the roof. The
system includes building shell air distribution through
main trunk line feed as well as perimeter slot diffusers.
2. Heating, Ventilating and Air Conditioning Systems
* Two (2) 150 ton air cooled chillers located on the roof.
* Two (2) chilled water pumps.
* Chilled water distribution piping to air handlers.
* One (1) air handler per floor and one (1) 100% outside air
handler in penthouse.
* Galvanized duct system for supply air toilet exhaust,
outside air, and atrium exhaust.
* Two (2) atrium exhaust fans with roof curbs.
* Two (2) toilet exhaust fans with roof curbs.
* Air distribution in core area only.
----
* Direct digital control system with pneumatic operators.
* Water treatment of closed chilled water loop.
* Two (2) outside air intake louvers.
* Storm drainage system for building consisting of 6 roof
drains, 6 vertical rain leaders to 5'-0" outside of
building.
* Typical core restrooms on four floors.
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EXHIBIT D
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a. The system shall provide separate control zones for every
1200-1500 square feet (approximate average size; some
zones will be smaller). Exterior zones shall be capable of
providing heating.
b. All ductwork will be constructed of sheetmetal per SMACNA
standards and shall be insulated.
B. Testing & Balancing
1. An independent test and balance agency will perform a complete
test, balance and adjustment of the new and existing HVAC
systems. Test and balance company shall be AABC accredited or
NEB.
2. A complete test and balance report shall be submitted to the
tenant's representative to review.
3. Test and balance will have a one (1) year warranty.
C. The following HVAC equipment and equipment shall be furnished,
fabricated and installed in compliance with the standard building
codes.
a. Ductwork
b. Duct Insulation
c. Air Distribution Devices (P.I.U. and V.A.V. Boxes)
d. HVAC Piping
e. Pipe Insulation
D. In general, the system shall be installed complete through the
terminus of VAV boxes within the base building, with run-outs to be
provided under tenant buildout.
15.03 PLUMBING
A. Piping
1. Complete systems of cold and hot water piping and accessories
so that all fixtures and water-using equipment in the building
will be furnished with a water supply.
2. All domestic water piping shall be type "L" hard drawn copper.
Fittings shall be wrought, with 95/5 non-lead-bearing solder
joints.
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EXHIBIT D
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3. All sanitary and vent piping above grade shall be hubless cast
iron with joints of neoprene sleeves and stainless steel cover
and bands, or type DWV copper with 95/5 non-lead bearing solder
joints.
4. All sanitary and vent piping below grade shall be DWV PVC with
solvent weld joints.
B. Piping Insulation
1. Domestic Water Piping Insulation: After the system has been
tested and accepted, all new hot piping whether in wall chases
or above the ceiling (except piping run exposed to fixtures)
shall be insulated with glass fiber preformed pipe insulation.
2. Horizontal roof drain piping shall be insulated with 1 1/2"
blanket fiberglass insulation.
C. Tests and Inspections
1. All piping shall be tested in accordance with the standard
building codes.
D. Plumbing Fixtures
1. All fixture colors shall be white.
2. Acceptable Manufacturers: Plumbing fixtures by American
Standard, Kohler, Crane or Eijer. Fixture carriers by Ancon,
Josam, Smith, Wade or Zurn. Fixture supplies and tailpieces and
p-traps by McGuire or Brasscraft. Flush valves by Sloan or
Zurn.
15.04 FIRE PROTECTION
A. System Requirements
1. Sprinkler Systems shall comply with requirements of the
Standard Codes and NFPA 13, including all local amendments and
interpretations.
2. General office areas be sprinklered in accordance with NFPA 13
requirements for Light Hazard Occupancies in office areas and
Ordinary Hazard Group 2 Occupancies for storage areas. Heads
shall be turned up in general office areas.
3. A 50 hp electric fire pump has been included.
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EXHIBIT D
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B. Design Requirements
1. Sprinkler contractor shall perform water flow test to determine
adequate water flow for hydraulically sizing fire lines.
2. All piping is to be hydraulically sized for the available water
supply based on sprinkler demands.
C. All materials and installation shall be in compliance with the
standard building codes.
16.0 ELECTRICAL
Pizzuti proposes to provide material and labor for the electrical
installation as required by the design criteria. All work shall comply with
applicable electrical codes per NFPA 70. (National Electrical Code) and local
electrical inspection authorities within the guidelines of the Florida Statutes
(Chapter 471) and the Florida Administrative Code (Chapter 21-H).
SCOPE OF WORK:
The work covered by this Division consists of providing all equipment,
material and labors required for a complete installation of the Electrical Work
inclusive of, but not limited to, the following items:
16010 Basic Electrical Requirements
16050 Basic Electrical Materials and Methods
16100 Raceways, Boxes and Enclosures
16120 Wires and Cables
16143 Wiring Devices
16170 Circuit and Motor Disconnects
16190 Supporting Devices
16195 Electrical Identification
16420 Service Entrance
16450 Transformers
16470 Panelboards
16478 Surge Protection
16481 Motor Controllers
16500 Lighting Fixtures
16670 Lightning Protection System
16721 Fire Alarm System
16760 Telecommunications System
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EXHIBIT D
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BASIC ELECTRICAL REQUIREMENTS
1. Submittals will be provided for all major equipment and materials to
ensure compliance with specifications.
2. Electrical installation to be coordinated with respect to other
trades.
3. Electrical permit and inspection costs will be provided for the
County of Seminole.
4. Project clean-up of electrical debris resulting from Division 16
installation as required to a designated on-site location.
5. Coordination with Florida Power Corporation for project service
requirements.
6. Maintenance manuals (2) will be provided for manufactured systems at
time of project completion.
7. One (1) year warranty for labor and materials thirty (30) days
warranty for lamps.
BASIC ELECTRICAL MATERIALS AND METHODS
1. All work to be performed in a neat and professional manner in
compliance with the project specifications.
2. Conduit penetrations through fire rated walls and partitions to be
sealed with 3M #CP 25 caulk or similar method acceptable to local
jurisdiction having authority.
3. Standard electrical commodity items such as outlet and junction
boxes, pull boxes, conduit, devices, etc. will be provided by
various manufacturers as needed based upon availability and demand
at the time of order placement. All materials provided to this
project will be U.L. listed and furnished to specification
requirements.
RACEWAYS, BOXES AND ENCLOSURES
1. EMT to be 1/2" minimum with die-cast, set-screw type fittings.
2. PVC conduit to be 3/4" minimum schedule 40 installed below grade in
concrete slabs. Maximum size conduit to be installed in the slab to
be limited to 1" trade size. Schedule 80 PVC to be installed in
exposed locations where subject to damage and outdoor locations
where exposed to weather conditions.
3. RMC conduit to be provided for installation to the fuel tanks per
NEC requirements.
4. Flexible metallic conduit to be provided as 3/8" trade size for
termination to lighting fixtures and 1/2" minimum for equipment
connections. Liquid tight flexible metallic conduit will be provided
for wet locations.
5. ENT, electrical nonmetallic tubing, will be provided for
installation in the Office Building for branch power and lighting
circuits.
6. Sheet metal enclosures will be provided as required or necessary.
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EXHIBIT D
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WIRES AND CABLES
1. All services and feeder circuits 100 amps and greater to be provided
as aluminum conductors sized #1 AWG and larger in compliance with
the Florida Electrical Code, Notice "K". All other circuit wiring to
be provided as 98% copper.
2. Conductor insulation to be THHN/THWN rated at 600 volt.
CIRCUIT AND MOTOR DISCONNECTS
1. Disconnect switches to be provided as General Duty, not-fused type
with voltage ratings and NEMA classification as required to serve
the equipment load.
2. Fusible disconnects will be provided as Heavy Duty type with RK5
rejection type fusing.
SUPPORTING DEVICES
1. Electrical items to be supported from the building structure in
compliance with NEC requirements for a secure installation by
utilizing power actuated supporting devices, expansion anchors,
straps and/or other devices specifically designed for the task.
2. The wrap support to be used for loose cable.
3. Support for installation of raceways under accessible floor panels
to be provided by the flooring contractor or others.
ELECTRICAL IDENTIFICATION
1. Feeder circuits will be identified at the source and termination
points by self-adhesive marking tape.
2. Engraved, plastic laminated labels will be provided for
switchboards, equipment panels, control panels, disconnect switches,
contactors, transformers, etc.
3. Systems outlet boxes installed in accessible areas will be color
coded by use of permanent markers or spray paint.
4. Informational/Caution signs for entries into electrical equipment
rooms.
5. Line marker to be installed for underground service conduit
installations.
SERVICE ENTRANCE
1. Main distribution to be 2,500 A, 480/277v, 3 phase, 4W.
2. All bussing to be 98% copper.
-17-
<PAGE>
EXHIBIT D
---------
TRANSFORMERS
1. Transformers will be provided at standard manufacturers ratings for
rate of rise and top configurations. No special conditions have been
applied to these units such as shielding or "K" factor ratings.
2. Where possible, all primary and secondary conduit terminations will
be stubbed up into the bottom of the transformer rather than
flexible connections on the outside of the enclosure.
PANEL BOARDS
1. All 208v panelboards to be based on 225 A fully bussed 42 circuit
panels.
2. All 480v panelboards shown as serving transformers for 208v loads
are to be provided as 400 A fully bussed 42 circuit panels. Standard
KAIC ratings will be provided at 42KAIC for 480 volt and 10KAIC for
208 volt panels pending confirmation from the local Utility.
SURGE PROTECTION
1. Transient Voltage Surge Suppression (TVSS) will be provided for each
main service over current protective device.
MOTOR CONTROLLERS
1. All motor starters, variable frequency drives and other controlling
devices that may be required for equipment being provided by others
will be furnished and installed by the respective trade contractor.
LIGHTING FIXTURES
1. Parabolic 2 x 4 fixtures at the rate of (1) per 80 SF.
2. Exit lighting provided as required for safe egress and base of 10%
of the total building fixtures to be provided with emergency
ballasts.
3. Strip lighting provide for closet and mechanical areas.
4. Fixtures for tenant areas to be job pallotized and placed on floor
for future installation by others.
5. All fixtures to be considered as pre-lamped and pre-whipped with
energy saving ballasts and type T-8 lamps.
SITE LIGHTING
1. Average maintained illumination level of one (1) foot candle for
site area.
-18-
<PAGE>
EXHIBIT D
---------
PACKAGED ENGINE GENERATOR SYSTEM
1. One (1) 100 kw Emergency Generator unit.
2. Provide weatherproof enclosure.
3. Remote annunciator provided with monitor located in the area of the
main lobby.
4. Provide critical silencer.
5. Genset mounted control panel.
6. Genset mounted main disconnect circuit breaker.
7. 200 gallon double wall skid base mounted fuel tank provided.
8. Pending Utility verification, all interrupt ratings to be based upon
standard 42KAIC for 480 volt equipment.
LIGHTNING PROTECTION SYSTEM
1. Lightning Protection System per NFPA78 and UL96A for a Master Label
system.
FIRE ALARM SYSTEM
1. Provide fire alarm system for a four story shell building per
federal ADA, NFPA 72 and local requirements with provisions for
future tenant occupancy.
2. Contacts provided for outside monitoring services provided by
others.
TELECOMMUNICATIONS SYSTEM
1. An empty raceway system to plenum areas will be provided for
Telephone and Communications systems. All systems components,
devices, cabling and terminations to be furnished and installed by
others.
-19-
<PAGE>
EXHIBIT E
---------
CONSTRUCTION MILESTONE DATES
----------------------------
The following dates are those Construction Milestone Dates referred to in (S)9
of the Lease, with respect to the preparation, submission and approval of the
preliminary specifications and the Final Plans:
. Tenant's delivery to Landlord of its preliminary requirements for the
Improvements - thirty days from date of lease execution.
. Tenant's approval of the preliminary specifications and floor plans -
April 1, 1996. (assumes Landlord's delivery of the same to Tenant by
March 18, 1996).
. Tenant's approval of the Final Plans for Improvements - May 3, 1996.
(assumes Landlord's delivery of the same to Tenant on or before April
19, 1996).
. Tenant's selection and approval of all interior finishes (carpets,
wallcoverings, etc.) - May 3, 1996.
Initialed and Approved by Tenant:
/s/ CRG 2/12/96
--------------------------------------------
<PAGE>
EXHIBIT F
---------
FORM OF SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT
--------------------------------------------------------------
Initialed and Approved by Tenant:
--------------------------------------------
<PAGE>
EXHIBIT F
---------
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
THIS AGREEMENT is made as of this _____day of _______________, 1996,
between _________________________ ("Tenant"); and FIRST UNION NATIONAL BANK OF
NORTH CAROLINA, a national banking association ("Lender").
W I T N E S S E T H:
--------------------
WHEREAS, Tenant is the lessee under the lease (the "Lease") dated as of
_________________, as amended, covering approximately _____________ square feet
of space located in________________________________________________________ (the
"Demised Premises") and more particularly described in the Lease; and
WHEREAS, Lender has made or will make a loan to
_____________________________________________________________, a North Carolina
__________________________, the owner of said _________________________
("Landlord"), in the principal amount of up to $_______________ (the "Loan"), as
evidenced by notes in said principal amount (the "Note") and secured by a Deed
of Trust and Security Agreement and an Assignment of Rents, Leases and Profits
on the premises described on Exhibit A attached hereto and incorporated herein
---------
by reference (the "Property") (collectively, the "Security Documents"); and
WHEREAS, Lender is willing to agree that Tenant's possession of the Demised
Premises shall not be disturbed as a result of a foreclosure of the Security
Documents or a transfer in lieu of foreclosure, so long as Tenant is not in
default under the Lease and provided Tenant subordinates the Lease to the lien
of the Security Documents and attorn to the purchaser at the foreclosure and
recognizes said purchaser or transferee as lessor under the Lease.
NOW, THEREFORE, for and in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Lender and Tenant do hereby mutually covenant and
agree as follows:
3. SUBORDINATION. Tenant hereby subordinates the Lease, all extensions,
-------------
modifications and renewals thereof, and all Tenant's rights and interests
thereunder, to the Security Documents and the Lien thereof, and to all
modifications, renewals and extensions of same, to the extent of all advances
heretofore or hereafter made to Landlord secured by the Security Documents.
4. NON-DISTURBANCE AND ATTORNMENT. Provided Tenant complies with the
------------------------------
Agreement and is not in default (beyond any period of time given Tenant to cure)
as of the date Lender commences foreclosure proceedings or accepts a deed in
lieu of foreclosure, or at time thereafter, then no default under the Security
Documents, as modified, extended, increased, spread or consolidated and no
<PAGE>
proceeding to foreclose the same or other acquisition of the Demised Premises
(whether the deed in lieu of foreclosure or otherwise) by Lender or other third
party will disturb Tenant's possession. Any purchaser at foreclosure and their
successors and Lender will recognize the Lease in it's entirety, including,
without limitation, all of Tenant's purchase and renewal options hereunder.
Notwithstanding any such foreclosure or other acquisition of the Demised
Premises (whether by deed in lieu of foreclosure or otherwise) by Lender or any
third party, Tenant shall attorn to Lender or such third party, and the Lease
will be recognized as a direct lease from Lender or any other party acquiring
the Demised Premises upon the foreclosure sale or other such acquisition, except
that Lender, or any subsequent owner, shall not (a) be liable for any previous
act or omission of Landlord under the Lease, (b) be subject to any offset, claim
or defense which shall have accrued against Landlord, (c) have any obligation
with respect to any security deposited under the Lease unless such security has
been physically delivered to Lender, or (d) be bound by any previous
modification of the Lease or by any previous prepayment of rent for a period
greater than one (1) month In advance of its due date under the Lease, unless
such modification or prepayment shall have been expressly approved in writing by
Lender. Lender hereby expressly recognizes and agrees to be bound by all
renewal and purchase options contained in the Lease.
5. FURTHER ASSURANCES. Tenant will, upon request by Lender or any
------------------
subsequent owner, execute a written agreement in the form of this Agreement in
which Tenant will attorn to Lender or any such subsequent owner and will affirm
Tenant's obligations under the Lease and agree to pay all rentals and charges
then due or to become due as they become due to Lender or such subsequent owner;
provided that such subsequent owner recognizes Tenant's interest under the Lease
and agrees not to disturb Tenant's possession of the Demised Premises.
6. NOTICES TO LANDLORD. From and after the date hereof, Tenant shall
-------------------
send to Lender a copy of any notice or statement of default under the Lease or
of intent to assign or sublet any portion of the Demised Premises at the same
time such notice or statement is sent to Landlord under the Lease.
7. TERMINATION OF LEASE. Tenant will not terminate, nor seek to
--------------------
terminate the Lease by reason of a default under the Lease, or exercise any
right under the Lease to make deductions from or reduction in rental payments,
until Tenant shall have given written notice of such default to Lender as
hereinafter provided. Tenant will allow Lender thirty (30) days from its
receipt of said notice within which Lender shall have the right, but shall not
be obligated, to remedy such act, omission or other default and Tenant will
accept such performance by Lender; provided, however, if the act, omission or
-------- -------
other default cannot with due diligence be remedied within such thirty (30) day
period, then lender shall have a reasonable time in which to remedy the same
provided Lender proceeds with due diligence to complete the remedy thereof.
Notwithstanding the foregoing, Tenant shall have the right without prior
notice to Lender to make repairs if Tenant determines in good faith that a bona
fide emergency precludes the giving of such notice. In the event of such an
emergency, Tenant may present to Landlord a demand for reimbursement to the
extent permitted under the Lease, but Tenant will not make deductions from or
reductions in rental to recoup such expenses until Tenant shall give Lender
notice of such repairs and such demand and a thirty (30)day period to cause such
reimbursement to be made.
-2-
<PAGE>
8. NO IMPAIRMENT OF SECURITY DOCUMENTS. Nothing contained in this
-----------------------------------
Agreement shall in any way impair or affect the lien created by the Security
Documents, except as specifically set forth herein.
9. WAIVERS TO BE IN WRITING. No modification, amendment, waiver or
------------------------
release of any provision of this Agreement or of any right, obligation, claim or
cause of action arising hereunder shall be valid or binding for any purpose
whatsoever, unless in writing and duly executed by the party against whom the
same is sought to be asserted.
10. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
----------------------
the parties hereto, their successors and assigns; provided; however, that in the
event of the assignment or transfer of the Interest of Lender, all obligations
and liabilities of Lender under this Agreement shall terminate, and thereupon
all such obligations and liabilities shall be the responsibility of the party to
whom Lender's interest is assigned or transferred.
11. NOTICE. Notice to Lender under the Lease or this Agreement shall be
------
sent to Lender at the following address, or such other address as Lender shall
designate to the Tenant in writing:
First Union National Bank of North Carolina
301 South Tryon Street
Charlotte, North Carolina 28288-0146
Attention:__________________________
12. GOVERNING LAW. This Agreement shall for all purposes be governed by
-------------
and construed in accordance with the laws of the State of North Carolina.
13. WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH
--------------------
OF THE UNDERSIGNED HEREBY IRREVOCABLY WAIVES ITS RIGHTS TO A JURY TRIAL, WITH
RESPECT TO ANY ACTION, CLAIM OR OTHER PROCEEDING, ARISING OUT OF ANY DISPUTE IN
CONNECTION WITH THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER, OR THE
PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. THIS WAIVER IS A MATERIAL
INDUCEMENT TO LENDER IN AGREEING TO THE TERMS OF THIS AGREEMENT.
-3-
<PAGE>
IN WITNESS WHEREOF, Tenant and Lender have respectively signed and sealed
this Agreement of the day and year first above written.
TENANT:
Attest:
-----------------------------------------
By:
- ---------------------------------- --------------------------------------
Secretary Title:
-----------------------------------
LENDER:
ATTEST: FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
By:
- ---------------------------------- --------------------------------------
Secretary Title:
-----------------------------------
-4-
<PAGE>
STATE OF ____________________________
COUNTY OF____________________________
This _____ day of _____________, 1995 personally came before me
______________________, who, being by me duly sworn, says that he is
_____________________ of _______________________, that the seal affixed to the
foregoing instrument in writing is the corporate seal of said Corporation, that
said writing was signed and sealed by him in behalf of said Corporation, by its
authority duly given, and that he or she acknowledged said writing to be the act
and deed of said Corporation.
----------------------------------
NOTARY PUBLIC
My commission expires:____________
STATE OF ____________________________
COUNTY OF____________________________
This _____ day of ________________, personally came before me
______________________, who, being by me duly sworn, says that he is
_____________________ of FIRST UNION NATIONAL BANK OF NORTH CAROLINA and that
the seal affixed to the foregoing instrument in writing is the seal of said bank
and said writing was signed and sealed by him in behalf of said bank by its
authority duly given, and that he or she acknowledged the said writing to be the
act and deed of said bank.
WITNESS my hand and notarial seal.
----------------------------------
NOTARY PUBLIC
My commission expires:____________
-5-
<PAGE>
EXHIBIT G
---------
AGENCY DISCLOSURE STATEMENT
---------------------------
The following are the only real estate agents and brokers involved in the
leasing transition between Landlord and Tenant:
Pizzuti Realty Inc. - Representative of Landlord
Commission to be paid by Landlord.
Commercial First Properties - Representative of Tenant
Commission to be paid by Landlord
Initiated and Approved by Tenant:
/s/ CRG 2/12/96
--------------------------------
<PAGE>
EXHIBIT H
---------
RADON NOTICE
------------
Notification pursuant to Florida statute 404.056(8):
RADON GAS: "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."
Initiated and Approved by Tenant:
/s/ CRG 2/12/96
--------------------------------
<PAGE>
EXHIBIT I
---------
SIGNAGE SPECIFICATIONS
----------------------
To be developed by parties as part of development of preliminary
specifications for Tenant's Improvements to Leased Premises.
Initiated and Approved by Tenant:
/s/ CRG 2/12/96
--------------------------------
<PAGE>
EXHIBIT J
---------
ARTICLE B
---------
PIZZUTI CLEANING SPECIFICATIONS FOR JANITORIAL SERVICE
WORK TO BE PERFORMED DAILY
- --------------------------
1. Common Corridor Area
(a) Spot clean smudges, marks, etc. from vinyl wall covers
(b) Clean, disinfect and polish all drinking fountains
(c) Wipe down with a damp cloth all elevator doors
(d) Empty, clean and polish all ashtrays.
(e) Vacuum carpets
(f) Hand spot clean carpet as needed.
(g) Clean cove base
(h) Wipe down all handrails, ledges, etc.
2. Elevators
(a) Vacuum carpets
(b) Clean and polish (if needed) all Inside surfaces including cab
ceilings
(c) Clean all door tracks
(d) Clear debris from all phone boxes
3. Restrooms
(a) Clean and polish all metal surfaces
(b) Clean and polish all mirrors
(c) Empty and clean all trash containers
(d) Clean and disinfect all sinks, commodes and urinals
(e) Empty and disinfect all sanitary napkin waste containers
(f) Mop and clean floors with germicidal solution
(g) Wipe down toilet partitions
(h) Clean and fill soap dispensers
(i) Fill all paper towel and tissue dispenses
4. Tenant Office Space
(a) Dust window ledges
(b) Remove all trash
-1-
<PAGE>
(c) Replace plastic trash liners as needed
(d) Dust all furniture
(e) Vacuum carpet
(f) Clean all glass tops
(g) Clean and disinfect telephone receiver
(h) Spot clean carpets
(i) Spot clean doors
(j) Spot clean all vinyl covers and around light switches
(k) Clean all light lenses as needed
(l) Turn off all lights and lock corridor door when finished.
5. Stairwells
(a) Pick up trash and debris
(b) Sweep and damp mop as needed
6. Main Lobby
(a) Sweep and damp mop granite
(b) Clean and polish all metal surfaces
(c) Empty and clean all ashtrays
(d) Clean and empty all trash receptacles
(e) Clean glass doors and surround areas to remove streaks and
fingerprints
(f) Clean all granite walls as needed
(g) Clean directory boards and glass
(h) Clean all wall bases
(i) Clean and polish telephone alcoves and restroom doors
WORK TO BE PERFORMED MONTHLY
- ----------------------------
1. Dust all window blinds
2. High dusting to Include:
(a) Door frames
(b) Pictures
(c) Art objects
(d) Tenant suite signs
3. Strip, clean and rewax restroom floors
4. Clean high glass store of office fronts
5. Flush restroom drains with disinfectant
-2-
<PAGE>
WORK TO BE PERFORMED QUARTERLY
- ------------------------------
1. Clean and polish all common area cove bases
2. Vacuum and spot clean all upholstered office furniture
3. Shampoo all corridor carpeting
WORK TO BE PERFORMED SEMI-ANNUALLY
- ----------------------------------
1. Clean air supply vents
2. Clean lights lenses in common areas
-3-
<PAGE>
EXHIBIT K
---------
ARCADA SOFTWARE INC.
--------------------
EXAMPLE OF BASE RENT ADJUSTMENT PER (S)9 OF THE LEASE IN EVENT ACTUAL
IMPROVEMENT COSTS IS MORE THAN (OR LESS THAN) TI ALLOWANCE OF $2,016,420 ($20
PRSF)
#I Assumption: Actual Ti Costs of $2,218,062 ($22.00 prsf)
Excess TI Costs = $201,642 ($2.00 prsf)
Increase to Annual Base Rent per (S)9 of the Lease:
$201,642 X 16.5% =
$33,270.93
Increase to Monthly Base Rent = $33,270.93 / 12 = $2,772.58
PRSF Base Rent Increase = $33,270.93 / 100,8211 = $.33 prsf
#2 Assumption: Actual TI Costs of $1,814,778 ($18.00 prsf)
Diminished TI Costs = $201,642 ($2.00 prsf)
Decrease to Annual Base Rent per (S)9 of the Lease:
$201,642 X 16.5% =
$33,270.93
Decrease to Monthly Base Rent = $33,270.93 / 12 = $2,772.58
PRSF Base Rent Decrease = $33,270.93 / 100,8211 = $.33 prsf
Initialed and Approved by Tenant
--------------------------------
<PAGE>
EXHIBIT L
---------
[LOGO OF ARCADA SOFTWARE APPEARS HERE]
Arcada Software, Incorporated
Worldwide Facilities
Standard Construction Program
Heathrow Fitout Project
Arcada Manager, Worldwide
Facilities
Cleophus Calloway, Jr. C.F.M.
805-782-4139
Arcada Facilities Design Consultant
Shannon Sokolnik IBD
Watkins Carter Hamilton
6575 W. Loop South Suite 300
Bellaire, Texas 77401
713-665-5665
Program Contents:
Pg.
---------------------------------------------------------
Partitions 2
---------------------------------------------------------
Heating, Venting, and Air Conditioning 3
---------------------------------------------------------
Diversity Factors 5
---------------------------------------------------------
Electrical 6
---------------------------------------------------------
Miscellaneous 7
---------------------------------------------------------
Architectural Engineering Plans 8
---------------------------------------------------------
<PAGE>
Note:
- -----
This Standard construction program is provided as an aide to the development and
construction of major construction related projects for Arcada Software, Inc.
In the event of a conflict of this documentation and any Landlords documentation
this Standard Construction Program shall prevail.
PARTITIONS:
- --------------------------------------------------------------------------------
Demising Partition:
Shall be same as building standard specification (BSS).
Interior Partitions:
Same as BSS, except partitions for all offices shall be drywalled,
taped and bead the interior of all exterior walls, cores, demising
walls, and all columns, finished to receive paint or vinyl wall
covering. All demising walls are to be a minimum two layer - 5/8 inch
dry wall on 3-1/2 inch 25 gauge metal studs at 16 inches on center
from the floor slab to underside of the structure above, penetrated
only as necessary for building structural and mechanical systems.
Demising walls to be fire rated per applicable code. All demising
walls or other walls at the perimeter of the Demised Premises are to
be insulated and will have a minimum sound coefficient (STC) of 42.
In addition one (1) hour rated corridor walls shall be fully
insulated. All partitions having hang on furniture shall be reinforced
with sheetmetal backing inside of framing.
DOOR INTERIOR ASSEMBLY:
Tenant Entrance Doors:
Provide B5S glass entry doors with closures and locking hardware.
Other Tenant Entry Doors(S)
Same as (BSS), except add a stainless steel 12" high kick plate to the
open side of each door. Vision panels (4" X 24") starting at 4'-6"
AFF, will also be required each at double entry doors.
Frame: Same as BSS ADA approved.
Hardware: No change from BSS, except that electronic security
system (ESS) will be provided by Arcada qualified security
provider where shown on the developed design drawings. Type: EPS.
-2-
<PAGE>
TENANT INTERIOR DOOR ASSEMBLY:
Door Assembly:
Same as BSS, except that closures are to be added to the equipment
room, lunch room, restroom and ESS equipped doors. All doors shall
have silencers and wall stops. All office doors shall have an office
coat hook as specified by Arcada.
Frame: Same as BSS
Hardware: Same except all doors to have locksets unless noted
otherwise.
Kickplate:
Install stainless steel 12" high kick plate to open side of the
equipment room and double entry warehouse access doors. Install clear
Plexi-glass kickplate to open side of Lunchroom, mailrooms, and copy
rooms.
CEILING SYSTEM:
Grid:
Ceiling grid: material and installation of 2' x 2' or 2' x 4' white
exposed metal 15/ 16" inch standard "T". Suspension shall meet all
applicable codes but shall be minimum of 12 gauge wire with maximum
spacing of 3' - O" on center.
Ceiling tile: material only of lay-in acoustical panels of white
tegular fine fissured travertone mineral board of a minimum 3/4 inch
thickness and the following minimum characteristics: sound
transmission coefficient (STC) of 35; noise reduction coefficient
(NRC) of 70; and noise solution class (NIC) of 17. Acceptable
manufactures are USG, Armstrong, or equal. The Architect/Contractor
shall provide technical literature on the ceiling system for Arcada
project management approval.
FLUORESCENT LIGHT FIXTURES:
Lighting:
Lighting shall be installed in accordance with Tenant's Preliminary
Plans and Specifications (as shown in Exhibit ____). Light fixtures to
be 2 tube 2' x 2' and/or 3 tube 2' x 4 fluorescent fixtures with
energy saving electronic ballasts, or hybrid electromagnetic ballast
with T-8 or T-10 lams as required. Energy saving 40 watt lamps, lenses
are to be 3 inch deep 9 cell parabolic anodized semi-specular aluminum
louver's for 2' x 2' fixtures and 3 inch deep 18 cell parabolic
anodized semi-specular aluminum louvers for 2' x 4' fixtures. Housings
shall be code gauge steel troffer housing. Acceptable manufactures
Columbia, Daybrite, Lightolier or equal. All lighting circuits shall
be 277 volts and designed for 20% spare capacity.
The general fighting system shall be designed to a 50 Foot Candel (FC)
requirement unless noted otherwise.
-3-
<PAGE>
All emergency lighting per local code requirements.
Provide dual switching in all offices, conference and lunch rooms.
All accent lighting to be specified by Arcada on architectural
reflected ceiling plan.
MOTION SENSORS:
Sensors:
Utilize Light-O-Matic ceiling mounted detectors Model #01-072 277
volt - One way sensor with # 13-011 switch pack. Motion sensors are to
be provided in open plan areas to control lighting. Consider the use
of lumen sensors and indirect lighting where appropriate.
PAINTING:
Paint:
Paint all selected surfaces in accordance with developed design
drawings. Application shall consist of one coat primer and two coats
finish. Paint shall be satin enamel finish, unless noted otherwise.
WALL SURFACE:
Wall surfaces are to be smooth finish. Textured wall will not be
acceptable.
Carpet and Base:
Install in accordance to the developed design drawings finish plans
(red line set).
Wall Coverings:
Install in accordance to the developed design drawings finish plans
(red line set). Apply seal coat to walls before applying adhesive and
material covering.
Window coverings:
Provide LEVELOR "Pinlight" Color: #8038 WHITE to storefront windows
and doors and all frontage glass.
HEATING, VENTILATION AND AIR CONDITIONING:
- --------------------------------------------------------------------------------
SYSTEM:
All air conditioning to be provided by BSS roof top mounted package
systems. The main building system shall be capable of providing a
minimum of the following:
Main HVAC system complete and fully operational to accommodate
Tenant"s specific requirements as indicated on the layout plans and
specifications (as shown in Exhibit __) as well as the heat load
attendant to the electrical capability described in subparagraph __
hereof. This system includes, but is not limited to, mechanical plant
for chilled water
-4-
<PAGE>
and hot water as required, energy management system (acceptable
manufacturer: Honeywell, Novar or equal), supply and return fans,
supply and return ductwork, diffusers, and any necessary heat pumps
and / or VAV boxes (dependent on distribution system selected),
attendant piping and wiring, thermostats and sensors. The HVAC system
shall meet or exceed the following design parameters:
<TABLE>
<CAPTION>
<S> <C>
Outside Air - 20 CFM per person with a minimum of 10% fresh
outside air being brought into the air handling
unit.
Temperature - Summer 74 degrees FDB plus or minus 2 degrees.
& Humidity FDB and relative 50% maximum ASHRAE standards.
- Winter 72 degrees FDB plus or minus 2 degrees.
FDB and relative humidity 25% minimum.
Zoning - Each full height comer office shall be separately
zoned and have its own thermostat.
- No more that three fullheight offices per zone.
- 3000 square feet maximum size for open office
area zones.
- Each full height conference room shall be
separately zoned and hve its own then-nonstat and
exhaust fan.
- Each smoking room shall be exhausted to the
outside of the Building.
- The lunch/break room shall be separately zoned
and have its own thermostat and exhaust fan.
Ductwork - Fiberglas ductwork is not permitted. Required
insulation shall be installed on the exterior of
ducts and shall be wrapped and sealed in return
air plenums. The intent being that the airflow,
including recirculated air, provided to the
Demised Premises is not exposed to fiberglass.
- Flexible ductwork is not preferred, but if used
any single run shall not exceed 6 feet in length
and shall not have more than one 90 degree bend.
Diffusers - No more than 300 CFM per duffuser.
- At least one diffuser for every 300 square feet
of floor area.
Balancing - a preliminary balancing report for all systems is
required at the completion of construction, but
before Tenant's occupancy Landlord shall provide
a certified balancing report for all Systems.
</TABLE>
-5-
<PAGE>
<TABLE>
<S> <C>
Filtration - Adequately filtered so as to maintain a clean,
dust free, non toxic and odorless environment.
General
Requirements - Primary system shall the capacity to fulfill the
solar loads, people loads of one (1) person per
200 square feet, lighting load of 1.5 watts per
rentable square foot, and the equipment power
loads of 5.5 watts per rentable square foot
(this does not include power requirements for
any of the Building's equipment).
- System shall have an economizer
</TABLE>
RETURN AIR:
Unless ducted; return air in all offices and conference rooms shall be
designed through return air grilles with sound boots as shown below.
All rooms with walls extending to underside of slab shall exit return
air through an insulated duct of proper size extending 3 ft. at each
side of partition.
SPECIAL REQUIREMENTS:
The Telephone / Equipment room shall be ducted together with the most
adjacent zone. This room shall have a Diffuser and grille designed for
the space load requirements and shall not exceed 300 cfm/diffuser. All
diffusers shall be on flexible connectors permitting 1 tile
relocation. All thermostats to have 0-12 Hour spring wound Bypass
timer located adjacent to thermostat.
DIVERSITY FACTORS:
- --------------------------------------------------------------------------------
HVAC diversity factors for equipment and spaces shall be designed as follows:
COPIERS:
Demonstration Rooms 8&Z Training Rooms: The sum of all unit standby
loads plus the running load of the largest unit less its standby load.
Copier Centers: The sum of running loads of all units. Convenience
Copiers (less than and including the Xerox 1090 and or Xerox 5355):
The sum of standby plus 25% running load. Convenience Copier's
(greater than the Xerox 5355): The sum of standby plus 50% running
load.
COMPUTERS
Standard line CRTs: 100% or running load.
6085 workstations: 100% of running load.
-6-
<PAGE>
Equipment rooms: 100% of running load.
Facsimile: 80% of running load.
The BTU/Hr output for all equipment shall be on the red line set of
plans.
ELECTRICAL
- --------------------------------------------------------------------------------
ELECTRICAL DISTRIBUTION:
Electrical energy shall be supplied to the Arcada suites via BSS power
distribution unit with panel interior mounted Transient Voltage Surge
Suppressant (TVSS) unit connected to standard incoming voltage
transformer.
PANELS:
Locate on permanent walls or closets in easily accessible but visually
non obtrusive locations.
DISTRIBUTION:
In rigid conduit except provide flexible conduit to light fixtures.
LIGHT SWITCH ASSEMBLY:
All enclosed room lighting to be on building Electronic Motion
Sensors. All lighting in open plan areas to be controlled by ceiling
mounted motion sensors Light O Matic ceiling mounted Motion detector
Model #01-072 277 volt (or equal) One way sensor with #13-011 Switch
pack, Color: Ivory. All office and lunch room lighting to be
controlled by Light O Matic wall mounted motion detector Model #01-134
277 volt (or equal), Color: Ivory. All restroom lighting to be
controlled by Light-O-Matic ceiling mounted motion detector Model #1-
072 277 volt (or equal) One way sensor with #13-011 Switch pack,
Color: Ivory. Separate 0-12 Hour spring wound Bypass Timer switch to
be provided at entry door. (ALTERNATE: All lighting controls are to
use the latest in motion sensors and daylighting techniques).
POWER OUTLETS:
No change from BSS, except all outlets are to be labeled with Panel
and Circuit number on outside of cover plates. Color to be standard
off-white or better where BSS. No back to back outlets allowed. All
outlets shall be offset by a minimum of at least six (6) inches.
Outlet configurations shall be as specified by Arcada.
EXIT SIGNS
No change from BSS.
TELEPHONE / COMMUNICATIONS WALL OUTLETS:
Provide J-box with 3/4" conduit to plenum and pull string (U.N.O.).
Each standard office to have two duplex outlets and one (1) voice and
one (1) data connection.
-7-
<PAGE>
LIFE SAFETY SPEAKERS:
No change from Building Standard Specifications (BSS) if required by
code.
SMOKE DETECTOR:
No change from BSS if required by code.
SENTRY SWITCH:
No change from BSS.
FIRE SPRINKLERS:
Sprinkler system shall be designed and installed so that the sprinkler
heads are chrome semi-recessed and centered in the ceiling tiles.
EQUIPMENT ROOM:
Provide a 2" conduit with pull wire from the main electrical room to
the Arcada equipment room. The termination point of this conduit will
be shown on the plans. Wall to be provided with 3/4" plywood to be
shown on the plans.
SECURITY SYSTEM:
Contracted by Arcada.
PAGING:
To be provided by Arcada service providers.
MUSIC-ON-HOLD:
Arcada will contract for this service if required.
ENTRY ANNUNCIATORS:
Install in accordance with the developed design drawings Arcada
approved annunciator systems.
MISCELLANEOUS
- --------------------------------------------------------------------------------
KEYING:
All locksets shall be individually keyed. Arcada will provide a list
of master and sub master requirements when all doors have been
numbered by the Architect/Designer. Two keys are to be provided for
each lockset. Provide four (4) Grand master keys.
KEY CABINET:
Provide a lockable key cabinet suitable for storing the number of keys
required. This cabinet shall be mounted in the equipment room.
MILLWORK SHELVING:
All shelves are adjustable and are 12" wide unless noted otherwise.
Shelves are to be melamine.
-8-
<PAGE>
FIRST AID KIT
Provide First Aid Kit to be wall mounted in the Health Room by: North
Health Care, Bulk, First Aid Kit-Deluxe, #100, 1515 Elmwood Road,
Rockford, IL 61103 (or equal).
LOW FLUSH TOILETS:
Provide low flush toilets of the type Crane Plumbing, Economizer-18"
high toilet, with siphon-assisted blowout, close coupled combination,
elongated rim, 1-1/2 gallon capacity same or similar.
MILLWORK:
Details provided by Arcada.
JANITORIAL CLOSET:
Provide same or similar Florwell Service Sink: American Standard
#7740.020 Faucet #8344.111 with top brace stops and vacuum breaker.
Drain #7721.038 with strainer and socket for 3" outlet and removable
vinyl-coated rim guard #7745.001.
CORNER GUARDS:
Install clear Lexan corner guards with pre-drilled holes, 1-1/8" X 1-
1/8" X 48' on all outside comers in corridors and common areas.
GLASS BLOCK:
In accordance with the developed design drawings Arcada approved Glass
Block systems.
MECHANICAL CYPHER HARDWARE:
Install in accordance with the developed design drawings Arcada
Approved Simplex model mechanical hardware or similar version.
APPLIANCES:
Note: The general contractor is to provide all appliances (i.e.,
refrigerator, microwave, etc.) shown on the plans as part of the
tenant buildout.
ARCHITECTURAL AND ENGINEERING
- --------------------------------------------------------------------------------
The working set of plans shall consist of the following minimum plan
sheets:
. Title sheet (including legend/general notes).
. Demolition plan
. Construction plan (to include door numbers, room numbers, and
hallway numbers).
. Partial / complete roof plan
. Restroom plan
. Partition plan
. Power and telecommunications plan
. Reflected ceiling plan
-9-
<PAGE>
. Door and Hardware schedule
. Finish plan
. Schedules
. Building standard details and elevations
. Detail plan (wall, ceiling, millwork, projection screen,
structural, etc.)
. Furniture and equipment plan
. Electrical plans (include building riser plan)
. HVAC/Mechanical plans
Plumbing plans
. Sprinkler plan
ITEMS INCLUDED IN BASE BUILDING COST STRUCTURE:
. Dock doors
. Structural supports for HVAC equipment.
. Transformer panel and incoming electrical
-10-
<PAGE>
TITLE XV: LAND USAGE
Chapter
150. BUILDING CODE
150A. UNIFORM BUILDING NUMBERING SYSTEM
151. COMPREHENSIVE PLAN
152. FLOOD HAZARD REDUCTION
153. MOBILE HOMES
APPENDIX: MINIMUM BLOCKING AND TIE-DOWN STANDARDS
154. ZONING CODE
155. SUBDIVISION REGULATIONS
APPENDIX A: STREET SYSTEM REGULATIONS
APPENDIX B: OFF-STREET PARKING, LOADING, AND UNLOADING
APPENDIX C: STORMWATER MANAGEMENT REGULATIONS
APPENDIX D: PUBLIC UTILITIES
APPENDIX E: FIRE PREVENTION REGULATIONS
APPENDIX F: BORROW PITS
APPENDIX G: SWIMMING POOL REGULATIONS
APPENDIX H: VESTED RIGHTS
APPENDIX I: SIGN CODE
APPENDIX J: TRANSPORTATION GUIDELINES
156. SITE PLAN REGULATIONS
APPENDIX A: PROGRAM FOR SITE DEVELOPMENT REVIEW (TRANSPORTATION)
157. LANDSCAPE AND BUFFER REGULATIONS; TREES
158. GATEWAY CORRIDOR OVERLAY STANDARDS CLASSIFICATION
APPENDIX: ILLUSTRATIONS
159A. INTERSTATE 4 CORRIDOR ACTIVITY CENTER OVERLAY DEVELOPMENT DISTRICT
158A. RINEHART ROAD CORRIDOR DISTRICT OVERLAY ZONING DISTRICT
APPENDIX A: APPROVED PLANTING SPECIES
-1-
<PAGE>
159. DEVELOPMENT AGREEMENTS RELATING TO COMPREHENSIVE PLAN OR ZONING CODE
AMENDMENTS
160. RESOURCE PROTECTION STANDARDS
161. CONCURRENCY MANAGEMENT AND CONSISTENCY DETERMINATION
-2-
<PAGE>
CHAPTER 150
-----------
Section
150.01 Short Title
150.02 Definitions
150.03 Adoption of standard codes
150.04 Administration and enforcement
150.05 Permit fees
150.06 Building permits
150.07 Application for building permit
150.08 Expiration of building permit
150.09 Certificate of occupancy
150.10 Construction
Impact Fees
-----------
150.15 Levy and purpose
150.16 Applicability
150.17 Determination of fee amounts
150.18 Schedule of impact fees
150.19 Waiver of impact fee and provision for
appeal
150.20 Time of payment; remedies for non-
payment; credit of fees
150.99 Penalty
(S)150.01 SHORT TITLE.
- -------------------------
This chapter shall be known as, and may be cited as the building code of
the city. (ord. 78, passed 3-1-79.)
(S)150.02 DEFINITIONS.
- -------------------------
For the purpose of this chapter the following definitions shall apply
unless the context clearly indicates or requires a different meaning.
"BUILDING CODE" Refers to standard codes and all amendments thereto.
-------------
"RATE STANDARDS" Refers to the rate standards as set forth by the City
--------------
Council. (ord. 78, passed 3-1-79.)
(S)150.03 ADOPTION OF STANDARD CODES.
- ----------------------------------------
The city hereby adopts the following codes and all amendments thereto,
present and future, included in the reference manuals referred to below, as the
minimum standards within the municipal limits of the city, and these shall be
considered as much as part of this chapter as if all the matter and information
set forth by the referenced manuals were fully set forth herein.
(A) Standard Building Code as published by the Southern Building code
Congress International, Inc. with the following deletions and amendments.
(1) Delete.
(a) Section 102.2 - Appointment of inspectors by Building
Administrator.
(b) Section 103.3 - Appointment of Deputy by Building
Administrator.
(c) Section 106.6 - Foundation permit.
(d) Section 107.4 - Fees (Appendix X).
(e) Section 111.0 - Establishment of Board of Adjustment.
(f) Chapter III - Fire District.
(2) Amend.
(a) Section 106.3 is amended to include the following paragraph.
If the work described in any building permit has not been substantially
completed within one (1) year of the date of issuance thereof, said permit shall
expire and be cancelled by the Building Administrator, and written notice
thereof shall be given to the persons affected, together with notice that
further work as described in the cancelled permit shall not proceed unless and
until a new building permit has been issued.
As used herein "substantially" shall be interpreted to be the completion of
at least fifty-one percent (51%) of the total construction.
(B) Standard Plumbing Code as published by the Southern Building Code
Congress International, Inc. with the following deletions.
(1) Section 102 - Organization of Plumbing Inspection Department.
(2) Section 106 - Fees (Appendix B).
(C) Standard Mechanical Code as published by the Southern Building Code
Congress International, Inc. with the following deletions.
-3-
<PAGE>
LAKE MARY BUILDING CODE
--------- -------------
(1) Section 102 - Organization of Mechanical Department.
(2) Section 103 - Powers and duties of Mechanical Official.
(3) Section 106 - Fees.
(D) Standard Fire Code as published by the Southern Building Code Congress
International, Inc. with the following deletions.
(1) Section 108 - Gas Inspector and assistants.
(2) Section 113 - Fees.
(3) Section 115 - Appeals.
(E) Fire Prevention Code as published by the Southern Building Code
Congress International, Inc. with the following deletions and
amendments.
(1) Delete.
(a) Section 1.05 - Organization and functions, Fire Authority.
(b) Chapter 2 - Board of Appeals and Adjustment.
(c) Chapter 5 - Definitions and abbreviations - delete only
Chief of Fire Prevention Bureau.
(2) Amend. Sections 4.03 and 4.04 - Wherever words "Fire Authority"
appear, substitute "Fire Official."
(F) Standing Housing Code as published by the Southern Building Code
Congress International, Inc. with the following deletions.
(1) Section 105 - Hardships.
(2) Section 106 - Housing Board of Adjustment and Appeals.
(3) Section 107 - Appeals.
(G) National Electrical Code as published by the National Fire Protection
Association.
(H) Standard Swimming Pool Code as prepared by the City of Lake Mary,
Florida.
(I) Florida Model Energy Efficiency Code for Building Construction,
dated May, 1980.
(ord. 16, passed 6-25-74; Am. Ord. 78, passed 3-1-79;
Am. Ord. 85, passed 8-2-79; Am. Ord. 119, passed 10-23-80)
(S) 150.04 ADMINISTRATION AND ENFORCEMENT.
- ----------------------------------------------
The Building and Zoning Administrator duly appointed and delegated by the
City Council is hereby charged with the responsibility of administering and
enforcing this chapter. He may be assisted by other city personnel as necessary
to enforce the provisions of this chapter.
(A) The Building and Zoning Administrator shall notify, in writing,
violators of this chapter, indicating the nature of the violation and
ordering necessary action to correct the violation.
(B) The Building and Zoning Administrator shall order discontinuance of
the illegal use of land, buildings or structures; the removal of
illegal buildings, structures, additions, alterations, or structural
changes thereto; discontinuance of any illegal work being performed;
or any other action authorized to insure compliance with the
provisions of this chapter.
(C) The issuance of a permit upon plans and specifications shall not
prevent the Building and Zoning Administrator from thereafter
requiring the correction of errors in these plans and specifications.
(D) If the work described in any building permit has not been
substantially completed within one year of the date of issuance
thereof, the permit shall expire and shall be cancelled by the
Building and Zoning Administrator, with written notice thereof given
to the persons affected, together with notice that any further work as
described in the cancelled permit shall not proceed until a new
building permit has been issued.
-4-
<PAGE>
LAKE MARY BUILDING CODE
--------- -------------
(E) Energy calculations shall be submitted, on the forms provided by the
city, when application is made for a building permit.
(F) The owner of a building must certify compliance prior to receiving a
permit for construction.
(Ord. 78, passed 3-1-79; Am. Ord. 119; passed 10-23-80)
(S) 150.05 PERMIT FEES.
- ---------------------------
All applications for permits shall be accompanied by an appropriate permit
fee as set forth by the City Council.
(A) Building permit fees.
<TABLE>
<CAPTION>
Type Fee
- ---- ---
<S> <C>
New construction, alterations, and additions.
Commercial $.70 per $1,000 of cost* due at application, minimum $5.00 which shall be
nonrefundable plus $4.50 per $1,000 of cost* due at permit issuance, minimum
$20.00.
Single-family residential $.50 per $1,000 of cost* due at application, minimum $5.00 which shall be
nonrefundable plus $4.50 per $1,000 of cost* due at permit issuance, minimum
$20.00.
Fences, re-roofs, and signs $.50 per $1,000 of cost* due at application, minimum $5.00 which shall be
nonrefundable plus $4.50 per $1,000 of cost* due at permit issuance, minimum
$20.00.
Factory built house, mobile home (includes
building, electrical, plumbing, and mechanical) $100
Tents and air supported structures $100
Building moving $50
Demolition of structure $50 (no fee if condemned by city)
</TABLE>
Minor repairs to residential structures not involving structural, electrical, or
roof modifications are exempt from permit fee requirements.
*or fraction thereof
(B) Basis for determining estimated cost.
(1) The unit cost per square foot for type of construction shall be
based on the values contained in the following table or signed contract
whichever is greater.**
-5-
<PAGE>
LAKE MARY BUILDING CODE
--------- -------------
-6-
<PAGE>
LAKE MARY BUILDING CODE
--------- -------------
BASIS FOR DETERMINATION OF ESTIMATED COST
<TABLE>
<CAPTION>
==========================================================================================================================
Type of Construction
---------------------------------------------------------------------------------------------
IV/5/ V/5/ VI/5/
------------------------------------------------------------
Occupancy I II III 1-HR UNP 1-HR UNP 1-HR UNP
=============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assembly
Auditorium 74 71 57 35 34 56 53 52 49
Church 70 68 57 51 49 56 53 52 49
Gymnasium N/D/2/ N/D/2/ 44 38 37 43 40 40 37
Restaurant 65 65 57 49 47 56 53 52 49
Theater 78 75 57 51 50 56 53 52 49
- -----------------------------------------------------------------------------------------------------------------------------
Business
Office 65 62 48 41 40 47 44 43 40
Research/Eng'g 41 39 35 31 29 34 31 32 29
Serv. Station 72 69 56 54 52 55 52 49 46
- -----------------------------------------------------------------------------------------------------------------------------
Educational
School 65 65 50 44 42 49 46 45 42
- -----------------------------------------------------------------------------------------------------------------------------
Industrial
Factory 35 33 26 21 20 25 22 19 16
- -----------------------------------------------------------------------------------------------------------------------------
Hazardous/4/
Hazardous 36 35 28 23 21 27 24 21 18
- -----------------------------------------------------------------------------------------------------------------------------
Institutional
Convalescent 85 83 61 54 53 60 N/P/1/ 56 N/P/1/
Hospital 100 97 83 54 53 82 N/P/1/ 76 N/P/1/
- -----------------------------------------------------------------------------------------------------------------------------
Mercantile
Dept. Stores 56 54 50 35 33 49 46 36 33
Mall Stores 62 62 48 43 42 47 44 44 41
Mall-Concourse 50 50 24 19 18 23 20 20 17
Retail Store 45 43 39 35 33 38 35 36 33
- -----------------------------------------------------------------------------------------------------------------------------
Residential
Apartments 54 51 44 39 37 43 40 41 38
Dormitories 63 62 53 48 46 52 49 48 45
Home, Elderly 63 62 55 49 48 54 51 51 48
Hotel 61 59 53 40 39 52 49 47 44
Motel 61 59 45 40 39 44 41 43 40
Sgl. Family/3/ 53 51 45 41 39 44 41 40 37
- -----------------------------------------------------------------------------------------------------------------------------
Storage
Park'g Structure 23 22 N/D/2/ 19 17 N/D/2/ N/D/2/ N/D/2/ N/D/2/
Private Garage 23 22 16 11 10 15 12 12 9
Repair Garage 36 36 28 31 29 27 24 24 21
Warehouse 36 33 27 21 19 26 23 22 19
=============================================================================================================================
</TABLE>
Noted:
1. N/P = Not permitted by code.
2. N/D = Insufficient data to determine average cost.
3. Unfinished basements $6.00/square foot.
4. Hazardous includes sprinkler system. For sprinklered buildings in other than
hazardous occupancies add $1.50/square foot.
5. In Type IV, V, and VI, add $27,000 per elevator.
-7-
<PAGE>
LAKE MARY - BUILDING CODE
-------------------------
(2) Commercial finishes and remodeling same as complete or
contract price.
**When using contract price, a signed copy of the contract must accompany the
permit application.
<TABLE>
<S> <C> <C>
(C) Electrical permit fees.
Alteration, additions, repairs, change of service $25.00
New construction $.30 per amp. minimum fee $25 (each unit of multi-
family housing is considered a separate housing unit
for fee calculations
Temporary service $25.00
Prepower agreement $50.00 for 90 days
(D) Plumbing permit fees.
Alterations, additions, repairs to existing $25.00
residential
New construction $25.00 plus $3.00 per fixture unit (each unit of
multi-family housing is considered a separate
housing unit for fee calculations
Gas piping system $1.50 per outlet, minimum fee $25
Septic tank/drainfield $25.00
(E) Mechanical permit fees.
New Construction
0 - $1,000 $25.00
$1,000.01 - $2,500 $40.00
$2,500.01 - $5,000 $55.00
$5,000.01 - $10,000 $70.00
$10,000.01 - $25,000 $125.00
Greater than $25,000 $5.00 per $1,000 of valuation*
</TABLE>
*Or fraction thereof
-8-
<PAGE>
LAKE MARY - BUILDING CODE
-------------------------
<TABLE>
<S> <C> <C>
(F) Fire loss management permit fee.
Fixed protection systems including wet chemical $45.00 due at time of application which is
dry chemical, CO, Halon/FM, 200/Intergen nonrefundable plus $4.50 per $1,000 of cost* due at
permit issuance, minimum $25.00
Fire Sprinkler systems and fire alarms systems $50.00 due at time of application which is
nonrefundable plus $4.50 per $1,000 of cost* due at
permit issuance, minimum $25.00
</TABLE>
*Or fraction thereof
<TABLE>
<S> <C> <C>
(G) Swimming pool permit fees.
Swimming pools and/or pool enclosures $8.00 per $1,000 of valuation*, minimum fee
$25.00
(H) Site permit fees.
Site plan or subdivision (requires Commission 1.00% of contract price***, minimum of $200.00
approval)
</TABLE>
***A Breakdown of estimated cost must be provided before a permit will be
issued.
<TABLE>
<S> <C> <C>
(I) Right-of-way utilization permit fees.
Miscellaneous work within right-of-way or each $75.00 if not part of site permit
bore and jack operation
Residential driveway connection to city street $50.00 if no part of building permit
system and/or sidewalk
Commercial driveway connection to city street $100.00 if not part of site permit
system and/or sidewalk
(J) Irrigation permit fees.
Single-family residential $35.00
Commercial 1.00% of valuation, minimum fee $75.00
(K) Arbor permit fees.
Existing residential or commercial No fee
New single-family residential $15.00
New commercial $5.00 per gross acre. Minimum fee $50.00
</TABLE>
-9-
<PAGE>
LAKE MARY - BUILDING CODE
-------------------------
<TABLE>
<S> <C> <C>
(L) Special permit fees.
Garage/rummage sale $5.00
Vehicle for sale $5.00
Temporary sign, 30 days $25.00
Temporary residential sales trailer $30.00
Fireworks display events $50.00
Bonfire $50.00
(M) Miscellaneous fees.
Reinspection of rejected work $25.00
Fire hydrant flow test $50.00 per each
Health Department required inspections $25.00
HRS licensure inspections $25.00
Stamp extra plan set before issuance of permit $2.00 per page
Restamp and recertification of unaltered plans $35.00 for single-family residential, $5.00 per page
after issuance of permit for commercial
Re-review plans New fee
Change of prime contractor $25.00
Update building permit 50% of original fee
Duplicate certificate of occupancy at time of $10.00
issuance
(N) Penalties.
Construction without permit by owner Double fee
Construction without permit by licensed Double fee, minimum $100.00
contractor
</TABLE>
(Ord. 78, passed 3-1-79) (Res. 108, passed 10-18-99; Am. Ord. 199, passed
8-16-84; Am. Ord. 453, passed 8-17-89; Am. Ord. 726, passed 11-17-94)
-10-
<PAGE>
LAKE MARY BUILDING CODE
--------------------------
(S)150.06 BUILDING PERMITS.
- -----------------------------
No person, firm or corporation shall commence, or cause to be commenced,
the erection, construction, or alteration of any building structure, sign, or
canopy within the city until an application for a permit therefore has been
previously filed with the city as provided herein, and as provided in other
ordinances of the city, and until a permit therefore has first been issued by
the city. No person, firm, or corporation shall commence, or cause to be
commenced any repair to any existing building, structure, sign, or canopy in the
city until an application for a permit therefore has been previously filed with
the city as provided herein and as provided in all other ordinances of the city.
No repair shall be commenced upon any building, structure, or sign until a
permit therefore has been issued by the city. All work done on or pursuant to
any building or sign permit issued by the city shall conform to the plans or
specifications therefore as approved prior to the issuance of the permit, and
any deviation therefrom shall constitute a violation of this chapter.
(Ord. 78, passed 3-1-79) Penalty, sec (S)150.99
- --------------------
Cross-reference:
Building permits required under zoning regulations, see (S)154.29
Connection of building to public sewer a condition to issuance of
building permit, see Ch. 155, App. D. (S)21(A)
(S)150.07 APPLICATION FOR BUILDING PERMIT.
- --------------------------------------------
(A) Every application for a permit to erect a building or structure or
to materially alter a front, rear, or side elevation of any existing building or
structure in the city shall be accompanied by three sets of detailed plans, and
all detailed structural drawings thereof that the Building and Zoning
Administrator may require. If the plans submitted do not furnish sufficient
information to adequately show the scope of the planned construction for which
a permit has been requested, then there shall be furnished, in addition to the
two sets of detailed plans, one set of detailed specifications for each proposed
work. Both the plans and specifications, when required by law, shall be prepared
by a registered architect or a registered engineer, qualified under the laws of
the state to prepare the plans and specifications, and no permit therefore shall
be issued until the plans, and specifications when required, have been approved
by the Building and Zoning Administrator. All plans and specifications for
buildings or structures to be erected in the city that are governed by state
laws, must have the standard approval of the proper state authority before
application is made for a permit.
(B) All plans shall be drawn at a scale acceptable to the building and
Zoning Administrator and shall show the following.
(1) A plot plan which shall show the actual shape and dimensions
of the lot or lots to be built on, the exact size and location on the lot or
lots of proposed and existing buildings and accessory buildings, and the
existing and intended use of each building or part of a building existing or
proposed, driveway, provisions for off-street parking, and other information
with regard to the lot as may be necessary to determine compliance with these
regulations.
(2) The location and layout of the proposed sewage disposal
system.
(3) When applicable the required loading and unloading spaces,
maneuvering space, and openings for ingress and egress.
(4) When applicable, grading and drainage plans showing any and
all cuts, fills, and provisions for adequately carrying off surface water on
premises, plus provisions for any surface water on premises, plus provisions for
any surface water which would naturally flow over or through the area. These
plans shall be reviewed and approved by the City Engineer.
(5) Specifications, when required, shall be full and complete as
to the character of the work, structural details, strength of material, and
workmanship.
(6) Other information may be lawfully required by the Building
and Zoning Administrator including existing or proposed building or alteration;
existing or proposed uses of the building and land; the number of families,
housekeeping units, or rental units the building is designed to accommodate;
conditions existing on the lot; and other matters necessary to determine
conformance with, and provide for the enforcement of this chapter.
-11-
<PAGE>
LAKE MARY BUILDING CODE
--------- -------------
(C) Two copies of the plans shall be returned to the applicant by the
Building Administrator after he has marked the copies either as approved or
disapproved, and attested this by his signature on the copy. One copy shall be
kept on the job-site in a waterproof container. The original, similarly marked,
shall be retained by the Building Administrator.
(Ord. 78, passed 3-1-79)
(S)150.08 EXPIRATION OF BUILDING PERMIT.
- ------------------------------------------
If the work described in any building permit has not begun within six
months from the date of issuance thereof, the permit shall expire and be
cancelled by the Building Administrator and written notice thereof shall be
given to the persons affected. If the work described in any building permit has
not been substantially completed within one year of the date of issuance
thereof, the permit shall expire and be cancelled by the Building Administrator
and written notice thereof shall be given to the person affected, together with
notice that further work as described in the cancelled permit shall not proceed
unless and until a new building permit has been obtained. As used herein,
"SUBSTANTIALLY" shall be interpreted to be the completion of at least 51% of the
-------------
total construction effort. The Building Administrator may allow one or more
extensions not to exceed 90 days each, for cause, if the application is made
prior to the cancellation of the permit.
(Ord. 78, passed 3-1-79)
(S)150.09 CERTIFICATE OF OCCUPANCY.
- -------------------------------------
(A) No land, building, or part thereof hereafter erected or altered in
its use or structure, shall be used until the Building Administrator has issued
a certificate of occupancy stating that the land, building, or part thereof, and
the proposed use thereof are found to be in conformity with the provisions of
this chapter. Within three days after notification that a building, premises, or
part thereof, is ready for occupancy or use, it shall be the duty of the
Building Administrator to make a final inspection thereof. No non-conforming
structure or use shall be maintained, renewed, changed, or extended until a
certificate of occupancy has been issued by the Building Administrator.
(B) The certificate of occupancy shall state specifically wherein the
non-conforming use differs from the provisions of this chapter, provided that
upon enactment or amendment of this chapter, owners or occupants of
non-conforming uses or structures shall have six months to apply for
certificates of occupancy. Failure to make such an application within six months
shall be presumptive evidence that the property was in conforming use at the
time of enactment or amendment of this chapter. Failure to obtain a certificate
of occupancy will place upon the owner and lessee the entire burden of proof
that the use of the land or building existed on the effective date of this
chapter.
(Ord. 78, passed 3-1-79)
(S)150.10 CONSTRUCTION.
- -------------------------
Building permits or certificates of occupancy issued on the basis of
plans and applications approved by the Building and Zoning Administrator
authorize only the use, arrangement, and construction set forth in the approved
plans and applications, and no other use, arrangement, or construction. Use,
arrangement, or construction in variance with that authorized shall be deemed a
violation of this chapter.
(Ord. 78, passed 3-1-79) Penalty, see (S)10.99
IMPACT FEES
(S)150.15 LEVY AND PURPOSE.
- -----------------------------
Impact fees are levied on new construction within the city limits in
accordance with the schedule of impact fees and other provisions of this
subchapter, for the purpose of helping to defray the cost of new or expanded
police, fire, public works, and parks and recreational capital facilities and
equipment attributable to new construction within the city limits, and the cost
of those impact fee development studies deemed necessary by the City Commission
and which are conducted by a professional agency or corporation contracted by
the City Commission.
(Ord. 279, passed 3-19-87; Am. Ord. 528, passed 9-20-90)
- -------------------------
Cross-reference:
Deposit of impact fees collected into capital expansion trust funds, see
(S)31.10.
(S)150.16 APPLICABILITY.
- --------------------------
This subchapter shall apply to all new construction within the city
limits except the following:
-12-
<PAGE>
LAKE MARY BUILDING CODE
--------- -------------
(A) Alterations or expansion of an existing structure where no additional
units are created and the use of the structure is not changed.
(B) The replacement of a building or structure with a new building or
structure of the same size and use.
(C) The construction of agricultural structures other than residences.
(D) The construction of any public-owned, public-purpose structures by
federal, state, or local government.
(E) The construction of structures primarily relating to religious,
non-proprietary educational, or charitable purposes.
(F) Developments of regional impact approved prior to June 1, 1986.
(G) Construction under any building permit originally issued prior to the
effective date of this subchapter. (Ord. 279, passed 3-19-87)
(S) 150.17 DETERMINATION OF FEE AMOUNTS.
- ----------------------------------------
(A) Impact fees shall be determined and reviewed at the direction of the
City Commission in accordance with a detailed analysis of projected construction
within the city limits; the cost of any expanded or new capital facilities and
equipment for police, fire, public works, and park and recreation facilities
generated by such construction, the costs associated with such a determination,
update or review, and the money otherwise available to meet those costs. The
City Commission may adjust the established impact fee rates to reflect changes
in the cost of relevant capital facilities and equipment and/or impact fee
development studies or related updates or reviews at such times as it deems
appropriate and as circumstances supporting adjustment may exist.
(B) All changes or adjustments in the established impact fee rates shall
be by ordinance and shall apply only to construction for which building permits
are issued after the effective date of the ordinance. (Ord. 279, passed 3-19-87;
Am. Ord. 528, passed 9-20-90; Am. Ord. 658, passed 8-5-93)
(S) 150.18 SCHEDULE OF IMPACT FEES.
- -----------------------------------
Impact fees for new construction within the city limits shall be as
follows:
<TABLE>
<CAPTION>
Residential Non-Residential
Impact Fee (per-unit) (per-sq.-ft.)
- -------------------------- ------------- ------------------
<S> <C> <C>
Police protection $ 51 $ .053
Fire protection 67 .055
Recreation 278 .031
Public works 24 .022
Total fees $ 420 $ .161
(Ord. 279, passed 3-19-87)
</TABLE>
(S) 150.19 WAIVER OF IMPACT FEE AND PROVISION FOR APPEAL.
- ---------------------------------------------------------
(A) The City Commission may waive part or all of the impact fees imposed
on a project if it determines that the private space and facilities provided in
the proposed project are of such nature as to reduce substantially the project's
impact upon the city's capital needs for expansion of public facilities; or that
the fees imposed by this subchapter upon any given project substantially exceed
the clearly demonstrated impact upon public facilities, including fire, public
works, and police facilities.
(B) In the event a project owner shall consider any impact fee applicable
to it to be excessive, the City Commission, on application, shall conduct a
hearing to consider alleged overpayment. It shall be the duty of the project
owner to demonstrate to the City Commission by clear and convincing evidence
that applicable impact fees are substantially excessive as applied to the
project. The Commission may adjust the fees based on the evidence presented.
(Ord. 279, passed 3-19-87)
(S) 150.20 TIME OF PAYMENT; REMEDIES FOR NON-PAYMENT; CREDIT OF FEES.
- ---------------------------------------------------------------------
(A) Impact fees shall be due and payable at the time of issuance by the
city of a building permit for new construction. No building permit on new
construction shall be issued until all applicable impact fees have been received
by the city.
-13-
<PAGE>
LAKE MARY BUILDING CODE
--------- -------------
(B) The fees collected pursuant to this subchapter shall be returned to
the then-present owner of the development if the fees have not been spent by the
end of the sixth year from the date the fees were paid, together with interest
at the rate of 5 1/4% per annum.
(C) All impact fees collected shall be deemed to accrue to the benefit of
the parcel or parcels of real property constituting a project for which a
building permit is issued. Further, if and in the event the new construction for
which a building permit is issued shall not take place and said building permit
shall lapse, any impact fees collected as an incident to the issuance of that
building permit shall be maintained by the city, to be credited against any
impact fees which may be charged at the time of the issuance of any building
permit for new construction upon or involving the property for which a previous
building permit has been issued and impact fees collected. If subsequent impact
fees exceed the amount collected and maintained by the city under any previous
building permit, then the additional sum shall be paid as a condition of and at
the time of the issuance of the subsequent building permit. If the impact fees
so charged are less than the impact fees initially collected and maintained,
then at that time the excess shall be refunded to the applicant. In the event
that no subsequent building permit shall be issued and impact fees due within
six years from the date of payment of impact fees under a building permit for
which construction did not take place, any impact fees so collected shall be
returned to the then- present owner of the development together with interest at
the rate of 5 1/2% per annum from the date of initial collection. (Ord. 279,
passed 3-19-87; Am. Ord. 523, passed 9-6-90)
(S) 150.99 PENALTY.
- -------------------
Violations of this chapter and the standards set forth herein shall be
punishable by a fine of not more than $500 or incarceration for not more than 90
days, or both. Each day that a violation exists shall constitute a new and
separate offense. (Ord. 78, passed 3-1-79)
-14-
<PAGE>
CHAPTER 150A: UNIFORM BUILDING NUMBERING SYSTEM
------------- ---------------------------------
Section
<TABLE>
<S> <C>
150A.01 Purpose of uniform numbering
system
150A.02 Definitions
150A.03 Uniform building numbering system
established; incorporation of map
150A.04 Administration and assignment of
numbers
150A.05 Posting of numbers
150A.06 Municipal annexation
150A.07 Address changes
150A.99 Penalty
</TABLE>
(S) 150A.01 PURPOSE OF UNIFORM NUMBERING SYSTEM.
- ------------------------------------------------
This chapter is adopted for the purpose of providing a uniform building
numbering system for the assignment of address numbers to buildings and
structures located on or with access from officially named public and private
streets and ways in the city, in the interest of the public health, safety and
general welfare of the citizens and inhabitants of the city.
(Ord. 491, passed 3-1-90)
(S) 150A.02 DEFINITIONS.
- ------------------------
For the purpose of this chapter, the following terms, phrases, words, and
their derivations shall have the meaning given herein, unless the context
clearly indicates otherwise:
"ACCESSORY BUILDING." A building which is clearly incidental or
------------------
subordinate to and customarily utilized adjacent to and in connection with a
principal building located on the same lot.
"BUILDING FRONT OR FACADE." That area or facade of a building which has
------------------------
visible numbers from a public or private street or way because it faces the
public or private street or way pursuant to which the building is numbered. When
a building is constructed on a corner lot, the building front or facade shall be
that area of the building which faces the street on which a projected address
was assigned or, in the event a projected address has not been assigned, the
area so designated by the Planning Department of Seminole County.
"BUILDING NUMBERING MAPS." A master set of maps which, in conjunction
-----------------------
with approved plots and site plans, details the existing street names and
numbering scheme and the projected street name and numbering scheme within
Seminole County; said maps, in addition to the plots and site plans, being
currently designated the one inch to 400 feet legal section maps.
"E-9-1-1 COORDINATOR." That person designated by the City Manager to
-------------------
assist Seminole County in designing, implementing and maintaining an emergency
telephone response system which involves the expeditious response of public
safety, police and other services resulting from such emergency telephone
system.
"GRID SYSTEM GUIDE." A series of designated north/south parallel lines
-----------------
intersecting a second set of east/west parallel lines, as indicated on the
official "master grid maps," currently delineated on a 1:2000 map of Seminole
County.
"NONCONFORMANCE." Any failure to comply with the provisions of this
--------------
chapter including, but not limited to by way of example: a number out of
sequence, odd or even number on wrong side of street, rural box numbers, numbers
improperly affixed, numbers illegible, numbers unclear, numbers obstructed,
numbers not visible, numbers not present, numbers of improper size, numbers not
in contrast with immediate background, weather-worn numbers, wrong numbers, and
non-approved numbers.
"OCCUPANT." Any person, firm, entity, partnership, trust, corporation,
--------
association, or other organization who is occupying or leasing a building or
other property for a period exceeding 30 days.
"OWNER." Any and all persons, firms, entities, partnerships, trust,
-----
corporation, associations, or other interest in, any building or property which
is subject to the provisions of this chapter.
"PRINCIPAL BUILDING." Any structure which is designed, built or used for
------------------
the support, enclosure, shelter, or protection of persons, animals, chattels or
property of any kind for any residential, commercial, or industrial purpose.
"PRIVATE WAY." Any street, road, avenue, drive, cul-de-sac or other
-----------
thoroughfare used for vehicular traffic
-15-
<PAGE>
CHAPTER 150A: UNIFORM BUILDING NUMBERING SYSTEM
------------- ---------------------------------
and any easement or right-of-way that provides sole access to more than one
parcel or lot which is not included in the definition of "PUBLIC WAY" and which
----------
is not maintained by Seminole County, the City of Lake Mary or the Florida
Department of Transportation. This term shall include, but is not limited to
roadways or driveways in mobile home parks, apartments, condominiums, and
commercial or industrial complexes, which have been named and signed in
accordance with the comprehensive plan of this city.
"PROJECTED STREET NAME AND NUMBERING SCHEME." All approved site plans and
------------------------------------------
plots, including amendments thereto, which contain projected street names and
addresses although no construction or development has occurred on the projected
street.
"PUBLIC WAY." Any area of a public road or right-of-way, either paved or
----------
unpaved, which is intended for vehicular traffic, and that has been dedicated to
the City of Lake Mary, Seminole County or State of Florida for the purpose of
vehicular traffic and for use as a thoroughfare for vehicular traffic whether
accepted or not by the city, excluding, however, service entrances or driveways.
"UNIFORM BUILDING NUMBERING SYSTEM." A system by which existing buildings
---------------------------------
and projected lots and parcels for future buildings are assigned addresses in a
coordinated and uniform method based on a designated grid system contained in
the official master grid maps. (Ord. 491, passed 3-1-90)
(S) 150A.03 UNIFORM BUILDING NUMBERING SYSTEM ESTABLISHED; INCORPORATION OF
- ----------------------------------------------------------------------------
MAP.
- ----
A uniform building numbering system, as shown on the maps, identified by
the title, "Building Numbering Maps," and filed in the office of the Seminole
County Planning Department is hereby adopted for use in this city pursuant to an
interlocal agreement on file with the Board of County Commissioners and this
city. Upon adoption, the uniform building numbering system maps and the grid
maps and each amendment thereto shall be on file in the office of the City
Clerk. (Ord. 491, passed 3-1-90)
(S) 150A.04 ADMINISTRATION AND ASSIGNMENT OF NUMBERS.
- -----------------------------------------------------
(A) The Seminole County Planning Department has been assigned
responsibility for coordinating and maintaining the numbering system by the
Board of County Commissioners. Said Department shall assign building numbers in
conformity with the uniform building numbering system. Charges for such
assignments shall be made in accordance with a fee schedule duly adopted by
resolution by the Board of County Commissioners.
(B) Should an existing building fail to conform with the uniform
numbering system, the Seminole County Planning Department will give notice to
those owners or occupants whose building number is in nonconformity with the
uniform building numbering system. Said notice will be delivered to the owner or
occupant by certified mail, return receipt requested, by posting same in a
conspicuous place on the property or by hand delivery. Said notice may include a
notification of a change of address which shall contain the new building
number(s) assigned to the building in accordance with the uniform building
numbering system and shall direct the owner or the occupant to post the newly
assigned building number on said building or property in accordance with the
provisions of the uniform building numbering system. The owners or occupants
shall have 30 days from receipt of the notice sent by certified mail, from the
date of delivery, if delivered by hand, or from the date of posting, if such
notice is posted on the property, to come into compliance.
(C) Assignment by the Seminole County Planning Department of the assigned
number to a lot or parcel on which a projected future building may be
constructed shall be a condition precedent to the issuance of a Building Permit
for any such building. (Ord. 491, passed 3-1-90) Penalty, see (S)150A.99.
(S) 150A.05 POSTING OF NUMBERS.
- -------------------------------
All buildings within the municipal limits of the city, shall have its
assigned building number properly displayed in accordance with the provisions of
this chapter, whether or not mail is delivered to such building or property. It
shall be the duty of the owners and occupants of each building in the city, to
post the assigned building number on the property in conformity with this
chapter as follows:
-16-
<PAGE>
CHAPTER 150A: UNIFORM BUILDING NUMBERING SYSTEM
------------- ---------------------------------
(A) The building address number shall be permanently affixed to the
building front or facade as defined herein, or to a separate structure such as a
mailbox, post, wall, fence, or other visible and commonly used area, in such a
manner as to be clearly visible and legible and without obstruction from the
public or private way on which the building fronts.
(B) Any numbers which are not clearly visible and legible from the public
or private way shall not be used.
(C) The numerals shall be of a contrasting color with the immediate
background of the building or structure on which such numerals are affixed and
shall not be less than three inches in height and one-half inch in width.
(D) Numerals shall be made of a durable weather-resistant material. (Ord.
491, passed 3-1-90) Penalty, see (S) 150A.99.
(S) 150A.06 MUNICIPAL ANNEXATION.
- ---------------------------------
Whenever a parcel of land, a subdivision, or any part thereof, becomes a
part of the municipal limits of this city, by annexation, the Seminole County
Planning Department will review the address numbers of such property and
determine whether such numbers, their posting, and the method of numbering for
such annexed portion conforms to the designated grid system and the uniform
building numbering system within 30 days of such annexation. (Ord. 491, passed
3-1-90)
(S) 150A.07 ADDRESS CHANGES.
- -----------------------------
(A) If the number, posting, or method of numbering a building is in
nonconformance with Seminole County's grid system and uniform building numbering
system after a municipal annexation, the Seminole County Planning Department
will give notice of such nonconformance to the owners or occupants of the
affected building or property.
(B) Said notice shall be delivered by certified mail, return receipt
requested; by posting said notice in a conspicuous place on the building; or by
hand delivery.
(C) Said notice shall include a notification or a change of address which
shall contain the correct or new building number(s) assigned to the building or
property in accordance with the provisions of this chapter and the date of
notification.
(D) Said notice shall direct the owner or the occupant to post the newly
assigned building number(s) contained in the change of address on said building
or property in accordance with this chapter.
(E) Said notice shall notify the owner or occupant that, if he or she
disagrees with the determination of the Seminole County Planning Department, an
appeal may be taken regarding the determination made. The Deputy County
Administrator/County Development or his functional successor shall hear such
appeals. (Ord. 491, passed 3-1-90) Penalty, see (S)150A.99
(S) 150A.99 PENALTY.
- --------------------
(A) Any person, firm, entity, partnership, trust, corporation,
association, or other organization failing to comply with the provision of this
chapter shall be punished as provided by general law.
(B) The city Code Enforcement Board shall have jurisdiction over
violations of this chapter. Proceedings before the Code Enforcement Board shall
be governed by its rules and procedures. (Ord. 491, passed 3-1-90)
-17-
<PAGE>
SECTION 2. SHORT TITLE. This Ordinance shall create a new Chapter 155,
- ---------- ------------
Appendix I of the Code of Ordinances to be known as the "Lake Mary Sign Code".
SECTION 3. PURPOSE AND INTENT. The purpose and intent of this Code is to
- ---------- -------------------
establish regulations for the fabrication, erection and use of signs and other
outdoor advertising displays within the City of Lake Mark. These regulations
are hereby established in order to promote the overall economic well being of
the businesses in the City, while at the same time providing for the health,
safety and welfare of its citizens by reducing the adverse effects of signs and
displays on highway safety, building safety, property value, and the enjoyment
of the scenic beauty of the City. These regulations are intended to avoid
excessive competition and clutter among sign displays in the demand for public
attention.
SECTION 4. DEFINITIONS:
- ---------- ------------
(A) In General
----------
The word "shall" is mandatory, the word "may" is permissive.
(B) "ABANDONED SIGN."
--------------
(1) A sign is presumed to have been abandoned when it is located on
property which becomes vacant and unoccupied for a period of three (3)
or more months.
(2) Any sign face which advertises a business no longer conducted or
product no longer sold. In making the determination that a sign
advertises a business no longer being conducted, the Enforcement
Official shall consider the existence or absence of a current
occupational license, utility service deposit or account, or active use
of the premises.
(3) Any sign structure which has not been used for business purposes for
over three (3) months that is non-conforming as to existing codes
regarding height, setback or maintenance.
(4) Any previously permitted temporary sign for which the permit or
permitted time has expired.
(C) "ADVERTISING FLAGS." Any commercial flags designed for or having the
-----------------
effect of attracting attention, promotion or advertising.
(D) "AWNING SIGN." A sign composed of cloth or canvas supported by a metal or
-----------
rigid framework attached to and extending from an exterior wall or any
other portion of a building utilized as protection from the rain or sun.
(E) "BANNER SIGNS." Any signs having characters, letters, illustrations, or
------------
ornamentations applied to cloth, paper, or fabric of any kind, including
foil.
(F) "CONSTRUCTION SIGN." A sign announcing and identifying the construction
-----------------
project scheduled or underway on the site where the sign is located.
(G) "DIRECTIONAL SIGN." - ON-SITE. Any sign used to indicate the direction to
----------------------------
entrances, exists, parking areas, restrooms, or other non-business related
facilities on the site on which the sign is located.
(H) "DIRECTORY SIGN." A sign which gives the names of the businesses or
--------------
individuals located in the building or complex where it is located. A
directory sign shall be of a unified design and common material, and shall
allow for a uniform size sign for each business or unit of space in the
development. Directory Signs shall be limited to the name and type of
business and its location within the building or complex.
<PAGE>
(I) "DOUBLE-FACED SIGN." A sign with two (2) faces which are no more than
-----------------
twelve (12) inches apart at their closest point, and which describe an
internal angle between face planes extended no more than thirty (30)
degrees.
(J) "ELECTRONIC MESSAGE CENTER." A sign on which the copy/advertising changes
-------------------------
automatically on a lampbank or through mechanical means.
(K) "FREE STANDING SIGN". A sign wholly independent of any building for
------------------
support. For the purposes of this sign code, a free standing sign may be
constructed of wood or other permanent, rigid material and may be used for
construction and real estate signs only.
(L) "FRONT FOOT, BUSINESS." The lineal distance of the building space occupied
--------------------
by the particular business, measured on a straight line parallel to the
street. In the event that a building fronts on two or more streets, the
property owner shall be given the option of selecting one street frontage
for the purpose of computing allowable sign area. Where a business does
not parallel a street, the front foot shall be measured along the exterior
side of the building space occupied by the particular business and which is
considered by the business and general public to be the front of the
business.
(M) "FRONT-FOOT, PROPERTY." Each foot, or major portion thereof, measured
--------------------
along the public right-of-way where the subject property abuts said right-
of-way.
(N) "FRONT-FOOT, BUILDING." Each foot, or major portion thereof, measured
--------------------
along the main entry side of a building. Where buildings form an "L" or
"U", all main entry sides are measured.
(O) "GROUND SIGNS." A sign wholly independent of any building for support; and
------------
where the subject of the sign relates to either the identifying of the
business name or the activity carried on in the structure on the same
property as the sign.
(P) "HEIGHT OF SIGN." The distance between the top of a sign and the average
--------------
grade elevation below it.
(Q) "IDENTIFICATION SIGN." A sign that indicates the name and type of business
-------------------
or service, or the name of the development located on the site where the
sign is located; including street address, phone number, and graphic of
business logo.
(R) "ILLEGAL SIGN." A sign not legally permitted prior to or after the
------------
adoption of this sign code.
(S) "ILLUMINATED SIGN." A sign that uses artificial light, either internal or
----------------
external to the sign faces, to draw attention to the sign or otherwise
increase its visibility.
(T) "INSTRUCTIONAL SIGN." A sign conveying non-advertising information
------------------
relating to the use of the premises, including such signs as "no parking",
"no trespassing" and warning signs.
(U) "INTERNALLY ILLUMINATED SIGN." A sign that uses artificial light from
---------------------------
behind the sign face to increase its visibility.
(V) "MARQUEE SIGN." Any sign placed flat along and on the edges of a marquee.
------------
(W) "MEMBERSHIP SIGN." A sign identifying affiliation with a travel club,
---------------
business association, credit card company, or professional association.
(X) "MEMORIAL SIGN." A permanent sign, plaque, inscription or similar group of
-------------
symbols recording historical data relating to the construction of the
building to which it is affixed.
(Y) "NON-CONFORMING SIGN." A sign legally permitted in the City before the
-------------------
adoption of this sign code that does not conform to the requirements of
this sign code. A sign not legally permitted prior to the adoption of this
sign code shall not be considered a non-conforming sign.
(Z) "OFF PREMISE SIGN." A sign, either attached to a building or other
----------------
structure located on real property, which is not appurtenant to the use of
the real property where the sign is located or
-2-
<PAGE>
which does not advertise a service offered at the location where the sign
is placed or which does not identify a business located where the sign is
placed as a purveyor of the merchandise or services advertised on the sign.
The term "OFF PREMISE SIGN" includes, but is not limited to, signs commonly
known as billboards.
(AA) "ON-SITE SIGN." A sign that identifies or advertises only goods, services,
------------
facilities, events or attractions available on the premises where the sign
is located.
(BB) "PAINTED WALL SIGN." A sign painted on any outside wall or roof of any
-----------------
building.
(CC) "PARAPET." The extension of the main walls of a building above the roof
-------
level.
(DD) "PARASITE SIGN." Any unpermitted sign which is attached to another sign.
-------------
(EE) "PENNANT." Any flag-like piece of cloth, plastic or paper attached to any
-------
staff, cord, building or other structure and which hangs loosely for the
purpose of attracting attention to the site.
(FF) "PERMITTED SIGNS." All signs requiring a permit under this sign code.
---------------
(GG) "POLE SIGNS." A sign supported by poles, uprights, or braces, which are
----------
not concealed in an enclosed base, but are permanently placed on or in the
ground and wholly independent of any building for support, either single-
faced or double-faced.
(HH) "POLITICAL SIGN OR POLITICAL FLAG." Any display of characters, names, or
--------------------------------
illustrations which advocate the election of any individual, group pf
individuals, or any position for or against any political issue.
(II) "PORTABLE SIGN." A sign that has no permanent attachment to a building or
-------------
to the ground by means of a footing; including, but not limited to, an A-
frame sign, sign with wheels or frame or structures with axles or designed
to be pulled or towed on a trailer or similar devise, pull attachments, or
hot air or gas-filled balloons.
(JJ) "PREMISES." The lot or lots, plots, portions or parcels of land considered
--------
a unit for a single development or activity.
(KK) "PROJECTING SIGN." A sign supported by a wall of a building, projecting
---------------
away from that wall twelve (12) inches or more, and designed with a face or
faces reading at an angle to that wall.
(LL) "READER BOARD." A sign designed to accommodate changeable copy including,
------------
but not limited to, individual letters and numbers that can be removed and
replaced by hand. Electronic message centers are not considered part of
this definition.
(MM) "REAL ESTATE SIGN." A sign erected by the owner, or his agent, advertising
----------------
the real property where the sign is located for sale, lease, or rent.
(NN) "ROOF SIGN." A sign erected on or over the roof of any building.
---------
(OO) "SANDWICH SIGN." Any two-sided, self-supporting portable sign.
-------------
(PP) "SIGN." Any display of characters, letters, illustrations or any
----
ornamentations; or the complete structure on which any characters, letters,
illustrations, or ornamentations are supported or applied, except guys or
their anchorages.
(QQ) "SIGN AREA." The area enclosed by one continuous line, connecting the
---------
extreme points or edges of a sign. The area shall be determined using the
largest sign area or silhouette visible at any one time from any one point
that is off-site. This area does not include the main supporting sign
structure; but all other ornamental attachments, inner connecting links,
and the like, which are not a part of the main supports of the sign are to
be included in determining sign area.
(1) Free-standing letters or cut letters used as a sign area: the area is
measured as ninety percent (90%) of the area enclosed within the
smallest regular geometric figure needed
-3-
<PAGE>
to encompass completely all letters, insignias, or symbols of the
sign, including horizontal spacing between letters, insignias,
symbols, logos, and trademarks, except as otherwise provided herein.
(2) Signs other than free-standing letters, words, insignias, or symbols:
the area is measured as the total area of the facing, or the total
area within the outer edge of any existing border of the sign.
(3) In every event, computation of allowable sign area includes all
existing signs on the premises, whether those signs are conforming or
non-conforming under the terms of this appendix.
(RR) "SUBDIVISION SIGN." Any sign which marks or identifies the entrance or
----------------
entrances to a residential subdivision.
(SS) "SWING SIGNS OR SUSPENDED SIGNS." Any sign projecting at an angle on the
------------------------------
outside wall or walls of any building, and which is suspended from a
projecting structure in such a manner that the sign itself, or any part
thereof, is not attached to the building or wall.
(TT) "TEMPORARY SIGN." A sign used to advertise or identify transitory events
--------------
or two (2) weeks or less duration unless specifically permitted for a
longer period by this code.
(UU) "WALL SIGN." Any sign painted on, or attached to, or erected parallel to
---------
the face of, or erected and confined within the limits of, the outside wall
of any building, and which displays only one (1) advertising surface.
(VV) "WINDOW SIGN." A permanent or temporary sign affixed to, suspended behind,
-----------
or painted on either face of a window or glass door that reads to the
exterior of the building.
SECTION 5. SIGN PERMITS
- ---------- ------------
(A) PERMIT REQUIRED. It shall be unlawful for any person to erect, construct,
---------------
alter or relocate within the City of Lake Mary, Florida, any sign without
having first obtained a permit therefore, except as provided for in this
sign code.
(B) WORK TO BE PERFORMED BY OWNER, LESSEE, OR LICENSED CONTRACTOR. The
-------------------------------------------------------------
erection of all signs requiring permits under this sign code shall be done
by and permitted to the property owner or lessee, or to a sign contractor,
general contractor or building contractor legally authorized to perform
such work.
(C) APPLICATION FOR PERMIT. All applications for permits under this section
----------------------
shall be filed by either a contractor licensed to erect signs in the City,
or the owner of the property where the sign is to be located or his
authorized agent. Such applications shall include the following:
(1) Name, address and telephone number of owner(s) of property;
(2) Name, address and telephone number of licensed sign company erecting
the sign;
(3) The street address and legal description of the property upon which
proposed sign is to be located.
(4) The height, size, shape and location of the proposed sign;
(5) Written permission of the owner, his lessee or agent, to erect the
proposed sign;
(6) A plan, sketch, blueprint, or similar presentation drawn to scale,
showing all pertinent structural details, wind load requirements, and
materials in accordance with the requirements of the Southern Standard
Building Code;
(7) A statement verifying the height, size, shape and location of existing
signage on the premises.
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<PAGE>
(D) ISSUANCE OF PERMIT. Upon receipt of an application for a sign permit, the
------------------
Building Official or his designee shall review the plans, specifications
and other data relating to such sign, and, if considered necessary, inspect
the premises upon which the sign is proposed to be erected. If the
proposed sign is in compliance with this sign code and all other applicable
laws and code of the City, a sign permit shall be issued upon receipt of
the permit fee.
(E) PERMIT FEES. Permit fees under this sign code shall be set by resolution
-----------
of the City Commission.
(F) PERMIT LABEL REQUIRED. With each permit issued, the Building Official
---------------------
shall provide a label or decal for each permitted sign bearing the permit
number. This label shall be attached to the sign or sign structure so as
to be clearly visible from the public right-of-way or public areas of the
business site.
(G) PENALTY. In addition to other penalties provided by this sign code, or
-------
Code of Ordinances generally, a permit fee of double the amount specified
shall be required if work has commenced without a permit.
(H) EXPIRATION OF PERMIT. Any permit issued under this sign code shall expire
--------------------
ninety (90) days after date of issuance, unless installation of the
permitted sign is completed.
SECTION 6. GENERAL PROVISIONS.
- ---------- -------------------
(A) EXEMPT SIGNS: The following signs are exempt from the permitting
------------
requirements of this sign code, but shall still meet applicable
construction standards and obtain electrical permits if required by the
City Electrical Code:
(1) Identification signs of two (2) square feet or less;
(2) "No Trespassing," "Private Property," "No Soliciting," or "No Dumping"
signs of two (2) square feet or less;
(3) On-Site Directional or instructional signs of four (4) square feet or
less and less than three (3) feet in height where vehicle or
pedestrian movements are involved;
(4) Governmental signs for traffic control, street designation, direction
to public facilities, and any public sign deemed necessary by a public
official in the performance of his public duty, or as approved by the
City Commission;
(5) Professional name plates not exceeding three (3) square feet in area.
(6) Occupational signs denoting only the name and profession of an
occupant in a commercial building or public institutional building,
placed flat against the exterior surface of the building and not
exceeding three (3) square feet in area.
(7) Under-canopy signs behind the right-of-way line for pedestrian
identification of less than four (4) square feet.
(8) Credit card or membership signs or two (2) square feet or less, one
(1) of each different organization permitted for each street frontage;
(9) A maximum of two (2) menu (reader) boards for drive-through facilities
of no more than twenty-four (24) square feet each. Such signs shall be
located adjacent to and oriented toward the drive-through area;
(10) Decals affixed to fuel pumps, or other types of vending equipment used
for dispensing retail products, so long as the signs or decals remain
applicable to the use of the equipment.
-5-
<PAGE>
(11) Permanent ground type church service signs not exceeding fifty (50)
square feet and located on the property where the church sanctuary is
situated. Such signs shall be limited to six (6) feet in height and
shall meet the setbacks of the zoning district in which the church is
located.
(12) Standard-sized menus mounted at the entrance to restaurants.
(13) Signs required or authorized by federal, state, or county law.
(14) An owner or his designated agent is permitted to advertise real
property for sale, rent, or lease. No sign permit will be required
under the following conditions:
(a) Advertising shall be by the use of (1) sign not exceeding the
standards set forth in section 7(A)(2) and section 7(A)(3).
Maximum sign area shall be inclusive of all riders and
attachments.
(b) These signs shall be firmly anchored in the ground.
(c) No sandwich-type signs will be permitted.
(d) These signs shall be solely for the purpose of offering for sale,
for rent, or for lease the particular property on which the signs
are placed.
(e) All signs shall be removed upon the sale or lease of the property
immediately after closing. "Sold" signs may be permitted for
seven (7) days after the closing, and cannot exceed the size of
the original sign.
(15) Off-site directional signs, including but not limited to; garage sale,
open house, yard sale, neighborhood watch, and homeowners association
signs of six (6) square feet or less limited to one (1) per parcel,
lot or tract. These signs shall not be permitted in road or street
rights-of-way and may be removed by the City without notice.
(16) Home occupation signs limited ton one (1) square foot, affixed on the
wall adjacent to the front entrance of the building.
(B) PROHIBITED SIGNS. It shall be unlawful to erect or maintain any sign
----------------
described as follows:
(1) Commercial sign adjacent to residentially zoned land: No sign shall be
located within fifty (50) feet of any residentially zoned property.
(2) Traffic or pedestrian hazards: Any sign which constitutes a traffic
hazard or a detriment to traffic safety by reason if its size,
location, movement, content, coloring, or method of illumination. Any
sign which obstructs the vision between pedestrians and vehicles using
the public right-of-way, including, but not restricted to, those not
meeting visibility standards, in the Zoning Ordinance. Specifically
prohibited are signs using:
(a) Electronic message centers, or signs of a flashing, revolving or
stroboscopic nature. Signs of a flashing, animated, or rotating
nature, except traditional, non-illuminated barber poles not
exceeding three (3) feet in length.
(b) Bare bulbs in excess of eleven (11) watts; and
(c) Words and traffic control symbols so as to interfere with, mislead
or confuse traffic, such as "stop", "look", "caution", "danger",
or "slow".
(3) Signs or flags attached to trees, streetlight poles, parking lot light
poles or utility poles.
(4) Signs attached to or painted on vehicles which vehicles are not
regularly used as part of the advertised business and are parked or
located in such a way as to advertise.
(5) Privately constructed signs in public right-of-way not specifically
permitted by this sign code.
-6-
<PAGE>
(6) Signs made of combustible materials that are attached to or in close
proximity to fire escapes or fire fighting equipment.
(7) Roof Signs.
(8) Abandoned Signs.
(9) Projecting Signs.
(10) Any other signs that are not specifically permitted or exempted by
this sign code.
(11) Banner signs, streamers, ribbons, propellers, searchlights, balloons,
pennants or similar devices.
(12) Portable Signs.
(13) Pole Signs.
(14) Off Premise/Off-Site Signs (except for those permitted under section
6(A) (16)).
(15) Advertising Flags.
(16) Any temporary sign placed or located on or over any public
thoroughfare, road, alley sidewalk, easement, or right-of-way within
any zone of the City, except for special event signs sanctioned or
sponsored by the City Commission, at such locations and for such
duration as determined appropriate by the City Commission to the
event.
(17) Parasite signs.
(18) Reader Boards unless otherwise provided for in this code.
(C) PERMITTED SIGNS. All permitted signs shall be constructed in accordance
---------------
with the following standards, and no Certificate of Occupancy will be
issued for any new or renovated building unless it has conformed to these
standards.
(1) Code Compliance: All signs shall be constructed and maintained in
accordance with the provisions and requirements of the City of Lake
Mary Building Code, Electrical Codes, all other applicable codes,
ordinances or requirements.
(2) Copy: All copy shall be maintained so as to be legible and complete.
(3) Structure: Signs shall be maintained in a vertical position unless
originally permitted otherwise, and in good and safe condition at all
times.
(4) Damage: Damaged faces or structural members shall be repaired in a
timely manner.
(5) Safety: Electrical systems, fasteners, and the sign and structure as a
whole shall be maintained at all times in a safe condition.
(6) All permitted signs, including permanent and temporary signs, shall
conform to all ordinances and codes of the City and will be counted as
part of the total sign allowance established by these regulations for
any given parcel of real property or business, as appropriate.
(D) SIGN REGULATIONS.
----------------
(1) Individual/single use businesses (commercial, office, and industrial uses).
(a) Sign Area. Total sign area shall not exceed one-hundred (100) square
feet in PO, C-1 and C-2 zones, or two-hundred (200) square feet in M-
1A and M-2A zones. This can be either wall signs, window signs, reader
boards (as permitted) or ground signs, or a combination.
(b) Wall signs. Maximum wall sign area shall be permitted as follows:
1. In PO, C-1 and C-2 zones, one and one-half ( 1 1/2) square feet
for each building front foot, up to one-hundred (100) square feet.
-7-
<PAGE>
2. In M-1A and M-2A zones, two (2) square feet for each building
front foot, up to two-hundred (200) square feet.
(c) Window signs. Maximum window sign area shall be permitted as follows:
1. In A-1, M-1A, M-2A, PO, C-1 and C-2 zones, one (1) square foot for
each store front foot, up to one-hundred (100) square feet.
(d) Ground signs. One (1) ground sign per parcel for each primary street
frontage shall be permitted, of maximum area as follows:
1. Area. In A-1, PO, C-1 and C-2 zones, one and one-half (1 1/2)
square feet for each building front foot, up to one-hundred (100)
square feet. In M-1A and M-2A zones, two (2) square feet for each
building front foot, up to two-hundred (200) square feet.
2. Height. In A-1, PO, C-1 and C-2 zones the maximum height shall be
twelve (12) feet. In M-1A and M-2A zones shall be fifteen (15)
feet.
3. Setback. Minimum setback from right-of-way line shall be five (5)
feet for all ground signs.
4. Design of ground signs.
a. Vertical structure supports for ground signs shall be
concealed in an enclosed base. The width of such enclosed
base shall be equal to at least two-thirds (2/3) the
horizontal width of the sign surface.
b. The base shall be of a low maintenance finish which is
compatible with the architectural style of the principal
building limited to split face block, stone, finished metal
or brick. Sign bases finished with stucco or wood are
strictly prohibited.
c. Any external above ground light source shall be located and
hidden within the planer bed or shall be in a burial fixture.
(e) Reader boards are permitted for the following uses and with the
following restrictions:
1. Churches, places of worship, organizations which are exempt from
paying Federal Income Tax under section 501(c)(3) of the Internal
Revenue Code, public schools, government buildings and facilities
shall be permitted to have reader boards provided that the total
sign area for reader boards does not exceed 32 (thirty-two)
square feet per lot, tract or parcel.
2. Movie theaters, drive-in theaters, or playhouses. Reader boards
are permitted, and shall be calculated as part of the total
maximum allowable sign area in the zoning district in which these
uses are located.
3. Automobile service stations and convenience stores. A maximum of
nine (9) square feet may be devoted to reader boards per lot or
parcel which contains an automobile service station or
convenience store. Only one side of a double-faced ground signs
shall be counted for area calculation purposes. Reader board sign
area shall be calculated as part of the total maximum allowable
sign area in the zoning district in which it is located.
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<PAGE>
(2) Commercial Shopping Centers. Shopping centers shall be permitted signs
----------------------------
under this section. However, the following criteria are to be considered
guidelines for maximum signage. All shopping center signage shall be
reviewed and approved by the Planning and Zoning Board as to final size,
location, and coordination.
(a) Wall and window signs. Wall and window signage for individual
businesses in shopping center of up to two (2) square feet for each
business front foot and not to exceed a maximum of one-hundred (100)
square feet. This can either be a wall signage, window signage, or a
combination.
(b) Individual businesses in a shopping center exceeding one-hundred (100)
business front feet are permitted one (1) square foot of sign area for
each additional business front foot over and above one-hundred (100)
business front feet, but not to exceed two-hundred (200) square feet.
This can be wall signage, window signage or a combination.
(c) No illuminated wall sign shall exceed one-hundred (100) square feet if
it is within five-hundred (500) feet of a residential land use or
zoning district and is visible from the residential land use or zoning
district.
(d) In the case of corner stores, additional signage may be allowed only
where the same or similar facade treatment is used on both front and
side and there is an entrance to the general public along such sides,
but in no case shall more than one side facade of a corner store
exceed one-hundred (100) square feet of sign area. Sign area is not
transferable between facades.
(e) Ground Sign.
1. Maximum sign area shall be in accordance with the following
regulations:
a. Centers under seventy-five-thousand (75,000) square feet:
Shopping center identification sign of fifty-six (56) square
feet or less.
b. Centers of seventy-five-thousand (75,000) square feet to
two-hundred-fifty-thousand (250,000) square feet: Shopping
center identification sign of eighty-four (84) square feet
or less.
c. Centers of over two-hundred-fifty-thousand (250,000) square
feet: Shopping center identification sign of one-hundred-
twelve (112) square feet or less.
2. Height, setback, and spacing of ground signs.
a. Maximum height shall be fifteen (15) feet.
b. Ground signs shall be set back a minimum of:
b.1. Fifty (50) feet from side lot lines, or equidistant
from side lot lines.
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<PAGE>
b.2. Five (5) feet or more from right-of-way, but in no
event erected in any location which shall constitute
an impediment to clear line of sight for vehicular
traffic. Signs which constitute a traffic safety
hazard based upon recommendation by the City Police
Department shall be relocated on order of the Planning
and Zoning Board to eliminate the hazard.
b.3. Ground sign structures on the same ownership parcel
shall be minimum of seven-hundred (700) feet apart.
3. Design of ground sign. The design of permitted ground sign shall
be in accordance with section 6(D) (1) (c) 4.
(3) INDUSTRIAL PARKS. Subdivisions of land as defined in the City Subdivision
----------------
Regulations which are zoned for industrial use shall be permitted signage
as follows:
(a) Ground Sign. One (1) ground sign structure for each public right-of-
way entrance consisting of any combination of identification or
directory signage. Maximum sign area of all ground signs shall be
forty-eight (48) square feet for every fifty (50) acres or fraction
thereof. The design of permitted ground signs shall be in accordance
with section 6 (D) (1) (c) 4.
(b) Individual sites within an industrial park. Individual sites
within an industrial park shall be permitted ground and wall
signage under Section 6 (D) (1) of this sign code.
(c) Directory signs for multi-tenant complex within an industrial
park.
1. Directory Sign. One (1) directory sign per street frontage which
is accessed by the complex shall be permitted as follows:
a. Complexes under one-hundred-thousand (100,000) square feet -
Maximum area per sign shall be forty-eight (48) square feet.
b. Complexes of 100,000 square feet or greater - Maximum area
per sign shall be seventy-two (72) square feet.
c. Height and Setback Requirements for Directory Signs.
c.1. Maximum height shall be fifteen (15) feet.
c.2. Ground signs shall be setback a minimum of five (5)
feet from public right-of-way; however, signs in
entrance median may be approved.
d. Design of directory sign. The design of permitted ground
signs shall be in accordance with section 6 (d) (1) (c) 4.
2. Wall and window signage. Wall signage for individual tenants in a
multi-tenant complex shall be permitted in accordance with
section 6 (D) (2) of this code.
(4) OFFICE PARKS.
------------
(a) Ground Sign. One (1) ground sign structure for each primary park
entrance consisting of any combination of identification and directory
signage. Maximum sign area for each structure shall be calculated as
thirty-two (32) square feet for every fifty (50) acres or fraction
thereof. The design of permitted ground signs shall be in accordance
with section 6 (D) (1) (c) 4.
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<PAGE>
(b) Individual sites within an office park.
1. Directory Sign. One (1) wall or ground directory sign located
adjacent to each building entrance of up to eight (8) square
feet; and
2. Wall signs to identify individual offices not to exceed two (2)
square feet each.
3. Ground Signs.
a. Maximum height shall be twelve (12) feet.
b. Ground signs shall be setback a minimum of:
b.1. Twenty-five (25) feet from side lot lines, or
equidistant from side lot lines.
b.2. Five (5) feet from public rights-of-way.
c. Design of ground sign. The design of permitted ground signs
shall be in accordance with section 6 (D) (1) (c)4.
(5) RESIDENTIAL ZONES.
-----------------
(a) Ground Signs. One (1) ground sign for each street frontage shall be
permitted as follows:
1. Multi-family uses of twelve (12) units or less in R-3 zones -
maximum sixteen (16) square feet.
2. Multi-family uses of thirteen (13) or more units in R-3 zones -
maximum thirty-two (32) square feet.
3. Subdivision Signs. Permanent subdivision signs shall be reviewed
by the Planning and Zoning Board and/or City Commission as part
of the subdivision review process, or upon request for property
owners after development has occurred. If an off-site subdivision
sign is approved, no other off-site sign (including directional
signs) shall be allowed on the parcel containing the off-site
subdivision sign.
a. Design standards for subdivision signs. Vertical structure
supports for subdivision signs shall be concealed in an
enclosed base. The width of such enclosed base shall be
equal to the horizontal width of the sign surface. The base
shall be of a low maintenance finish. Stucco, wood, raw
concrete and exposed concrete block are not acceptable
finishes.
b. The maximum height of a subdivision sign is six (6) feet
from grade.
c. A subdivision sign shall be located in close proximity to
the entrance or entrances of the subdivision identified by
the particular sign. No more than two subdivision signs are
permitted per entrance. Subdivision signs proposed to be
located in public right of way must be specifically reviewed
by the City Commission.
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<PAGE>
d. Subdivision signs shall not be internally illuminated.
e. Free standing letters/cut out letters shall not exceed a
maximum height of two (2) feet. The maximum sign area for
each subdivision sign shall be sixty (60) square feet.
4. Height and Setback. Setback and height for ground signs in
residential districts shall be as follows:
a. One (1) to five (5) foot setback - maximum height three (3)
feet.
b. Over five (5) foot setback - maximum height eight (8) feet.
c. Minimum setback from side lot lines shall be ten (10) feet.
d. Design of ground sign. The design of permitted ground signs
shall be in accordance with section 6 (D) (1) (c)4.
(b) Wall Signs. One (1) wall sign may be utilized in lieu of a ground
sign, of maximum size as specified above. Any internal illumination of
signs shall be approved by the Planning and Zoning Board.
(c) Conditional uses in residential zones. The following total sign areas
shall be permitted for conditional uses in residential zones. Height,
setback shall be according to the preceding subsection (4).
1. Child care, nursery school - sixteen (16) square feet.
2. Churches - thirty-two (32) square feet.
3. Home Occupation - one (1) square foot, affixed on the wall
adjacent to the front entrance of the building.
4. All other conditional uses - sixteen (16) square feet.
5. In A-1 zones maximum height of ground signs for churches,
nurseries, day care centers, schools, funeral homes and other
conditional uses in A-1 shall be twelve (12) feet. Maximum total
sign area allowed for an A-1 non-residential use shall be one
hundred (100) square feet which includes all wall, window, reader
board, temporary and ground sign areas.
SECTION 7. TEMPORARY SIGNS.
- ---------------------------
(A) Real Estate and Construction Signs. Real Estate and construction signs,
as defined in this sign code, shall be permitted under the following
conditions:
(1) One (1) non-illuminated sign of each type shall be allowed on each
street frontage of the subject property only.
(2) Freestanding signs shall be:
(a) Setback five (5) feet from public rights-of-way.
(b) Setback twenty-five (25) feet from side property lines, or
equidistant between side property lines.
(c) A maximum height of five (5) feet in residential zones and ten
(10) feet in commercial and industrial zones.
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<PAGE>
(3) Maximum sign area shall be:
ZONE REAL ESTATE CONSTRUCTION
- ------------------ --------------- --------------
RCE, A-1 (3 ACRES 6 Square Feet 16 Square Feet
OR LESS), R-1A per lot, parcel per approved
R-1AA, R-1AAA, R-2 or tract subdivision or
RM site plan
- --
PO, R-3 16 Square Feet 32 Square Feet
A-1 (MORE THAN per lot, parcel per approved
3 ACRES) or tract subdivision or
site plan
C-1, C-2, M-1A 32 Square Feet 64 Square Feet
M-2A per lot, parcel per approved
or tract subdivision or
site plan
(4) Construction signs shall not be erected more than sixty (60) days
prior to the beginning of construction, and shall be removed within
thirty (30) days after construction is completed. Such signs shall be
removed immediately if construction has not begun after sixty (60)
days, or if construction is halted thereafter for a period of more
than thirty (30) days.
(5) Subcontractor and other additional signs of two (2) square feet or
less shall be permitted in addition to total sign area and shall be
affixed to, or immediately adjacent to the main sign structure.
Additional signs exceeding two (2) square feet shall be counted toward
total sign area.
(B) Political Signs and Flags.
--------------------------
(1) Temporary political campaign signs or flags shall be permitted in all
zoning districts subject to the following restrictions, limitations
and requirements and any other applicable requirements set forth in
this sign code.
(2) Setback shall be five (5) feet from public rights-of-way.
(3) Setback shall be twenty-five (25) feet from side property lines or
equidistant between side property line.
(4) The maximum height shall be five (5) feet in residential zones and ten
(10) feet in commercial and industrial zones.
(5) The maximum sign or flag area shall be:
ZONE MAXIMUM PER SIGN/FLAG
---- ---------------------
Residential 6/50 Square Feet
Agricultural, Commercial,
or Industrial Zone 16/50 Square Feet
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<PAGE>
(6) Political campaign signs shall be erected no sooner than the candidate
has qualified for an election and shall be removed within ten (10)
days after the election or after the campaign issue has been decided.
(7) The erection and removal of all political signs shall be the joint
responsibility of the owner of the property upon which the sign is
placed, of the owner of such sign and the candidate for whom such sign
was placed. Each such person shall be jointly and severable liable
for a violation of the terms and conditions of this sign code.
(8) Political Campaign/Permit; Bond. It shall be unlawful for any
candidate for an elected office to post any signs, billboards, or
posters within the City unless such candidate or his campaign manager
shall first obtain a permit from the City Clerk and post a good and
sufficient surety bond or cash bond in an amount of not less than one
hundred dollars ($100.00) conditioned upon compliance with Code and
the removal of such signs, billboards and posters within ten (10) days
after the election in which the candidate is eliminated or elected or
the campaign issue is decided. Should the candidate fail to comply
with Code or refuse to remove said signs, billboards or posters within
fifteen (15) days after such election, the City shall have the
authority to enforce the Code and/or to remove such signs, billboards
and posters and dispose thereof and charge the cost of enforcement
and/or such removal and disposition against the bond posted by the
candidate. In the event a cash bond is posted, any sums remaining in
the hands of the City after the cost of such removal has been deducted
shall be remitted to the candidate.
(D) Temporary signs for special events.
----------------------------------
(1) Permits for temporary signs not otherwise prohibited are allowed for
such purposes as auctions, special events, notice of opening of new
businesses, and going out of business sales. Permits for temporary
signs shall authorize the erection of the signs and maintenance
thereof for a period not exceeding fourteen (14) days; and permits
cannot be renewed on the same sign, nor shall another temporary permit
be issued on the same location, within ninety (90) days from the date
of expiration of any previously issued temporary permit. This
limitation shall specifically apply to shopping centers, industrial
parks, and office parks, where only one (1) temporary sign permit
shall be issued in any ninety (90) day period.
(2) Signs for specific events shall be removed within two (2) working days
after conclusion of the event. A temporary sign shall be no larger
than a maximum of thirty-two (32) square feet, and may be double-
faced.
(3) Temporary signs for public or private non-profit special events, or
special events not related to the primary use of the property may be
permitted by the City Commission for a period covering the duration of
the event and advance publicity not to exceed a total period of
fourteen (14) days. Such temporary signs shall not exceed thirty-two
(32) square feet for each parcel,. lot or tract and shall not be
illuminated. Temporary signs for such events may be reader boards.
SECTION 8. MISCELLANEOUS ADVERTISING.
- --------- -------------------------
(A) Handbills.
---------
(1) Posting Handbills on Buildings, etc. It shall be unlawful for any
person to post any bills or other advertising matter upon any
permanent or temporary structure or building, pole or tree located in
any street, park, or other public way or place within the City.
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<PAGE>
(2) Scattering Handbills. It shall be unlawful for any person to
distribute or place or cause to be distributed or placed on any public
or private property in the City any handbills, circular, dodgers or
other advertising matter is such a manner that the same may be blown,
carried by water or otherwise scattered by the elements, or so as to
constitute litter.
(3) Placing or Throwing Handbills on or into Vehicles. It shall be
unlawful for any person to distribute or cause to be distributed in
the City any handbill or other similar form of advertising matter by
throwing or placing the same on or into any vehicle within the City.
(B) Sound Trucks and Sound Amplifying Devices. It shall be unlawful for any
-----------------------------------------
person to operate or permit to be operated in the City any sound amplifying
device or equipment for the purpose of conveying a message from public
streets or property or from private property to adjoining land.
(C) Off-site directional Signs. Charitable, fraternal, civic (including
--------------------------
homeowners associations and neighborhood watch) or religious organizations
maintaining a fixed place of assembly or meeting within the City of Lake
Mary, Florida, may erect directional signs for the purpose of indicating
the address or location of their place of assembly or meeting within the
City. Each such sign may bear the logo or symbol of the charitable,
fraternal, civic or religious organization together with the address of its
location or meeting place, and a directional arrow. Except as otherwise
prohibited by state law or county ordinance, a maximum of two such signs
per organization may be erected at locations to be designated by the City
Commission, by resolution. Size material and location are subject to City
Commission approval.
(D) On-site historical marker, service club signs, memorial signs or tablet.
-----------------------------------------------------------------------
These signs may be erected and maintained at such location as recommended
by the Planning and Zoning Board, and shall be subject to design,
construction, size, and illumination restrictions as appropriate to the
area where erected.
SECTION 9. MISCELLANEOUS RESTRICTIONS.
- ---------- ---------------------------
(A) Illuminated signs. Illuminated signs located within five-hundred (500)
-----------------
feet of a residential land use or zoning district, and which are visible
from the residential land use or zoning district, shall be turned off no
later than 10:00 p.m. and remain off until 6:00 a.m. each night, unless
exempted from this requirement upon the recommendation of the exempted from
this requirement upon the recommendation of the City Police Department,
based on considerations of safety or property security, and approved or
modified by the City Commission. Emergency medical facilities shall be
exempt from this section.
(B) Electrical Requirements
-----------------------
(1) The construction and maintenance of all signs using electric power in
any manner shall be subject to the requirements of the current
electrical requirements of the current electrical ordinances and codes
of the City. Plans and locations shall be approved by the Building
Official, and such signs shall be inspected and approved by him before
operation. All such signs must be installed by a qualified and
licensed electrician in accordance with provision of the National
Electrical Code.
(2) Proximity to electrical conductor: No signs shall be erected closer
than ten (10) feet to any overhead electrical conductor, where the
difference in potential between any two conductors or between one
conductor and ground exceeds seven-hundred-fifty (750) volts.
-15-
<PAGE>
(3) All exterior electrical outlets for signs shall terminate in a
galvanized box with a blank cover, which shall be flush with and not
protrude beyond the finished surface of the exterior wall.
(4) Transformer boxes, outlets, conduits, and other accessory equipment
for any sign shall be placed so that they are not visible from the
exterior.
(5) Wooden signs shall not have electrical lights or fixtures attached to
them in any manner.
(6) No electrical sign shall be so lighted or maintained as to throw a
glare or blinding light into any street, highway, or other public
thoroughfare, which would be likely to blind or impair the vision of
any motorists upon the street, highway, or thoroughfare.
(C) Public Liability Insurance.
--------------------------
(1) Bond. The owner or person in control of a display sign, awning,
marquee, banner, or structure of any kind whatsoever, suspended over
or extending into any public right-of-way, shall obtain, maintain and
give evidence of public liability insurance having minimum coverage
limits of one-hundred-thousand dollars ($100,000) per person, two-
hundred-thousand dollars ($200,000) per incident, indemnifying the
City against all loss, cost, damage, or expenses incurred or sustained
by, or judgments recovered against the City, or by any of its
officers, employees, appointees or servants, by reason of the
construction or methods of such display sign, awning, marquee, banner
or structure whatsoever; and also conditioned to indemnify any person
for any injury sustained by reason of such construction or
maintenance.
(D) Liability for damages. The provisions of this appendix shall not be
---------------------
construed to relieve or to limit in any way the responsibility or liability
of any person, firm, or corporation which erects or owns any sign, for
personal injury or property damage caused by the sign; nor shall the
provisions of this appendix be construed to impose upon the City, its
officers, or its employees any responsibility or liability by reason of the
inspection or approval of any sign under the provisions of this appendix.
(E) Painting and pasting on sidewalks and the like. No person shall paint,
----------------------------------------------
paste, print, or nail any banner sign, paper sign, or any advertisement or
notice of any kind whatsoever, or cause the same to be done, on any
curbstone, flagstone, pavement, or any other portion or part of any
sidewalk or street, or upon any tree, lamp post, utility pole, hydrant, or
bridge within the limits of any street or public right-of-way within the
City; however, this section shall not apply to regular notices required by
law to be as posted. No advertisement may be placed on trash containers or
benches located within the City. The City may by resolution permit
painting of house numbers on curbs pursuant to standards of uniformity and
location as may be subsequently adopted.
(F) Signs in power line easements. Signs to be located on power line easements
shall be approved by the power company.
SECTION 10. ENFORCEMENT. The Code Enforcement Officer shall be empowered to
- ---------- -----------
enforce this sign code.
(A) Removal of Prohibited Signs.
---------------------------
(1) Prohibited signs on public property or rights-of-way shall be removed
immediately, and may be removed by the City or its agent without
notice.
-16-
<PAGE>
(2) Temporary signs and parasite signs shall be removed within a
reasonable time frame as determined by the city after receipt of
written notification by the Code Enforcement Officer or Building
Official.
(3) Abandoned signs shall be removed by the owner, agent, or person in
charge of the premises within thirty (30) days after receipt of
written notification by the Code Enforcement Officer or Building
Official.
(B) Should any sign become insecure or in danger of falling, in disrepair or
deteriorated, or otherwise unsafe in the opinion of the Code Enforcement
Officer or the Building Official, the owner thereof, or person or firm
maintaining it, shall, upon receipt of written notification from the
Building Official or Code Enforcement Officer immediately, in the case of
imminent danger, or within ten (10) days in other instance, secure the sign
or cause it to be placed in good repair in a manner approved by the
Building Official, or said sign shall be removed by the owner thereof. If
such order is not complied with, the City may remove the sign at the
expense of its owner and may place a lien for the cost thereof upon the
property on which the sign was located together with any other cost
incurred by the City by filing such lien. The lien may be foreclosed in
the same manner provided by law for the foreclosure of mortgages and the
City shall have the right to receive all costs of court including
reasonable attorney fees.
(C) Removal of Illegally Erected Signs. Where this sign code requires sign
----------------------------------
painting or erection by a licensed contractor and such work is not
performed by a licensed contractor, the owner or lessee of the property
where such illegally erected sign is located shall either:
(1) Have the sign immediately removed; or
(2) Have a licensed contractor secure a permit for such sign. City
inspections of the sign shall be performed.
(D) Termination of Unlawful Illumination. Upon receipt of written notification
------------------------------------
by the Code Enforcement Officer or Building Official that a sign is
unlawfully illuminated in violation of this sign code, the owner, his
agent, or person in control of the premises, shall immediately terminate
the prohibited illumination or animation of such sign.
(E) Violation; Penalties; Continuing Violations and Penalty Thereof. A person
---------------------------------------------------------------
violating any of the terms, conditions, regulations, limitations or
provisions of this sign code shall be punished in accordance with Section
10.99 Code of Ordinances, City of Lake Mary, Florida. Each day that any
violation of the terms, conditions, regulation, limitations, or provisions
of this sign code shall continue to exist, shall constitute a separate and
distinct offense, punishable as herein provided. Any continuing violations
of the terms, conditions, regulations, limitations or provisions of the
Chapter may be adjoined and restrained by an injunctive order of the
Circuit Court in appropriate proceedings instituted for such purposes.
Violations of this sign code, including those sections authorizing City
removal of signs or other penalties, may be referred to the municipal Code
Enforcement Board as prescribed by Chapter 30 of the Code of Ordinances,
City of Lake Mary, Florida, and/or a code enforcement citation may be
issued.
In addition to any other remedies, whether civil or criminal, the City
shall, at its discretion, have the right to seek the aid of the courts of
the State of Florida with respect to the enforcement
-17-
<PAGE>
hereof and the violation of this sign code or any lawful order of the City
Commission, Code Enforcement Officer, or Building Official which right
shall include the right to seek injunctive relief against such persons as
may be determined by the Chief Building Official to be in violation of the
terms and provisions hereof.
(F) Repairs, Maintenance & Improvements of Non-Conforming Signs. Normal
------------------------------------------------------------
repairs, maintenance and improvements may be made; however, the cost of
such improvements made during any two (2) year period shall not exceed
twenty-five percent (25%) of the replacement cost of the sign at the end of
the two (2) year period except in full conformity with the provision of
this sign code.
(G) Reconstruction After Catastrophe. If any non-conforming sign is damaged
--------------------------------
by fire, flood, explosion, collapse, wind, war, or other catastrophe to
such an extent that the cost of repair and reconstruction will exceed fifty
percent (50%) of the replacement cost at the time of damage, it shall not
be used or reconstructed except in full conformity with the provision of
this sign code.
(H) Causal, Temporary or Illegal Use. The casual, temporary, or illegal use
--------------------------------
of any sign shall not be sufficient to establish the existence of a legal
non-conforming sign or to create any rights in the continuance of such
sign.
SECTION 11. NON-CONFORMING SIGNS
- ----------- --------------------
(A) Any sign having an original cost in excess of one-hundred dollars ($100)
and which is non-conforming as to permitted sign area or any other reason
which would necessitate the complete removal or total replacement of the
sign, may be maintained for the longer of the following two periods:
(1) Three (3) years from the date upon which the sign became non-
conforming under the provisions of this appendix and amendments
hereto; or
(2) (a) A period of from three (3) to seven (7) years from the installation
date, or most recent renovation date which preceded the effective date
of this appendix; however, if the date of the most recent renovation
is chosen as the starting date for the period of amortization, then
the period of amortization shall be calculated according to the cost
of the renovation and not according to the original cost of the sign.
The term of years to be determined by the cost of the sign or of
renovation, including installation cost, shall be as follows:
<TABLE>
<CAPTION>
Permitted years from
Sign cost or installation or
renovation cost renovation date
----------------- --------------------
<S> <C>
$ 101 to $1,000 3
$1,001 to $3,000 4
$3,001 to $10,000 5
Over $10,000 7
</TABLE>
(2) (b) The provisions of division (A) (1) and (A) (2) (a) of this section
shall not apply to any sign subject to the Federal Highway
Beautification Act (23 USC 1310) and F.S Chapter 479, as same may be
from time to time amended.
-18-
<PAGE>
(3) (a) For and during the period of amortization of any sign caused to be
a non-conforming sign by this Chapter, no sign deemed to be a non-
conforming sign shall have its useful life extended by rehabilitation,
renovation or alteration.
(3) (b) Any owner of a sign who desires to rely upon an amortization period
longer than three (3) years shall file with the Building Official
within one (1) year form the effective date of this appendix a
statement setting forth the cost and date of most recent renovation,
and a written agreement to remove or bring into conformance the non-
conforming sign at or prior to the expiration of the amortization
period applicable to that sign.
(3) (c) Failure to comply with these requirements shall constitute a
violation of this appendix. In addition to any other remedies
provided herein by law for violation of this appendix.
SECTION 12. VARIANCES AND APPEALS
- ----------- ---------------------
(A) Non-Conforming Lots. On existing lots of substandard width, where
-------------------
existing conditions or City site plan requirements conflict with the
ability to meet setback requirements of this sign code, the City Planner
may allow the setback to be reduced to the largest dimension available.
(B) Shopping Centers containing ten (10) or more rental spaces. In the case
----------------------------------------------------------
of shopping centers containing ten or more rental spaces, special
exceptions to requirements of this appendix may be granted by the City
Commission upon application and a showing that applicable provisions of
this appendix create substantial and irremediable hardship for any
commercial tenant owing to the design of the structure of the center or its
structural orientation to the highway upon which it fronts. It is the
intent of the section to assure tenants of such centers of the opportunity
to advertise their presence therein pursuant to such exceptions to the
appendix as may be required to that end.
(C) Sign Code Board of Adjustment. The Planning and Zoning Board is hereby
-----------------------------
designated as the Sign Code Board of Adjustment, and is authorized to:
(1) Hear and decide appeals where it is alleged there is error in any
order, requirements, decision, or determination made by a City
Official in the enforcement of this sign code or in the interpretation
of this sign code as regards permitting.
(2) Consider variances of this sign code in specific cases where such
variances will not be contrary to the public interest and where,
owning to special conditions, a literal enforcement of the provisions
of this sign code would result in unnecessary hardship. All
requirements, procedures, findings and appeals of sign code variances
shall follow those provisions for zoning variances. No action of the
Board shall be valid or binding unless adopted by the affirmative vote
of three (3) or more members of the Board.
-19-
<PAGE>
EXHIBIT 10.5
GENERAL SERVICES AGREEMENT
--------------------------
This GENERAL SERVICES AGREEMENT ("Agreement") is made and entered into as
of June 28, 1997, by and between SEAGATE SOFTWARE, INC., a corporation organized
and existing under the laws of the United States and with its business address
at 920 Disc Drive, Scotts Valley, California 95066, U.S.A. ("SSI"), and SEAGATE
TECHNOLOGY, INC., a corporation organized and existing under the laws of the
United States and with its business address at 920 Disc Drive, Scotts Valley,
California 95066, U.S.A. ("STI").
W I T N E S S E T H:
WHEREAS, SSI and its Affiliates are in the business of producing and
distributing software;
WHEREAS, STI has performed administrative, accounting and similar tasks
that benefited SSI and its Affiliates in their business in prior periods, and
SSI wishes to acquire such services from STI on an ongoing basis; and
WHEREAS, STI is willing and able to perform such services for SSI on the
terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing, the mutual promises set
forth herein and the mutual benefits to be derived herefrom, SSI and STI hereby
agree as follows:
Article 1: Definitions
- -----------------------
1.1 "Affiliate" shall mean and include any entity or association controlled by,
controlling or under common control with any of the parties. For the
purposes of this definition, the term "control" shall mean the ownership of
at least 50% of the voting interests in any entity or association.
1.2 "Products" shall mean and include all information, storage, and network
management software.
1.3 "Services" shall mean the activities described in Article 2.1 of this
Agreement.
1.4 "Service Fees" shall mean the amount estimated to be paid by SSI to STI
during any fiscal year for the performance of Services hereunder as
specified in Appendix A to this Agreement.
Page 1 of 9
<PAGE>
Article 2: Engagement of STI
- -----------------------------
2.1 SSI hereby engages STI and STI hereby agrees, to provide those
administrative, accounting and similar services requested by SSI and, which
SSI shall require for the effective and efficient operation of SSI's
business. The Services may include, but are not limited to, the following:
(a) providing general accounting services and preparing budgets and
performing financial forecasting, cost control and other financial
planning services;
(b) assisting SSI in human resources activities including, but not limited
to, employee benefits, hiring, and payroll administration;
(c) providing such other legal and government relations services,
preparing applications for export licenses, permits and other
authorization forms, and preparing filings and reports with
governmental agencies, as may be required for the conduct of SSI's
business activities;
(d) preparing the documentation necessary to satisfy customs formalities
and entry procedures, including the determination and reporting of
customs duties, import tax, value-added tax, and any other charges or
taxes imposed on the Products;
(e) assisting SSI with tax related issues including, but not limited to,
Federal, State, and international tax planning, provisions, audits,
and compliance, including income, sales and use, property, VAT, and
similar taxes;
(f) preparing documentation relating to SSI's general administration,
including documentation necessary to maintain it in good standing in
its place of organization and such other jurisdictions where SSI
conducts business;
(g) maintaining files of corporate and commercial documentation;
(h) providing assistance relating to the marketing, promotion, and sale of
the Products;
(i) providing services and support relating to information technology and
facilities;
(j) providing such other administrative services for SSI as SSI may
reasonably request from time to time; and
Page 2 of 9
<PAGE>
(k) oversight by SSI's Chairman of the Board, including screening of
potential acquisitions, partnerings, joint ventures, or similar
transactions.
2.2 The parties acknowledge that STI may provide Services benefitting SSI or
its Affiliates. SSI shall be responsible for payment of Service Fees to
STI pursuant to Article 5 of this Agreement. SSI may allocate such Service
Fees to its Affiliates as SSI determines to be appropriate.
Article 3: Independent Contractors
- -----------------------------------
The relationship of SSI and STI established by this Agreement is that of
independent contractors, and nothing in this Agreement shall be construed: (a)
to give any party the right or power to direct or control the daily activities
of any other party; (b) to constitute the parties as principal and agent,
employer and employee, partners, joint venturers, co-owners or otherwise as
participants in a joint undertaking; or (c) to allow either party (i) to create
or assume any obligation on behalf of the other party for any purpose whatsoever
or (ii) to represent to any person, firm or entity that such party has any right
or power to enter into any binding obligation on the other party's behalf. STI
shall independently determine the method, means and technical details of
performing the services contemplated by this Agreement.
Article 4: Representations, Warranties and Covenants of STI
- ------------------------------------------------------------
STI hereby represents, warrants and covenants that:
(a) It has the personnel, facilities and resources required to discharge
and will discharge the services contemplated by this Agreement in a
timely and efficient manner.
(b) It has the administrative, business and technical experience and
expertise required to perform and will perform such services in a
competent and professional manner.
Article 5: Consideration
- -------------------------
5.1 Service Fees. In consideration for STI's performance of Services
------------
hereunder, SSI shall pay to STI each fiscal year the Service Fees specified
in Appendix A attached to this Agreement. The parties acknowledge that the
Service Fees represent a reasonable estimate of STI's direct and indirect
costs to be incurred in performing the Services. Service Fees shall be paid
in U.S. dollars in equal monthly installments within thirty (30) days after
the end of each month.
Page 3 of 9
<PAGE>
Appendix A shall be reviewed at least annually and revised, as necessary,
as agreed between the parties.
5.2 True-Up Adjustment. For each fiscal year, the parties shall review the
------------------
actual level of Services provided by STI, and the corresponding actual
direct and indirect costs incurred by STI in performing such Services. The
parties agree that if such actual costs are greater than or less than the
Service Fees specified in Appendix A for such fiscal year, such difference
shall be charged to or refunded to SSI, as the case may be, within thirty
(30) days after such review.
5.3 Prior Years. The parties acknowledge that STI performed Services for SSI
-----------
(and/or one or more predecessor entities to SSI) or its Affiliates during
periods prior to the effective date of this Agreement. In recognition of
this fact, SSI hereby agrees to pay Service Fees to STI for such prior
periods. The parties shall agree as to the proper amount of such Service
Fees, and STI shall provide such supporting documentation as SSI reasonably
requests.
5.4 Governmental Adjustment. In the event that any government authority
-----------------------
determines that the provisions hereof do not constitute an arm's-length
arrangement between the parties, and accordingly adjusts the amount to be
reported in such jurisdiction, the parties shall make an appropriate
correlative adjustment between themselves. Payment of such correlative
adjustment shall be made in the year that the amount of the governmental
adjustment becomes fixed by a final administrative determination. If a
party chooses to contest such determination, the payment shall be made in
the year that the governmental adjustment is fixed by a final judgment of a
court of competent jurisdiction or determination under applicable competent
authority proceedings.
Article 6: Examination of Records
- ----------------------------------
STI agrees to provide SSI with access to such original receipts, ledgers
and other records as may be reasonably necessary for SSI or its representatives
to verify the amount and nature of any of STI's costs incurred in performing
Servics hereunder. Any such examination shall be conducted at STI's business
premises during regular business hours. SSI shall bear the cost of any such
examination.
Page 4 of 9
<PAGE>
Article 7: Indemnification
- ---------------------------
STI shall indemnify, defend and hold SSI harmless against any and all
claims, suits, actions, demands, proceedings, losses, damages, liabilities,
costs and expenses, including, without limitation, interest and reasonable
attorneys' fees (collectively, "Liabilities"), arising out of, relating to, or
resulting from Services performed by STI pursuant to this Agreement, other than
those Liabilities that would not have arisen but for any act, error and/or
omission of SSI and/or any of its officers, directors, employees and/or agents.
Article 8: Term and Termination
- --------------------------------
8.1 Term. The term of this Agreement shall commence on the date first written
----
above, and shall continue indefinitely, unless terminated pursuant to the
terms in this Agreement.
8.2 Termination. In addition to the rights of termination established under
-----------
Article 11.2 herein, this Agreement may be terminated in the following
circumstances, without judicial action or arbitration:
(a) In the event of any material breach of, or material default under,
this Agreement by SSI or STI, the nonbreaching or nondefaulting party
shall give the other party written notice of such breach or default.
The other party shall have a period of thirty (30) calendar days from
the date of receipt of such written notice within which to cure the
breach or default. In the event of failure to cure, this Agreement
may be terminated by written notice of the nonbreaching or
nondefaulting party's election to terminate to the other party.
(b) Any party may terminate this Agreement immediately, upon written
notice of termination to the other party, if any other party goes into
bankruptcy or voluntary or involuntary dissolution, is declared
insolvent, fails to pay its debts as they come due, makes an
assignment for the benefit of creditors, becomes subject to any
proceedings under any bankruptcy or insolvency law, or suffers the
appointment of a receiver, manager, trustee or similar officer over
all or substantially all of its assets or properties.
(c) Any party may terminate this Agreement upon sixty (60) calendar days
notice in writing to the other party. In the event that this
Agreement is terminated pursuant to this Article 8.2(c), SSI shall pay
to STI Service Fees for all Services performed prior to the
termination date, within thirty (30) calendar days of STI's submission
to SSI of a final invoice. Thereafter, SSI shall have no further
obligation to STI whatsoever.
Page 5 of 9
<PAGE>
8.3 Preservation of Rights. Termination of this Agreement for any reason
----------------------
whatsoever shall be in addition to, and not in lieu of, any rights and/or
remedies available to any party at law or in equity; provided, however,
that no party shall be liable to any other party for, and each party hereby
expressly waives any right to, any compensation, reimbursement or damages
of any kind or character whatsoever, to which such party may be entitled
solely by virtue of such termination.
Article 9: Assignment
- ----------------------
No party shall have the right or power to assign any of its rights, or
delegate the performance of any of its duties, under this Agreement without the
prior written authorization of the other parties; provided, however, that such
prior written authorization shall not be required for any party to assign any of
its rights, and/or delegate the performance of any of its duties hereunder, to
any Affiliate. In those instances where prior authorization is not required,
any party may assign its complete rights and obligations under this Agreement by
written notice to the other parties.
Article 10: Compliance with Laws
- ---------------------------------
Each party shall at all times and at its own expense (a) strictly comply
with all applicable laws, rules, regulations and governmental orders, now or
hereafter in effect, relating to its performance of this Agreement, (b) pay all
fees and other charges required by such laws, rules, regulations and orders and
(c) maintain in full force and effect all licenses, permits, authorizations,
registrations and qualifications from all applicable governmental departments
and agencies to the extent necessary to perform its obligations hereunder.
Article 11: General Provisions
- -------------------------------
11.1 No Waiver. The failure or delay by any party to assert any of its rights
---------
under this Agreement shall not be deemed to constitute a waiver of that
party's right thereafter to enforce each and every provision of this
Agreement in accordance with its terms.
11.2 Force Majeure. Notwithstanding anything in this Agreement to the contrary,
-------------
no party shall be liable to any other party for any failure to perform, or
delay in the performance of, that party's obligations hereunder, when such
failure to perform or delay in performance is caused by an event of force
-----
majeure; provided, however, that the party whose performance is prevented
-------
or delayed by such event of force majeure shall give prompt notice thereof
----- -------
to the other parties. For purposes of this Article 11.2, the term "force
-----
majeure" shall include war, rebellion, civil disturbance, earthquake, fire,
-------
flood, strike, lockout, labor unrest, acts of governmental authorities,
shortage of materials, acts of God, acts of the public enemy, and, in
general, any other causes or conditions beyond the
Page 6 of 9
<PAGE>
reasonable control of the parties. If any event of force majeure continues
----- -------
for more than ninety (90) calendar days, any party may terminate this
Agreement upon notice to the other parties.
11.3 Notice. All notices required or permitted by, or made pursuant to, this
------
Agreement shall be in writing and shall be sent by facsimile or by
registered, first-class airmail, return receipt requested and postage
prepaid, to the following addresses:
If to SSI: Seagate Software, Inc.
920 Disc Drive
Scotts Valley, California 95066
U.S.A.
Facsimile: (408) 438-0721
Attention: Corporate Counsel
If to STI: Seagate Technology, Inc.
920 Disc Drive
Scotts Valley, California 95066
U.S.A.
Facsimile: (408) 438-8931
Attention: Vice President and Treasurer
All such notices shall be deemed to have been received as follows: (a) if by
facsimile, twenty-four (24) hours after transmission; and (b) if by registered,
first-class airmail, five (5) calendar days after dispatch.
11.4 Subject Headings. The subject headings of this Agreement are included for
----------------
purposes of convenience only and shall not affect the construction or
interpretation of any of its provisions.
11.5 Governing Law. This Agreement and any dispute arising out of or in
-------------
connection with this Agreement, shall be governed by, and interpreted in
accordance with the laws of the United States of America and the State of
California, USA.
11.6 Entire Agreement. This Agreement embodies the entire agreement of SSI and
----------------
STI respecting the Services to be provided hereunder and supersedes all
prior agreements, understandings and communications, whether written or
oral, among the parties with respect to the subject matter hereof. No
modification or amendment of this Agreement shall be effective unless in
writing and executed by a duly authorized representative of each party.
Page 7 of 9
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
effective as of the day and year first written above.
SEAGATE SOFTWARE, INC.
By: /s/ Ellen E. Chamberlain
-----------------------------------------
Ellen E. Chamberlain
Its : Senior Vice President and CFO
SEAGATE TECHNOLOGY, INC.
By: /s/ James A. Taylor
-----------------------------------------
James A. Taylor
Its : Vice President and Treasurer
Page 8 of 9
<PAGE>
APPENDIX A
SEAGATE TECHNOLOGY
BUDGETED EXPENSES FOR SEAGATE SOFTWARE
FISCAL YEAR 1998
<TABLE>
<CAPTION>
DEPARTMENT DEPARTMENT/VENDOR TOTAL SALARY &
NUMBER NAME BENEFITS EXP
<S> <C> <C>
[*** Redacted] [*** Redacted] [*** Redacted]
[*** Redacted] [*** Redacted] [*** Redacted]
[*** Redacted] [*** Redacted] [*** Redacted]
[*** Redacted] [*** Redacted] [*** Redacted]
[*** Redacted] [*** Redacted] [*** Redacted]
[*** Redacted] [*** Redacted] [*** Redacted]
[*** Redacted] [*** Redacted] [*** Redacted]
[*** Redacted] [*** Redacted] [*** Redacted]
[*** Redacted] [*** Redacted] [*** Redacted]
[*** Redacted] [*** Redacted] [*** Redacted]
[*** Redacted] [*** Redacted] [*** Redacted]
[*** Redacted] [*** Redacted] [*** Redacted]
[*** Redacted] [*** Redacted] [*** Redacted]
[*** Redacted] [*** Redacted] [*** Redacted]
[*** Redacted] [*** Redacted] [*** Redacted]
[*** Redacted] [*** Redacted] [*** Redacted]
[*** Redacted] [*** Redacted] [*** Redacted]
[*** Redacted] [*** Redacted] [*** Redacted]
--------------
[*** Redacted]
==============
</TABLE>
Page 9 of 9
- ------------------
*** Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
<PAGE>
EXHIBIT 10.6
TAX ALLOCATION AGREEMENT
THIS TAX ALLOCATION AGREEMENT ("Agreement") is entered into as of April 4,
1996, by and between A Technology, Inc., a corporation organized under the laws
of the State of Delaware ("STI"), and A Software, Inc., a corporation organized
under the laws of the State of Delaware ("SSI").
WHEREAS, pursuant to the Restructuring and Contribution Agreement entered
into as of April 4, 1996, SSI currently is a more than 80 percent owned
subsidiary of STI;
WHEREAS, SSI has consented to file a consolidated federal income tax return
with STI;
WHEREAS, at some time in the future SSI may cease to be qualified to file a
consolidated federal income tax return with STI; and,
WHEREAS, STI and SSI desire to set forth their respective rights and
responsibilities arising as a result of the inclusion of SSI and its
subsidiaries in the consolidated federal income tax return of STI, including
rights and responsibilities related thereto in the event SSI is no longer
eligible to be included in the consolidated federal income tax return of STI;
NOW THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereby agree as follows:
1. Definitions.
-----------
(a) For purposes of this Agreement, the terms set forth below shall
have the following meanings:
Affiliated Group shall have the meaning set forth in section 1504 (a)
----------------
(1) of the Code and shall be determined without regard to section 1504
(b).
Applicable Interest Rate means the interest rate, as adjusted from
------------------------
time to time, payable on underpayments of tax as determined under
Section 6621 of the Code.
STI Group means STI and all corporations that are included in any
---------
Affiliated Group of which STI is a member corporation.
STI Group Accountants means the firm of certified public accountants
---------------------
that regularly audits the financial statements of the STI Group.
-1-
<PAGE>
STI Group Estimated Federal Income Tax Liability means the
------------------------------------------------
consolidated estimated federal income tax liability of the STI Group
for any period, computed in accordance with the Code and the
Regulations.
STI Group Federal Tax Liability means the consolidated federal income
-------------------------------
tax liability, determined as of the end of the taxable year, of the
STI Group, computed in accordance with the Code and Regulations, for
any taxable year in respect of which the STI Group files a
consolidated federal income tax return.
STI Member means STI or any other corporation that is a member of the
----------
STI Group.
STI Member Tax Liability means the federal income tax liability,
------------------------
determined as of the end of the taxable year, that the STI Member
would have incurred with respect to its separate taxable income (as
defined by Section 1.1502-12 of the Regulations) for any taxable year,
computed in accordance with the Code and Regulations.
Code means the internal Revenue Code of 1986, as amended through the
----
date thereof and the same may be further amended hereafter;
Combined Tax means any tax (however denominated) imposed by any
------------
foreign taxing authority or by any State, or local government or
taxing authority in the United States on, based on, or measured by,
the net income of any member of the SSI Group where the amount of such
tax is determined, in whole or in part, by reference to all or any
part of the net income or loss of any member of the Separate STI
Group.
Common Parent shall have the meaning set forth in Section 1504 (a) (1)
-------------
of the Code.
Credits means any credits against federal income tax liability,
-------
exclusive of payments, allowed by any provision of the Code.
Deconsolidation Date means the date on which SSI and the SSI
--------------------
Subsidiaries cease to be members of the STI Group. If the
Deconsolidation Date shall occur, then, notwithstanding any other
provision of this Agreement, the period ending with the close of
business on the Deconsolidation Date shall be considered a separate
taxable year for purposes of this Agreement, whether or not such a
taxable year actually exists under applicable law.
Estimated Tax Due Date means each date on which either the STI Group
----------------------
or the SSI Group is required (or but for the application of Losses
and/or
-2-
<PAGE>
Credits, would be required) to make a payment of estimated tax
pursuant to Section 6655 of the Code.
Federal Income Tax Due Date means the fifteenth day of the third month
---------------------------
following the end of a taxable year.
Federal Income Tax Return Due Date means each date, determined with
----------------------------------
regard to extensions, on which either the STI Group or the SSI Group
is required under the Code to file a federal income tax return or, if
earlier, the date on which such return is actually filed.
Losses means net operating losses determined under Section 172 of the
------
Code and net capital losses determined under Section 1222 of the Code.
SSI Group means SSI and all other corporations that would be members
---------
of the Affiliated Group, the Common Parent of which would be SSI, if
SSI were not a member of the STI Group. Such term also includes
Seagate Software Information Management Group, Inc. (formerly Crystal
Computer Services, Inc.)
SSI Group Accountants means the firm of certified public accountants
---------------------
that regularly audits the financial statements of the SSI Group
following the Public Offering.
SSI Member means SSI or any other corporation that is a member of SSI
----------
Group.
SSI Member Book Tax Liability means the federal income tax liability,
-----------------------------
determined as of the end of the taxable year, that the SSI Member
would have incurred for any taxable year with respect to its book
income before taxes computed in accordance with generally accepted
accounting practices consistently applied (but otherwise computed in
accordance with the Code and Regulations and assuming that the SSI
Member was subject to the maximum marginal federal corporate income
tax rate).
SSI Member Estimated Federal Income Tax Liability means the estimated
-------------------------------------------------
federal income tax liability that the SSI Member would have incurred
with respect to its separate taxable income (as defined by Section
1.1502-12 of the Regulations) for any period, computed in accordance
with the Code and the Regulations (but assuming all income of the
member was subject to the maximum marginal federal corporate income
tax rate and that the member constitutes a "large corporation" for
purposes of Section 6655(g) (2) of the Code).
-3-
<PAGE>
SSI Member Tax Liability means the federal income tax liability,
------------------------
determined as of the end of the taxable year, that the SSI Member
would have incurred with respect to its separate taxable income (as
defined by Section 1.1502-12 of the Regulations) for any taxable year,
computed in accordance with the Code and Regulations (but assuming all
income of the SSI Member was subject to the maximum marginal federal
corporate income tax rate).
SSI Subsidiary means any corporation, other than SSI, that would be a
--------------
member of the SSI Group.
Regulations means the Treasury Regulations promulgated pursuant to the
-----------
Code from time to time, including any amendments thereto.
Separate STI Group means the STI Group exclusive of the SSI Group.
------------------
(b) Unless otherwise indicated, the terms and concepts used in this
Agreement shall be given the same definitions and meanings as are ascribed to
them by the Code and Regulations. Unless otherwise indicated, all references
herein to a particular section of the Code or Regulations shall include any
successor provision, whether or not designated by a different or additional
section reference.
2. Agreement to File Consolidated Federal Income Tax Returns, Etc.
----------------------------------------------------------------
(a) Agreement to File. SSI hereby consents, for itself and for all SSI
-----------------
Subsidiaries not described in Section 1504 (b) that are now or hereafter A in
the SSI Group, to be included in the filing of a consolidated federal income tax
return with STI and other members of the STI Group for all periods for which SSI
and any SSI Subsidiaries are members of the STI Group.
(b) Agreement to Cooperate. Each SSI Member shall cooperate in filing
----------------------
any return or consent that is contemplated by the provisions of this Agreement
and shall take such actions as STI may reasonably request in connection
therewith and in connection with the prosecution of any refund claim or defense
or settlement of any proposed deficiency with respect to any taxable year in
which any SSI Member has joined in the consolidated federal income tax return of
the STI Group. Without limiting the foregoing, each SSI Member will (i) furnish
to STI all relevant information that STI may reasonably require in order to
prepare consolidated federal income tax returns of the STI Group and (ii)
deliver to STI all consents, directors' resolutions and other documentation that
STI may reasonably require to evidence the STI Group's authority to file
consolidated federal income tax returns as contemplated in this Agreement.
Subject to the provisions of this Agreement and except as otherwise provided
herein, STI shall make all payments and be entitled to all refunds of federal
income tax and estimated federal income tax on behalf of any and all members of
the STI Group.
-4-
<PAGE>
(c) Agreement to Pay Taxes. Provided that each SSI Member has paid to
----------------------
STI all amounts that they are obligated to pay under this Agreement, STI hereby
agrees that it shall be responsible for, and shall hold each SSI Member harmless
from, all and any part of the federal income tax liability of STI and any member
of the STI Group.
(d) Conduct of Operations. Nothing contained in this Agreement shall
---------------------
obligate either STI, any member of the Separate STI Group, SSI, or any member of
the SSI Group to conduct its business or affairs in a manner that maximizes the
payments to, or minimizes the payments from, SSI or STI, as the case may be.
(e) Decisions as to Tax Policy. Notwithstanding any other provision
--------------------------
of this Agreement, STI, in its sole and absolute discretion, shall make all
final decisions with respect to all tax policy matters (including, as examples
and not by way of limitation, decisions with respect to accounting methods, the
recognition, characterization, timing, and reporting of items of income, losses,
deductions, and credits, and appropriate disclosures on returns) relating to or
affecting the STI Group, including SSI Members for all periods during which
those entities are members of the STI Group.
3. Certain Payments Required Under this Agreement.
----------------------------------------------
(a) Estimated Tax Payments. Not less than five (5) days prior to the
----------------------
Estimated Tax Due Date for any taxable quarter for which the SSI Group is
includable in the STI Group, SSI shall submit to STI a calculation of the SSI
Member Estimated Federal Income Tax Liability, if any, for each SSI Member for
such taxable quarter, together with the amount of Losses for that quarter, if
any, of each SSI Member and such other information as STI may reasonably request
in order to verify the taxable income, deductions, Losses and Credits of each
SSI Member. On the Estimated Tax Due Date, (i) SSI shall pay to STI an amount
equal to the sum of the SSI Member Estimated Federal Income Tax Liability of
each SSI Member, and (ii) Subject to Section 3 (d) STI shall pay to SSI an
amount equal to the sum of the Losses, if any, of each SSI Member for the
quarter times the Section 11 (b) tax rate expected for the current tax year.
Any amount required under this Section 3 (a) to be paid on an Estimated Tax
Due Date and not paid on such Date shall bear interest from such Date through
the date of payment at the Applicable Interest Rate. In determining their
respective Estimated Federal Income Tax Liabilities for purposes hereof, the
parties shall determine the smallest amount of estimated tax that reasonably
could be paid on the applicable Estimated Tax Due Date without the Member for
which the computation is being made incurring a penalty pursuant to Section 6655
of the Code by reason of an underpayment of estimated tax.
(b) Amounts Payable by SSI to STI Following Close of Taxable Year.
-------------------------------------------------------------
Except as provided in the next sentence, SSI, for any taxable year in which any
SSI Member is includable in the STI Group (either for the entirety or for any
portion of such year) shall pay to STI an amount equal to the sum of (i) the
excess of the SSI Member Tax Liability, if any, for each SSI Member for such
taxable year over the payments, if any, previously made by SSI to STI with
respect to such SSI Member pursuant to Section
-5-
<PAGE>
3 (a) above with respect to such taxable year, and (ii) the amounts, if any, by
which payments previously made by STI pursuant to Section 3 (a) above with
respect to such taxable year exceed the aggregate of the reductions of the STI
Member Tax Liability of each STI Member for such year resulting from the use of
Losses or Credits of any SSI Member.
(c) Amount Payable by STI to SSI Following Close of Taxable Year.
------------------------------------------------------------
For any taxable year in which any SSI Member is includable in the STI Group
(either for the entirety or for any portion of such year), or for any other
taxable year of the STI Group in which Losses or Credits of the SSI Group are
applied to reduce the federal income tax liability of any STI Member, STI shall
pay to SSI an amount equal to the sum of (i) the excess of the amount, if any,
by which the reduction in the STI Member Tax Liability of each STI Member for
such taxable year resulting from the use of Losses or Credits of any SSI Member
exceeds the payments, if any, previously made by STI with respect to each SSI
Member pursuant to Section 3 (a) above with respect to such taxable year, and
(ii) the excess of the payments, if any, previously made by SSI pursuant to
Section 3 (a) above with respect to such taxable year over the Separate SSI
Member Tax Liabilities for each SSI Member for such year. Any payment required
pursuant to this Section 3(c) shall be made at the time specified in Section
3(e) below.
(d) Amounts Payable for Group Losses and Credits and Carryforwards.
--------------------------------------------------------------
(1) Amounts Payable by STI to SSI Attributable to SSI Group Losses
--------------------------------------------------------------
and Credits and Carryforwards. Notwithstanding anything to the contrary
- ------------------------------
contained in this Agreement, no payment from STI shall be required to be made to
SSI with respect to SSI Member Losses or Credits unless and solely to the extent
that such Losses and Credits of the SSI Member are applied by an STI Member in
such year or in any subsequent year (e.g., as part of a consolidated net
---
operating loss carryforward) with the result that the STI Member Tax Liability
of any STI Member for such year is reduced.
(2) Amounts Payable by SSI to STI Attributable to STI Group Losses
--------------------------------------------------------------
and Credits and Carryforwards. Notwithstanding anything to the contrary
- ------------------------------
contained in this Agreement, no payment from SSI shall be required to be made to
STI with respect to Losses or Credits of an STI Member (excluding for this
purpose any SSI Member) unless and solely to the extent that such Losses or
Credits are applied by an SSI Member in such year or in any subsequent year
(e.g., as part of a consolidated net operating loss carryforward) with the
---
result that the SSI Member Tax Liability of any SSI Member for such year is
reduced.
(e) Procedures Governing Computation of Amount Payable Following Close
------------------------------------------------------------------
of Taxable Year. Not later than one hundred eighty (180) days following the
- ---------------
close of each taxable year for which SSI may be required to make or be entitled
to receive payments under this section 3, SSI shall provide to STI such
information as STI may reasonably require as to the income, deductions, Losses
and Credits of any SSI Member for such year in order to permit STI to properly
prepare the consolidated federal income
-6-
<PAGE>
tax return of the STI Group for that year. Within forty-five (45) days
thereafter, but in no event less than fifteen (15) days prior to the filing of
the consolidated federal income tax return of the STI Group, STI shall deliver
to SSI calculations showing the amount that SSI is required to pay to STI, or
the amount that STI is required to pay to SSI, pursuant to the terms of this
Section 3. All such calculations shall be made on the basis of the facts shown
on the consolidated federal income tax return of the STI Group required to be
filed with respect to such year, absent mathematical miscalculation. Unless SSI
disagrees with said calculations in writing within fifteen (15) days after
receipt of said calculations, the amount so determined by STI shall be payable
as provided in Section 3 (b) or Section 3 (c) hereof. If SSI disagrees with
STI's calculations as hereinabove provided and STI and SSI cannot agree as to
the proper amount due within a reasonable time (but in no event more than thirty
(30) days after SSI notifies STI of its disagreement), STI's calculations shall
be delivered to the STI Group Accountants (or if SSI objects to the STI Group
Accountants, to another "Big Six" public accounting firm mutually agreed to by
STI and SSI), together with a statement of the basis of the disagreement, and
the determination of said STI Group Accountants (or such other accounting firm)
shall control for purposes of determining the payments provided for in this
section 3(e). The fees and expenses charged by the STI Group Accountants (or
such other accounting firm) shall be borne equally between STI and SSI.
(f) Payment. Not later than (i) the Federal Income Tax Return Due
-------
Date for any taxable year for which SSI may be required to make payments
pursuant to Section 3 (b) hereof or for which SSI may be entitled to receive
payments pursuant to Section 3(c) or Section 3 (d) hereof, or (ii) five (5) days
after the STI Group Accountants (or such other accounting firm) makes a
determination as provided in Section 3(e) hereof with respect to such taxable
year, SSI shall pay to STI or STI shall pay to SSI, whichever is required, the
amount determined to be payable under this Section 3 with respect to such
taxable year, together with interest thereon from the Federal Income Tax Due
Date to the date such amount is actually paid at the Applicable Interest Rate.
(g) Allocation of Income in the Year Including the Deconsolidation
--------------------------------------------------------------
Date. The income, deductions, Losses, and Credits of SSI Members for the
- ----
period ending on the Deconsolidation Date shall be included in the consolidated
federal income tax return of the STI Group and the provisions of this Section 3
generally applicable to STI and SSI shall apply with respect to such period.
Unless otherwise agreed between the parties hereto, the income, deductions,
Losses, and Credits of the SSI Group for the taxable period ending on the
Deconsolidation Date shall be computed on the basis of actual results from
operations during such period.
(h) The SSI Member Estimated Federal Income Tax Liability. The SSI
-----------------------------------------------------
Member Tax Liability and the Separate STI Member Tax Liability shall not be less
than zero. In determining the extent to which Losses or Credits of an SSI
Member are used to reduce tax liability of a Separate STI Member (i.e., the
----
extent to which an SSI Member is reimbursed for such Losses or Credits), the
Losses or Credits of each member of the STI Group shall be applied on a
proportionate basis.
-7-
<PAGE>
4. Certain Obligations of STI and SSI Following a Public Offering.
--------------------------------------------------------------
(a) Application of Carryovers and Adjustments by SSI in the Event an
----------------------------------------------------------------
SSI Member Leaves the STI Group. In the event that an SSI Member ceases in any
- -------------------------------
taxable year to be a member of the STI Group, STI will undertake reasonable
efforts for such taxable year and all taxable years thereafter to notify SSI of
(A) any carryover of any Losses or Credits that could be partially or totally
attributed to and carried over by the SSI Member pursuant to Section 1.1502-79
of the Regulations and (B) any subsequent adjustment that could affect any such
item.
(b) Carryback from an SSI Group Separate Return Year to an STI Group
----------------------------------------------------------------
Consolidated Year. Unless STI in its sole and absolute discretion consents
- -----------------
thereto, or unless specifically required by law, no SSI Member shall carry back
any Losses or Credits accruing after the Deconsolidation Date to a taxable
period ending on or before the Deconsolidation Date, and the SSI Members shall
make any elections and take all such action necessary to avoid any such
carryback. Even if a carryback is required by law, STI shall make no payment to
SSI and SSI shall be entitled to no refund to the extent that the use of such
carryback prevented STI or an STI Member from using a Credit or Loss which it
would otherwise use in the year or years to which the SSI Credit or Loss is
carried back. In the event that a carryback is not required by law, and STI, in
its sole and absolute discretion, consents to such a carryback, then STI's sole
obligation shall be to make reasonable efforts to prepare and file an amended
return based on information supplied to STI by SSI and, in the event of the
collection of any refund as a result thereof, to pay to SSI the amount thereof
(including interest received thereon) attributable to the carryback of such
Losses and Credits. As a condition precedent to any such action by STI, SSI
shall agree to indemnify and hold STI harmless with respect to all costs and
expenses incurred in connection therewith and the full amount of any increase in
the STI Group Federal Tax Liability, including interest and penalties, arising
as a result of such amended return.
5. Recomputations and Adjustments.
------------------------------
(a) General Rule Regarding Adjustments of SSI Member Tax Liability
--------------------------------------------------------------
and STI Member Tax Liability. If any item of income, Loss, expense or Credit
- ----------------------------
that enters into computation of the SSI Member Tax Liability or the STI Member
Tax Liability is changed or adjusted by the Internal Revenue Service and such
change is finally determined (including as the result of any administrative
settlement with the Internal Revenue Service or any settlement of judicial
proceedings), then each of the parties hereto shall make such payments (which
payments shall include interest at the Applicable Interest Rate and a
reimbursement on an after-tax basis for any penalties incurred) to the other
party hereto as may be necessary to ensure that each party hereto has made the
correct net payments hereunder, determined as if such change or adjustment had
been taken into account by the parties in computing their original obligations
to each other under Section 3 hereof.
-8-
<PAGE>
(b) Procedures Governing Recomputations. STI shall calculate the
-----------------------------------
amount of any payment to be made pursuant to Section 5 (a) and shall deliver a
copy of such calculations to SSI within sixty (60) days after the change or
adjustment referred to in such Section is finally determined. Unless SSI
disagrees with STI's calculations as hereinbelow provided (and such disagreement
must be limited to the mathematical correctness of the computation unless STI
has failed to follow the procedures of Section 7 below), the amount so
determined by STI shall be payable within fifteen (15) days after said
calculations are delivered to SSI. If SSI disagrees with STI's calculations in
writing within fifteen (15) days after its receipt thereof and if STI and SSI
cannot agree as to the proper amount due within a reasonable time (but in any
event not more than thirty (30) days after SSI notifies STI of its
disagreement), STI's calculations shall be delivered to the STI Group
Accountants (or if SSI objects thereto, to another "Big Six" public accounting
firm mutually agreed to by STI and SSI), and the determination by said STI Group
Accountants (or such other accounting firm) shall control for purposes of this
section 5 (b). The amount so determined (including interest at the Applicable
Interest Rate through the date of payment) shall be payable within five (5) days
after the STI Group Accountants (or such other accounting firm) has made its
determination. The fees and expenses charged by the STI Group Accountants (or
such other accounting firm) shall be borne equally between STI and SSI.
6. Recapitalization of SSI Subsidiaries Prior to Deconsolidation
-------------------------------------------------------------
Date. Prior to the Deconsolidation Date, SSI shall recapitalize the SSI
Subsidiaries so as to eliminate any "excess loss accounts" of the SSI
Subsidiaries that otherwise would exist on the Deconsolidation Date. In the
event that SSI fails to perform its obligation under this Section 6 and the STI
Group realizes taxable income as the result of the existence of such "excess
loss accounts" on the Deconsolidation Date, such income shall be treated for
purposes of Section 3 as taxable income of the SSI Group for the taxable year
period ending on the Deconsolidation Date.
7. Appointment As Agent; Audits; Contests.
--------------------------------------
(a) Appointment As Agent. SSI, for itself and all SSI Subsidiaries,
--------------------
hereby irrevocably designates STI as its agent for the purpose of taking any and
all actions necessary or incidental to the payment of estimated tax and the
filing of consolidated federal and state income tax returns for any periods
during which any SSI Member is includable in the STI Group.
(b) STI Control of Audits - General Rule. STI shall have the sole
------------------------------------
right to control all audits, proceedings, and disputes relating to any
consolidated return of the STI Group or any other tax liability if no payment
from any SSI Member would be required if such audit, proceedings, or dispute
were resolved adversely, and if such resolution would not have a material
adverse effect on a SSI Member for periods after the Deconsolidation Date.
-9-
<PAGE>
(c) Audits Involving Potential Material Adverse Effect on SSI. If the
---------------------------------------------------------
resolution of an audit, proceeding or dispute relating to a Pre-Deconsolidation
Period would result in requiring a payment from an SSI Member or have a material
adverse effect on an SSI Member, STI shall keep SSI fully informed of the status
of the matter, shall consult with SSI, and shall not settle such matter without
SSI's written consent, which consent shall not be unreasonably withheld. If SSI
fails to provide STI with its written consent within fifteen (15) days of a
written request from STI, STI and SSI shall immediately submit the matter to a
"Big Six" public accounting firm mutually agreed to by STI and SSI (the
"Referee") which shall within thirty (30) days of such submission examine the
entire settlement and determine whether the SSI Group has been treated unfairly
in the settlement as compared with other members of the STI Group. If the
Referee finds that the settlement does not treat the SSI Group unfairly, STI
shall not be required to make any payment to SSI as a result of such settlement
(whether STI agrees to such settlement before or after the Referee renders its
determination). If the Referee finds that the settlement treats the SSI Group
unfairly, STI shall either renegotiate the settlement or litigate the matter
with the taxing authorities or pay to SSI such amount as the Referee may
determine. The fees and expenses charged by the Referee shall be borne equally
between STI and SSI.
(d) Expenses; Cooperation. As between STI and SSI, SSI will bear all
---------------------
professional fees and expenses associated with the defense or prosecution of any
proposed income tax deficiencies, adjustments or refund claims referred to in
Section 7 (c) above. Subject to the foregoing, STI and SSI (for itself and the
other SSI Members) each agree to fully cooperate, each at its own cost, in
connection with the resolution of any tax audits, proceedings or disputes
relating to any periods prior to or including the period ending on the
Deconsolidation Date. Each party shall provide the other with such documents as
the other may request and make available personnel familiar with the item which
is the subject of such audit, proceeding or dispute.
8. General Indemnification. STI shall pay and shall indemnify SSI
-----------------------
against (a) any liability to the United States for penalties, additions to tax,
and/or interest with respect thereto, and (b) any other cost (including, but not
limited to, reasonable costs of litigation incurred with respect to the
foregoing), (herein collectively an "imposition"), excluding (except as
specifically contemplated under Section 5(b) or Section 7(d) above) any
Imposition that (i) is attributable to the realization of income by, or the
allowability of any deduction or Credit to, any SSI Member or (ii) results from
an act or omission of any SSI Member. Similarly (except as specifically
contemplated under Section 7 (d) above), SSI shall pay and indemnify STI against
any Imposition to the extent such Imposition (i) is attributable to the
realization of income by, or the allowability of any deduction or credit to, any
STI Member or (ii) results from an act or omission of any STI Member.
-10-
<PAGE>
9. Other Federal, State, Local and Foreign Tax Liabilities.
-------------------------------------------------------
(a) Except (i) for federal income taxes and (ii) as set forth in
Section 9 (b) hereof with respect to any Combined Tax, as between the SSI Group
and STI or any member of the Separate STI Group, SSI assumes responsibility and
liability for all taxes of any kind whatsoever, including interest and penalties
relating thereto, imposed by any governmental authority with respect to the
income, property, employees, or activities of any SSI Member (including without
limitation, state, local, and foreign income and excise taxes, payroll taxes,
sales and use taxes, and employee withholding taxes relating to the business of
any SSI Member). Subject to Section 2 (c) above, STI assumes responsibility and
liability for all taxes of any kind whatsoever, including interest and penalties
relating thereto, imposed by any governmental authority with respect to the
income, property, employees, or activities of STI and other members of the
Separate STI Group (including without limitation, state, local, and foreign
income and excise taxes, payroll taxes, sales and use taxes, and employee
withholding taxes relating to the business of STI and the other members of the
Separate STI Group).
(b) Combined Taxes. The principles underlying the rights and
--------------
obligations of STI and SSI in respect of federal income taxes, including those
contained in Sections 3, 4, and 5 hereof, shall be applied in determining
required payments to and from SSI in respect of any Combined Tax, and STI and
SSI each shall make such payments to the other party in respect of Combined
Taxes as is required as a result of the application of such principles. All of
the procedural and timing requirements of this Agreement applicable to federal
income tax shall be equally applicable to any Combined Tax, with appropriate
adjustments thereto to reflect the differences, if any, in corresponding
provisions of the applicable income tax code, law or statute governing any such
combined Tax and any administrative provisions relating thereto.
10. Term of Agreement. This Agreement shall be effective as of the date
-----------------
hereof and shall terminate when all payments and obligations hereunder have been
made or satisfied. This Agreement shall not be terminable prior to such date
without the prior written consent of both parties hereto.
11. Miscellaneous Provisions.
------------------------
(a) Entire Understanding. This Agreement constitutes the entire
--------------------
understanding of the parties hereto with respect to the matters addressed
herein, and this Agreement supersedes all prior understandings and agreements,
whether oral written, or implied, relating to the matters addressed herein.
(b) Successors and Assigns. This Agreement shall be binding upon and
----------------------
shall inure to the benefit of the parties hereto and their respect successors
and assigns.
-11-
<PAGE>
(c) Notices. Any and all notices provided for hereunder shall be in
-------
writing and hand delivered or sent by first class, registered or certified mail,
postage prepaid, return receipt requested, to the following addresses (or such
other address for a named party as shall have been given by such party to the
other named party from time to time in the manner set forth in this Section 11
(c)):
(i) If to STI:
Attention: Seagate Technology, Inc.
920 Disc Drive
Scotts Valley, CA 95066
cc: Tax Director
(ii) If to SSI Seagate Software, Inc.
920 Disc Drive
Scotts Valley, CA 95066
cc: Vice President and Assistant Treasurer
(d) Amendments; Waiver. No provisions of this Agreement may be
------------------
amended, waived, modified, extended, or discharged unless such amendment,
waiver, modification, extension or discharge is agreed to in writing by the
parties hereto. No waiver by any party hereto of the other party's breach of or
failure to comply with any condition or provision of this Agreement to be
performed by such other party shall operate as a waiver of or estoppel with
respect to any subsequent or other breach or failure to comply.
(e) Severability. If any part of any provision of this Agreement
------------
shall be invalid or unenforceable under applicable law, such part shall be
ineffective only to the extent of such invalidity or unenforceability, and such
invalidity or unenforceability shall not affect in any way the validity or
enforceability of the remaining provisions of this Agreement, or the remaining
parts of such provision.
(f) Applicable Law. This Agreement and the rights and obligations of
--------------
the parties hereunder shall be construed, interpreted, and enforced in
accordance with the laws of the State of California, exclusive of the choice-of-
law rules thereunder.
(g) Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(h) Payments. All payments required to be made under this Agreement
--------
shall be made in clearing house funds or by certified check, unless otherwise
consented to (in its sole and absolute discretion) by the party entitled to
receive such payment.
-12-
<PAGE>
(i) Captions. The captions of the Sections of this Agreement are
--------
inserted for convenience only and shall not constitute a part hereof.
(j) Further Assurances. The parties hereto shall execute and deliver
------------------
such further instruments and do such further acts and things (including, without
limitation, by causing their respective subsidiaries to execute and deliver such
instruments and to do such acts and things) as may be necessary or appropriate
to carry out the intent and purpose of this Agreement.
(k) Inter-Company Services Agreement. The parties hereto acknowledge
--------------------------------
that STI and SSI will enter into an Intercompany Services Agreement pursuant to
which STI will perform various administrative functions for SSI. In the event
that the STI tax department is performing services for SSI pursuant to such
Agreement and SSI does not maintain a separate tax department, the parties
contemplate that the STI tax department, as the agent for SSI, will take the
actions provided for under this Agreement by SSI. Notwithstanding the
foregoing, no action or omission by the STI tax department to take any action in
such capacity as agent for SSI shall relieve SSI of its responsibilities or
otherwise limit its liability hereunder to STI in the absence of gross
negligence, willful misconduct, or actual fraud on the part of the STI tax
department.
(l) Retroactive Application of Agreement. The parties hereto
------------------------------------
acknowledge that certain SSI members of the SSI Group may be successor
corporations or merged corporations that existed prior to (or their predecessors
existed prior to) the effective date of this Agreement and the Restructuring and
Contribution Agreement. Such corporations may also have been owned directly or
indirectly by STI prior to the effective date of this Agreement and the
Restructuring and Contribution Agreement. The parties hereto further
acknowledge and agree that the provisions of this Agreement or any relevant
portion thereof reflect the intent of the parties or their predecessors as of
the date each SSI Member or its predecessor(s) was acquired directly or
indirectly by STI and such Agreement or any relevant portion thereof shall apply
retroactively to each SSI Member or its predecessor(s) for all taxable years or
portions thereof that such SSI Member or its predecessor(s) was owned directly
or indirectly by STI or SSI. The parties hereto agree that, for any reporting
period designated by either party, the STI tax department shall determine on or
before June 30, 1997, the amount of any payments due to or from either party or
its predecessor(s) in accordance with Section 3 of the Agreement, as modified by
mutual agreement of the parties in order to record such amounts for financial
statement purposes.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on their behalf as of the day and year first above written.
-13-
<PAGE>
SEAGATE TECHNOLOGY, INC.
By: /s/ Donald L. Waite
------------------------------------
Donald L. Waite
Title: Executive Vice President, Chief
Administrative Officer and Chief
Financial Officer
SEAGATE SOFTWARE, INC.
By: /s/ Ellen E. Chamberlain
------------------------------------
Ellen E. Chamberlain
Title: Vice President and Assistant
Treasurer
-14-
<PAGE>
Exhibit 10.7
INTERCOMPANY
------------
REVOLVING LOAN AGREEMENT
------------------------
This INTERCOMPANY REVOLVING LOAN AGREEMENT ("Loan Agreement"), dated as of
--------------
June 28, 1996, is entered into by and between:
(1) Seagate Technology, Inc. ("Lender"); and
------
(2) Seagate Software, Inc. ("Borrower").
--------
In consideration of the covenants, conditions and agreements set forth herein,
the parties agree as follows:
ARTICLE 1
DEFINITIONS
1.1 "Advance" shall have the meaning given in Section 2.1 of the Loan
-------
Agreement.
1.2 "Business Day" shall mean any day on which commercial banks are not
------------
authorized or required to close in San Francisco, California.
1.3 "Commitment" shall mean an amount equal to $60,000,000.00.
----------
1.4 "Default" shall mean any event or circumstance not yet constituting an
-------
Event of Default but which, with the giving of any notice or the lapse of any
period of time or both, would become an Event of Default.
1.5 "Event of Default" shall have the meaning given to that term in
----------------
Section 5.1.
1.6 "GAAP" shall mean generally accepted accounting principles and
----
practices as promulgated by the Financial Accounting Standards Board and as in
effect in the United States of America from time to time, consistently applied.
Unless otherwise indicated in this Loan Agreement, all accounting terms used in
this Loan Agreement shall be construed, and all accounting and financial
computations hereunder or thereunder shall be computed, in accordance with GAAP.
1.7 "Governmental Authority" shall mean any domestic or foreign national,
----------------------
state or local government, any political subdivision thereof, any department,
agency, authority or bureau of any of the foregoing, or any other entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
1.8 "Indebtedness" of any Person shall mean and include the aggregate
------------
amount of, without duplication (a) all obligations of such Person for borrowed
money, (b) all obligations of such Person evidenced by bonds, debentures, notes
or other similar instruments, (c) all obligations of such Person to pay the
deferred purchase price of property or services (other than accounts payable
incurred in the ordinary course of business determined in accordance with
generally accepted accounting principles), (d) all obligations under capital
leases of such Person, (e) all obligations or liabilities of others secured by a
lien on any asset of such Person, whether or not such obligation or liability is
assumed, (f) all guaranties of such Person of the obligations of another Person;
(g) all obligations created or arising under
<PAGE>
any conditional sale or other title retention agreement with respect to property
acquired by such Person (even if the rights and remedies of the seller or lender
under such agreement upon an event of default are limited to repossession or
sale of such property), (h) net exposure under any interest rate swap, currency
swap, forward, cap, floor or other similar contract that is not entered to in
connection with a bona fide hedging operation that provides offsetting benefits
to such Person, which agreements shall be marked to market on a current basis,
(i) all reimbursement and other payment obligations, contingent or otherwise, in
respect of letters of credit.
1.9 "LIBOR Rate" shall mean the rate per annum, calculated to the nearest
-----------
.01%, at which U.S. dollar deposits are offered in the London interbank market
for one month periods as quoted by Bloomberg Financial Services. All
computations of such interest shall be based on a year of 360 days and actual
days elapsed. Such LIBOR Rate shall remain in effect until it is adjusted on
the first Business Day of the following calendar month.
1.10 "Loan Agreement" shall have the meaning set forth in the opening
--------------
paragraph of this document.
1.11 "Loan Documents" shall mean and include this Loan Agreement and any
--------------
other documents, instruments and agreements delivered to Lender in connection
with this Loan Agreement.
1.12 "Obligations" shall mean and include all Advances, debts,
-----------
liabilities, and financial obligations, howsoever arising, owed by Borrower to
Lender of every kind and description (whether or not evidenced by any note or
instrument), direct or indirect, absolute or contingent, due or to become due,
now existing or hereafter arising pursuant to the terms of any of the Loan
Documents, including, without limitation, all interest, fees, charges, expenses,
reasonable attorneys' fees (and expenses) and accountants' fees (and expenses)
chargeable to Borrower or payable by Borrower hereunder or thereunder.
1.13 "Person" shall mean and include an individual, a partnership, a
------
corporation (including a business trust), a joint stock company, a limited
liability company, an unincorporated association, a joint venture or other
entity or a Governmental Authority.
1.14 "Termination Date" shall mean the second anniversary of the date of
----------------
this Loan Agreement.
ARTICLE 2
ADVANCES
2.1 Terms. Subject to the terms and conditions of this Loan Agreement,
-----
Lender agrees to advance to Borrower from time to time and until the Termination
Date, and continuing thereafter by mutual consent, such sums as Borrower may
request (the "Advances") but which shall not exceed, in the aggregate principal
amount at any one time outstanding, the Commitment. Advances shall be made in
lawful currency of the United States of America and shall be made in same day or
immediately available funds. Subject to the terms and conditions hereof,
Borrower may borrow pursuant to this Section 2.1, prepay the Advances and
reborrow pursuant to this Section 2.1.
-2-
<PAGE>
2.2 Payment of Principal upon Maturity. If not paid earlier, the
----------------------------------
outstanding principal balance of all Advances shall be due and payable to the
Lender on the Termination Date.
2.3 Interest Payments. For the first two years of the loan agreement,
-----------------
interest shall be payable monthly based on a formula which takes into account
the prior three months of the Borrower's net payable balance with Seagate
Technology. Interest charged in respect to the calculation is at the rate of 6%
per annum. Interest thereafter will accrue at a method and rate to be
negotiated between the Lender and Borrower, with the rate not to exceed the
LIBOR Rate in effect plus two per cent. All computations of such interest shall
be based on a year of 360 days and actual days elapsed for each day on which any
principal balance is outstanding under the terms of the Loan Agreement.
2.4 Interest Payments. All accrued and unpaid interest shall be due and
-----------------
payable to the Lender on the Termination Date.
2.5 Other Payment Terms.
-------------------
(a) Place and Manner. Borrower shall make all payments due to Lender
hereunder in lawful money of the United States and in same day or immediately
available funds.
(b) Date. Whenever any payment due hereunder shall fall due on a day other
than a Business Day, such payment shall be made on the next succeeding Business
Day, and such extension of time shall be included in the computation of interest
or fees, as the case may be.
(c) Default Rate. From and after the occurrence of an Event of Default and
during the continuance thereof, Borrower shall pay interest on all Obligations
not paid when due, from the date due thereof until such amounts are paid in full
at a per annum rate equal to the three (3) percentage points in excess of the
rate otherwise applicable to Advances. All computations of such interest shall
be based on a year of 360 days and actual days elapsed.
2.6 Loan Account. The Obligations of Borrower to Lender hereunder shall be
------------
evidenced by one or more accounts or records maintained by Lender in the
ordinary course of business. The accounts or records maintained by Lender shall
be presumptive evidence of the amount of such Obligations, and the interest and
principal payments thereon. Any failure so to record or any error in so doing
shall not, however, limit, increase or otherwise affect the obligation of
Borrower hereunder to pay any amount owning hereunder. Upon Lender's request,
Borrower shall execute a promissory note in favor of Lender.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BORROWER
To induce Lender to enter into this Loan Agreement and to make Advances
hereunder, Borrower represents and warrants to Lender as follows:
-3-
<PAGE>
3.1 Due Incorporation, Qualification, etc. Borrower is a corporation duly
--------------------------------------
organized, validly existing and in good standing under the laws of its state of
incorporation.
3.2 Authority. The execution, delivery and performance by Borrower of
---------
each Loan Document to be executed by Borrower and the consummation of the
transactions contemplated thereby (i) are within the power of Borrower and (ii)
have been duly authorized by all necessary actions on the part of Borrower.
3.3 Enforceability. Each Loan Document executed, or to be executed, by
--------------
Borrower has been, or will be, duly executed and delivered by Borrower and
constitutes, or will constitute, a legal, valid and binding obligation of
Borrower, enforceable against Borrower in accordance with its terms, except as
limited by bankruptcy, insolvency or other laws of general application relating
to or affecting the enforcement of creditors' rights generally and general
principles of equity.
ARTICLE 4
CONDITIONS TO MAKING ADVANCES
Lender's obligation to make the initial Advance and each subsequent Advance
is subject to the prior satisfaction or waiver of all the conditions set forth
in this Article 4.
4.1 Principal Loan Documents. Borrower shall have duly executed and
------------------------
delivered to Lender: (a) the Loan Agreement; and (b) such other documents,
instruments and agreements as Lender may reasonably request.
4.2 Representations and Warranties Correct. The representations and
--------------------------------------
warranties made by Borrower in Article 3 hereof shall be true and correct as of
the date on which each Advance is made and after giving effect to the making of
the Advance. The submission by Borrower to Lender of a request for an Advance
shall be deemed to be a certification by the Borrower that as of the date of
borrowing, the representations and warranties made by Borrower in Article 3
hereof are true and correct.
4.3 No Event of Default or Default. No Event of Default or Default has
------------------------------
occurred or is continuing.
4.4 Total Outstanding Advances. The total aggregate principal amount of
--------------------------
outstanding Advances does not exceed the Commitment.
ARTICLE 5
EVENTS OF DEFAULT
5.1 Events of Default. The occurrence of any of the following shall
-----------------
constitute an "Event of Default" under this Loan Agreement and the Note:
-4-
<PAGE>
(a) Failure to Pay. Borrower shall fail to pay (i) the principal amount of
all outstanding Advances on the Termination Date hereunder; (ii) any interest,
Obligation or other payment required under the terms of this Loan Agreement or
any other Loan Document on the date due and such failure shall continue for five
(5) Business Days after Borrower's receipt of Lender's written notice thereof to
Borrower; or (iii) any Indebtedness (excluding Obligations) owed by Borrower to
Lender on the date due and such failure shall continue for five (5) Business
Days after Borrower's receipt of Lender's written notice thereof to Borrower.
(b) Breaches of Covenants. Borrower shall fail to observe or perform any
other covenant, obligation, condition or agreement contained in this Loan
Agreement or any other Loan Document and (i) such failure shall continue for ten
(10) Business Days, or (ii) if such failure is not curable within such ten (10)
Business Day period, but is reasonably capable of cure within thirty (30)
Business Days, either (A) such failure shall continue for thirty (30) Business
Days or (B) Borrower shall not have commenced a cure in a manner reasonably
satisfactory to Lender within the initial ten (10) Business Day period; or
(c) Representations and Warranties. Any representation, warranty,
certificate, or other statement (financial or otherwise) made or furnished by or
on behalf of Borrower to Lender in writing in connection with any of the Loan
Documents, or as an inducement to Lender to enter into this Loan Agreement,
shall be false, incorrect, incomplete or misleading in any material respect when
made or furnished; or
(d) Voluntary Bankruptcy or Insolvency Proceedings. Borrower shall (i)
apply for or consent to the appointment of a receiver, trustee, liquidation or
custodian of itself or of all or a substantial part of its property, (ii) be
unable, or admit in writing its inability, to pay its debts generally as they
mature, (iii) make a general assignment for the benefit of its or any of its
creditors, (iv) be dissolved or liquidated in full or in part, (v) become
insolvent (as such term is defined in 11 U.S.C. (S)101 (32), as amended from
time to time), (vi) commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in effect
or consent to any such relief or to the appointment of or taking possession of
its property by any official in an involuntary case or other proceeding
commenced against it, or (vii) take any action for the purpose of effecting any
of the foregoing; or
(e) Involuntary Bankruptcy or Insolvency Proceedings. Proceedings for the
appointment of a receiver, trustee, liquidator or custodian of Borrower or of
all or a substantial part of the property thereof, or an involuntary case or
other proceedings seeking liquidation, reorganization or other relief with
respect to Borrower or the debts thereof under any bankruptcy, insolvency or
other similar law now or hereafter in effect shall be commenced and an order for
relief entered or such proceeding shall not be dismissed or discharged within
sixty (60) calendar days of commencement.
5.2 Rights of Lender upon Default.
-----------------------------
(a) Acceleration. Upon the occurrence or existence of any Event of
Default described in Sections 5.1(d) and 5.1(e), automatically and without
notice or, at the option of Lender, upon the occurrence of any other Event of
Default, all outstanding Obligations payable by Borrower
-5-
<PAGE>
hereunder shall become immediately due and payable, without presentment, demand,
protest or any other notice of any kind, all of which are hereby expressly
waived, anything contained herein or in the other Loan Documents to the contrary
notwithstanding.
(b) Cumulative Rights, etc. The rights, powers and remedies of Lender
under this Loan Agreement shall be in addition to all rights, powers and
remedies given to Lender by virtue of any applicable law, rule or regulation of
any Governmental Authority, any transaction contemplated thereby or any other
agreement, all of which rights, powers, and remedies shall be cumulative and may
be exercised successively or concurrently without impairing Lender's rights
hereunder.
ARTICLE 6
MISCELLANEOUS
6.1 Notices. Except as otherwise provided herein, all notices, requests,
-------
demands, consents, instructions or other communications to or upon Lender or
Borrower under this Agreement or the other Loan Documents shall be in writing
and telecopied, mailed or delivered to each party at its telecopier number or
address set forth below (or to such other telecopier number or address for any
party as indicated in any notice given by that party to the other party). All
such notices and communications shall be effective (a) when sent by Federal
Express or other overnight service of recognized standing, on the Business Day
following the deposit with such service; (b) when mailed by registered or
certified mail, first class postage prepaid and addressed as aforesaid through
the United States Postal Service, upon receipt; (c) when delivered by hand, upon
delivery; and (d) when telecopied, upon confirmation of receipt; provided,
--------
however, that any notice delivered to Lender under Article 2 shall not be
- -------
effective until received by Lender.
LENDER: Seagate Technology, Inc.
920 Disc Drive
Scotts Valley, California 95066
Attention: David Nelson
BORROWER: Seagate Software, Inc.
920 Disc Drive
Scotts Valley, California 95066
Attention: Ellen Chamberlain
6.2 Waivers; Amendments. Any term, covenant, agreement or condition of
-------------------
this Loan Agreement or any other Loan Document may be amended or waived if such
amendment or waiver is in writing and is signed by Borrower and Lender. No
failure or delay by Lender in exercising any right hereunder shall operate as a
waiver thereof or of any other right nor shall any single or partial exercise of
any such right preclude any other further exercise thereof or of any other
right. A waiver or consent given hereunder shall be effective only if in
writing and in the specific instance and for the specific purpose for which
given.
-6-
<PAGE>
6.3 Successors and Assigns. This Loan Agreement and the other Loan
----------------------
Documents shall be binding upon and inure to the benefit of Borrower, Lender and
their respective successors and permitted assigns, except that Borrower may not
assign or transfer (and any such attempted assignment or transfer shall be void)
any of its rights or obligations under any Loan Document without the prior
written consent of Lender.
6.4 Set-off. In addition to any rights and remedies of Lender provided by
-------
law, Lender shall have the right, without prior notice to Borrower, any such
notice being expressly waived by Borrower to the extent permitted by applicable
law, upon the occurrence and during the continuance of a Default or an Event of
Default, to set-off and apply against any Indebtedness, whether matured or
unmatured, of Borrower to Lender (including, without limitation, the
Obligations), any amount owing from Lender to Borrower. The aforesaid right of
set-off may be exercised by Lender against Borrower or against any trustee in
bankruptcy, debtor-in-possession, assignee for the benefit of creditors,
receiver or execution, judgment or attachment creditor of Borrower or against
anyone else claiming through or against Borrower or such trustee in bankruptcy,
debtor-in-possession, assignee for the benefit of creditors, receiver, or
execution, judgment or attachment creditor, notwithstanding the fact that such
right of set-off shall not have been exercised by Lender prior to the occurrence
of a Default or an Event of Default. Lender agrees promptly to notify Borrower
after any such set-off and application made by Lender, provided that the failure
--------
to give such notice shall not affect the validity of such set-off and
application.
6.5 No Third Party Rights. Nothing expressed in or to be implied from
---------------------
this Agreement or any other Loan Document is intended to give, or shall be
construed to give, any Person, other than the parties hereto and thereto and
their permitted successors and assigns, any benefit or legal or equitable right,
remedy or claim under or by virtue of this Agreement or any other Loan Document.
6.6 Partial Invalidity. If at any time any provision of this Loan
------------------
Agreement or any of the Loan Documents is or becomes illegal, invalid or
unenforceable in any respect under the law of any jurisdiction, neither the
legality, validity or enforceability of the remaining provisions of the Loan
Agreement or such other Loan Documents, nor the legality, validity or
enforceability of such provision under the law of any other jurisdiction, shall
in any way be affected or impaired thereby.
6.7 Governing Law. This Loan Agreement and each of the other Loan
-------------
Documents shall be governed by and construed in accordance with the laws of the
State of California without reference to conflicts of law rules.
6.8 Construction. Each of this Loan Agreement and the other Loan
------------
Documents is the result of negotiations among, and has been reviewed by,
Borrower, Lender and their respective counsel. Accordingly, this Loan Agreement
and the other Loan Documents shall be deemed to be the product of all parties
hereto, and no ambiguity shall be construed in favor of or against Borrower or
Lender.
6.9 Entire Agreement. This Loan Agreement and the other Loan Documents,
----------------
taken together, constitute and contain the entire agreement of Borrower and
Lender with respect to the subject matter hereby and supersede any and all prior
agreements, negotiations, correspondence,
-7-
<PAGE>
understandings and communications among the parties, whether written or oral,
respecting the subject matter hereof.
IN WITNESS WHEREOF, the parties have executed this Loan Agreement as of the
date first set forth above.
BORROWER:
SEAGATE SOFTWARE, INC.
By: ________________________________
Name: Ellen E. Chamberlain
Title: Senior Vice President & Chief
Financial Officer
LENDER:
SEAGATE TECHNOLOGY, INC.
By: _______________________________
Name: James A. Taylor
Title: Vice President, Finance & Treasurer
-8-
<PAGE>
EXHIBIT 10.8
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is made as of this ________ day of
_________ 199__ by and between SEAGATE SOFTWARE, INC., a Delaware corporation
(the "Company") and _________________ ("Indemnitee").
WHEREAS, the Company and Indemnitee recognize the increasing difficulty in
obtaining directors and officers liability insurance, the significant increases
in the cost of such insurance and the general reductions in the coverage of such
insurance; and
WHEREAS, the Company and Indemnitee further recognize the substantial increase
in corporate litigation, in general, subjecting officers and directors to
expensive litigation risks at the same time as liability insurance has been
severely limited; and
WHEREAS, Indemnitee does not regard the current protection available as adequate
given the present circumstances, and Indemnitee and other officers and directors
of the Company may not be willing to serve as officers and directors without
adequate protection; and
WHEREAS, the Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitees, to serve as officers and directors
of the Company and to indemnify its officers and directors so as to provide them
with the maximum protection permitted by law.
NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:
1. Indemnification.
(a) Third Party Proceedings. The Company shall indemnify Indemnitee
if Indemnitee is or was a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Company) by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Company, or any subsidiary of the
Company, by reason of any action or inaction on the part of Indemnitee while an
officer or director or by reason of the fact that Indemnitee 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 expenses (including attorneys fees), judgments, buying and amounts paid
in settlement (if such settlement is approved in advance by the Company, which
approval shall not be unreasonably withheld) actually and reasonably incurred by
Indemnitee in connection with such action, suit or proceeding if Indemnitee
acted in good faith in a manner Indemnitee reasonably believed to be in or not
opposed to the best interest of the Company, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe Indemnitee's conduct
was unlawful. The termination of any action, suit, or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that Indemnitee did not
act in good faith and in a manner which Indemnitee reasonably believed to be in
or not opposed to the best interest of the Company, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that Indemnitee's
conduct was unlawful.
(b) Proceedings by or in the Right of the Company. The Company shall
indemnify Indemnitee if Indemnitee was or is a party or is threatened to be made
a party to any threatened, pending or completed action or suit by or in the
right of the Company or any subsidiary of the Company to procure a judgment in
its favor by reason of the fact that Indemnitee is or was a director, officer,
employee or agent of the Company, or any subsidiary of the Company, by reason of
any action or inaction on the part of Indemnitee while an officer or director or
by reason of the fact that Indemnitee 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 expenses
(including attorneys' fees) and amounts paid in settlements actually and
reasonably incurred by Indemnitee in connection with the defense or settlement
<PAGE>
of such action or suit if Indemnitee acted in good faith and in a manner
Indemnitee reasonably believed to be in or not opposed to the best interests of
the Company, except that no indemnification shall be made in respect of any
claim, issue or matter as to which Indemnitee shall have been adjudged to be
liable to the Company unless and only to the extent that the Court of Chancery
of the State of Delaware or the court in which such action or suit was brought
shall determine upon application that, despite adjudication of liability but in
view of all the circumstances of the case, Indemnitee is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery of this
state of Delaware or such other court shall deem proper.
(c) Mandatory Payments of Expenses. To the extent that Indemnitee has
been successful on the merits were otherwise in defense of any action, suit or
proceeding referred to in Subsections (a) and (b) of this Section 1 for the
defense of any claim, issue or matter therein, Indemnitee shall be indemnified
against expenses (including attorneys fees) actually and reasonably incurred by
Indemnitee in connection therewith.
2. Agreement to Serve. In consideration of the protection afforded by
this Agreement, if Indemnitee is a director of the Company he agrees to serve at
least for the balance of the current term as a director and not to resign
voluntarily during such period without the written consent of a majority of the
Board of Directors. If Indemnitee is an officer of the Company not serving under
an employment contract, he agrees to serve in such capacity at least for the
balance of the current fiscal year of the Company and not to resign voluntarily
during such period without the written consent of a majority of the Board of
Directors. Following the applicable period set forth above, Indemnitee agrees to
continue to serve in such capacity at the will of the Company (or under separate
agreement, if such agreement exists) so long as he is duly appointed or elected
and qualified in accordance with the applicable provisions of the bylaws of the
Company or any subsidiary of the Company until such time has he tenders his
resignation in writing. Nothing contained in this Agreement is intended to
create in Indemnitee any right to continued employment.
3. Expenses; Indemnification Procedure.
(a) Advancement of Expenses. The Company shall advance all expenses
incurred by Indemnitee in connection with the investigation, defense, settlement
or appeal of any civil or criminal action, suit or proceeding referenced in
Section 1(a) or (b) hereof. Indemnitee hereby undertakes to repay such amounts
advanced only if, and to the extent that, it shall ultimately be determined that
Indemnitee is not entitled to be indemnified by the Company as authorized
hereby. The advances to be made hereunder shall be paid by the Company to
Indemnitee within twenty (20) days following delivery of a written request
therefore by Indemnitee to the Company.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
condition precedent to his right to be indemnified under this Agreement, give
the Company notice in writing as soon as practicable than any claim made against
Indemnitee for which indemnification will or could be sought under this
Agreement. Notice to the Company shall be directed to Seagate software, Inc.,
920 Disk Drive, Scotts Valley, CA 95066, Attn: Ellen E. Chamberlain (or such
other address as the Company shall designate in writing to Indemnitee). Notice
shall be deemed received on the third business day after the date post marked by
domestic certified or registered mail, properly addressed; otherwise notice
shall be deemed received when notice shall actually be received by the Company.
In addition, Indemnitee shall give the Company such information and cooperation
as it may reasonably require and shall be within Indemnitee's power.
(c) Procedure. Any indemnification and advances provided for in
Section 1 and this Section 3 shall be made no later than forty five (45) days
after receipt of the written request of Indemnitee. If a claim under this
Agreement, under any statute, or under any provision of the Company's
Certificate of Incorporation or Bylaws providing for indemnification is not paid
in full by the Company within forty-five (45) days after a written request for
payment thereof has first been received by the Company, Indemnitee may, but need
not, at any time thereafter bring an action against the Company to recover the
unpaid
<PAGE>
amount of the claim and, subject to Section 13 of this Agreement. Indemnitee
shall also be entitled to be paid for the expenses (including attorneys' fees)
of bringing such action. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in connection with any
action, suit or proceeding in advance of its final disposition) that Indemnitee
has not met the standards of conduct which make it permissible under applicable
law for the Company to indemnify Indemnitee for the amount claimed, but the
burden of providing such defense shall be on the Company and Indemnitee shall be
entitled to receive interim payments of expenses pursuant to Subsection 3(a)
unless and until such defense may be finally adjudicated by court order or
judgment from which no further right of appeal exists. It is the parties'
intention that if the Company contests Indemnitee's right to indemnification,
the question of Indemnitee's right to indemnification shall be for the court to
decide, and neither the failure of the Company (including its Board of
Directors, any committee or subgroup of the Board of Directors, independent
legal counsel, or its shareholders) to have made determination that
indemnification of Indemnitee is proper in the circumstances because Indemnitee
has met the applicable standard of conduct required by applicable law, nor an
actual determination by the Company (including its Board of Directors, any
committee are subgroup of the Board of Directors, independent legal counsel, or
its shareholders) that Indemnitee has not met such applicable standard of
conduct, shall create a presumption that Indemnitee has or has not met the
applicable standard of conduct.
(d) Notice to Insurers. If, at the time of the receipt of a notice of
a claim pursuant to Section 3(b) hereof, the Company has director and officer
liability insurance in effect, the Company shall give prompt notice of the
commencement of such proceedings to the insurers in accordance with procedure
set forth in respective policies. The Company shall thereafter take all
necessary or desirable action to cause such insurers to pay, on behalf of the
Indemnitees, all amounts payable as a result of such proceeding in accordance
with the terms of such policies.
(e) Selection of Counsel. In the event the Company shall be obligated
under Section 3(a) hereof to pay the expenses of any proceeding against
Indemnitee, the Company, if appropriate, shall be entitled to assume the defense
of such proceeding, the council approved by Indemnitee, upon the delivery to
Indemnitee of written notice of its election to do so. After delivery of such
notice, approval of such counsel by Indemnitees and retention of such counsel by
the Company, the Company will not be liable to Indemnitee under this Agreement
for any fees of counsel subsequently incurred by Indemnitee with respect to the
same proceeding, provided that (i) Indemnitee shall have the right to employ his
counsel in any such proceeding at Indemnitee's expense; and (ii) if (A) the
employment of counsel by Indemnitee has been previously authorized by the
Company, (B) Indemnitee shall have reasonably concluded that there may be a
confilict of interest between the Company and Indemnitee in the conduct of any
such defense or (C) the Company shall not, in fact, have employed counsel to
assume the defense of such proceeding, then the fees and expenses of
Indemnitee's counsel shall be at the expense of the Company.
4. Additional Indemnification Rights; Non-Exclusivity.
(a) Scope. Notwithstanding any other provision of this Agreement, the
Company hereby agrees to indemnify Indemnitee to the fullest extent permitted by
law, notwithstanding that such indemnification is not specifically authorized by
the other provisions of this Agreement, the Company's Certificate of
Incorporation, the Company's Bylaws or by statute. In the event of any change,
after the date of this Agreement, in any applicable law, statute, or rule which
expands the right of a Delaware corporation to indemnify a member of its board
of directors or an officer, such changes shall be, ipso facto, within the
purview of Indemnitee's rights and Company's obligations, under this Agreement.
In the event in any change in any applicable law, statute or rule which narrows
the right of the Delaware corporation to indemnify a member of its board of
directors or an officer, such changes, 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 or obligations hereunder.
(b) Nonexclusivity. The indemnification provided by this Agreement
shall not be deemed exclusive of any rights to which an Indemnitee may be
entitled under the Company's Certificate of
<PAGE>
Incorporation, its Bylaws, any agreement, any vote of stockholders or
disinterested directors, the General Corporation Law of the State of Delaware,
or otherwise, both as to action in Indemnitee's official capacity and as to
action in another capacity while holding such office. The indemnification
provided under this Agreement shall continue as to Indemnitee for any action
taken are not taken while serving as an indemnified capacity even though he may
have ceased to serve in certain such capacity at the time of any action, suit or
other covered proceeding.
5. Partial Indemnification. If Indemnitee is entitled under any provision
of this Agreement to indemnification by the Company for some portion of
expenses, judgments, finds or penalties actually or reasonably incurred by him
in the investigation, defense, appeal or settlement of any civil or criminal
action, suit or proceeding, but not, however, for the total amount thereof the
Company shall nevertheless indemnify Indemnitee for the portion of such
expenses, judgments, finds or penalties to which Indemnitee is entitled.
6. Mutual Technology. Both the Company and Indemnitee acknowledge that in
certain instances, Federal law or public policy may override applicable state
law and prohibit the Company from indemnifying its directors and officers under
this Agreement or otherwise. For example, the Company and Indemnitee acknowledge
that the Securities and Exchange Commission (the "SEC.") has taken the position
that indemnification is not permissible for liabilities arising under certain
federal securities laws, and federal legislation prohibits indemnification for
certain ERISA violations. Indemnitee understands and acknowledges that the
Company has undertaken with the SEC to submit the question to a court in certain
circumstances for determination of the Company's right under public policy to
indemnify Indemnitee.
7. Officer and Director Liability Insurance. The Company shall, from time
to time, make the good faith determination whether or not it is practicable for
the company to obtain and maintain a policy or policies of insurance with
reputable insurance companies providing the officers and directors of the
Company with coverage for losses from wrongful acts or to ensure the Company's
performance of its indemnification obligations under this Agreement. Among other
considerations, the Company will weigh the cost to obtain such insurance
coverage against the protection afforded by such coverage. In all policies of
director and officer liability insurance, Indemnitee shall be named as an
insured in such a manner as to provide Indemnitee the same rights and benefits
as are accorded to the most favorably insured of the Companies directors, if
Indemnitee is a director; or of the Companies officers, if Indemnitee is not a
director of the Company but is an officer; or of the Company's key employees, if
Indemnitee is not an officer or director but a key employee. Notwithstanding the
foregoing, the Company shall have no obligation to obtain or maintain such
insurance if the Company determined in good faith that such insurance is not
reasonably available, if the premium cost for such insurance are
disproportionate to the amount of coverage provided, if the coverage provided by
such insurance is limited by exclusions so as to provide an insufficient
benefit, or Indemnitee is covered by similar insurance maintained by parent or
subsidiary of the Company.
8. Severability. Nothing in his Agreement is intended to require or shall
be construed as requiring the Company to do or fail to do any act in violation
of applicable law. The Company's inability, pursuant to court order, to perform
its obligations under this Agreement shall not constitute a breach of this
Agreement. The provisions of this Agreement shall be severable as provided in
this Section 8. If this Agreement or any portion hereof shall be invalidated on
any ground by any court of competent jurisdiction, the Company shall
nevertheless indemnify Indemnitee to the full extent permitted by any applicable
portion of this Agreement that shall have been invalidated and the balance of
this Agreement not so invalidated shall be enforceable in accordance with its
terms.
9. Exceptions. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement.
(a) Claims Initiated by Indemnitee. To indemnify or advance expenses
to Indemnitee with respect to proceedings brought voluntarily by Indemnitee and
not by way of defense, except with respect to proceedings brought to establish
or enforce a right to indemnification under this
<PAGE>
Agreement or any other statute or law or otherwise as required under Section 145
of the Delaware General Corporation Law, but such indemnification or advancement
of such expenses may be provided by the Company in specific cases if the Board
of Directors finds it to be appropriate;
(b) Lack of Good Faith. To indemnify Indemnitee for any expenses
incurred by Indemnitee with respect to any proceeding instituted by Indemnitee
to enforce or interpret this Agreement, if a court of competent jurisdiction
determines that each of the material assertions made by the Indemnitee in such
proceeding was not made in good faith or was frivolous;
(c) Insured Claims. To indemnify Indemnitee for expenses or
liabilities of any type whatsoever (including, but not limited to, judgment,
fines, ERISA excise taxes or penalties, and amounts paid in settlement) which
have been paid directly to Indemnitee by an insurance carrier under a policy of
officers' and directors' liability insurance maintained by the Company;
(d) Claims Under Section 16(b). To indemnify Indemnitee for expenses
or 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, for any similar successor statute.
10. Construction of Certain Phrases.
(a) For purposes of this Agreement, references to the "Company" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, employees or agents, so that,
Indemnitee is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust for other enterprise. Indemnitee shall stand in the same
position under provision of this Agreement with respect resulting or surviving
corporation as Indemnitee would have with respect to such constituent
corporation if its separate existence had continued.
(b) For purposes of this Agreement, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on Indemnitee with respect to an employee benefit plan;
and references to "serving at the request of the Company" shall include any
service as a director, officer, employee for agent of the Company which imposes
duties on, or involves services by such director, officer, employee or agent
with respect to employee benefit plan, its participants, or 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.
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
12. Successors and Assigns. This Agreement shall be binding upon the
Company and its successors and assigns, and shall inure to the benefit of
Indemnitee and Indemnitee's estate, heirs, legal representatives and assigns.
13. Attorney's Fees. In the event any action is instituted by Indemnitee
under this Agreement to enforce or interpret any of the terms hereof, Indemnitee
shall be entitled to be paid all court costs and expenses, including reasonable
attorneys fees, incurred by Indemnitee with respect to such action unless as
part of such action, the court of competent jurisdiction determines that each of
the material assertions made by Indemnitee as a basis for such action or not
made in good faith or were frivolous. In the event of an action instituted by or
in the name of the Company under this Agreement or to enforce or interpret any
of the terms of this Agreement, Indemnitee shall be entitled to be paid all
court costs and expenses, including attorneys' fees, incurred by Indemnitee in
defense of such action (included with respect to
<PAGE>
Indemnitee's counterclaims and cross claims made in such action), unless as a
part of such action the court determines that such each of Indemnitee's material
defenses to such action were made in bad faith or were frivolous
14. 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 receipted for by the party addressee, on the data such
receipt, 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 shown on the signature page of this Agreement, or as
subsequently modified by written notice.
15. Consent to Jurisdiction. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be brought only in the state courts of the State of Delaware.
16. Choice of Law. This Agreement shall be governed by and its provisions
construed in accordance with the laws of the State of Delaware, as applied to
contacts between Delaware residents entered into and to be performed entirely
within Delaware.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first written above.
SEAGATE SOFTWARE, INC.
By:_________________________
Title:______________________
920 Disc Drive
Scotts Valley, California 95066
AGREED TO AND ACCEPTED:
INDEMNITEE:
_________________________
Name
_______________________
Signature
_______________________
Address
_______________________
<PAGE>
EXHIBIT 10.9
SUPPORT AGREEMENT
THIS AGREEMENT made as of the 26th day of December, 1996.
BETWEEN:
SEAGATE SOFTWARE, INC., a Delaware corporation
("SEAGATE SOFTWARE")
AND:
SEAGATE SOFTWARE INFORMATION MANAGEMENT GROUP, INC., a British Columbia
company
("SEAGATE CANADA")
WHEREAS:
A. Concurrent with the execution of this agreement, Seagate Canada and
its sole shareholder Seagate Technology International Holdings (the
"SHAREHOLDER"), a Cayman Island corporation, will enter into two exchange
agreements (the "EXCHANGE AGREEMENTS") which provide for, among other things,
the exchange by the Shareholder of all of its outstanding shares in the capital
of Seagate Canada for 7,200,000 Convertible Preference Shares without par value
in the capital of Seagate Canada and the subsequent exchange of such shares for
7,200,000 Class B Exchangeable Shares without par value (the "CLASS B
EXCHANGEABLE SHARES") in the capital of Seagate Canada.
B. In accordance with the special rights and restrictions attaching to
the Class B Exchangeable Shares as set out in the Articles of Seagate Canada
(the "SHARE PROVISIONS"), the Class B Exchangeable Shares in the capital of
Seagate Canada are exchangeable for shares of Series A Preferred Stock in the
capital stock of Seagate Software (as such shares may be constituted from time
to time as set out in the Amended & Restated Certificate of Incorporation of
Seagate Software and as the same may be effected by any subdivision,
consolidation, reclassification or other change or by any reorganization,
amalgamation, merger, sale of assets or by any distribution in respect of such
shares, including any automatic or voluntary conversion of such shares into
common stock or any other shares in the capital stock of Seagate Software, the
"SEAGATE SOFTWARE SERIES A PREFERRED STOCK").
C. The parties wish to enter into this agreement to record the
subscription by Seagate Software for 10,000 Class A Common Shares without par
value (the "CLASS A COMMON SHARES") in the capital of Seagate Canada at a
subscription price per share of $0.10 Cdn. and to record certain
<PAGE>
obligations of Seagate Software in respect of the Class B Exchangeable Shares,
as further set out herein.
NOW THEREFORE in consideration of the respective covenants and agreements
provided for in this agreement and for other good and valuable consideration,
the parties agree as follows:
ARTICLE 1
SUBSCRIPTION
1.1 SUBSCRIPTION. With effect as and from the date of the exchange of
------------
7,200,000 Convertible Preference Shares for 7,200,000 Class B Exchangeable
Shares, as described in one of the exchange agreements referred to in Recital A,
Seagate Software will subscribe for and purchase 10,000 Class A Common Shares
and Seagate Canada will concurrently issue and sell to Seagate Software from its
treasury 10,000 Class A Common Shares, for the subscription price of $0.10 Cdn.
per share or $ 1,000 Cdn. in the aggregate, which amount shall be paid by
Seagate Software to Seagate Canada concurrent with its subscription.
ARTICLE 2
COVENANTS OF SEAGATE SOFTWARE AND SEAGATE CANADA
2.1 FUNDING OF SEAGATE CANADA. So long as any Class B Exchangeable Shares
-------------------------
are outstanding, Seagate Software will:
(a) not declare or pay any dividend on Seagate Software Series A Preferred
Stock unless Seagate Canada shall simultaneously declare or pay, as the
case may be, an equivalent dividend on the Class B Exchangeable Shares in
accordance with the Share Provisions;
(b) cause Seagate Canada to declare simultaneously with the declaration of
any dividend on Seagate Software Series A Preferred Stock, an equivalent
dividend on the Class B Exchangeable Shares and, when such dividend is paid
on Seagate Software Series A Preferred Stock, cause Seagate Canada to pay
simultaneously therewith such equivalent dividend on the Class B
Exchangeable Shares, in each case in accordance with the Share Provisions;
(c) advise Seagate Canada sufficiently in advance of the declaration by
Seagate Software of any dividend on Seagate Software Series A Preferred
Stock and take all such other actions as are necessary, in cooperation with
Seagate Canada, to ensure that the respective declaration date, record date
and payment date for a dividend on the Class B Exchangeable Shares shall be
the same as the record date, declaration date
-2-
<PAGE>
and payment date, respectively, for the corresponding dividend on Seagate
Software Series A Preferred Stock;
(d) provide or cause to be provided to Seagate Canada, by any means which
Seagate Software deems appropriate from time to time, such assets, funds
and other property as may be necessary in order that Seagate Canada will
have sufficient assets, funds and other property available to enable the
due declaration and the due and punctual payment, in accordance with
applicable law, of all dividends on the Class B Exchangeable Shares in
accordance with the Share Provisions;
(e) take all such actions and do all such things as are necessary or
desirable to enable and permit Seagate Canada, in accordance with
applicable law, to pay and otherwise perform its obligations with respect
to the satisfaction of the BASIC LIQUIDATION AMOUNT (as defined in the
Share Provisions) in respect of each issued and outstanding Class B
Exchangeable Share upon the occurrence of a LIQUIDATING EVENT (as defined
in the Share Provisions) including, without limitation, all such actions
and all such things as are necessary or desirable to enable and permit
Seagate Canada to cause to be delivered shares of Seagate Software Series A
Preferred Stock to the holders of Class B Exchangeable Shares in accordance
with the Share Provisions; and
(f) subject to the exercise by Seagate Software of its Right of First
Refusal, take all such actions and do all such things as are necessary or
desirable to enable and permit Seagate Canada, in accordance with
applicable law, to pay and otherwise perform its obligations with respect
to the satisfaction of the RETRACTION PRICE (as defined in the Share
Provisions) including, without limitation, all such actions and all such
things as are necessary or desirable to enable and permit Seagate Canada to
cause to be delivered shares of Seagate Software Series A Preferred Stock
to the holders of Class B Exchangeable Shares, upon the redemption of the
Class B Exchangeable Shares in accordance with the Share Provisions.
2.2 SEGREGATION OF FUNDS. Upon Seagate Software providing or causing to
--------------------
be provided to Seagate Canada any funds, assets or other property in accordance
with section 2.1, Seagate Canada will deposit such funds in a separate account
and segregate such assets and other property, in each case for the benefit of
holders from time to time of the Class B Exchangeable Shares, and will use such
funds, assets or other property exclusively for the payment of dividends and the
payment or other satisfaction of the Basic Liquidation Amount or the Retraction
Price, as applicable.
2.3 RESERVATION OF SEAGATE SOFTWARE SERIES A PREFERRED STOCK. Seagate
--------------------------------------------------------
Software hereby represents, warrants and covenants that it has irrevocably
reserved for issuance and will at all times keep available, free from pre-
emptive and other rights, out of its authorized and unissued capital stock such
number of shares of Seagate Software Series A Preferred Stock (or other shares
or securities into which Seagate Software Series A Preferred Stock may be
reclassified or changed as contemplated by section 2.7 hereof) equal to: (a) the
number of Class B Exchangeable Shares issued
-3-
<PAGE>
and outstanding from time to time multiplied by the EXCHANGE RATE (as defined in
the Share Provisions); and (b) as are now and may hereafter be required to
enable and permit Seagate Canada to meet its obligations hereunder, under the
Share Provisions and under any other security or commitment pursuant to which
Seagate Software may now or hereafter be required to issue shares of Seagate
Software Series A Preferred Stock to the holders of Class B Exchangeable Shares.
2.4 NOTIFICATION OF CERTAIN EVENTS. In order to assist Seagate Software
------------------------------
to comply with its obligations hereunder, Seagate Canada will give Seagate
Software notice of each of the following events at the time set forth below:
(a) in the event of any determination by the board of directors of
Seagate Canada to institute voluntary liquidation, dissolution or winding-
up proceedings with respect to Seagate Canada or to effect any other
distribution of the assets of Seagate Canada among its shareholders for the
purpose of winding-up its affairs, at least 60 days prior to the proposed
effective date of such liquidation, dissolution, winding up or other
distribution;
(b) immediately, upon the earlier of receipt by Seagate Canada of notice
of and Seagate Canada otherwise becoming aware of any threatened or
instituted claim, suit, petition or other proceedings with respect to the
involuntary liquidation, dissolution or winding-up of Seagate Canada or to
effect any other distribution of the assets of Seagate Canada among its
shareholders for the purpose of winding-up its affairs; and
(c) immediately, upon receipt by Seagate Canada of a Retraction Request
(as defined in the Share Provisions).
2.5 DELIVERY OF SEAGATE SOFTWARE SERIES A PREFERRED STOCK. In furtherance
-----------------------------------------------------
of its obligations under section 2.1(e) and 2.1(f) hereof, which for
clarification shall not include the exercise by Seagate Software of its Right of
First Refusal (as defined in Article 3 hereof), upon notice from Seagate Canada
of any event which requires Seagate Canada to cause to be delivered Seagate
Software Series A Preferred Stock to any holder of Class B Exchangeable Shares,
Seagate Software shall forthwith issue and deliver the requisite Seagate
Software Series A Preferred Stock to or to the order of the former holder of the
surrendered Class B Exchangeable Shares, as Seagate Canada shall direct. All
such Seagate Software Series A Preferred Stock shall be duly issued as fully
paid and non-assessable and shall be free and clear of any lien, claim or
encumbrance. In consideration of the issuance of each such Seagate Software
Series A Preferred Stock by Seagate Software, Seagate Canada shall issue to
Seagate Software or as Seagate Software shall direct, one Common Share of
Seagate Canada.
2.6 QUALIFICATIONS OF SEAGATE SOFTWARE SERIES A PREFERRED STOCK. If any
-----------------------------------------------------------
shares of Seagate Software Series A Preferred Stock (or other shares or
securities into which Seagate Software Series A Preferred Stock may be
reclassified or changed as contemplated by section 2.7 hereof) to be issued and
delivered hereunder require registration or qualification with or approval of or
the filing of any document including any prospectus or similar document or the
taking of any proceeding with
-4-
<PAGE>
or the obtaining of any order, ruling or consent from any governmental or
regulatory authority under any Canadian or United States federal, provincial or
state law or regulation or pursuant to the rules and regulations of any
regulatory authority or the fulfilment of any other legal requirement before
such shares (or such other shares or securities) may be issued and delivered by
Seagate Software at the direction of Seagate Canada to the initial holder
thereof (other than any restrictions on transfer by reason of a holder being a
"control person" of Seagate Software for purposes of Canadian federal or
provincial securities law or an "affiliate" of the Parent for purposes of United
States federal or state securities law), Seagate Software will in good faith
expeditiously take all such actions and do all such things as are necessary or
desirable to cause such Seagate Software Series A Preferred Stock (or such other
shares or securities) to be and remain duly registered, qualified or approved.
Seagate Software will in good faith expeditiously take all such actions and do
all such things as are necessary or desirable to cause all Seagate Software
Series A Preferred Stock (or such other shares or securities to be delivered
hereunder) to be listed, quoted or posted for trading on all stock exchanges and
quotation systems on which outstanding Seagate Software Series A Preferred Stock
(or such other shares or securities) are listed, quoted or posted for trading at
such time.
2.7 ECONOMIC EQUIVALENCE.
--------------------
(a) Seagate Software will not without the prior approval of Seagate
Canada and the prior approval of the holders of the Class B Exchangeable
Shares:
(i) issue or distribute Seagate Software Series A Preferred Stock (or
securities exchangeable for or convertible into or carrying rights to
acquire Seagate Software Series A Preferred Stock) to the holders of
all or substantially all of the then outstanding Seagate Software
Series A Preferred Stock (solely by virtue of their ownership of
Seagate Software Series A Preferred Stock) by way of stock dividend or
other distribution, other than an issue of Seagate Software Series A
Preferred Stock (or securities exchangeable for or convertible into or
carrying rights to acquire Seagate Software Series A Preferred Stock)
to holders of Seagate Software Series A Preferred Stock who exercise
an option to receive dividends in Seagate Software Series A Preferred
Stock (or securities exchangeable for or convertible into or carrying
rights to acquire Seagate Software Series A Preferred Stock) in lieu
of receiving cash dividends; or
(ii) issue or distribute rights, options or warrants to the holders
of all or substantially all of the then outstanding Seagate Software
Series A Preferred Stock (solely by virtue of their ownership of
Seagate Software Series A Preferred Stock) entitling them to subscribe
for or to purchase Seagate Software Series A Preferred Stock (or
securities exchangeable for or convertible into or carrying rights to
acquire Seagate Software Series A Preferred Stock); or
-5-
<PAGE>
(iii) issue or distribute to the holders of all or substantially
all of the then outstanding Seagate Software Series A Preferred Stock
(solely by virtue of their ownership of Seagate Software Series A
Preferred Stock): (A) shares or securities of Seagate Software of any
class other than Seagate Software Series A Preferred Stock (other than
shares convertible into or exchangeable for or carrying rights to
acquire Seagate Software Series A Preferred Stock); (B) rights,
options or warrants other than those referred to in section 2.7(a)(ii)
above; (C) evidences of indebtedness of Seagate Software; or (D)
assets of Seagate Software;
unless the economic equivalent on a per share basis of such rights, options,
securities, shares, evidences of indebtedness or other assets is issued or
distributed simultaneously to holders of the Class B Exchangeable Shares.
(b) Seagate Software will not without the prior approval of Seagate
Canada and the prior approval of the holders of the Class B Exchangeable Shares:
(i) subdivide, redivide or change the then outstanding Seagate
Software Series A Preferred Stock into a greater number of Seagate
Software Series A Preferred Stock; or
(ii) reduce, combine, or consolidate or change the then outstanding
Seagate Software Series A Preferred Stock into a lesser number of
Seagate Software Series A Preferred Stock; or
(iii) reclassify or otherwise change Seagate Software Series A
Preferred Stock or effect an amalgamation, merger, reorganization or
other transaction affecting Seagate Software Series A Preferred Stock;
unless the same or an economically equivalent change shall simultaneously be
made to, or in the rights of the holders of, the Class B Exchangeable Shares.
(c) Seagate Software will ensure that the record date for any event
referred to in section 2.7(a) or 2.7(b) above, or (if no record date is
applicable for such event) the effective date for any such event, is not less
than 3 business days after the date on which such event is declared or announced
by Seagate Software (with simultaneous notice thereof to be given by Seagate
Software to Seagate Canada).
(d) The Board of Directors of Seagate Canada shall determine, in good
faith and in its sole discretion (with the assistance of such reputable and
qualified independent financial advisors and/or other experts as the board may
require), economic equivalence for the purposes of any event referred to in
section 2.7(a) or 2.7(b) above and each such determination shall be conclusive
and binding on Seagate Software. In making each such determination, the
following
-6-
<PAGE>
factors shall, without excluding other factors determined by the board to be
relevant, be considered by the Board of Directors of Seagate Canada:
(i) in the case of any stock dividend or other distribution
payable in Seagate Software Series A Preferred Stock, the number of
such shares issued in proportion to the number of Seagate Software
Series A Preferred Stock previously outstanding;
(ii) in the case of the issuance or distribution of any rights,
options or warrants to subscribe for or purchase Seagate Software
Series A Preferred Stock (or securities exchangeable for or
convertible into or carrying rights to acquire Seagate Software
Series A Preferred Stock), the relationship between the exercise
price of each such right, option or warrant and the current market
value (as determined by the Board of Directors of Seagate Canada in
the manner above contemplated) of a share of Seagate Software Series
A Preferred Stock;
(iii) in the case of the issuance or distribution of any other
form of property (including without limitation any shares or
securities of Seagate Software of any class other than Seagate
Software Series A Preferred Stock, any rights, options or warrants
other than those referred to in section 2.7(d)(ii) above, any
evidences of indebtedness of Seagate Software or any assets of
Seagate Software), the relationship between the fair market value (as
determined by the Board of Directors of Seagate Canada in the manner
above contemplated) of such property to be issued or distributed with
respect to each outstanding share of Seagate Software Series A
Preferred Stock and the current market value (as determined by the
Board of Directors of Seagate Canada in the manner above
contemplated) of a share of Seagate Software Series A Preferred
Stock;
(iv) in the case of any subdivision, redivision or change of the
then outstanding Seagate Software Series A Preferred Stock into a
greater number of Seagate Software Series A Preferred Stock or the
reduction, combination, consolidation or change of the then
outstanding Seagate Software Series A Preferred Stock into a lesser
number of Seagate Software Series A Preferred Stock or any
reclassification, amalgamation, merger, reorganization or other
transaction affecting Seagate Software Series A Preferred Stock, the
effect thereof upon the then outstanding shares of Seagate Software
Series A Preferred Stock; and
(v) in all such cases, the general taxation consequences of the
relevant event to holders of Class B Exchangeable Shares to the
extent that such consequences may differ from the taxation
consequences to holders of Seagate Software Series A Preferred Stock
as a result of differences between taxation
-7-
<PAGE>
laws of Canada and the United States (except for any differing
consequences arising as a result of differing marginal taxation rates
and without regard to the individual circumstances of holders of
Class B Exchangeable Shares).
For the purposes of the foregoing determinations, the current market value of
any security listed and traded or quoted on a securities exchange shall be the
weighted average of the daily trading prices of such security during a period of
not less than 20 consecutive trading days ending not more than five trading days
before the date of determination on the principal securities exchange on which
such securities are listed and traded or quoted; provided, however, that if in
the opinion of the Board of Directors of Seagate Canada the public distribution
or trading activity of such securities during such period does not create a
market which reflects the fair market value of such securities, then the current
market value thereof shall be determined by the Board of Directors of Seagate
Canada, in good faith and in its sole discretion (with the assistance of such
reputable and qualified independent financial advisors and/or other experts as
the board may require), and provided further that any such determination by the
board shall be conclusive and binding on Seagate Software.
2.8 TENDER OFFERS, ETC. In the event that a tender offer, share exchange
------------------
offer, issuer bid, take-over bid or similar transaction with respect to Seagate
Software Series A Preferred Stock (an "OFFER") is proposed by Seagate Software
or is proposed to Seagate Software or its shareholders and is recommended by the
Board of Directors of Seagate Software, or is otherwise effected or to be
effected with the consent or approval of the Board of Directors of Seagate
Software, Seagate Software will use its best efforts expeditiously and in good
faith to take all such actions and do all such things as are necessary or
desirable to enable and permit holders of Class B Exchangeable Shares to
participate in such Offer to the extent and on an economically equivalent basis
as the holders of Seagate Software Series A Preferred Stock, without
discrimination. Without limiting the generality of the foregoing, Seagate
Software will use its best efforts expeditiously and in good faith to ensure
that holders of Class B Exchangeable Shares may participate in all such Offers
without being required to retract Class B Exchangeable Shares as against Seagate
Canada (or, if so required, to ensure that any such retraction shall be
effective only upon, and shall be conditional upon, the closing of the Offer and
only to the extent necessary to tender or deposit to the Offer).
ARTICLE 3
RIGHT OF FIRST REFUSAL
3.1 SEAGATE SOFTWARE RIGHT OF FIRST REFUSAL. Seagate Software is granted
---------------------------------------
an overriding "RIGHT OF FIRST REFUSAL" (on the terms set forth herein and in the
Share Provisions) to purchase, from a holder of Class B Exchangeable Shares who
has delivered a RETRACTION REQUEST (as defined in the Share Provisions) to
Seagate Canada, such holder's RETRACTED SHARES (as defined in the Share
Provisions). Seagate Software acknowledges having received a copy of the Share
Provisions and agrees with Seagate Canada that all such Share Provisions,
including the Right of First Refusal relating to Seagate Software, are hereby
incorporated by reference into this Agreement. Seagate Software hereby agrees to
be bound by and to act in accordance with its obligations under
-8-
<PAGE>
the Share Provisions. To the extent that any action on the part of Seagate
Software may be required under section 3.2 or 3.3 of this Agreement in respect
of the retraction of any of the Class B Exchangeable Shares, Seagate Software
may, in lieu of taking such action, make a one time irrevocable election to
exercise its Right of First Refusal under this section 3.1 as to all of the
Class B Exchangeable Shares that would thereafter be available for retraction or
acquisition by Seagate Software upon exercise of its Right of First Refusal, and
all Class B Exchangeable Shares that any holder wishes to have retracted from
and after such date shall be acquired by Seagate Software under its Right of
First Refusal and the holder of such Class B Exchangeable Shares may, at its
option, surrender such Class B Exchangeable Shares directly to Seagate Software
and need not surrender them to Seagate Canada upon the holder's election to seek
retraction.
3.2 SEAGATE SOFTWARE CAPITALIZATION OF SEAGATE CANADA. Seagate Software
-------------------------------------------------
hereby acknowledges that the retraction rights contained in the Share Provisions
provide that each holder of Retracted Shares shall receive, upon retraction of
the Retracted Shares by Seagate Canada, shares of Seagate Software Series A
Preferred Stock in satisfaction of Seagate Canada's retraction obligations. In
connection therewith, Seagate Software grants to Seagate Canada the immediate
right to acquire from Seagate Software, if Seagate Software does not exercise
its Right of First Refusal, the number of shares of Seagate Software Series A
Preferred Stock issuable to a holder of Retracted Shares upon a retraction of
Retracted Shares and Seagate Software shall receive Class A Common Shares of
Seagate Canada in consideration therefor, on the basis of one Common Share for
each Class B Exchangeable Share retracted by Seagate Canada.
3.3 BLOCKS ON RETRACTION. If: (a) Seagate Software has not exercised its
--------------------
Right of First Refusal to purchase Retracted Shares; and (b) Seagate Canada is
not permitted under its Articles, or other applicable law, to retract the
Retracted Shares, then Seagate Software shall contribute to Seagate Canada's
capital a sufficient number of shares of Seagate Software Series A Preferred
Stock to enable Seagate Canada to retract such Class B Exchangeable Shares. If
such action does not allow Seagate Canada to retract such shares, then Seagate
Software shall contribute cash or other assets, repay or guarantee Seagate
Canada's debt obligations, or take such other actions as Seagate Software may
elect in order to enable Seagate Canada, in each case, to retract the Retracted
Shares. Seagate Canada's counsel, acting reasonably, shall determine whether
Seagate Software's proposed actions would enable Seagate Canada to retract the
Retracted Shares.
ARTICLE 4
GENERAL
4.1 TERM. This Agreement shall come into force and be effective as of the
----
date hereof and shall terminate and be of no further force and effect at such
time as no Class B Exchangeable Shares (or securities or rights convertible into
or exchangeable for or carrying rights to acquire Class B Exchangeable Shares)
are held by any party other than Seagate Software.
-9-
<PAGE>
4.2 CHANGES IN CAPITAL OF SEAGATE SOFTWARE AND SEAGATE CANADA. At all
---------------------------------------------------------
times after the occurrence of any event effected pursuant to section 2.7 and 2.8
hereof, as a result of which either the Seagate Software Series A Preferred
Stock or the Class B Exchangeable Shares or both are in any way changed, this
Agreement shall forthwith be amended and modified as necessary in order that it
shall apply with full force and effect, mutatis mutandis, to all new securities
into which Seagate Software Series A Preferred Stock or the Class B Exchangeable
Shares or both are so changed and the parties hereto shall execute and deliver
an agreement in writing giving effect to and evidencing such necessary
amendments and modifications.
4.3 SEVERABILITY. If any provision of this Agreement is held to be
------------
invalid, illegal or unenforceable, the validity, legality or enforceability of
the remainder of this Agreement shall not in any way be affected or impaired
thereby and this Agreement shall be carried out as nearly as possible in
accordance with its original terms and conditions.
4.4 AMENDMENTS, MODIFICATIONS, ETC. This Agreement may not be amended or
------------------------------
modified except by an agreement in writing executed by Seagate Canada and
Seagate Software and approved by the holders of Class B Exchangeable Shares.
4.5 AMENDMENTS ONLY IN WRITING. No amendment to or modification or waiver
--------------------------
of any of the provisions of this Agreement otherwise permitted hereunder shall
be effective unless made in writing and signed by both of the parties hereto.
4.6 ENUREMENT. This Agreement shall be binding upon and enure to the
---------
benefit of the parties hereto and their respective successors and assigns.
4.7 NOTICES TO PARTIES. All notices and other communications between the
------------------
parties shall be in writing and shall be deemed to have been given if delivered
personally or by confirmed telecopy to the parties at the following addresses
(or at such other address for either such party as shall be specified in like
notice):
To Seagate Canada:
------------------
Seagate Software Information Management Group, Inc.
1095 West Pender Street, Suite 400
Vancouver, British Columbia
Attention: President
---------
To Seagate Software:
-------------------
Seagate Software Inc.
920 Disc Drive
Scotts Valley, California 95066
Attention: President
---------
-10-
<PAGE>
Any notice or other communication given personally shall be deemed to have been
given and received upon delivery thereof and if given by telecopy shall be
deemed to have been given and received on the date of confirmed receipt thereof
unless such day is not a business day in which case it shall be deemed to have
been given and received upon the immediately following business day.
4.8 COUNTERPARTS. This Agreement may be executed in counterparts, each of
------------
which shall be deemed an original, and all of which taken together shall
constitute one and the same instrument.
4.9 JURISDICTION. This Agreement shall be construed and enforced in
------------
accordance with the laws of the Province of British Columbia and the laws of
Canada applicable therein.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
SEAGATE SOFTWARE, INC. SEAGATE SOFTWARE INFORMATION
MANAGEMENT GROUP, INC.
By:/s/ Ellen Chamberlain By:/s/ Stephen J. Luczo
--------------------------------------- --------------------------------
Its: Vice President and Assistant Its: Vice President
---------------------------- --------------
Treasurer
SEAGATE SOFTWARE INFORMATION
MANAGEMENT GROUP, INC.
By: /s/ Gregory Kerfoot
--------------------------------
Its: President
----------------------------
-11-
<PAGE>
EXHIBIT 13.1
AUDITORS' REPORT TO THE DIRECTORS AND SHAREHOLDERS OF HOLISTIC SYSTEMS LIMITED
(NOW SEAGATE SOFTWARE INFORMATION MANAGEMENT GROUP LIMITED)
We have audited the accompanying consolidated balance sheet of Holistic Systems
Limited (now Seagate Software Information Management Group Limited) as at 31
March 1996 and 31 March 1995 and the consolidated profit and loss account and
cashflow statement for the years ended 31 March 1996 and 31 March 1995 ("the
consolidated accounts").
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
The directors are responsible for preparing consolidated accounts that give a
true and fair view of the state of affairs of the group and of the profit or
loss of the group for its financial year. In doing so the directors are
required to:
. select suitable accounting policies and apply them consistently
. make judgements and estimates that are reasonable and prudent
. state whether applicable accounting standards have been followed, subject to
any material departures disclosed and explained in the consolidated accounts
. prepare consolidated accounts on the going concern basis unless it is
inappropriate to presume that the group will continue in business.
The directors are responsible for maintaining proper accounting records that
disclose with reasonable accuracy at any time the financial position of the
group. They are also responsible for safeguarding the assets of the group and
hence for taking reasonable steps for the prevention and detection of fraud and
other irregularities.
It is our responsibility to form an independent opinion, based on our audit, on
those consolidated accounts and to report our opinion to you.
BASIS OF OPINION
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board in the United Kingdom. An audit includes examination,
on a test basis, of evidence relevant to the amounts and disclosures in the
consolidated accounts. It also includes an assessment of the significant
estimates and judgements made by the directors in the preparation of the
consolidated accounts and of whether the accounting policies are appropriate to
the group's circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the consolidated accounts
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the consolidated accounts.
OPINION
In our opinion, the consolidated accounts give a true and fair view of the state
of the group's affairs as at 31 March 1996 and 31 March 1995 and of its profit
and cash flows for the years ended 31 March 1996 and 31 March 1995.
Accounting principles generally accepted in the United Kingdom vary in certain
significant respects from accounting principles generally accepted in the United
States. The application of the latter would have affected the determination of
the consolidated retained profit for the year ended 31 March 1996 to the extent
summarised in note 25.
/s/ Moores Rowland
Moores Rowland
Chartered Accountants
Registered Auditors
London, United Kingdom
30 September 1997
1
<PAGE>
HOLISTIC SYSTEMS LIMITED
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Year ended 31 March 1996
<TABLE>
<CAPTION>
1996 1995
Note (Pounds) (Pounds)
<S> <C> <C> <C>
TURNOVER 2 16,178,670 11,747,445
Cost of sales (1,396,414) (962,170)
----------- ----------
GROSS PROFIT 14,782,256 10,785,275
Administrative expenses (12,913,259) (9,384,479)
----------- ----------
OPERATING PROFIT 1,868,997 1,400,796
Investment income 3 99,097 38,145
Interest payable 4 (5,396) (8,888)
----------- ----------
PROFIT ON ORDINARY
ACTIVITIES BEFORE TAXATION 5 1,962,698 1,430,053
Tax on profit on ordinary
activities 7 (905,557) (579,387)
----------- ----------
PROFIT ON ORDINARY
ACTIVITIES AFTER TAXATION 1,057,141 850,666
Dividends 8 (8,744) (14,300)
----------- ----------
RETAINED PROFIT FOR THE YEAR 15 1,048,397 836,366
=========== =========
</TABLE>
All disclosures relate only to continuing operations.
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
<TABLE>
<CAPTION>
1996 1995
(Pounds) (Pounds)
<S> <C> <C>
Profit for the financial year 1,057,141 850,666
Currency translation differences on
foreign currency net investments 86,342 (18,479)
----------- ---------
1,143,483 832,187
=========== =========
</TABLE>
The accompanying notes form part of these consolidated accounts.
2
<PAGE>
HOLISTIC SYSTEMS LIMITED
CONSOLIDATED BALANCE SHEET
As at 31 March 1996
<TABLE>
<CAPTION>
1996 1995
Note (Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C> <C>
FIXED ASSETS
Tangible assets 9 610,948 471,077
CURRENT ASSETS
Debtors 10 4,915,675 3,571,325
Cash at bank and in hand 2,395,532 1,903,185
--------- ---------
7,311,207 5,474,510
CREDITORS amounts falling
due within one year 11 4,408,467 3,241,289
--------- ---------
NET CURRENT ASSETS 2,902,740 2,233,221
--------- ---------
TOTAL ASSETS LESS
CURRENT LIABILITIES 3,513,688 2,704,298
CREDITORS amounts falling
due after more than one year 12 64,043 -
Provisions for liabilities
and charges 21 73,107 74,526
--------- ---------
TOTAL NET ASSETS 3,376,538 2,629,772
========= =========
<CAPTION>
CAPITAL AND RESERVES
Called up share capital 13 10,000 409,925
Share premium 14 48,396 36,444
Capital redemption reserve 15 400,000 -
Profit and loss account 15 2,918,142 2,183,403
--------- ---------
(Shareholders' funds include 22 3,376,538 2,629,772
non-equity interests) ========= =========
</TABLE>
The accompanying notes form part of these consolidated accounts.
3
<PAGE>
HOLISTIC SYSTEMS LIMITED
CONSOLIDATED CASHFLOW STATEMENT
Year ended 31 March 1996
<TABLE>
<CAPTION>
Note 1996 1995
(Pounds) (Pounds)
<S> <C> <C> <C>
NET CASH INFLOW FROM OPERATING
ACTIVITIES 16 1,899,620 1,918,420
RETURNS ON INVESTMENTS AND SERVICING
OF FINANCE
Interest received 99,097 38,145
Interest paid (628) (8,878)
Interest element of hire purchase payments (4,768) (10)
Dividends paid (14,300) (11,143)
--------- ---------
NET CASH INFLOW FROM RETURNS
ON INVESTMENTS AND SERVICING OF FINANCE 79,401 18,114
--------- ---------
TAXATION
U.K. corporation tax paid (353,747) (259,000)
Overseas tax paid, including
withholding tax (254,581) (261,446)
--------- ---------
TAX PAID (608,328) (520,446)
INVESTING ACTIVITIES
Purchase of tangible fixed assets (563,472) (486,556)
Proceeds from disposal of fixed assets 10,000 -
--------- ---------
NET CASH OUTFLOW FROM
INVESTING ACTIVITIES (553,472) (486,556)
--------- ---------
NET CASH INFLOW BEFORE FINANCING 817,221 929,532
FINANCING
Net cash (outflow)/inflow from share capital 19 (387,973) 26,235
New hire purchase loan 69,886 -
Capital element of hire purchase payments (6,787) (9,987)
--------- ---------
NET CASH (OUTFLOW)/INFLOW FROM FINANCING (324,874) 16,248
--------- ---------
INCREASE IN CASH 492,347 945,780
CASH BALANCES AT 1 APRIL 1995/1994 1,903,185 957,405
--------- ---------
CASH BALANCES AT 31 MARCH 1996/1995 17 2,395,532 1,903,185
========= =========
</TABLE>
The accompanying notes form part of these consolidated accounts.
4
<PAGE>
HOLISTIC SYSTEMS LIMITED
NOTES TO THE ACCOUNTS
1. ACCOUNTING POLICIES
ACCOUNTING CONVENTION
The accounts have been prepared under the historical cost convention and in
accordance with applicable accounting standards.
BASIS OF CONSOLIDATION
The group accounts consolidate the accounts of the company and its
subsidiaries.
DEPRECIATION OF TANGIBLE FIXED ASSETS
Depreciation is provided on all tangible fixed assets so as to write them off
over their anticipated useful lives at the following annual rates on a
straight line basis:
Leasehold property - 20% or to next rent review if greater
Office equipment and fittings - 20%
Computer equipment - 33%
Motor vehicles - 25%
FOREIGN CURRENCIES
Assets and liabilities expressed in foreign currencies are translated at the
rates of exchange ruling at the balance sheet date. Transactions in foreign
currencies are translated at the rate ruling at the date of the transaction.
Differences arising are dealt with in the profit and loss account. The
results of overseas companies are translated at the rate of exchange ruling
at the balance sheet date. Exchange differences arising on the retranslation
of opening reserves of subsidiaries are taken to group reserves.
FINANCE LEASES AND HIRE PURCHASE CONTRACTS
Assets being acquired under finance leases and hire purchase contracts are
capitalised in the balance sheet and are depreciated over their anticipated
useful lives. The obligation to make future rental payments, net of future
finance charges, is recognised as a liability in the balance sheet. The
interest element of the lease and hire purchase payments is charged to the
profit and loss account at a constant rate over the period of the agreement.
Rentals under operating leases are charged to the profit and loss account as
incurred.
DEFERRED TAXATION
Deferred taxation is calculated using the liability method and provision is
made to the extent that it is probable that such tax will become payable in
the foreseeable future.
DEVELOPMENT EXPENDITURE
All computer development expenditure is written off as it is incurred except
for capital expenditure on hardware and the associated externally purchased
software related to the general development of the business which is
capitalised and written off over 3 years.
5
<PAGE>
HOLISTIC SYSTEMS LIMITED
NOTES TO THE ACCOUNTS (CONTINUED)
2. TURNOVER
Turnover arises from the group's principal activity based on delivered,
unconditional, signed licences (or other written confirmation) except in the
case of distributor sales which are determined by invoice dates to
distributors. Turnover is stated net of value added tax and trade discounts.
Credit is taken for consulting services when the services are provided.
An analysis of turnover by geographical
market is given below:
<TABLE>
<CAPTION>
1996 1995
(Pounds)000 (Pounds)000
<S> <C> <C>
Europe 7,431 6,040
USA/Canada 6,749 3,941
Far East 641 669
Australia/New Zealand 1,358 1,097
------ ------
16,179 11,747
====== ======
</TABLE>
Turnover and profit are attributable to one class of business.
3. INVESTMENT INCOME
<TABLE>
<CAPTION>
1996 1995
(Pounds) (Pounds)
<S> <C> <C>
Bank interest receivable 98,427 38,054
Other interest receivable 670 91
------ ------
99,097 38,145
====== ======
</TABLE>
4. INTEREST PAYABLE
<TABLE>
<CAPTION>
1996 1995
(Pounds) (Pounds)
<S> <C> <C>
On bank overdrafts wholly
repayable within five years 628 8,878
On finance leases and hire purchase contracts 4,768 10
------ ------
5,396 8,888
====== ======
</TABLE>
6
<PAGE>
HOLISTIC SYSTEMS LIMITED
NOTES TO THE ACCOUNTS (CONTINUED)
5. PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
Profit on ordinary activities before
taxation is stated after charging/(crediting):
<TABLE>
<CAPTION>
1996 1995
(Pounds) (Pounds)
<S> <C> <C> <C>
Auditors' remuneration - Audit 59,394 35,976
- Non-audit (UK only) 16,400 20,400
Depreciation of fixed assets 434,237 296,146
Amortisation of goodwill - 22,250
(Profit)/loss on exchange (48,726) 28,767
Hire of plant and equipment 381,642 332,834
Exceptional item overprovision
relating to prior years (30,000) (80,000)
====== ======
</TABLE>
6. DIRECTORS AND OTHER EMPLOYEES
Staff costs include the following:
<TABLE>
<CAPTION>
1996 1995
(Pounds) (Pounds)
<S> <C> <C>
Wages and salaries 7,506,819 5,207,656
Social security costs 803,709 597,612
--------- ---------
8,310,528 5,805,268
========= =========
</TABLE>
The average weekly number of persons employed
by the group during the year was as follows:
<TABLE>
<CAPTION>
Number Number
<S> <C> <C>
Research and development 40 31
Sales 43 28
Support 52 49
Administration 16 16
Directors 8 6
--- ---
159 130
=== ===
</TABLE>
The emoluments of the directors of the parent company were (Pounds)465,500
(1995 (Pounds)434,294). The chairman, who was also the highest paid director,
received (Pounds)166,051 (1995 (Pounds)162,470).
The emoluments of the other directors were in the following ranges:
<TABLE>
<CAPTION>
Number Number
<S> <C> <C>
Pounds)55,001 - (Pounds)60,000 - 2
Pounds)75,001 - (Pounds)80,000 1 -
Pounds)95,001 - (Pounds)100,000 1 -
(Pounds)125,001 - (Pounds)130,000 1 -
(Pounds)155,001 - (Pounds)160,000 1 -
- 1
-- --
3 3
== ==
</TABLE>
7
<PAGE>
HOLISTIC SYSTEMS LIMITED
NOTES TO THE ACCOUNTS (CONTINUED)
7. TAX ON PROFIT ON ORDINARY ACTIVITIES
<TABLE>
<CAPTION>
1996 1995
(Pounds) (Pounds)
<S> <C> <C>
Based on the profit for the year:
Corporation tax at 33% (1995 33%) 136,000 357,332
Overseas taxation 757,182 236,387
Taxation under/(over) provided in prior years
Corporation tax 12,375 (14,332)
------- -------
905,557 579,387
======= =======
</TABLE>
8. DIVIDENDS
<TABLE>
<CAPTION>
1996 1995
(Pounds) (Pounds)
<S> <C> <C>
Preference dividends 8,744 14,300
===== ======
</TABLE>
9. TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
Office
equipment Computer Motor Leasehold
and fittings equipment vehicles improvements Total
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C> <C>
Cost
At 1 April 1995 216,265 1,262,355 29,404 50,152 1,558,176
Exchange differences 10,028 18,931 - - 28,959
Additions 25,828 449,329 79,886 8,429 563,472
Disposals - - (29,404) - (29,404)
------- --------- ------- ------ ---------
At 31 March 1996 252,121 1,730,615 79,886 58,581 2,121,203
------- --------- ------- ------ ---------
Depreciation
At 1 April 1995 121,267 924,577 29,403 11,852 1,087,099
Exchange differences 4,484 13,838 - - 18,322
Charge for year 35,222 364,150 19,886 14,979 434,237
Disposals - - (29,403) - (29,403)
------- --------- ------- ------ ---------
At 31 March 1996 160,973 1,302,565 19,886 26,831 1,510,255
------- --------- ------- ------ ---------
Net book value at
31 March 1996 91,148 428,050 60,000 31,750 610,948
======= ======== ======= ====== =========
Net book value at
31 March 1995 94,998 337,778 1 38,300 471,077
======= ======== ======= ====== =========
</TABLE>
8
<PAGE>
HOLISTIC SYSTEMS LIMITED
NOTES TO THE ACCOUNTS (CONTINUED)
10. DEBTORS
<TABLE>
<CAPTION>
1996 1995
(Pounds) (Pounds)
<S> <C> <C>
Trade debtors 4,369,417 3,360,635
Other debtors 157,661 137,378
Prepayments and accrued income 386,411 69,737
Advance corporation tax
recoverable 2,186 3,575
--------- ---------
4,915,675 3,571,325
========= =========
</TABLE>
11. CREDITORS--amounts falling
due within one year
<TABLE>
<CAPTION>
1996 1995
(Pounds) (Pounds)
<S> <C> <C>
Trade creditors 523,204 288,744
Obligations under finance leases
and hire purchase contracts 11,636 -
Corporation tax and taxes
on overseas profits 732,275 433,657
Other taxes and social
security costs 313,257 300,857
Advance corporation tax
payable 2,186 3,575
Accruals and deferred income 2,825,909 2,214,456
--------- ---------
4,408,467 3,241,289
========= =========
</TABLE>
12. CREDITORS--amounts falling
due after more than one year
<TABLE>
<CAPTION>
1996 1995
(Pounds) (Pounds)
<S> <C> <C>
Obligations under finance leases
and hire purchase contracts 51,463 -
Other creditors 12,580 -
--------- ---------
64,043 -
========= =========
</TABLE>
9
<PAGE>
HOLISTIC SYSTEMS LIMITED
NOTES TO THE ACCOUNTS (CONTINUED)
13. CALLED UP SHARE CAPITAL
<TABLE>
<CAPTION>
1996 1995
(Pounds) (Pounds)
<S> <C> <C>
Authorised:
'A' ordinary shares of 10p each 7,600 7,600
'B' ordinary shares of 10p each 3,400 3,400
Non-cumulative participating redeemable
2.5% preference shares of (Pounds)1 each 400,000 400,000
------- -------
411,000 411,000
======= =======
Allotted and fully paid:
'A' ordinary shares of 10p each 6,645 6,905
'B' ordinary shares of 10p each 3,355 3,020
Non-cumulative participating redeemable
2.5% preference shares of (Pounds)1 each - 400,000
------- -------
10,000 409,925
======= =======
</TABLE>
During the year the company redeemed 400,000 non-cumulative participating
redeemable 2.5% preference shares at par. Prior to redemption, a dividend
had been declared (note 8).
The company also issued 750 'B' ordinary shares to employees, 700 at
(Pounds)15.90 each and 50 at (Pounds)17.95 each (1995-1,650 shares issued
to employees at (Pounds)15.90 each). Additionally 2,600 'A' ordinary shares
of 10p each were converted to 'B' ordinary shares of 10p each.
14. SHARE PREMIUM ACCOUNT
<TABLE>
<CAPTION>
1996 1995
(Pounds) (Pounds)
<S> <C> <C>
At 1 April 1995/1994 36,444 10,374
Premium on shares issued during the year 11,952 26,070
At 31 March 1996/1995 48,396 36,444
====== ======
</TABLE>
15. PROFIT AND LOSS ACCOUNT
<TABLE>
<CAPTION>
1996 1995
(Pounds) (Pounds)
<S> <C> <C>
At 1 April 1995/1994 2,183,403 1,365,516
Profit for the year 1,048,397 836,366
Transfer to capital redemption reserve (400,000) -
Exchange rate adjustments 86,342 (18,479)
--------- ---------
At 31 March 1996/1995 2,918,142 2,183,403
</TABLE>
10
<PAGE>
HOLISTIC SYSTEMS LIMITED
NOTES TO THE ACCOUNTS (CONTINUED)
16. RECONCILIATION OF OPERATING PROFIT TO
NET CASH INFLOW FROM OPERATING ACTIVITIES
<TABLE>
<CAPTION>
1996 1995
(Pounds) (Pounds)
<S> <C> <C>
Operating profit 1,868,997 1,400,796
Depreciation charges 434,237 318,396
(Decrease)/increase in provisions (7,235) 4,512
Exchange rate adjustments 86,342 (18,479)
(Increase)/decrease in debtors (1,345,739) 113,035
Increase in creditors 863,018 100,160
---------- ---------
Net cash inflow from operating
activities 1,899,620 1,918,420
========== =========
</TABLE>
17. ANALYSIS OF CHANGES IN CASH AND
CASH EQUIVALENTS DURING THE YEAR
<TABLE>
<CAPTION>
1996 1995
(Pounds) (Pounds)
<S> <C> <C>
At 1 April 1995/1994 1,903,185 957,405
Net cash inflow 492,347 945,780
--------- ---------
At 31 March 1996/1995 2,395,532 1,903,185
========= =========
</TABLE>
18. ANALYSIS OF THE BALANCES OF CASH
AND CASH EQUIVALENTS AS SHOWN IN
THE BALANCE SHEET
<TABLE>
<CAPTION>
Change in year ended
31 March 1996 1996 1995
(Pounds) (Pounds) (Pounds)
<S> <C> <C> <C>
Cash at bank and in hand 492,347 2,395,532 1,903,185
======= ========= =========
Change in year ended
31 March 1995 1995 1994
(Pounds) (Pounds) (Pounds)
Cash at bank and in hand 945,780 1,903,185 957,405
======= ========= =========
</TABLE>
11
<PAGE>
HOLISTIC SYSTEMS LIMITED
NOTES TO THE ACCOUNTS (CONTINUED)
19. ANALYSIS OF CHANGES IN FINANCING
DURING THE YEAR
<TABLE>
<CAPTION>
Share Share
capital capital
1996 1995
(Pounds) (Pounds)
<S> <C> <C>
At 1 April 1995/1994 446,369 420,134
--------- --------
Issue of ordinary shares 12,027 26,235
Redemption of preference shares (400,000) -
--------- --------
(387,973) 26,235
--------- --------
At 31 March 1996/1995 58,396 446,369
========= ========
</TABLE>
20. COMMITMENTS: OPERATING LEASES
<TABLE>
<CAPTION>
Land and buildings Other
1996 1995 1996 1995
(Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C>
Annual commitments on
agreements expiring:
Within one year 538,000 336,000 84,000 321,000
Between one and five years 500,000 272,000 48,000 181,000
After five years 30,000 31,000 2,000 -
--------- ------- ------- -------
1,068,000 639,000 134,000 502,000
========= ======= ======= =======
</TABLE>
21. PROVISIONS FOR LIABILITIES AND CHARGES
<TABLE>
<CAPTION>
(Pounds)
<S> <C>
Provision against warranty
costs and claim by former
distributor
At 1 April 1995 74,526
Exchange rate differences 1,024
Utilised in the year (3,012)
Provided in the year 569
------
At 31 March 1996 73,107
======
</TABLE>
12
<PAGE>
HOLISTIC SYSTEMS LIMITED
NOTES TO THE ACCOUNTS (CONTINUED)
22. SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
1996 1995
(Pounds) (Pounds)
<S> <C> <C>
RECONCILIATION OF MOVEMENTS
Profit for the financial year 1,057,141 850,666
Dividends (8,744) (14,300)
--------- ---------
1,048,397 836,366
New share capital subscribed 12,027 26,235
Preference shares redeemed in the year (400,000) --
--------- ---------
Net addition to shareholders' funds 660,424 862,601
Exchange rate adjustment to opening
shareholders' funds 86,342 (18,479)
Opening shareholders' funds 2,629,772 1,785,650
--------- ---------
Closing shareholders' funds 3,376,538 2,629,772
========= =========
SHAREHOLDERS' FUNDS COMPRISE:
Equity interests 3,376,538 2,229,772
Non-equity interests -- 400,000
--------- ---------
3,376,538 2,629,772
========= =========
</TABLE>
23. CONTINGENT LIABILITY
Holistic Systems Limited has received a claim for damages from a former
distributor. Based on legal advice that the company has strong defences, the
directors are firmly resisting the claim. It is not practicable to quantify
the financial effect of the claim should it be found against the company.
24. COMPANIES ACT 1985
These consolidated accounts do not comprise the company's statutory accounts
within the meaning of Section 240 of the Companies Act 1985 of Great Britain.
Statutory accounts for the years ended 31 March 1996 and 31 March 1995 have
been delivered to the Registrar of Companies for England and Wales. The
auditors' report on those accounts were unqualified.
13
<PAGE>
HOLISTIC SYSTEMS LIMITED
NOTES TO THE ACCOUNTS (CONTINUED)
25. SUMMARY OF DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES
The consolidated accounts are prepared in accordance with accounting
principles generally accepted in the United Kingdom ("UK GAAP"), which
differ in certain significant respects from United States generally accepted
accounting principles ("US GAAP"). These differences and their effect on
the retained profit for the year are set out below.
<TABLE>
<CAPTION>
1996
(Pounds)
<S> <C>
Retained profit in accordance with UK GAAP, as reported in the
consolidated profit and loss account 1,048,397
---------
US GAAP adjustments:
(a) Adjustment to profit on ordinary activities before taxation:
Foreign currency translation (71,130)
(b) Adjustment to tax on profit on ordinary activities related to:
Deferred taxation 80,000
Foreign currency translation 20,973
---------
Net US GAAP adjustments 29,843
---------
Retained profit as adjusted for US GAAP 1,078,240
=========
Retained profit for the year arises from continuing operations.
</TABLE>
ADDITIONAL INFORMATION
BAD DEBTS
The bad debt charge for the year ended 31 March 1996 was (Pounds)97,458 and bad
debts written off amounted to (Pounds)115,180, net of recoveries.
Comments on the above and on the differences between the company's accounting
policies and US GAAP are as follows:
(a) FOREIGN CURRENCY
Under UK GAAP, revenues, expenses and assets and liabilities relating to
overseas subsidiaries are translated at the year end rate. Under US GAAP
assets and liabilities are translated as under UK GAAP; however, revenues
and expenses are translated at average rates for the year.
(b) DEFERRED TAXATION
Under UK GAAP, provision is made for deferred taxation under the
liability method when it is probable that a tax liability will become
payable. Under US GAAP, Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes," requires deferred taxation to be
provided in full on the liability method; in particular, it requires the
recognition of deferred taxation assets for gross deductible temporary
differences and operating loss carry forwards at the expected applicable
tax rate based on currently enacted tax law. A valuation allowance would
be provided for these deferred tax assets to the extent that it is more
likely than not that they will not be realised.
The adjustment of (Pounds)80,000 relates to the recognition of deferred
taxation assets in respect of gross deductible temporary differences of
(Pounds)50,000 and operating loss carry forwards of (Pounds)30,000.
14
<PAGE>
HOLISTIC SYSTEMS LIMITED
NOTES TO THE ACCOUNTS (CONTINUED)
25. SUMMARY OF DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES (CONTINUED)
(c) CONSOLIDATED CASHFLOW STATEMENT
The consolidated cashflow statement prepared in accordance with UK
Financial Reporting Standard No. 1 presents substantially the same
information as that required under US GAAP by Statement of Financial
Accounting Standards No. 95, "Statement of Cash Flows". These standards
differ, however, with regard to the definition of cash and cash
equivalents and in respect of the classification of items within the
statements.
Under US GAAP, cash and cash equivalents would not include bank
overdrafts and borrowings with initial maturities of less than three
months or cash held in escrow. Under UK GAAP, cash flows are presented
separately for operating activities, servicing of finance and returns on
investments, taxation, investing activities and financing activities. US
GAAP, however, requires only three categories of cash flow activity to be
reported: operating, investing and financing. Cash flows from taxation
and servicing of finance and returns on investments shown under UK GAAP,
would, with the exception of dividends paid, be included as operating
activities under US GAAP. The payment of dividends would be included as
a financing activity under US GAAP.
15
<PAGE>
EXHIBIT 21.1
SEAGATE SOFTWARE, INC.
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
STATE OR OTHER
NAME OF SUBSIDIARY JURISDICTION OF INCORPORATION
------------------ -----------------------------
<S> <C>
Seagate Software Network & Storage Management
Group, Inc. ................................... Delaware
Seagate Software Information Management Group,
Limited........................................ United Kingdom and Delaware
Seagate Software S.A. .......................... France
Seagate Software Limited........................ United Kingdom
Seagate Software GmbH........................... Germany
Seagate Software Pty Limited.................... Australia
Seagate Software Information Management Group,
GmbH........................................... Germany
Seagate Software Information Management Group,
AB............................................. Sweden
Seagate Software Pte Limited.................... Singapore
Seagate Software Information Management Group,
BV............................................. Netherlands
Seagate Software Information Management Group,
Inc. .......................................... Americas
Nippon Seagate Software KK...................... Japan
Seagate Software Limited........................ Hong Kong
Seagate Software Information Management Group,
AG............................................. Switzerland
Arcada Software France S.A.R.L. (1)............. France
Arcada Software U.K., Limited (1)............... United Kingdom
Seagate Software Australia Pty. Limited (1)..... Australia
Seagate Software Information Management Group,
Inc. .......................................... British Columbia
</TABLE>
- --------
(1) In process of liquidation.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF JUNE 27, 1997, THE CONSOLIDATED STATEMENT OF
INCOME FOR THE TWELVE MONTHS ENDED JUNE 27, 1997, THE CONSOLIDATED BALANCE
SHEETS AS OF JUNE 28, 1996 AND JUNE 30, 1995 AND THE CONSOLIDATED STATEMENTS OF
INCOME FOR THE TWELVE MONTHS ENDED JUNE 28, 1996 AND JUNE 30, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS 12-MOS
<FISCAL-YEAR-END> JUN-27-1997 JUN-28-1996 JUN-30-1995
<PERIOD-START> JUN-29-1996 JUL-01-1995 JUL-02-1994
<PERIOD-END> JUN-27-1997 JUN-28-1996 JUN-30-1995
<CASH> 12,085 7,595 5,950
<SECURITIES> 0 0 0
<RECEIVABLES> 29,442 33,352 21,359
<ALLOWANCES> (1,270) (597) (491)
<INVENTORY> 3,206 1,625 1,986
<CURRENT-ASSETS> 47,503 44,808 32,922
<PP&E> 40,438 20,614 11,769
<DEPRECIATION> (19,653) (5,453) (3,060)
<TOTAL-ASSETS> 143,594 201,598 104,007
<CURRENT-LIABILITIES> 75,442 72,001 45,187
<BONDS> 0 0 2,598
0 0 0
55 47 0
<COMMON> 0 0 0
<OTHER-SE> 61,563 115,555 47,215
<TOTAL-LIABILITY-AND-EQUITY> 143,594 201,598 104,007
<SALES> 216,950 141,586 92,796
<TOTAL-REVENUES> 216,950 141,586 92,796
<CGS> 47,789 29,019 22,379
<TOTAL-COSTS> 47,789 29,019 22,379
<OTHER-EXPENSES> 125,488 179,244 112,088
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> (2,688) (970) (767)
<INCOME-PRETAX> (66,414) (138,416) (80,599)
<INCOME-TAX> (8,714) (8,748) 2,265
<INCOME-CONTINUING> (57,700) (129,668) (82,864)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (57,700) (129,668) (82,864)
<EPS-PRIMARY> (852.11) 0 0
<EPS-DILUTED> (852.11) 0 0
</TABLE>
