<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 22, 1998
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
EXE TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7371 751719817
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) No.)
</TABLE>
12740 HILLCREST ROAD
DALLAS, TEXAS 75230
(972) 233-3761
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
--------------------------
RAYMOND R. HOOD
PRESIDENT AND CHIEF EXECUTIVE OFFICER
EXE TECHNOLOGIES, INC.
12740 HILLCREST ROAD
DALLAS, TEXAS 75230
(972) 233-3761
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
--------------------------
COPIES TO:
BARRY M. ABELSON, ESQUIRE KENNETH M. SIEGEL, ESQUIRE
MICHAEL P. GALLAGHER, ESQUIRE TAMARA G. MATTISON, ESQUIRE
CHRISTOPHER S. MILLER, ESQUIRE MICHELLE L. WHIPKEY, ESQUIRE
PEPPER HAMILTON LLP WILSON SONSINI GOODRICH & ROSATI, P.C.
1235 WESTLAKES DRIVE, SUITE 400 650 PAGE MILL ROAD
BERWYN, PA 19312 PALO ALTO, CA 94304
(610) 640-7800 (650) 493-9300
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
--------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $0.01 par value.............. 8,855,000 Shares $14.00 $123,970,000 $36,580
</TABLE>
(1) Includes 1,155,000 shares of Common Stock subject to the over-allotment
options granted to the Underwriters. The shares of Common Stock are not
being registered for the purpose of sales outside the United States.
(2) Estimated solely for purposes of determining the registration fee in
accordance with Rule 457(a) under the Securities Act of 1933.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED JULY 22, 1998
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
7,700,000 SHARES
EXE TECHNOLOGIES, INC.
COMMON STOCK
(PAR VALUE $0.01 PER SHARE)
---------------------
Of the 7,700,000 shares of Common Stock offered, 6,160,000 shares are being
offered hereby in the United States and 1,540,000 shares are being offered in a
concurrent international offering outside the United States. The initial public
offering price and the aggregate underwriting discount per share will be
identical for both offerings. See "Underwriting".
Of the 7,700,000 shares of Common Stock offered, 6,850,000 shares are being
sold by the Company and 850,000 shares are being sold by the Selling
Stockholders. See "Principal and Selling Stockholders". The Company will not
receive any of the proceeds from the sale of the shares being sold by the
Selling Stockholders.
Prior to this offering, there has been no public market for the Common Stock
of the Company. It is currently estimated that the initial public offering price
will be between $12.00 and $14.00 per share. For factors to be considered in
determining the initial public offering price, see "Underwriting".
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE COMMON STOCK.
Application will be made for quotation of the Common Stock on the Nasdaq
National Market under the symbol "EXET".
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO PROCEEDS TO SELLING
OFFERING PRICE DISCOUNT(1) COMPANY(2) STOCKHOLDERS
----------------- ----------------- ----------------- -----------------------
<S> <C> <C> <C> <C>
Per Share........................... $ $ $ $
Total(3)............................ $ $ $ $
</TABLE>
- --------------
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.
(2) Before deducting estimated expenses of $950,000 payable by the Company.
(3) The Company has granted the U.S. Underwriters an option for 30 days to
purchase up to an additional 924,000 shares at the initial public offering
price per share, less the underwriting discount, solely to cover
over-allotments. Additionally, the Company has granted the International
Underwriters a similar option with respect to an additional 231,000 shares
as part of the concurrent international offering. If such options are
exercised in full, the total initial public offering price, underwriting
discount and proceeds to the Company will be $ , $ and $ ,
respectively. See "Underwriting".
---------------------
The shares offered hereby are offered severally by the U.S. Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that certificates
for the shares will be ready for delivery in New York, New York, on or about
, 1998, against payment therefor in immediately available funds.
GOLDMAN, SACHS & CO.
BANCAMERICA ROBERTSON STEPHENS
BT ALEX. BROWN
PIPER JAFFRAY INC.
---------------------
The date of this Prospectus is , 1998.
<PAGE>
[GRAPHIC: A BOX TITLED "GLOBAL SUPPLY CHAIN EXECUTION" WITH A DIAGRAM OF PRODUCT
FLOW FROM "MAKER" THROUGH THE SUPPLY CHAIN TO THE EVENTUAL "BUYER" OF THE GOODS.
EXE SOFTWARE IS ILLUSTRATED AS PRESENT IN VARIOUS PARTS OF THE SUPPLY CHAIN WITH
THE VIRTUAL INVENTORY MANAGEMENT "VIM" CONCEPT AND SUPPLY CHAIN MONITOR
ENCOMPASSING THE ENTIRE CHAIN. LIST OF OFFICE LOCATIONS TO FOLLOW DIAGRAM]
This Prospectus includes trademarks, service marks and trade names of
entities other than the Company, the mention of which in this Prospectus is with
due recognition of, and without intent to misappropriate their respective
trademarks, service marks, or trade names.
The Company intends to furnish to its stockholders annual reports containing
audited financial statements and to make available to its stockholders quarterly
reports containing unaudited interim financial information for the first three
fiscal quarters of each fiscal year of the Company.
------------------------
CERTAIN PERSONS PARTICIPATING IN THESE OFFERINGS MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OF THE
COMPANY, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS
IN SUCH SECURITIES, AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE
OFFERINGS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING".
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY SHOULD BE READ IN CONJUNCTION WITH, AND IS QUALIFIED
BY, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS AND NOTES THERETO
APPEARING ELSEWHERE IN THIS PROSPECTUS. EXCEPT AS OTHERWISE NOTED, ALL
INFORMATION IN THIS PROSPECTUS, INCLUDING SHARE AND PER SHARE INFORMATION,
ASSUMES (I) THE CONVERSION OF ALL OUTSTANDING SHARES OF CLASS B COMMON STOCK,
SERIES A CONVERTIBLE PREFERRED STOCK, SERIES B CONVERTIBLE PREFERRED STOCK AND
SERIES C CONVERTIBLE PREFERRED STOCK INTO SHARES OF COMMON STOCK, (II) THE
RENAMING OF THE CLASS A COMMON STOCK TO COMMON STOCK AND (III) NO EXERCISE OF
THE UNDERWRITERS' OVER-ALLOTMENT OPTIONS. THE COMPANY COMMENCED OPERATIONS
FOLLOWING THE ACQUISITION OF DALLAS SYSTEMS CORPORATION, A TEXAS CORPORATION, BY
NEPTUNE SYSTEMS, INC., A PENNSYLVANIA CORPORATION, IN SEPTEMBER 1997 (THE
"ACQUISITION"). UNLESS THE CONTEXT OTHERWISE REQUIRES, REFERENCES IN THIS
PROSPECTUS TO "EXE" OR THE "COMPANY" REFER TO, (I) WITH RESPECT TO ANY DATE OR
PERIOD PRIOR TO THE ACQUISITION, NEPTUNE SYTEMS, INC., AND (II) WITH RESPECT TO
ANY DATE OR PERIOD ON OR AFTER THE DATE OF THE ACQUISITION, EXE TECHNOLOGIES,
INC. REFERENCES IN THIS PROSPECTUS TO "NEPTUNE" REFER TO NEPTUNE SYSTEMS, INC.
REFERENCES IN THIS PROSPECTUS TO "DALLAS SYSTEMS" REFER TO DALLAS SYSTEMS
CORPORATION.
THE COMPANY
EXE is a leading provider of supply chain execution software. Supply chain
execution encompasses ordering, transporting, handling, storing and delivering
inventory as it moves through the supply chain from manufacturer to the point of
sale. The Company's software solution, EXceed, allows businesses to optimize the
operations of warehouses, distribution centers and other supply chain nodes and
to enhance the tracking and logistical control of inventory through the supply
chain. Combining elements of traditional warehouse, transportation and order
management systems, EXceed is designed to provide companies with an
enterprise-wide view of inventory regardless of its handling state or location.
By enabling better visibility and logistical control over inventory through the
supply chain, EXceed allows businesses to improve inventory turnover, reduce
carrying costs and more efficiently satisfy customer demand by delivering the
right product to the right place at the right time. In addition, EXceed is
designed to enable businesses to reduce operating costs through more efficient
management of labor, materials and other resources within warehouses and
distribution centers.
Today's increasingly competitive business environment demands that
businesses improve their ability to move raw materials, components and finished
goods through the supply chain. A number of trends, however, have made it
increasingly difficult to satisfy these requirements, including: (i)
globalization of manufacturing, component sourcing and sales; (ii) expansion of
product variety; and (iii) increased reliance on real-time inventory management
and value-added distribution. Many enterprises are attempting to meet these
challenges either by improving their internal operations through the use of
information technology or by outsourcing such operations to third party
logistics ("3PL") providers. Enterprise resource planning ("ERP") and advanced
planning systems ("APS") have enabled businesses to improve their capabilities
in forecasting, scheduling and supply chain planning. These systems do not,
however, typically address the execution of the operational plans that they
generate. The Company believes that enterprises are now realizing that a supply
chain execution system, which focuses on the ordering, transporting, handling,
storing and delivery of product, represents a critical element in the effort to
optimize overall supply chain operations. AMR Research estimates that the market
for supply chain execution software and related services will reach $1.4 billion
in 1998 and will continue to grow at a compound annual growth rate of
approximately 40% through 2002.
The Company currently focuses on providing solutions to three distinct, but
broad-based, target markets: retail/wholesale, manufacturing/consumer packaged
goods ("CPG") and 3PLs. Since the Acquisition, the Company has provided products
and services to approximately 200 customers including American Stores, BAX
Global Logistics, CompUSA, Consumer Value Stores, Ford Motor Company, General
Motors Corporation, GE/Penske Logistics, Hewlett-Packard Company, Kmart,
Neiman-Marcus, Staples, USF Logistics and Woolworths (AU).
3
<PAGE>
EXE commenced operations in September 1997 following the acquisition of
Dallas Systems by Neptune. The Acquisition combined Neptune's leading Windows NT
technology, rapid implementation focus and packaged applications business model
with Dallas Systems' large installed base, vertical industry expertise and
experience designing and implementing mainframe and UNIX systems. In addition,
the Acquisition provided international market leverage through the companies'
complementary strengths in Europe and Asia, and vertical market leverage,
primarily in the grocery, retail/wholesale and 3PL market segments.
The Company's headquarters are located at 12740 Hillcrest Road, Dallas,
Texas 75230, and its telephone number is (972) 233-3761. The Company also
operates from its various subsidiary and sales offices located in the United
States, Europe, Asia and Australia.
THE OFFERINGS
<TABLE>
<S> <C>
Common Stock offered by the Company............... 6,850,000 shares
Common Stock offered by the Selling
Stockholders.................................... 850,000 shares
Common Stock to be outstanding after the
offerings....................................... 35,652,167 shares(1)
Use of Proceeds................................... To repay indebtedness and for working
capital and other general corporate
purposes, including potential future
acquisitions. See "Use of Proceeds".
Proposed Nasdaq National Market symbol............ EXET
</TABLE>
- ------------------------
(1) Excludes an aggregate of 4,313,376 shares of Common Stock issuable upon
exercise of options outstanding as of July 15, 1998 at exercise prices
ranging from $0.75 to $5.00 per share and with a weighted average exercise
price of $2.34 per share. Also excludes an aggregate of 589,280 shares
reserved as of July 15, 1998 for issuance under the Company's equity-based
compensation plans. See "Management--Stock Option Plans".
4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
The Company
Dallas Systems ---------------------------------------------------------
------------------------------------
Eight and Three
One-half Year Ended Months
Year Ended December Months Ended December 31, Ended
31, September 15, ---------------------------------------------- March 31,
-------------------- -------------- 1997 Pro ---------
1995 1996 1997 1995 1996 1997(1) Forma(2) 1997
--------- --------- -------------- --------- --------- --------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Revenues................... $ 27,243 $ 34,190 $ 33,103 $ 2,768 $ 8,414 $ 26,772 $ 59,875 $ 2,123
Income (loss) from
operations............... 25 1,750 79 442 1,377 (22,879) (3,167) (79)
Net income (loss)(3)....... (10) 1,109 (627) 274 840 (22,786) (2,866) (72)
Net income (loss) per
share(3)(4).............. $ 0.03 $ 0.10 $ (2.03) $ (0.26) $ (0.01)
Net income (loss) per
share--assuming
dilution(3)(4)........... $ 0.03 $ 0.10 $ (2.03) $ (0.26) $ (0.01)
Shares used in computing
net income (loss) per
share(3)(4).............. 8,500 8,500 11,228 11,228 8,667
Shares used in computing
net income (loss) per
share--assuming
dilution(3)(4)........... 8,500 8,500 11,228 11,228 8,667
<CAPTION>
1998
---------
<S> <C>
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Revenues................... $ 20,605
Income (loss) from
operations............... 244
Net income (loss)(3)....... 175
Net income (loss) per
share(3)(4).............. $ 0.01
Net income (loss) per
share--assuming
dilution(3)(4)........... $ 0.01
Shares used in computing
net income (loss) per
share(3)(4).............. 15,993
Shares used in computing
net income (loss) per
share--assuming
dilution(3)(4)........... 27,964
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1998
--------------------------
ACTUAL AS ADJUSTED(5)
--------- ---------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents............................................................ $ 2,164 $ 84,015
Working capital...................................................................... 9,725 91,576
Total assets......................................................................... 36,896 118,747
Long-term debt, less current portion................................................. 15 --
Stockholders' equity................................................................. 21,055 102,921
</TABLE>
- ----------------------------------
(1) EXE commenced operations on September 15, 1997, following the Acquisition,
which was accounted for as a purchase of Dallas Systems by Neptune. As such,
the historical financial statements of Neptune are presented as the
historical financial statements of the Company. The assets and liabilities
of Dallas Systems were recorded at fair value at the date of the
Acquisition. Included in 1997 consolidated results of operations is a
write-off of in-process research and development of $19.7 million at the
date of the Acquisition. The Consolidated statements of operations data of
the Company and Neptune for the periods presented are not strictly
comparable due to the significant impact the Acquisition had on the 1997
statements.
(2) Pro forma information for the Company reflects the Acquisition as if it had
taken place on January 1, 1997. This information is unaudited and does not
purport to represent the actual operating results had the Acquisition taken
place January 1, 1997, nor does it purport to be indicative of the results
that would be obtained in the future. See "Selected Unaudited Pro Forma
Financial Information".
(3) Effective February 1, 1997, Neptune changed its taxable status from an S
Corporation to a C Corporation. Accordingly, the consolidated statements of
operations data for the periods prior to February 1, 1997 reflect a pro
forma tax provision by applying the anticipated statutory tax rate to
historical pre tax income (loss) adjusted for permanent tax differences. Net
income (loss) and net income (loss) per share--assuming dilution for periods
prior to December 31, 1997 give effect to the pro forma tax provision.
(4) See Note 13 of Notes to Consolidated Financial Statements of the Company for
the determination of shares used in computing basic and diluted net income
per share.
(5) Adjusted to reflect the sale by the Company of 6,850,000 shares of Common
Stock in the offerings at an assumed offering price of $13.00 per share and
the application of the estimated net proceeds therefrom. See "Use of
Proceeds" and "Capitalization".
5
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVES A
SIGNIFICANT DEGREE OF RISK. IN ADDITION TO THE OTHER INFORMATION IN THIS
PROSPECTUS, THE FOLLOWING RISK FACTORS SHOULD BE CONSIDERED CAREFULLY IN
EVALUATING AN INVESTMENT IN THE COMMON STOCK OFFERED BY THIS PROSPECTUS. WHEN
USED IN THIS PROSPECTUS, THE WORDS "EXPECTS," "ANTICIPATES," "ESTIMATES" AND
SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. SUCH
STATEMENTS ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED. THESE RISKS AND UNCERTAINTIES
INCLUDE, BUT ARE NOT LIMITED TO, THOSE RISKS DISCUSSED BELOW AND ELSEWHERE IN
THIS PROSPECTUS. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN
THE FORWARD-LOOKING STATEMENTS AS A RESULT OF THE RISK FACTORS DISCUSSED BELOW
AND ELSEWHERE IN THIS PROSPECTUS.
LIMITED COMBINED OPERATING HISTORY; INTEGRATION CHALLENGES
The Company commenced operations in September 1997 following the acquisition
of Dallas Systems (based in Dallas, Texas) by Neptune (based in Philadelphia,
Pennsylvania). Although Dallas Systems had been in existence for 18 years and
Neptune for five years, the Company has operated on a combined basis for less
than a year. The Company and its operations are subject to all of the risks
inherent in the establishment of a new business enterprise, especially one that
is a combination of two geographically and operationally diverse companies. In
addition, the Company's prospects must be considered in light of the risks,
expenses and difficulties frequently encountered by companies in new and rapidly
evolving markets.
Prior to the Acquisition, Neptune and Dallas Systems operated under
different business models and offered products and services based upon different
technology platforms. Neptune focused on the Windows NT market and it designed
its products to require limited, if any, services for installation. Dallas
Systems provided software and consulting services primarily for the
mainframe-based systems market. The Dallas Systems product required a
significant level of services for installation. Subsequent to the Acquisition,
the Company has committed, and may continue to commit, significant resources to
harmonize the mainframe and UNIX elements of the EXceed product line obtained
from Dallas Systems, with the Windows NT elements of the EXceed product line
contributed by Neptune. The integration of these distinct business models and
product lines has been, and continues to be, time intensive and costly.
Accordingly, the Company remains subject to the risks associated with the
integration of two different businesses, as well as the risks inherent in
operating in rapidly evolving markets.
Furthermore, although the Company and Dallas Systems have experienced
significant growth during the past five years, the Company does not believe that
prior growth rates are sustainable or indicative of future operating results.
The Company realized a reduction in overall gross margin as a result of the
Acquisition, primarily due to the historically lower gross margins realized by
Dallas Systems relative to Neptune. The Company has also recently hired a
significant number of new sales and marketing and professional services
personnel and intends to continue to invest significantly in its sales and
marketing infrastructure and research and development activities. Accordingly,
increases in operating expenses are expected to continue and may result in a
decrease in operating income and operating margin. There can be no assurance
that the Company will be able to increase its level of revenues or maintain
profitability in the future.
In light of the Company's limited combined operating history and integration
challenges, future operating results will depend on many factors, including,
without limitation: the overall growth rate of the markets in which the Company
competes; the level of market acceptance of, and demand for, the Company's
software products; the level of product and price competition; the Company's
ability to establish strategic marketing relationships, develop and market new
and enhanced products, and control costs; changes in the Company's products and
services mix; the Company's ability to expand its
6
<PAGE>
direct sales force and indirect distribution channels both domestically and
internationally; the Company's ability to integrate acquired businesses; and the
Company's ability to attract, train and retain consulting, technical and other
key personnel. See the Company's Selected Consolidated Financial Data and
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
POTENTIAL VARIABILITY OF QUARTERLY OPERATIONS AND FINANCIAL RESULTS; SEASONALITY
The Company's revenues and operating results have varied in the past and
likely will continue to vary substantially in the future. Among the factors that
could cause these potential variations are: fluctuations in the demand for the
Company's products and services; the level of product and price competition in
the Company's markets; the timing and market acceptance of new product
introductions and upgrades by the Company or its competitors; the Company's
success in expanding its services, customer support and marketing and sales
organizations, and the timing thereof; the size and timing of individual
transactions; the mix of products and services sold; delays in, or cancellations
of, customer implementations; customers' budget constraints; the level of
research and development expenditures; the size of recurring compensation
charges; changes in foreign currency exchange rates; the Company's ability to
control costs; the timing of acquisitions; and general economic conditions.
Quarterly software license revenues are difficult to forecast, in part,
because the Company's sales cycles, from initial evaluation to delivery of
software, vary substantially from customer to customer. Further, since software
products are typically shipped shortly after license agreements are signed,
revenues in any quarter are substantially dependent on orders booked and shipped
in that quarter. The Company typically recognizes a substantial amount of its
revenues in the last month of the quarter, frequently in the last week or even
days of the quarter. In addition, the timing of large individual licenses is
difficult for the Company to predict, and, in some cases, such licenses are
booked later than anticipated by the Company. Since the Company's operating
expenses are based on anticipated revenue levels and a substantial portion of
the Company's operating expenses, particularly personnel and facilities costs,
are relatively fixed in advance of any particular quarter, any delay in the
recognition of revenues may cause significant variations in operating results in
any particular quarter. In addition, the Company intends to continue to invest
heavily in its sales and marketing, professional services and research and
development organizations. Any of these activities may further limit the
Company's ability to adjust spending in response to fluctuations in revenue
levels. Finally, the Company's ability to increase its profitability is
dependent upon its ability to increase the operating efficiency of its
professional services organization, through improved utilization and/or billing
rates. There can be no assurance that revenues will grow in future periods, that
they will grow at historical rates, or that the Company will maintain positive
operating margins in future quarters. If revenues fall below the Company's
expectations in a particular quarter, the Company's operating results could be
materially and adversely affected. See "--Lengthy and Variable Sales Cycles" and
the Company's Management's Discussion and Analysis of Financial Condition and
Results of Operations.
In addition to quarterly fluctuations in operations, the Company experiences
seasonality, with a disproportionately greater amount of the Company's revenues
for any fiscal year being recognized in its fourth quarter and a
disproportionately lesser amount thereof being recognized in its third quarter.
As a result of the foregoing factors, the Company's operating results for
any future quarter may be above or below the expectations of public market
analysts and investors and are not indicative of any succeeding quarters or of
the year in question. Should the Company's revenues and operating results fall
below market expectations, the price of the Company's Common Stock could be
materially adversely affected. See the Company's Management's Discussion and
Analysis of Financial Condition and Results of Operations.
7
<PAGE>
ABILITY TO MANAGE GROWTH
The Company has rapidly and significantly expanded its operations and
anticipates that significant expansion will continue to be required in order to
address potential market opportunities. The Company's recent expansion has
resulted in substantial growth in the number of its employees and geographic
areas of its operations, resulting in increased responsibility for both existing
and new management personnel.
In particular, a significant portion of the Company's expansion has involved
opening operations in Europe and Asia, which are more difficult to manage and
are subject to additional risks associated with foreign operations. The Company
anticipates continuing to increase the size of its worldwide sales, support,
professional services, marketing and research and development operations
following the completion of the offerings. See "--International Operations and
Currency Fluctuations".
The Company has hired a majority of its salespeople since the beginning of
1998 and its professional services staff has increased significantly since then.
The Company anticipates continuing to increase the size of its sales and
professional services organizations following completion of the offerings. Such
significant growth in the number of salespeople results in significant costs in
advance of sales generation by such personnel. Similarly, the significant growth
in professional services personnel results in increased training costs in
advance of any corresponding revenues due to the typically lower productivity
levels of newer service personnel. Moreover, any growth in software license
revenues will likely generate the need for more professional services personnel
to deploy and implement such software and to train customers. There can be no
assurance that such expansion will be successfully completed, that the Company
will generate sufficient revenues to cover additional expenses incurred in
anticipation of such growth, that the added responsibility on management will
not cause a significant strain on management resources, or that such growth will
not have a material adverse effect on the Company's business operations or
financial condition.
The Company has only recently begun the process of developing the management
and operational capabilities necessary to support the anticipated growth. For
example, the Company hired its current Senior Vice President of Professional
Services in October 1997, its current Senior Vice President of Sales and
Alliances in February 1998, and its current Senior Vice President of Research
and Development in March 1998. Accordingly, a significant portion of the
Company's senior management team has been in place for only a relatively short
period of time. The Company's success will depend to a significant extent on the
Company's ability to integrate such personnel into the Company's daily
operations, to gain the trust and confidence of the Company's other employees
and to work effectively as a team. Although other members of the Company's
management team have a longer history with Neptune or Dallas Systems, as the
case may be, they have limited experience operating a business of the size and
complexity of the Company. Such challenges are significantly more difficult in
light of the Company's recent growth in general, and in particular the growth of
its sales and marketing and professional services organizations and the
expansion of its foreign operations.
The ability of the Company to manage its growth, if any, will depend in
large part on its ability to generally improve and expand its operational and
sales and marketing capabilities, to develop the management skills of its
managers and supervisors, and to train, motivate and manage both its existing
employees and the additional employees that will be required if the Company is
to achieve its business objectives. In addition, in order to effectively manage
its operations, the Company must continuously evaluate the adequacy of its
management structure and its existing systems and procedures, including, among
others, its financial and internal controls. There can be no assurance that
management will adequately anticipate all of the demands that growth may impose
on the Company's systems, procedures and structure or that the Company will be
able to manage any future growth successfully. Any failure to adequately
anticipate and respond to such demands or manage its growth effectively would
have a material adverse effect on the Company's business, financial condition
and results of operations.
8
<PAGE>
See "Business--Strategy", "--Services, Support and Training", "--Sales and
Marketing", "--Product Development", and "Management".
FOREIGN OPERATIONS AND CURRENCY FLUCTUATIONS
The Company derived no revenues in 1995 from foreign operations and
approximately 10.8%, 30.9%, 40.5% and 30.5% of its total revenues from its
foreign operations in 1996, 1997 and the first three months of 1997 and 1998,
respectively. The Company believes that continued growth and profitability will
require expansion of its operations in international markets. Further
penetration of international markets will require the Company to, among other
things, expand existing foreign operations, establish additional foreign
operations and translate its software and manuals into additional foreign
languages. This expansion is costly and time-consuming and may not generate
returns for a significant period of time, if at all. To the extent that the
Company is unable to expand its international operations or translate its
software and manuals into foreign languages in a timely manner, the Company's
ability to further penetrate international markets would be adversely affected,
which could have a material adverse effect on the Company's business, financial
condition or results of operations.
The Company's international operations are subject to risks inherent in
international business activities, including: difficulty in staffing and
managing geographically disparate operations; longer accounts receivable payment
cycles in certain countries; compliance with a variety of foreign laws and
regulations; unexpected changes in regulatory requirements; overlap of different
tax structures; greater difficulty in safeguarding intellectual property; import
and export licensing requirements; trade restrictions; changes in tariff rates;
and general economic conditions in international markets. There can be no
assurance that the Company's business, financial condition or results of
operations will not be adversely affected by these or other factors that may
affect international operations.
To date, the Company's revenues from international operations have primarily
been denominated in United States dollars. As a result, the Company's revenues
in international markets may be adversely affected by a strengthening United
States dollar. Certain revenues and the majority of the expenses incurred by the
Company's international operations are denominated in currencies other than the
United States dollar. In addition, with the expansion of international
operations, the number of foreign currencies in which the Company must operate
will increase, resulting in increased exposure to exchange rate fluctuations.
Exchange rate fluctuations have caused and will continue to cause currency
transaction gains and losses. While such currency transaction gains and losses
have not been material to date, there can be no assurance that currency
transaction losses will not have a material adverse effect on the Company's
business, results of operations or financial condition in future periods.
SUBSTANTIAL COMPETITION
The market for the Company's products is intensely competitive, highly
fragmented and characterized by rapid technological change. The Company's
competitors are numerous and diverse and offer a variety of solutions directed
at various aspects of the supply chain, as well as the enterprise as a whole.
Competitors tend to vary greatly depending on the customer's geographical
location or vertical market segment. The Company's existing competitors include:
(i) warehouse and transportation management software vendors such as Catalyst
International, Inc., Manhattan Associates, Inc. and McHugh Software
International, Inc.; (ii) ERP and APS vendors that offer warehouse or
transportation modules as part of their suites, such as J.D. Edwards & Company
and SAP Aktiengesellschaft; (iii) smaller independent companies that have
developed or are attempting to develop warehouse and transportation management
software solutions; and (iv) corporate information technology departments of
potential customers capable of internally developing solutions. Many of the
Company's competitors have longer operating histories, significantly greater
financial, technical, marketing and other resources, greater name recognition, a
broader range of products to offer and a larger installed base of customers than
the Company, any of which could provide them with a significant competitive
advantage.
9
<PAGE>
The Company expects to face increased competition in the future from its
current competitors. In addition, new competitors, or alliances among current
and new competitors, may emerge and rapidly gain significant market share. The
Company also may face increased competition in the future from business
application software vendors, such as ERP and APS providers, that may broaden
their product offerings to include supply chain execution software. To the
extent such vendors are able to offer systems with functionality comparable or
superior to the Company's products, their significant installed customer bases,
long-standing customer relationships, ability to offer a broad solution and
ability to price such products as incremental add-ons to existing systems could
provide a significant competitive advantage over the Company.
In order to succeed in the future, the Company must continue to respond
promptly and effectively to technological change and competitors' innovations.
There can be no assurance that current or potential competitors of the Company
will not develop products comparable or superior in terms of price and
performance features to those developed by the Company. In addition, no
assurance can be given that the Company will not be required to make substantial
additional investments in connection with its research, development, marketing,
sales and customer service efforts in order to meet any competitive threat, or
that the Company will be able to compete successfully in the future. Increased
competition could result in reductions in market share, pressure for price
reductions and related reductions in gross margins, any of which could
materially and adversely affect the Company's ability to achieve its financial
and business goals. There can be no assurance that in the future the Company
will be able to successfully compete against current and future competitors. See
"Business--Competition".
DEPENDENCE ON PERSONNEL
The Company is dependent upon the continued services of its Chairman, Chief
Executive Officer, Chief Financial Officer and other senior managers. There can
be no assurance that any of these individuals or any other key employee will not
voluntarily terminate his employment with the Company. The loss of the services
of any of the Company's executive officers could have a material adverse effect
on the Company's business, financial condition and results of operations.
The Company believes that its future success will also depend significantly
on its ability to attract, motivate and retain additional highly skilled
technical, managerial, consulting, sales and marketing, and, in particular,
professional services personnel. Competition for skilled personnel is intense,
and there can be no assurance that the Company will be successful in attracting,
motivating and retaining the personnel required to grow and operate profitably.
Failure to attract, motivate and retain such highly skilled personnel could have
a material adverse effect on the Company's business, financial condition and
results of operations. See "--Dependence on Professional Services Personnel" and
"Business-- Employees".
ACCOUNTING AND MANAGEMENT INFORMATION SYSTEMS LIMITATIONS
Although the Company has recently completed implementation of an integrated
management information system in the United States, it currently does not have
an integrated worldwide management information system, particularly in the area
of financial reporting. The increasingly global nature of the Company's
operations makes the financial reporting and control function more complex and
reliant upon adequate and integrated worldwide systems and timely communication.
Although the Company expects to complete the implementation of a financial
reporting system covering most of its foreign operations by the end of 1998,
there can be no assurance that the implementation of the new management
information system will be completed when scheduled, that the Company will not
experience other difficulties in transitioning from its current system to the
new system or that the new system will perform as expected. In addition, there
can be no assurance that the Company's current system will provide management
with adequate information timely and accurately for it to make proper decisions
during the transition to the new system. The failure of management to receive
adequate, accurate and timely
10
<PAGE>
financial information could inhibit management's ability to make effective and
timely business decisions, which could have a material adverse effect on the
Company's business or results of operations.
LENGTHY AND VARIABLE SALES CYCLES
The Company's software is generally used for critical division- or
enterprise-wide purposes and involves a significant commitment of resources by
customers. A customer's decision to license the Company's software generally
involves the evaluation of the available alternatives by a significant number of
personnel in various functional and geographic areas, each often having specific
and conflicting requirements. Accordingly, the Company typically must expend
substantial resources educating prospective customers about the value of the
Company's solutions. For these and other reasons, the length of time between the
date of initial contact with the potential customer and the execution of a
software license agreement typically ranges from three to nine months, and is
subject to delays over which the Company may have little or no control. As a
result of the length and variability of the sales cycle for its software
products, the Company's ability to forecast the timing and amount of specific
sales is limited, and the delay or failure to complete one or more large license
transactions could have a material adverse effect on the Company's business,
financial condition or results of operations and cause the Company's operating
results to vary significantly from quarter to quarter.
RISKS ASSOCIATED WITH POSSIBLE ACQUISITIONS
The Company may in the future engage in selective acquisitions of other
businesses that are complementary to those of the Company, including other
providers of supply chain execution solutions or technology. There can be no
assurance that the Company will be able to identify suitable acquisition
candidates available for purchase at reasonable prices, consummate any
acquisition or successfully integrate any acquired business into the Company's
operations. Further, acquisitions may involve a number of additional risks,
including diversion of management's attention, failure to retain key acquired
personnel, unanticipated events or circumstances, legal liabilities and
amortization of acquired intangible assets, some or all of which could have a
material adverse effect on the Company's business, results of operations and
financial condition. Problems with an acquired business could have a material
adverse effect on the performance of the Company as a whole. The Company expects
to finance any future acquisitions with cash on hand, which may include the
proceeds of the offerings, as well as with possible debt financing, the issuance
of equity securities (common or preferred stock) or combinations of the
foregoing. If the Company were to proceed with one or more significant future
acquisitions in which the consideration consisted of cash, a substantial portion
of the Company's available cash (possibly a portion of the proceeds of the
offerings) could be used to consummate the acquisitions. If the Company were to
consummate one or more significant acquisitions in which the consideration
consisted of stock, stockholders of the Company would suffer dilution of their
interests in the Company. There can also be no assurance that the Company would
be able to arrange adequate debt financing on acceptable terms, if required.
Many business acquisitions must be accounted for using the purchase method of
accounting, and the Company will be unable to consummate any business
acquisitions under the pooling-of-interests method of accounting at least until
September 1999. Most of the businesses that might become attractive acquisition
candidates for the Company are likely to have significant intangible assets, and
acquisition of these businesses, if accounted for as a purchase, would typically
result in substantial goodwill amortization charges to the Company, reducing
future earnings. In addition, such acquisitions could involve
acquisition-related charges, such as one-time acquired research and development
charges. For example, in connection with the Acquisition, in 1997 the Company
recorded a one-time research and development charge of $19.7 million. See the
Company's Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Implementation of the Company's products often involves a significant
commitment of resources, financial and otherwise, by customers. The Company's
implementation cycle can be lengthy due to the
11
<PAGE>
size and complexity of its implementations. The failure of the Company to
attract and retain services personnel, the failure of alliance partners to
commit sufficient resources towards implementing the Company's products or the
delay in implementation of the EXceed product line for any reason could result
in dissatisfied customers which could have a material adverse effect on the
Company's reputation, which in turn could adversely affect its business,
financial condition or results of operations. See the Company's Management's
Discussion and Analysis of Financial Condition and Results of Operations and
"Business--Sales and Marketing".
PRODUCT CONCENTRATION
The Company currently derives all of its software license revenues from its
EXceed software, particularly the warehouse management solution. The Company
expects to continue to be dependent upon EXceed in the future, and any factor
adversely affecting the market for supply chain execution software in general,
or the Company's products in particular, could adversely affect the Company's
business, financial condition and results of operations. The market for supply
chain execution software is competitive, highly fragmented and characterized by
rapid technological change. The Company's future financial performance will
depend in large part on the successful development, introduction and customer
acceptance of new products and product enhancements in a timely and cost
effective manner. Subsequent to the Acquisition, the Company has committed, and
expects to continue to commit, significant resources to harmonize the mainframe
and UNIX elements of the EXceed product line obtained from Dallas Systems with
the Windows NT elements of the EXceed product line contributed by Neptune. There
can be no assurance that the Company will achieve continued market acceptance of
the EXceed software, any new or enhanced versions of the EXceed software or
related products. In addition, there can be no assurance that the market for
such software will continue to grow. If this market fails to grow or grows more
slowly than the Company currently anticipates, the Company's business, financial
condition and results of operations would be materially adversely affected.
Since the Company's services and maintenance revenues are derived from
implementation and support services offered in conjunction with sales of EXceed
product licenses, any development that adversely affects sales of EXceed
licenses will also adversely affect the Company's services and maintenance
revenues. See the Company's Management's Discussion and Analysis of Financial
Condition and Results of Operations, "Business--Strategy" and "--Products".
CUSTOMER CONCENTRATION
The Company's top five customers for the year ended December 31, 1997 and
three months ended March 31, 1998 in the aggregate accounted for 29.1% and
28.0%, respectively, of the Company's revenues. In particular, Tru-Serve
Corporation accounted for 11.4% of total revenues during the year ended December
31, 1997. The Company expects that a small number of customers will continue to
account for a substantial portion of revenues in any given quarter in the
foreseeable future. As a result, the inability of the Company to secure major
customers during a given period could have a material adverse effect on the
Company's business, financial condition or results of operations. See
"Business-- Customers."
CHANGES IN SOFTWARE REVENUE RECOGNITION
Software license revenues for periods subsequent to December 31, 1997 are
recognized in accordance with the American Institute of Certified Public
Accountants' Statement of Position ("SOP") 97-2, "Software Revenue Recognition."
Under SOP 97-2, software license revenues are recognized upon execution of a
contract and delivery of software, provided that the license fee is fixed and
determinable, no significant production, modification or customization of the
software is required and collection is considered probable by management. For
periods prior to December 31, 1997, software license revenues were recognized in
accordance with SOP 91-1, "Software Revenue Recognition." Under SOP 91-1,
12
<PAGE>
software license revenues were recognized upon execution of a contract and
shipment of the software and after any customer cancellation right had expired,
provided that no significant vendor obligations remained outstanding, amounts
were due within one year and collection was considered probable by management.
The application of SOP 97-2 did not have a material impact on the Company's
consolidated financial statements for the quarter ended March 31, 1998. As the
practice under SOP 97-2 is relatively new, and many practical questions
regarding its application remain unresolved, there can be no assurance that the
application of SOP 97-2 will not have a material impact upon the Company's
revenue recognition in the future.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded to
accept only two digit entries in the date field. Beginning in the year 2000,
these date fields will need to accept four digit entries to distinguish
twenty-first century dates from twentieth century dates. As a result, over the
next two years, computer systems and/or software used by many companies may need
to be upgraded to comply with such "Year 2000" requirements. Significant
uncertainty exists in the software industry concerning the potential effects
associated with such compliance. The latest versions of the Company's products
are designed to be Year 2000 compliant. The Company does not currently believe
that the effects of any Year 2000 non-compliance in the Company's installed base
of software will result in a material adverse effect on the Company's business,
financial condition or results of operations. However, no assurance can be given
that the Company will not be exposed to potential claims resulting from system
problems associated with the century change. There is no assurance that the
Company's software products that are designed to be Year 2000 compliant contain
all necessary date changes.
The Company believes that the purchasing patterns of customers and potential
customers may be affected by Year 2000 issues in a variety of ways. Many
companies are expending significant resources to correct or patch their current
software systems for Year 2000 compliance. These expenditures may result in
reduced funds available to purchase software products such as those offered by
the Company. Potential customers may also choose to defer purchasing Year 2000
compliant products until they believe it is absolutely necessary, thus
potentially resulting in stalled market sales within the industry. Conversely,
Year 2000 issues may cause other companies to accelerate purchases, thereby
causing an increase in short-term demand and a consequent decrease in long-term
demand for software products. Additionally, Year 2000 issues could cause a
significant number of companies, including current Company customers, to
reevaluate their current software needs and as a result switch to other systems
or suppliers. Any of the foregoing could result in a material adverse effect on
the Company's business, financial condition and results of operations.
The Company may also need to modify or replace minor portions of its
internal systems and software to comply with Year 2000 requirements. Management
expects that the cost of such modifications will not be material and that they
will be completed by January 1999. Factors that could impact the Company's
ability to make the necessary modifications or replacements include, but are not
limited to the availability and cost of trained personnel and the ability of
such personnel to locate and correct all relevant computer codes. However, if
such modifications are not completed on a timely basis or are more costly to
implement than currently anticipated, the Company's business, financial
condition or results of operations could be materially adversely affected. See
the Company's Management's Discussion and Analysis of Financial Condition and
Results of Operations.
INCREASING USE OF FIXED-PRICE SERVICE CONTRACTS
The Company offers a combination of software implementation and related
consulting services to its customers. Although the Company typically provides
services on a "time and materials" basis, the Company has from time to time
entered into fixed-price service contracts, and it expects to increasingly enter
into such contracts in the future. These contracts specify certain milestones to
be met by the
13
<PAGE>
Company regardless of actual costs incurred in fulfilling those obligations. The
Company believes that fixed-price contracts may also increasingly be offered by
competitors to differentiate their product and service offerings. There can be
no assurance that the Company will successfully complete these contracts on
budget, and the Company's inability to do so could have a material adverse
effect on its business, financial condition and results of operations.
FUTURE CAPITAL NEEDS AND UNCERTAINTY OF ADDITIONAL FUNDING
The Company believes that the proceeds received by the Company from the
offerings, together with current cash balances, potential cash flows from
operations and available borrowings under its revolving credit facility will be
sufficient to meet its working capital requirements for the next eighteen
months. The Company periodically reviews other companies and technologies for
potential acquisition. Any material acquisitions of complementary businesses,
products or technologies, or material joint ventures, could require the Company
to obtain additional financing before or after that time. There can be no
assurance that such additional financing would be available to the Company on
favorable terms, if at all. Moreover, additional financing may cause dilution to
existing stockholders.
DEPENDENCE ON PROFESSIONAL SERVICES PERSONNEL
The implementation of the Company's EXceed products requires the services of
highly trained professional services personnel working directly for the Company
or for independent consultants. Although the Company conducts extensive training
programs to qualify internal and external personnel to implement EXceed
products, there can be no assurance that there will be a sufficient number of
professional services personnel to support the demand for such services. A
shortage in the number of trained personnel, either within the Company or
available from third-party consulting firms, could limit the Company's ability
to implement its software on a timely and effective basis. Delayed or
ineffective implementation of the Company's software may limit the Company's
ability to expand its revenues and may result in customer dissatisfaction and
damage the Company's reputation, each of which could have a material adverse
effect on the Company's business, operating results and financial condition. See
"Business--Services, Support and Training".
RISKS ASSOCIATED WITH RAPID TECHNOLOGICAL ADVANCES; NECESSITY OF DEVELOPING NEW
PRODUCTS
The market for supply chain execution systems is subject to rapid
technological change, changing customer needs, frequent new product
introductions and evolving industry standards that may render existing products
and services obsolete. The Company's growth and future operating results will
depend in part upon its ability to enhance existing applications and develop and
introduce new applications that meet or exceed technological advances in the
marketplace, that meet changing customer requirements, that respond to
competitive products and that achieve market acceptance. The Company's product
development and testing efforts have required, and are expected to continue to
require, substantial investments by the Company. There can be no assurance the
Company will continue to possess sufficient resources to make necessary
investments in technology, particularly in light of the substantial resources
that have been, and will continue to be, devoted towards integrating its
products across UNIX, Windows NT and mainframe platforms. In addition, there can
be no assurance the Company will successfully identify new product opportunities
and develop and bring new products to market in a timely and efficient manner,
that the Company's products will achieve market acceptance, or that the
Company's current or future products will conform to industry standards in the
markets they serve. If the Company is unable, for technological or other
reasons, to develop and introduce new and enhanced products in a timely manner,
the Company's business, financial condition and results of operations could be
materially and adversely affected. See "Business--Product Development".
Historically, the Company has issued significant new releases of its suite
of software products periodically, with interim releases issued more frequently.
As a result of the complexities inherent in
14
<PAGE>
software development, and in particular for multi-platform environments, and the
broad functionality and performance demanded by customers for supply chain
execution applications, major new product enhancements and new products can
require long development and testing periods before they are commercially
released. There can be no assurance that the Company will not experience delays
in the scheduled introduction of new products or product upgrades. See
"Business--Products" and "--Product Development".
Complex software products such as those offered by the Company frequently
contain undetected errors or "bugs" when first introduced or as new versions are
released that, despite testing by the Company, are discovered only after a
product has been installed and used by customers. The Company has in the past
discovered software errors in new versions of its software products after their
release. There can be no assurance that errors will not be found in the
Company's products or that such errors will not result in a delay or loss of
revenues, diversion of development resources, damage to the Company's
reputation, increased service and warranty costs, or impaired market acceptance
of these products, any of which could result in a material adverse effect on the
Company's business, financial condition or results of operations. See
"Business--Products" and "--Product Development."
PROPRIETARY RIGHTS
The Company relies on a combination of copyright, trade secret, trademark,
service mark and trade dress laws, confidentiality procedures and contractual
provisions to protect its proprietary rights in its products and technology. The
Company believes, however, that the foregoing measures afford only limited
protection, and there can be no assurance that such measures will be adequate.
The Company also may be subject to additional risks as it enters into
transactions in countries where intellectual property laws are not well
developed or are poorly enforced. Legal protections of the Company's rights may
be ineffective in such countries. Despite the Company's efforts to safeguard and
maintain its proprietary rights both in the United States and abroad, there can
be no assurance that the Company will be successful in doing so, or that the
steps taken by the Company in this regard will be adequate to deter
misappropriation or independent third party development of the Company's
technology or to prevent an unauthorized third party from copying or otherwise
obtaining and using the Company's products or technology. In addition, policing
unauthorized use of the Company's products is difficult, and while the Company
is unable to determine the extent to which piracy of its software products
exists, software piracy could become a problem. Litigation to defend and enforce
the Company's intellectual property rights could result in substantial costs and
diversion of resources and could have a material adverse effect on the Company's
business, financial condition or results of operations, regardless of the final
outcome of such litigation.
As the number of supply chain execution applications in the industry
increases and the functionality of these products further overlaps, software
development companies like the Company may become increasingly subject to claims
of infringement or misappropriation of the intellectual property rights of
others. There can be no assurance that third parties will not assert
infringement or misappropriation claims against the Company in the future with
respect to current or future products. Any claims or litigation, with or without
merit, could be time-consuming, result in costly litigation, diversion of
management's attention, cause product shipment delays or require the Company to
enter into royalty or licensing arrangements. Such royalty or licensing
arrangements, if required, may not be available on terms acceptable to the
Company, if at all, which could have a material adverse effect on the Company's
business, financial condition and results of operations. Such claims or
litigation, regardless of the final outcome, could have a material adverse
effect on the Company's business, financial condition or results of operations.
The Company recently received a notice from a third party that holds a patent on
a container monitoring software system and method asserting that certain
products or services offered by the Company may infringe on such patent, and
offering the Company a license to such patent. The Company is currently
investigating the matter.
15
<PAGE>
The Company has in the past and may in the future, resell, under license,
certain third party software that enables the Company's products to interact
with other software systems or databases. In addition, the Company licenses
certain software tools used to develop the Company's software products. There
can be no assurance that the third party software or software tools will
continue to be available to the Company on commercially reasonable terms. The
loss or inability to maintain any of these software licenses could result in
delays or reductions in product shipments until equivalent software could be
identified and licensed or compiled, which could adversely affect the Company's
business, financial condition or results of operations. See
"Business--Proprietary Rights".
POTENTIAL PRODUCT LIABILITY
Many of the Company's installations involve projects that are critical to
the operations of its clients' businesses and provide benefits that may be
difficult to quantify. Any failure in a client's system could result in a claim
for substantial damages against the Company, regardless of the Company's
responsibility for such failure. Although the Company attempts to limit
contractually its liability for damages arising from negligent acts, errors,
mistakes or omissions, there can be no assurance the limitations of liability
set forth in its contracts will be enforceable in all instances or would
otherwise protect the Company from liability for damages. Although the Company
maintains general liability insurance coverage, including coverage for errors or
omissions, there can be no assurance that such coverage will continue to be
available on reasonable terms or will be available in sufficient amounts to
cover one or more large claims, or that the insurer will not disclaim coverage
as to any future claim.
The successful assertion of one or more large claims against the Company
that exceed available insurance coverage or changes in the Company's insurance
policies, including premium increases or the imposition of large deductible or
co-insurance requirements, could adversely affect the Company's business,
financial condition and results of operations.
SIGNIFICANT UNALLOCATED NET PROCEEDS
A substantial portion of the net proceeds to be received by the Company in
connection with the offerings is allocated to working capital and general
corporate purposes. Accordingly, management will have broad discretion with
respect to the expenditure of such proceeds for the foreseeable future. See "Use
of Proceeds".
CONCENTRATION OF CONTROL
Upon completion of the offerings, the Company's directors, officers and
their affiliates will beneficially own approximately 65.2% of the Company's
outstanding Common Stock. As a result, these stockholders will have the ability
to elect the Company's directors and to determine the outcome of corporate
actions requiring stockholder approval. This concentration of ownership may have
the effect of delaying or preventing a change of control of the Company. See
"Management" and "Principal and Selling Stockholders".
BENEFITS OF OFFERINGS TO SELLING STOCKHOLDERS
In connection with the offerings, the Selling Stockholders, some of whom are
officers or directors, or are affiliates of directors, of the Company, will
receive substantial benefits including significant proceeds from the offerings.
The offerings also will establish a public market for the Common Stock and
provide increased liquidity to all current stockholders for the shares of Common
Stock they will own after the offerings. Assuming an initial public offering
price of $13.00 per share after deduction of estimated underwriting discounts
and commissions, the aggregate proceeds as a result of the offerings received by
the Selling Stockholders will be approximately $10.3 million. See "Principal and
Selling Stockholders" and "Certain Transactions".
16
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the offerings, the Company will have outstanding
35,652,167 shares of Common Stock (assuming no exercise of the underwriters'
overallotment options or options to purchase the Company's Common Stock
outstanding as of July 15, 1998). Of these shares, the 7,700,000 shares sold in
the offerings will be freely tradable without restriction or further
registration under the Securities Act of 1933, as amended (the "Securities Act")
unless such shares are purchased by "affiliates" of the Company, as such term is
defined in Rule 144 under the Securities Act (which sales would be subject to
certain limitations and restrictions described below). The remaining 27,952,167
shares held by existing stockholders are "restricted shares" as that term is
defined under Rule 144 (the "Restricted Shares"). Restricted Shares may be sold
in the public market only if registered under the Securities Act or if they
qualify for an exemption from registration under Rule 144, Rule 144(k) or Rule
701 promulgated under the Securities Act. As a result of the Lock-Ups (defined
below) and the provisions of Rules 144, 144(k) and 701, the Restricted Shares
will be available for sale in the public market as follows: (i) 2,875 shares
will become eligible for sale 90 days after the date of this Prospectus under
Rule 701, (ii) 45,735 shares will become eligible for sale from time to time
between the 90th day and the 180th day after the date of this Prospectus, (iii)
25,841,891 shares will become eligible for sale upon expiration of the Lock-Ups
180 days after the date of this Prospectus, and (iv) the remaining 2,061,666
shares will become eligible for sale from time to time thereafter. In addition,
upon completion of the offerings, assuming no exercise of options outstanding as
of July 15, 1998, the Company will have outstanding options to purchase
4,313,376 shares of Common Stock. If such options are exercised when vested, as
a result of Rule 701 and the Lock-Ups, the shares underlying such options would
be available for sale in the public market as follows: (i) 785,050 shares will
become eligible for sale 90 days following the date of this Prospectus, (ii)
251,152 shares will become eligible for sale from time to time between the 90th
day and the 180th day after the date of this Prospectus, (iii) 720,666 shares
will become eligible for sale 180 days after the date of this Prospectus, and
(iv) the remaining 2,556,508 shares will become eligible for sale from time to
time thereafter. As soon as practicable after the closing of the offerings, the
Company intends to register for offer and sale under the Securities Act the
4,800,000 shares of Common Stock issued or issuable under the Company's stock
option plans.
Furthermore, after the consummation of the offerings, the holders of
approximately 25,589,750 shares of Common Stock, or their transferees, will be
entitled to certain demand and piggyback rights with respect to the registration
of such shares under the Securities Act. See "Description of Capital
Stock--Registration Rights," "Shares Eligible for Future Sale" and
"Underwriting". Sales of a substantial number of shares of Common Stock in the
public market following the offerings, or the perception that such sales could
occur, could adversely affect the market price for the Company's Common Stock.
All directors, executive officers and certain stockholders and option
holders of the Company who hold in the aggregate approximately 25,831,230 shares
of Common Stock and options to purchase an aggregate of 1,849,896 shares have
agreed, subject to certain exceptions, not to sell or otherwise dispose of any
of their shares or options for a period of 180 days after the date of this
Prospectus without the prior written consent of Goldman, Sachs & Co. (the
"Lock-Ups"). The Company has also agreed not to issue, sell or otherwise dispose
of any of its shares or grant any options (other than options granted or shares
issued in connection with the 1997 Plan and Directors Plan) during such 180-day
period. However, Goldman, Sachs & Co. may, in its sole discretion and at any
time without notice, release for public sale all or any portion of the shares
subject to such lock-up agreements. See "Underwriting."
NO PRIOR PUBLIC MARKET FOR COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the offerings, there has been no public market for the Common
Stock. Although the Company has made application for the quotation of the Common
Stock on the Nasdaq National Market, there can be no assurance that an active
trading market will develop or be sustained after the offerings. The initial
public offering price of the Common Stock offered hereby will be determined by
negotiation
17
<PAGE>
between the Company and the representatives of the U.S. Underwriters and the
International Underwriters and may bear no relationship to the market price of
the Common Stock after the offerings. The market price of the Common Stock could
be subject to significant fluctuations in response to variations in quarterly
operating results and other factors. In addition, the securities markets have
experienced significant price and volume fluctuations from time to time that
have often been unrelated or disproportionate to the operating performance of
particular companies. These broad fluctuations may adversely affect the market
price of the Common Stock. See "Underwriting".
DILUTION
The purchasers of the Common Stock offered hereby will experience immediate
and significant dilution in the pro forma net tangible book value of the Common
Stock from the initial pubic offering price. See "Dilution".
NO CASH DIVIDENDS
It is anticipated that EXE will retain any future earnings to finance the
growth and development of its business and will not pay any cash dividends in
the foreseeable future. See "Dividend Policy".
CERTAIN ANTI-TAKEOVER PROVISIONS
Upon consummation of the offerings, the Company's Certificate of
Incorporation will authorize the issuance of up to 185,000,000 shares of Common
Stock and 15,000,000 shares of Preferred Stock, $.01 par value per share (the
"Preferred Stock"). The Board of Directors will have the power to determine the
price and terms under which any such Preferred Stock may be issued and to fix
the terms thereof. The ability of the Board of Directors to issue one or more
series of Preferred Stock without shareholder approval, as well as certain
applicable statutory provisions under the Delaware General Corporation Law
("DGCL"), could deter or delay unsolicited changes in control of the Company by
discouraging open market purchases of the Common Stock or a non-negotiated
tender or exchange offer for such stock, which may be disadvantageous to the
Company's stockholders who may otherwise desire to participate in such
transaction and receive a premium for their shares.
In addition, certain provisions of the Company's By-Laws may also discourage
or make more difficult the acquisition of control of the Company by means of a
tender offer, open market purchase, proxy contest or otherwise. Those include a
Board of Directors which is divided into three classes, each of which is elected
to serve staggered three year terms, and provisions under which only the Board
or the President or the Secretary of the Company may call a special meeting of
the stockholders and which permit the Board of Directors to increase the number
of directors to fill such positions without a vote of the stockholders. These
provisions may have the effect of discouraging certain types of takeover
practices and takeover bids and to encourage persons seeking to acquire control
of the Company first to negotiate with the Company. See "Description of Capital
Stock--Delaware Anti-Takeover Law and Certain Provisions of the Certificate of
Incorporation and By-Laws".
18
<PAGE>
THE COMPANY
EXE was incorporated on July 24, 1997 in anticipation of the acquisition of
Dallas Systems by Neptune. On September 15, 1997, the Acquisition was completed
by merging Dallas Systems and Neptune into EXE, with EXE being the surviving
corporation.
The Company's headquarters are located in Dallas, Texas. The Company also
maintains U.S. operations in Eddystone, Pennsylvania and Los Angeles,
California. The Company currently has six subsidiaries: EXE Technologies, (UK)
PLC in the United Kingdom; EXE Technologies (SEA) in Singapore; EXE
Technologies, Inc. Sdn Bhd in Malaysia; EXE Technologies (China), LTD in China;
EXE Technologies-Middle East (FZE) in Dubai; and EXE Technologies KK-Japan in
Japan.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 6,850,000 shares of
Common Stock offered by the Company pursuant to the offerings are estimated to
be approximately $81.9 million (approximately $95.9 million if the Underwriters'
over-allotment options are exercised in full), assuming an initial public
offering price of $13.00 per share and after deducting estimated underwriting
discounts and estimated expenses payable by the Company in connection with the
offerings.
From the net proceeds of the offerings, the Company will repay amounts
outstanding under its existing line of credit with Wells Fargo Bank. This line
of credit has a variable borrowing base that is determined based upon the
Company's average cash flow for the previous four quarters, up to a maximum of
$13.5 million. As of June 30, 1998, the borrowing base was approximately $8.1
million, with an outstanding balance of approximately $6.69 million. The
interest rate on the line of credit, which was 8.0% per year at June 30, 1998,
is the lesser of (i) a fluctuating rate per year that is 1/2% below the prime
rate, (ii) a fixed rate per year based upon LIBOR and the ratio of the Company's
senior debt to cash flow, or (iii) the maximum rate of interest permitted by
law, and was 8.0% per year as of June 30, 1998.
The remaining net proceeds will be used for working capital and other
general corporate purposes. Such purposes may include the funding of new product
development efforts, expanding sales, marketing and research and development
personnel and possible acquisitions of, or investments in, businesses and
technologies that are complementary to those of the Company. The Company has no
specific agreements, commitments or understandings with respect to any such
acquisitions or investments. The amounts actually expended for each purpose may
vary significantly and are subject to change at the Company's discretion
depending upon certain factors, including economic or industry conditions,
changes in the competitive environment and strategic opportunities that may
arise. Pending application of the net proceeds as described above, the Company
intends to invest the net proceeds of the offerings in interest-bearing
securities. See "Risk Factors--Significant Unallocated Net Proceeds" and
"Business--Strategy".
In addition to the foregoing, the principal purposes of the offerings are to
increase the Company's equity capital and financial flexibility, create a public
market for the Common Stock, provide liquidity to existing stockholders,
facilitate future access by the Company to the public equity markets, and
enhance the Company's ability to use Common Stock for potential acquisitions and
as a means of attracting, retaining and providing incentives to employees.
DIVIDEND POLICY
Prior to February 1997, the Company had been treated as an S corporation. As
a result, it had been the Company's policy to distribute a substantial portion
of earnings to its stockholders, in part to permit them to pay income taxes
attributable to their allocable share of the Company's earnings. Distributions
to stockholders of $230,150 and $1,376,180 were paid during 1996 and 1997,
respectively.
Management anticipates that all future earnings and other cash resources of
the Company, if any, will be retained by the Company for investment in its
business. Accordingly, the Company does not intend to declare or pay cash
dividends in the foreseeable future.
19
<PAGE>
CAPITALIZATION
The following table sets forth (i) the actual long-term debt and
capitalization of the Company at March 31, 1998, (ii) such debt and
capitalization after giving pro forma effect to certain financing transactions
that occurred subsequent to March 31, 1998 as if they had been completed as of
such date and (iii) such pro forma debt and capitalization as adjusted to
reflect (a) the sale by the Company of Common Stock offered by the Company in
the offerings at an assumed initial public offering price of $13.00 per share
and the application of the net proceeds thereof and (b) the conversion of
Preferred Stock to Common Stock in connection with the offerings. See "Use of
Proceeds."
<TABLE>
<CAPTION>
MARCH 31, 1998(1)
---------------------------------------
PRO FORMA
ACTUAL PRO FORMA(2) AS ADJUSTED
---------- ------------- ------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Long-term debt, less current portion................................... $ 15 $ 15 $ --
Stockholders' equity:
Preferred Stock, $0.01 par value:
15,000,000 shares authorized, actual, pro forma, and pro forma as
adjusted; 11,337,562, 12,937,562 and -0-shares issued and
outstanding, actual, pro forma and pro forma as adjusted,
respectively..................................................... 25,000 33,000 --
Common Stock, $0.01 par value:
50,000,000 shares authorized, actual, pro forma, and pro forma as
adjusted; 16,318,254, 16,779,920 and 36,567,482 shares issued
actual, pro forma and pro forma as adjusted, respectively........ 163 168 366
Additional paid-in capital........................................... 20,207 21,767 136,435
Treasury stock at cost, 417,388 shares of Common
Stock.............................................................. (926) (926) (926)
Accumulated deficit.................................................. (22,611) (22,611) (22,611)
Deferred compensation................................................ (685) (685) (685)
Foreign currency translation adjustment.............................. (93) (93) (93)
---------- ------------- ------------
Total stockholders' equity....................................... 21,055 30,620 112,486
---------- ------------- ------------
Total capitalization........................................... $ 21,070 $ 30,635 $ 112,486
---------- ------------- ------------
---------- ------------- ------------
</TABLE>
- ------------------------
(1) Excludes 3,648,021 shares of Common Stock issuable upon the exercise of
options outstanding at March 31, 1998 at a weighted average exercise price
of $1.83 per share. See "Management--Stock Option Plans" and Note 7 of Notes
to Consolidated Financial Statements.
(2) Gives pro forma effect to the issuance subsequent to March 31, 1998 of (i)
371,666 shares of Common Stock at an issuance price of $3.00 per share, (ii)
90,000 shares of Common Stock at an issuance price of $5.00 per share and
(iii) 1,600,000 shares of Series C Preferred Stock at an issuance price of
$5.00 per share, as if such issuances had occurred as of March 31, 1998. See
Note 12 of Notes to Consolidated Financial Statements of the Company.
20
<PAGE>
DILUTION
As of March 31, 1998, the net tangible book value of the Company was
approximately $23.6 million, or $.81 per share of Common Stock after giving pro
forma effect to (i) the completion of certain financing transactions that
occurred subsequent to March 31, 1998 and (ii) the conversion of all Preferred
Stock into Common Stock as if such financings and conversion had taken place as
of March 31, 1998). Net tangible book value per share represents the amount of
the Company's total tangible assets less total liabilities, divided by the
number of shares of Common Stock outstanding after giving effect to the
financings and the conversion of Preferred Stock as described above. After
giving effect to the sale by the Company of the 6,850,000 shares of Common Stock
in the offerings at an assumed initial public offering price of $13.00 per share
and the application of the estimated net proceeds therefrom, after deducting the
estimated underwriting discount and estimated offering expenses, the pro forma
net tangible book value of the Company at March 31, 1998 would have been
approximately $105.5 million, or $2.92 per share of Common Stock. This
represents an immediate increase in net tangible book value of $2.11 per share
to existing stockholders and an immediate decrease in net tangible book value of
$10.08 per share to new investors. The following table illustrates this
unaudited per share dilution to new investors:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.......................... $ 13.00
Pro forma net tangible book value per share as of March 31, 1998....... $ .81
Increase in net tangible book value per share attributable to new
investors............................................................ 2.11
---------
Pro forma net tangible book value per share as of March 31, 1998 after
the offerings.......................................................... 2.92
---------
Dilution per share to new investors...................................... $ 10.08
---------
---------
</TABLE>
The following table sets forth, as of March 31, 1998, the number of shares
of Common Stock previously issued by the Company (after giving pro forma effect
to (i) the completion of certain financing transactions that occurred subsequent
to March 31, 1998 and (ii) the conversion of all Preferred Stock into Common
Stock as if such financings and conversion had taken place as of March 31,
1998), the total consideration reflected in the accounts of the Company and the
average price per share to the existing stockholders and new investors, assuming
the sale by the Company of 6,850,000 shares of Common Stock at an assumed
initial public offering price of $13.00 per share, and before deducting the
estimated underwriting discounts and estimated offering expenses:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------------- ----------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------------- ----------- ---------------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1).......................... 29,300,094 81.1% $ 43,890,838 33.0% $ 1.50
New investors(1).................................. 6,850,000 18.9 89,050,000 67.0 13.00
------------- ----- ---------------- -----
Total........................................... 36,150,094 100.0% $ 132,940,838 100.0%
------------- ----- ---------------- -----
------------- ----- ---------------- -----
</TABLE>
- ------------------------
(1) Sales by Selling Stockholders will reduce the number of shares of Common
Stock held by existing stockholders to 28,450,094 shares, or approximately
78.7% of the total Common Stock outstanding after the offerings, and will
increase the number of shares held by new investors to 7,700,000 shares, or
21.3% of the total Common Stock outstanding after the offerings.
Assuming full exercise of the Underwriters' over-allotment option, the
percentage of shares held by existing stockholders would be 76.3% of the total
number of shares of Common Stock to be outstanding after the offerings, and the
number of shares held by new stockholders would be increased to 8,855,000
shares, or 23.7% of the total number of shares of Common Stock to be outstanding
after the offerings. See "Principal and Selling Stockholders".
The calculation of net tangible book value and the other computations above
assume no exercise of outstanding options. As of March 31, 1998, there were
options outstanding to acquire 3,648,021 shares at exercise prices ranging from
$0.75 to $2.30 per share at a weighted average exercise price of $1.83 per
share. The exercise of these options will cause further dilution to investors in
the offerings. See "Capitalization".
21
<PAGE>
THE COMPANY
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated financial data of the
Company as of and for the five years ended December 31, 1997, and as of and for
the three-month periods ended March 31, 1997 and 1998. The selected consolidated
financial data of the Company should be read in conjunction with the
consolidated financial statements and the notes thereto and the Company's
Management's Discussion and Analysis of Financial Condition and Results of
Operations included elsewhere herein. The selected financial data for the
Company as of and for the year ended December 31, 1997 has been derived from the
consolidated financial statements of the Company included elsewhere in this
Prospectus which have been audited by Ernst & Young LLP, independent auditors.
The statement of operations data for the Company for the years ended December
31, 1995 and 1996, and the balance sheet data at December 31, 1996, have been
derived from the consolidated financial statements of the Company included
elsewhere in this Prospectus which have been audited by PricewaterhouseCoopers
LLP, independent accountants. The balance sheet data at December 31, 1994 and
1995 have been derived from the consolidated financial statements of the Company
not included herein which have been audited by PricewaterhouseCoopers LLP,
independent accountants. The statements of operations data for the years ended
December 31, 1993 and 1994 and three-months ended March 31, 1997 and 1998 and
the balance sheet data at December 31, 1993 and March 31, 1998, have been
derived from the unaudited consolidated financial statements of the Company. The
unaudited interim consolidated financial statements of the Company reflect all
adjustments (consisting only of normal recurring adjustments) which, in the
opinion of the Company's management, are necessary for a fair presentation of
the results for the interim periods presented. Operating results for the
three-month period ended March 31, 1998 are not necessarily indicative of the
results that may be expected for the entire year ending December 31, 1998.
22
<PAGE>
THE COMPANY
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED
------------------------------------------------------ MARCH 31,
1997 PRO ---------------
1993 1994 1995 1996 1997(1) FORMA(2) 1997 1998
------ ------ ------ ------ -------- ------------ ------ -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenues:
Software licenses..................................... $ 436 $1,060 $1,085 $4,326 $ 8,429 $11,467 $1,232 $ 7,146
Services and maintenance.............................. 435 895 1,431 3,390 12,781 34,898 751 12,302
Resale software and equipment......................... -- 108 252 698 5,562 13,510 140 1,157
------ ------ ------ ------ -------- ------------ ------ -------
Total revenues...................................... 871 2,063 2,768 8,414 26,772 59,875 2,123 20,605
------ ------ ------ ------ -------- ------------ ------ -------
Cost and expenses:
Cost of software licenses............................. -- -- -- 206 749 749 65 72
Cost of services and maintenance...................... 366 725 989 2,146 9,967 26,931 458 9,266
Cost of resale software and equipment................. -- 98 193 608 4,129 9,797 134 819
Sales and marketing................................... 236 460 555 1,258 6,721 9,685 530 4,425
Research and development.............................. -- -- -- 600 3,534 7,351 392 3,149
General and administrative............................ 270 540 589 2,219 4,263 6,836 623 2,234
Amortization of intangibles........................... -- -- -- -- 588 1,693 -- 396
Write-off of in-process research and development...... -- -- -- -- 19,700 -- -- --
------ ------ ------ ------ -------- ------------ ------ -------
Total costs and expenses............................ 872 1,823 2,326 7,037 49,651 63,042 2,202 20,361
------ ------ ------ ------ -------- ------------ ------ -------
Operating income (loss)................................. (1) 240 442 1,377 (22,879) (3,167) (79) 244
Other income (expense).................................. 4 (65) (11) (22) (208) (2) (4) 75
------ ------ ------ ------ -------- ------------ ------ -------
Income (loss) before minority interest and taxes........ 3 175 431 1,355 (23,087) (3,169) (83) 319
Minority interest in subsidiary loss (income)........... -- -- -- 94 76 76 (12) 36
------ ------ ------ ------ -------- ------------ ------ -------
Income (loss) before income taxes and pro forma income
taxes(3).............................................. 3 175 431 1,449 (23,011) (3,093) (95) 355
Provision (benefit) for income taxes and pro forma
income taxes(3)....................................... 1 64 157 609 (225) (227) (23) 180
------ ------ ------ ------ -------- ------------ ------ -------
Net income (loss)....................................... $ 2 $ 111 $ 274 $ 840 $(22,786) $(2,866) $ (72) $ 175
------ ------ ------ ------ -------- ------------ ------ -------
------ ------ ------ ------ -------- ------------ ------ -------
Net income (loss) per share(3).......................... $ 0.00 $ 0.01 $ 0.03 $ 0.10 $ (2.03) $ (0.26) $(0.01) $ 0.01
------ ------ ------ ------ -------- ------------ ------ -------
------ ------ ------ ------ -------- ------------ ------ -------
Net income (loss) per share--assuming dilution(3)....... $ 0.00 $ 0.01 $ 0.03 $ 0.10 $ (2.03) $ (0.26) $(0.01) $ 0.01
------ ------ ------ ------ -------- ------------ ------ -------
------ ------ ------ ------ -------- ------------ ------ -------
Shares used in computing net income (loss) per
share(4).............................................. 8,500 8,500 8,500 8,500 11,228 11,228 8,667 15,993
Shares used in computing net income (loss) per
share--assuming dilution(4)........................... 8,500 8,500 8,500 8,500 11,228 11,228 8,667 27,964
CONSOLIDATED BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents............................... $ 34 $ 93 $ 569 $1,804 $ 6,653 $1,656 $ 2,164
Working capital......................................... 771 726 740 1,518 12,039 2,560 9,725
Total assets............................................ 792 1,033 2,234 5,208 40,249 6,105 36,896
Long-term debt (less current portion)................... 500 500 500 590 17 573 15
Stockholders' equity.................................... 287 385 816 2,034 21,607 3,157 21,055
</TABLE>
- ------------------------------
(1) EXE commenced operations on September 15, 1997, following the Acquisition,
which was accounted for as a purchase of Dallas Systems by Neptune. As such,
the historical financial statements of Neptune are presented as the
historical financial statements of the Company. The assets and liabilities
of Dallas Systems were recorded at fair value at the date of the
Acquisition. Included in the 1997 consolidated results of operations is a
write-off of in-process research and development of $19.7 million at the
date of acquisition. The financial statements of the Company for the periods
presented are not strictly comparable due to the significant impact the
Acquisition had on the 1997 statements.
(2) Pro forma information for the Company reflects the Acquisition as if it had
taken place on January 1, 1997. This information is unaudited and does not
purport to represent the actual operating results had the Acquisition taken
place January 1, 1997, nor does it purport to be indicative of the results
that would be obtained in the future. See "Selected Unaudited Pro Forma
Financial Information".
(3) Effective February 1, 1997, Neptune changed its taxable status from an S
Corporation to a C Corporation. Accordingly, the consolidated statements of
operations data for the periods prior to February 1, 1997 reflect a pro
forma tax provision by applying the anticipated statutory tax rate to
historical pre tax income (loss), adjusted for permanent tax difference. Net
income (loss) and net income (loss) per share--assuming dilution for periods
prior to December 31, 1997 give effect to the pro forma tax provision.
(4) See Note 13 of Notes to Consolidated Financial Statements of the Company for
the determination of shares used in computing basic and diluted net income
per share.
23
<PAGE>
THE COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE COMPANY
SELECTED CONSOLIDATED FINANCIAL DATA AND THE DALLAS SYSTEMS SELECTED
CONSOLIDATED FINANCIAL DATA, DALLAS SYSTEMS' MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, THE COMPANY SELECTED
UNAUDITED PRO FORMA FINANCIAL INFORMATION AND THE FINANCIAL STATEMENTS OF THE
COMPANY AND OF DALLAS SYSTEMS AND NOTES THERETO INCLUDED ELSEWHERE IN THIS
PROSPECTUS. CERTAIN STATEMENTS IN THIS "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS" ARE FORWARD-LOOKING STATEMENTS
THAT ENTAIL VARIOUS RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD
DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THE FORWARD-LOOKING STATEMENTS AS A
RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET FORTH IN THIS SECTION AS WELL AS
THOSE DISCUSSED UNDER THE CAPTION "RISK FACTORS" AND ELSEWHERE IN THIS
PROSPECTUS.
OVERVIEW
EXE is a leading provider of supply chain execution software. Supply chain
execution encompasses ordering, transporting, handling, storing and delivering
inventory as it moves through the supply chain from manufacturer to the point of
sale. The Company's software solution, EXceed, allows businesses to optimize the
operations of warehouses, distribution centers and other supply chain nodes and
to enhance the tracking and logistical control of inventory through the supply
chain. Combining elements of traditional warehouse, transportation and order
management systems, EXceed is designed to provide companies with an
enterprise-wide view of inventory regardless of its handling state or location.
By enabling better visibility and logistical control over inventory through the
supply chain, EXceed allows businesses to improve inventory turnover, reduce
carrying costs and more efficiently satisfy customer demand by delivering the
right product to the right place at the right time. In addition, EXceed is
designed to enable businesses to reduce operating costs through more efficient
management of labor, materials and other resources within warehouses and
distribution centers.
The Company commenced operations following the acquisition of Dallas Systems
by Neptune on September 15, 1997. For accounting purposes, the Acquisition was
accounted for as a purchase of Dallas Systems by Neptune. Pursuant to the
purchase method of accounting, the historical financial statements of the
Company exclude the assets and liabilities, results of operation and cash flows
of Dallas Systems for all periods ending at or prior to the date of the
Acquisition. The assets and liabilities of Dallas Systems were recorded at their
fair values at the Acquisition date. The fair value of Dallas Systems' research
and development efforts that had not reached final technological feasibility as
of the date of the Acquisition was determined by appraisal to be $19.7 million,
and was expensed at the date of the Acquisition.
Prior to the Acquisition, Neptune was focused on delivering packaged supply
chain execution software solutions capable of rapid deployment while Dallas
Systems' business model involved the development and sale of complex supply
chain execution software. In connection with its software, Dallas Systems
provided extensive implementation and consulting services. A primary goal of the
Acquisition was to combine Dallas Systems' distribution strength, large
installed base and expertise in mainframe and UNIX systems with Neptune's higher
margin, software license-based model, while at the same time leveraging
Neptune's Windows NT expertise and rapid deployment capabilities. In addition,
the Acquisition provided international market leverage through the companies'
complementary strengths in Europe and Asia, and vertical market leverage,
primarily in the grocery, retail/wholesale and 3PL markets.
The combination of the businesses of Neptune and Dallas Systems
substantially increased the Company's total revenues in the first three months
of 1998 as compared to the same period in 1997, and
24
<PAGE>
contributed to the increase in total revenues in 1997 as compared to 1996. The
Company realized a reduction in its overall gross margin as a result of the
Acquisition, primarily due to the historically lower gross margins realized by
Dallas Systems relative to Neptune. There can be no assurance that the Company's
revenues will increase at historical or current rates or that gross margins will
be maintained in future periods.
While both Neptune and Dallas Systems had traditionally maintained
relatively small and decentralized sales and marketing organizations, the
Company has integrated and begun to substantially expand these functions and, at
the same time, to rapidly expand its professional services staff to service the
anticipated growth in software license sales. As a result of these activities,
the Company has experienced increases in sales and marketing expenses and costs
of services and maintenance post-Acquisition. The Company expects to continue to
increase its sales and marketing and professional services personnel and to
incur additional associated costs in the foreseeable future.
The sales cycle for the Company's products is typically three to nine
months, and is subject to delays over which the Company may have little or no
control. As the Company generally seeks to ship software shortly after receipt
of orders, the Company's license revenues for a particular quarter are
significantly impacted by orders received in that quarter. Furthermore, the
Company has experienced, and expects to continue to experience, significant
variation in the size of individual sales. Accordingly, any delay in the receipt
of orders, particularly significant orders, can have a material adverse effect
upon the Company's results of operations in a particular quarter. As a result of
these and other factors, the Company's quarterly results have varied
significantly in the past and are likely to be subject to significant
fluctuation in the future. In addition, the Company has experienced, and is
expected to continue to experience, seasonality in its business, particularly as
it relates to the timing of license revenues, with a disproportionately greater
amount of the Company's revenues for any fiscal year being recognized in its
fourth quarter and a disproportionately lesser amount thereof being recognized
in third quarter. For the foregoing reasons, the Company believes that
quarter-to-quarter comparisons of its results of operations subsequent to the
Acquisition are not necessarily indicative of the results to be expected for any
future period and, more specifically, that the results of operations for the
quarter ended March 31, 1998 are not indicative of the results that may be
achieved in 1998 as a whole. See "Risk Factors--Potential Variability of
Quarterly Operations and Financial Results; Seasonality" and "--Lengthy and
Variable Sales Cycles.
The Company recorded deferred compensation expense of $811,210 for the
difference between the grant price and the deemed fair market value of certain
of the Company's common stock options granted during the three months ended
March 31, 1998. This amount is being amortized ratably over the vesting period
of the individual options, generally three to four years. Compensation expense
recognized in the three months ended March 31, 1998 totaled $125,950 and at
March 31, 1998 deferred compensation totaled $685,260.
25
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth certain operating data as a percentage of
total revenue for the years indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
YEAR ENDED DECEMBER 31, YEAR ENDED 31,
------------------------------------- DECEMBER 31, ------------------------
1995 1996 1997 1997 PRO FORMA 1997 1998
----------- ----------- ----------- --------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
AS A PERCENTAGE OF TOTAL REVENUES:
Revenues:
Software licenses.................... 39.2% 51.4% 31.5% 19.1% 58.0% 34.7%
Services and maintenance............. 51.7 40.3 47.7 58.3 35.4 59.7
Resale software and equipment........ 9.1 8.3 20.8 22.6 6.6 5.6
----------- ----------- ----------- ------ ----------- -----------
Total revenues..................... 100.0 100.0 100.0 100.0 100.0 100.0
----------- ----------- ----------- ------ ----------- -----------
Costs and expenses:
Cost of software licenses............ -- 2.4 2.8 1.2 3.0 0.3
Cost of services and maintenance..... 35.7 25.5 37.2 45.0 21.6 45.0
Cost of resale software and
equipment.......................... 7.0 7.2 15.4 16.4 6.3 4.0
Sales and marketing.................. 20.0 15.0 25.1 16.2 25.0 21.5
Research and development............. -- 7.1 13.2 12.3 18.5 15.3
General and administrative........... 21.3 26.4 15.9 11.4 29.3 10.8
Amortization of intangibles.......... -- -- 2.2 2.8 -- 1.9
Write-off of in-process research and
development........................ -- -- 73.6 -- -- --
----------- ----------- ----------- ------ ----------- -----------
Total costs and expenses........... 84.0 83.6 185.4 105.3 103.7 98.8
----------- ----------- ----------- ------ ----------- -----------
Operating income (loss)................ 16.0 16.4 (85.4) (5.3) (3.7) 1.2
Other income (expense)................. (0.4) (0.3) (0.8) 0.0 (0.2) 0.4
----------- ----------- ----------- ------ ----------- -----------
Income (loss) before minority interest
and taxes............................ 15.6 16.1 (86.2) (5.3) (3.9) 1.6
Minority interest in subsidiary loss
(income)............................. -- 1.1 0.3 0.1 (0.6) 0.1
----------- ----------- ----------- ------ ----------- -----------
Income (loss) before income taxes and
pro forma income taxes............... 15.6 17.2 (85.9) (5.2) (4.5) 1.7
Provision (benefit) for income taxes
and pro forma income taxes........... 5.7 7.2 (0.8) (0.4) (1.1) 0.9
----------- ----------- ----------- ------ ----------- -----------
Net income (loss)...................... 9.9% 10.0% (85.1)% (4.8)% (3.4)% 0.8%
----------- ----------- ----------- ------ ----------- -----------
----------- ----------- ----------- ------ ----------- -----------
</TABLE>
The following table sets forth the cost of each component of revenues as a
percentage of the corresponding component of revenues:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Software licenses............... --% 4.8% 8.9% 6.5% 5.3% 1.0%
Services and maintenance........ 69.1 63.3 78.0 77.2 61.0 75.3
Resale software and equipment... 76.6 87.1 74.2 72.5 95.7 70.8
</TABLE>
THREE MONTHS ENDED MARCH 31, 1997 AND 1998
REVENUES
The Company's revenues consist of: revenues from the licensing of software
products; fees derived from implementation, training and maintenance services;
and revenues generated from the resale of
26
<PAGE>
database software and computer equipment. Revenues increased 870.6% from $2.1
million in the quarter ended March 31, 1997 to $20.6 million in the quarter
ended March 31, 1998. This increase was primarily the result of the acquisition
of Dallas Systems' large base of service, maintenance and resale revenues. In
addition, the Company was able to recognize higher unit prices for, and an
increase in sales of, its packaged applications software. The Company also
introduced a price increase for all professional services in the first quarter
of 1998. As a percentage of total revenues, software license, service and
maintenance, and resale revenues represented 58.0%, 35.4% and 6.6% in the first
quarter of 1997, compared to 34.7%, 59.7% and 5.6% in the first quarter of 1998.
The Company expects software license revenues to become an increasingly larger
proportion of total revenues over time as the Company continues its shift toward
a packaged software licensing model. The Company further expects revenues from
the resale of software and equipment to remain relatively constant as a
percentage of total revenues in future periods with the level achieved in the
first quarter of 1998.
SOFTWARE LICENSE REVENUES. Software license revenues are derived from
licensing the Company's packaged software to customers. Software license
revenues increased 480% from $1.2 million in the first quarter of 1997 to $7.1
million in the first quarter of 1998. The increase in software license revenues
was primarily a result of an increased number of licenses of Windows NT-based
products, and to a lesser extent, mainframe and UNIX-based products sold, and
higher average transaction sizes in the first quarter of 1998. The increase in
licenses sold resulted primarily from the substantially greater number of active
sales and marketing personnel during the first quarter of 1998, both as a result
of combining the Dallas Systems and Neptune sales and marketing forces and
additional post-Acquisition hiring, as well as increased levels of sales and
marketing activities conducted since the Acquisition. In addition, the Company
believes that it is benefitting from continued growth in the demand for supply
chain execution solutions, and growing acceptance of the Company's EXceed
product line. Software license revenues represented 34.7% of total revenues for
the first quarter of 1998, compared to 58.0% of total revenues for the first
quarter of 1997, due to the inclusion of Dallas Systems' larger base of service
and maintenance revenues.
Software license revenues for periods subsequent to December 31, 1997 are
recognized in accordance with the American Institute of Certified Public
Accountants' Statement of Position ("SOP") 97-2, "Software Revenue Recognition."
Under SOP 97-2, software license revenues are recognized upon execution of a
contract and delivery of software, provided that the license fee is fixed and
determinable, no significant production, modification or customization of the
software is required and collection is considered probable by management. For
periods prior to December 31, 1997, software license revenues were recognized in
accordance with SOP 91-1, "Software Revenue Recognition." Under SOP 91-1,
software license revenues were recognized upon execution of a contract and
shipment of the software, and after any customer cancellation right had expired,
provided that no significant vendor obligations remained outstanding, amounts
were due within one year and collection was considered probable by management.
The application of SOP 97-2 did not have a material impact on the Company's
consolidated financial statements for the quarter ended March 31, 1998. As the
practice under SOP 97-2 is relatively new, and many practical questions
regarding its application remain unresolved, there can be no assurance that the
application of SOP 97-2 will not have a material impact upon the Company's
revenue recognition in the future.
SERVICE AND MAINTENANCE REVENUES. Service revenues are primarily derived
from fees for implementation, consulting and training services, and are
recognized as the services are performed. Maintenance revenues are derived from
customer support agreements generally entered into in connection with initial
license sales and subsequent renewals, and are recognized ratably over the term
of the maintenance period, which is typically one year. Payments for maintenance
fees are generally made in advance. Service and maintenance revenues increased
from $751,000 in the first quarter of 1997 to $12.3 million in the first quarter
of 1998. The increase was due to the acquisition of Dallas Systems and
27
<PAGE>
its significant base of professional services revenues, together with increased
demand for these services, which in part resulted from increased sales of the
Company's products. In addition, service and maintenance revenues in the first
quarter of 1998 benefitted from higher billing rates for professional services
introduced by the Company in the fourth quarter of 1997. Service and maintenance
revenues represented 59.7% of total revenues for the first quarter of 1998,
compared to 35.4% in the prior year period due to the inclusion of Dallas
Systems' revenues, which generally consisted of a higher percentage of service
and maintenance revenues as a percentage of total revenues as compared to
Neptune's revenues. While the Company is continuing to expand its service
organization and seeks to have service revenues increase in absolute amount in
future periods, the Company's goal is to decrease the percentage of total
revenues attributable to services and maintenance as it continues to focus on
selling packaged software applications.
RESALE SOFTWARE AND EQUIPMENT REVENUES. Resale software and equipment
revenues are generated from the resale of a variety of third-party software and
hardware products that are integrated with the Company's software solution at
the customer's request. These products include relational database software,
computer hardware and radio frequency-based equipment. Resale software and
equipment revenues are recognized upon shipment. The Company generally purchases
software and equipment from its vendors only after receiving an order from a
customer. As a result, the Company generally does not maintain a significant
inventory of third-party products. Revenues from resale of software and
equipment increased 726% from $140,000 in the first quarter of 1997 to $1.2
million in the first quarter of 1998. The increase in revenues from the resale
of software and equipment was principally due to the overall increase in sales
of EXceed products and the acquisition of Dallas Systems, which had a larger
base of customers that make periodic database software and computer equipment
purchases. Resale of software and equipment revenues as a percentage of total
revenues decreased to 5.6% in the first quarter of 1998 from 6.6% in the prior
year period as a result of the increase in total revenues in the first quarter
of 1998. While the Company is able to obtain discounts from its suppliers' list
prices and resell software and equipment at a modest profit, the Company resells
third-party software and equipment primarily as an accommodation to its
customers, and does not view this activity as a core business opportunity for
the Company. The Company expects revenues from the resale of software and
equipment to remain constant as a percentage of total revenues in future
periods.
COST OF REVENUES
COST OF SOFTWARE LICENSES. Cost of software licenses consists primarily of:
(i) the cost of royalties associated with tools used to develop the Company's
software products; (ii) the cost of user documentation; (iii) the cost of
reproduction and delivery of the software; and (iv) the amortization of
capitalized software. Cost of software licenses represented 1.0% of software
license revenues for the first quarter of 1998, down from 5.3% of such revenues
in the prior year period. The decrease in the cost of software licenses as a
percentage of software license revenues was primarily the result of the
write-off of certain previously capitalized software development costs related
to products that had diminished in value to the ongoing operations of the
Company. The Company currently expenses software development costs as such costs
are incurred. The Company expects the cost of software licenses as a percentage
of software license revenues to remain below 3% in future periods.
COST OF SERVICES AND MAINTENANCE. Cost of services and maintenance consists
primarily of salaries of professional staff and costs associated with
implementation, consulting and training services. Cost of services and
maintenance also includes the cost of providing software maintenance to
customers such as hotline telephone support, new releases of software and
updated user documentation. Cost of services and maintenance represented 75.3%
of the related revenues for the first quarter of 1998, up from 61.0% of such
revenues in the prior year period. The increase in the cost of services and
maintenance as a percentage of the related revenues was due to the acquisition
of Dallas Systems, which added significant services revenues at margins that
were lower than Neptune's traditional margins on
28
<PAGE>
services revenues. This lower margin on Dallas Systems' services and maintenance
revenues is attributable to the larger project size of the typical Dallas
Systems services contract and the multi-layered services delivery structure that
was present at Dallas Systems. The Company's goal is to reduce the cost of
services and maintenance as a percentage of the related revenues by streamlining
and increasing the efficiency of the Company's services and maintenance
organization.
COST OF RESALE SOFTWARE AND EQUIPMENT. Cost of resale software and
equipment revenues consists of costs related to the purchase of software and
equipment that the Company resells to its customers. Cost of resale software and
equipment represented 70.8% of related revenues in the first quarter of 1998,
down from 95.7% of such revenues in the prior year period. The decrease in the
cost of resale software and equipment revenues as a percentage of the related
revenues in the first quarter of 1998 was due to the higher volume of reselling
activities and a resulting increased ability to obtain better pricing from the
Company's suppliers of such software and equipment. The Company expects the cost
of resale software and equipment revenues as a percentage of the related
revenues to be comparable to the level achieved in the first quarter of 1998.
OPERATING EXPENSES
SALES AND MARKETING. Sales and marketing expenses include salaries and
other personnel-related costs, sales commissions, travel expenses, advertising
programs and other promotional activities. Sales and marketing expenses were
$530,000, or 25.0% of total revenues, in the first quarter of 1997, and $4.4
million, or 21.5% of total revenues, for the first quarter of 1998. The increase
in the absolute amount of sales and marketing expenses is due to (i) increased
hiring of sales and marketing personnel, (ii) increased sales commissions as a
result of significantly higher revenues, and (iii) increased marketing and
promotional activities. The decrease in sales and marketing expenses as a
percentage of total revenues is a result of greater sales and marketing
efficiencies realized since the Acquisition. The Company plans to continue to
invest significantly in expanding its sales and marketing organization worldwide
in order to grow software license sales. As a result, the Company expects sales
and marketing expenses to continue to increase in absolute amount, and to
fluctuate somewhat as a percentage of total revenues, in future periods.
RESEARCH AND DEVELOPMENT. Research and development expenses principally
consist of salaries and other personnel-related costs for the Company's product
development activities. Research and development expenses were $392,000, or
18.5% of total revenues, in the first quarter of 1997 and $3.1 million, or 15.3%
of total revenues, in the first quarter of 1998. The increase in research and
development expenses in the first quarter of 1998 in absolute amount resulted
from the addition of research and development personnel primarily as a result of
the Acquisition.
Subsequent to the Acquisition, the Company has spent, and expects to
continue to spend, significant amounts to harmonize the mainframe and UNIX
elements of the EXceed product line obtained from Dallas Systems with the
Windows NT elements of the EXceed product line contributed by Neptune. In
addition, the Company intends to continue to add features and functionality to
the EXceed products running on all platforms in order to remain competitive.
Accordingly, the Company intends to invest increasing amounts in research and
development activities, and expects such expenses to fluctuate as a percentage
of total revenues in future periods.
In accordance with SFAS 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. During 1997 and 1998, the establishment of
technological feasibility of the Company's products and general release of such
software have substantially coincided. As a result, software development costs
qualifying for capitalization have been insignificant and, therefore, the
Company has expensed all software development costs.
29
<PAGE>
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of salaries and other personnel-related costs of the finance, human
resources, information systems, administrative and executive departments of the
Company, insurance costs and the fees and expenses associated with legal,
accounting and other administrative services. General and administrative
expenses were $623,000, or 29.3% of total revenues, for the first quarter of
1997 and $2.2 million, or 10.8% of total revenues, in the first quarter of 1998.
The increase in the absolute amount of general and administrative expenses was
primarily the result of increased staffing and related costs associated with the
growth of the Company's business following the Acquisition. The decrease in
these expenses as a percentage of total revenues was primarily due to the
substantial increase in total revenues and the Company's ability to leverage its
base of resources to support a larger organization. The Company expects that the
absolute amount of general and administrative expenses will continue to increase
in the foreseeable future, in part as a result of the additional expenses
associated with operating as a public company, and that these expenses will
decline somewhat as a percentage of total revenues from the level experienced in
the first quarter of 1998.
AMORTIZATION OF INTANGIBLES. In connection with the Acquisition, the
Company recorded intangible assets as follows: $3.7 million of purchased
technology; $1.4 million attributed to an in-place work force; $1.8 million to
the purchased customer base; and $1.1 million to goodwill. The intangible
assets, excluding the assembled work force and goodwill, are being amortized
over six years based upon the associated estimated revenue stream noted in the
appraisal analysis. The assembled work force and goodwill are being amortized on
a straight-line basis over three and six year periods, respectively.
Amortization of intangibles resulted in an expense of $396,000, or 1.9% of total
revenues, in the first quarter of 1998.
OTHER INCOME (EXPENSE)
Other income (expense) consists of interest income on short-term
investments, offset by interest expense on outstanding debt, and foreign
currency gains and losses realized. Other income (expense) was $(4,000) in the
first quarter of 1997 and $75,000 in the first quarter of 1998. The improvement
in other income was primarily a result of the equity financing obtained by the
Company in connection with the Acquisition, which resulted in the Company going
from a net borrowing position in the first quarter of 1997 to having cash
balances on deposit in the first quarter of 1998. The Company expects other
income to increase after the offerings as a result of the application of a
portion of the offering proceeds to retiring outstanding indebtedness of the
Company and interest income on excess offering proceeds.
MINORITY INTEREST IN SUBSIDIARY GAINS AND LOSSES
In 1996, the Company and a third party formed a joint venture to provide
supply chain execution licenses and related services in Asia. The Company owns a
majority of the joint venture. The minority interest in subsidiary reflects the
minority partner's share of the gains and losses of the joint venture, and were
immaterial in both periods. In July 1998, the Company negotiated an agreement
with its joint venture partner to purchase the partner's interest in the joint
venture at a price equal to the joint venture partner's investment in the joint
venture, which is expected to close in July or August 1998. As a result, the
financial results of the former joint venture will thereafter be fully
consolidated with those of the Company and its other subsidiaries, and there
will be no further minority interest in such results.
INCOME TAXES
The Company recorded a federal income tax benefit of $23,000 for the three
months ended March 31, 1997 and federal income tax expense of $180,000 for the
three months ended March 31, 1998. The amounts recorded differ from amounts
computed at the statutory rate primarily as a result of the impact of state
taxes.
30
<PAGE>
YEARS ENDED DECEMBER 31, 1995, 1996, AND 1997
REVENUES
Total revenues increased 204.0% from $2.8 million in 1995 to $8.4 million in
1996 and 218.2% to $26.8 million in 1997. The increase in 1996 over 1995 was
primarily the result of the initial sales of Neptune's object-oriented, Windows
NT-based software product which was released in 1996. The increase in 1997 over
1996 was primarily the result of services and maintenance as well as resale
software and equipment revenues contributed by the Dallas Systems' operations
following the Acquisition in September 1997, combined with several significant
license sales during the fourth quarter.
SOFTWARE LICENSE REVENUES. Software license revenues increased 298.7% from
$1.1 million in 1995 to $4.3 million in 1996 and 94.8% to $8.4 million in 1997.
Software license revenues represented 39.2%, 51.4% and 31.5% of total revenues
in 1995, 1996 and 1997, respectively. The increase in software license revenues
in 1996 was primarily the result of the market acceptance of and initial sales
of Neptune's object-oriented, Windows NT-based software product which was
released in that year. The increase in the amount of software license revenues
in 1997 was primarily the result of: (i) several large contracts entered into in
the fourth quarter; (ii) significant sales and marketing activities associated
with the announcement of the Acquisition; (iii) the continued strong market
demand for supply chain execution software; and (iv) a combination of an
increase in the size of the Company's sales and marketing staff, particularly
following the Acquisition, and a more focused selling effort in the Company's
primary market sectors. The decrease in software license revenues as a
percentage of total revenues was due to the significant services and maintenance
revenues contributed by Dallas Systems.
SERVICES AND MAINTENANCE REVENUES. Services and maintenance revenues
increased 136.9% from $1.4 million in 1995 to $3.4 million in 1996 and 277.0% to
$12.8 million in 1997. Service and maintenance revenues represented 51.7%, 40.3%
and 47.7% of total revenues in 1995, 1996 and 1997, respectively. The increase
in 1996 was primarily due to increased demand for installation and
implementation services associated with Neptune's object-oriented, Windows
NT-based software product, which was released in 1996. The increase in services
and maintenance revenues in 1997 was principally due to the inclusion of Dallas
Systems, which added significant capacity in the form of billable professional
services personnel to meet the increased demand for services resulting from the
increased sales of the Company's software products.
RESALE SOFTWARE AND EQUIPMENT REVENUES. Resale software and equipment
revenues increased 177% from $252,000 in 1995 to $698,000 in 1996 and 696.8% to
$5.6 million in 1997. Resale software and equipment revenues represented 9.1%,
8.3% and 20.8% of total revenues in 1995, 1996 and 1997, respectively. The
increase in 1996 over 1995 was due to higher levels of sales of radio frequency
computer equipment to both previous and new customers of the Company's software.
The increase in resale software and equipment revenues in 1997 was principally
due to the acquisition of Dallas Systems, which generally had a higher level of
reselling activity than did Neptune.
COST OF REVENUES
COST OF SOFTWARE LICENSES. Cost of software license revenues represented
4.8% and 8.9% of the related revenues in 1996 and 1997, respectively. The cost
of software license revenues in 1995 was immaterial. The increase in the cost of
software license revenues as a percentage of the related revenues in 1997 was
primarily the result of the write-off of previously capitalized software
development costs of $223,000 related to certain Neptune products that had
diminished value to the ongoing operations of the Company as a result of the
Acquisition.
31
<PAGE>
COST OF SERVICES AND MAINTENANCE. Cost of services and maintenance revenues
represented 69.1%, 63.3% and 78.0% of the related revenues in 1995, 1996 and
1997, respectively. The decrease in cost of services and maintenance revenues as
a percentage of the related revenues in 1996 was due to the Company's personnel
gaining experience and becoming more efficient at deploying its products. The
increase in the cost of services and maintenance revenues as a percentage of the
related revenues in 1997 was due to the acquisition of Dallas Systems, which
added significant services revenues at margins that were lower than Neptune's
traditional margins on services revenues.
COST OF RESALE SOFTWARE AND EQUIPMENT. Cost of resale software and
equipment resale revenues represented 76.6%, 87.1% and 74.2% of the related
revenue in 1995, 1996 and 1997, respectively. The increase in such costs as a
percentage of the related revenues in 1996 compared to 1995 was a result of the
higher handling and administrative costs associated with the higher level of
resale activity in 1996 without commensurate pricing advantages. The decrease in
the cost of resale software and equipment revenues as a percentage of the
related revenues in 1997 was due to the higher volume of reselling activities
and the resulting increased ability to obtain better pricing from the Company's
suppliers of such software and equipment.
OPERATING EXPENSES
SALES AND MARKETING. Sales and marketing expenses were $555,000, or 20.0%
of total revenues, in 1995; $1.3 million, or 15.0% of total revenues, in 1996;
and $6.7 million, or 25.1% of total revenues, in 1997. The increase in sales and
marketing expenses in 1996 was a result of higher levels of sales and marketing
staff and activities than were experienced in the prior year. The decrease in
these expenses as a percentage of total revenues in 1996 represents increased
leverage as the Company's revenues grew significantly during 1996 over 1995. The
increase in sales and marketing expense in both absolute amount and as a
percentage of total revenues in 1997 was primarily attributable to: (i) a larger
sales and marketing staff, (ii) increased sales commissions as a result of
significantly higher revenues, and (iii) increased marketing and promotional
activities, particularly in conjunction with and subsequent to the Acquisition.
RESEARCH AND DEVELOPMENT. Research and development expenses were $600,000,
or 7.1% of total revenues, in 1996 and $3.5 million, or 13.2% of total revenues,
in 1997. During 1995, the Company capitalized all research and development
expenses as the projects had reached the state of technological feasibility but
were not yet ready for commercial release. The Company capitalized $309,000 in
research and development expenses in 1995 and $276,000 in 1996. Research and
development expenses incurred in 1996 were primarily related to the development
of Neptune's object-oriented Windows NT-based software product. The increase in
research and development expenses in 1997 in absolute amount resulted from the
addition of research and development personnel primarily in connection with the
Acquisition. Significant product development efforts during 1997 included new
releases for both the EXceed UNIX and Windows NT-based product lines and the
development of integration features to harmonize the product lines of the
Neptune and Dallas Systems.
GENERAL AND ADMINISTRATIVE. General and administrative expenses were
$589,000, or 21.3% of total revenues, in 1995; $2.2 million, or 26.4% of total
revenues in 1996; and $4.3 million, or 15.9% of total revenues, in 1997. The
increase in general and administrative expenses in both absolute amount and as a
percentage of total revenues in 1996 was due to increased administrative, legal
and accounting costs caused by the growth and the increasing complexity of the
Company's business. The increase in general and administrative expenses in
absolute amount in 1997 was primarily the result of increased staffing and
related costs associated with the growth of the Company's business after the
Acquisition. The decrease in such expenses as a percentage of total revenues in
1997 was primarily due to the substantial increase in total revenues and the
Company's ability to leverage its base of resources to support a larger
organization.
32
<PAGE>
AMORTIZATION OF INTANGIBLES. Amortization of intangibles expense was
$588,000, or 2.2% of total revenues, in 1997. The intangible assets amortized
during 1997 included purchased technology, in-place work force, customer base
and goodwill, all of which had been capitalized in connection with the
Acquisition.
WRITE-OFF OF IN-PROCESS RESEARCH AND DEVELOPMENT. In-process research and
development represents research and development efforts that have not reached
final technological feasibility. In connection with the Acquisition, the Company
wrote off the fair value attributable to in-process research and development
acquired from Dallas Systems. Based upon an appraisal obtained at the time of
the Acquisition, in-process research and development was valued at $19.7
million, or 73.6% of total revenues for 1997, and was expensed at the date of
the Acquisition. The Company did not experience similar write-offs in 1995 or
1996.
OTHER INCOME (EXPENSE)
Other expense was $11,000 in 1995, $22,000 in 1996, and $208,000 in 1997.
MINORITY INTEREST IN SUBSIDIARY
The Company's Asian joint venture was formed in 1996. The minority interest
in the income and losses of the joint venture were immaterial in both 1996 and
1997.
INCOME TAXES
Prior to the Acquisition, Neptune elected to be taxed pursuant to Subchapter
S of the Internal Revenue Code and, as a result, income tax benefits and
liabilities passed through the Company to its shareholders and the Company did
not record federal or state income taxes on a historical basis for the periods
prior to the Acquisition. A provision for income taxes of $157,000 in 1995 and
$609,000 in 1996 was calculated on a pro forma basis as if the Company was
liable for federal and state income taxes by applying the statutory rate to
pretax income, adjusted for permanent tax differences. Effective with the
Acquisition, the Company became subject to federal and state income taxes. For
1997, the Company recorded an income tax benefit of $225,000. The recorded
benefit differs from the amount computed at the statutory rate as a result of
non-deductible in-process research and development expense and merger costs. See
Note 6 of Notes to Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
From inception through the Acquisition, the Company funded its operations
primarily through cash generated from operations and sales of securities and, to
a lesser extent, bank borrowings. In connection with the Acquisition, the
Company effected a private placement of securities generating net proceeds of
approximately $9.8 million. As of March 31, 1998, the Company had $2.1 million
in cash and cash equivalents.
Cash provided by operations was $971,000 and $1.3 million for the years
ended December 31, 1995 and 1996, respectively. For the year ended December 31,
1997 and the three months ended March 31, 1998, cash used by operations was $1.7
million and $2.4 million, respectively. The operating cash used in 1997 included
cash used for funding the net loss of $1.3 million, net of depreciation,
amortization and write-off of in-process research and development costs. Much of
this operating cash was used to launch the new marketing programs for EXE and
the EXceed product line, recruit and hire additional executives, open offices in
Malaysia, China and the Middle East, and expand the sales and marketing
organization worldwide. Additionally, operating cash used in 1997 was largely
attributed to the increase in accounts receivable resulting from the growth in
the fourth quarter of 1997 as a result of the Acquisition and from the increased
sales of EXceed products. This growth in receivables during the year ended
December 31, 1997 was largely offset by increased payables. The increase in
accounts
33
<PAGE>
payable was largely attributable to the increased volume of expenditures
resulting from the Acquisition and the timing of certain large software database
resale transactions that were payable at December 31, 1997. The cash used by
operations during the three months ended March 31, 1998, was primarily
attributed to a decrease in payables of $2.5 million due to payments for the
significant payables associated with the database resale transactions that were
closed at the end of 1997. These uses were offset by income from operations net
of depreciation of $1.1 million during the three months ended March 31, 1998.
Cash used for investing activities was approximately $495,000 in 1995,
$966,000 in 1996, $481,000 in 1997 and $1.2 million during the three months
ended March 31, 1998. The Company used cash primarily for the purchase of
capital equipment, such as computer equipment and furniture and fixtures, to
support the Company's growth. The capital expenditures in 1997 were offset by
$1.6 million in cash acquired as a result of the acquisition of Dallas Systems.
Cash provided from financing activities was $920,000 in 1996 and was
primarily the result of funds received from Neptune's joint venture partner to
establish EXE Technologies (SEA) Pte. Ltd. in Singapore to service Southeast
Asia and borrowings under the credit line and equipment loan facility. The cash
provided from financing activities was $7.0 million in 1997. This included net
proceeds from the sale of equity securities in connection with the Acquisition
of approximately $9.8 million, $5.3 million of which were used to retire debt of
Neptune and Dallas Systems. Additionally, during 1997 the Company raised an
additional $3.7 million of equity investment and paid a distribution of $1.4
million prior to the Acquisition. The $916,000 used by financing activities
during the three months ended March 31, 1998 was used to repurchase shares of
stock from former employees of the Company.
The Company has an existing $13.5 million line of credit with a commercial
bank to provide funds for working capital needs. The terms of this line of
credit specify that advances under the agreement are limited based upon a
multiple of cash flow, as defined in the agreement. At March 31, 1998, the
Company was limited to approximately $8.1 million in available funds under the
terms of this agreement, none of which was outstanding.
In order to fund the continued expansion of the business, in June and July
1998 the Company sold 371,666 shares of its Class A Common Stock for an
aggregate of approximately $1.1 million to certain senior executives and vendors
of the Company. These shares were issued pursuant to prior commitments which
were approved by the Company's Board on April 6, 1998. In addition, in July
1998, the Company also sold 1,600,000 shares of Preferred Stock for an aggregate
of $8.0 million. A portion of the net proceeds of these financing activities was
used to retire outstanding balances on the Company's revolving line of credit.
The Company intends to use the balance of the net proceeds to fund working
capital requirements.
The Company believes that the proceeds received by the Company from the
offerings, together with current cash balances, potential cash flows from
operations and available borrowings under its revolving credit facility, will be
sufficient to meet its working capital requirements through December 31, 1999.
The Company periodically reviews other businesses and technologies for potential
acquisition. Any material acquisitions of complementary businesses, products or
technologies, or material joint ventures, could require the Company to obtain
additional financing before or after that time. There can be no assurance that
such additional financing would be available to the Company on favorable terms,
if at all. Moreover, additional financing may cause dilution to existing
stockholders.
IMPACT OF YEAR 2000
Many currently installed computer systems and software products were coded
using two digits rather than four to define the applicable year. As a result,
these computer programs have time-sensitive software that recognize a date using
"00" as the year 1900 rather than the year 2000. This could cause a system
failure or miscalculations, causing disruptions of operations, including, among
other things, a
34
<PAGE>
temporary inability to process transactions, send invoices, or engage in similar
normal business activities.
The Company has completed a preliminary assessment and may modify or replace
minor portions of its software so that its computer systems will function
properly with respect to dates in the year 2000 and thereafter. The total Year
2000 project cost is not expected to be material to the Company. The project is
estimated to be completed not later than January 1, 1999, which is prior to any
anticipated impact on its operating systems. The Company believes that with
minor modifications to existing software, the Year 2000 issues will not pose
significant operational problems for its computer systems.
The costs of the modifications and the date on which the Company believes it
will complete the Year 2000 modifications are based on management's estimates,
which were derived utilizing numerous assumptions of future events, including
the continued availability of certain resources and other factors. However,
there can be no guarantee that these estimates will be achieved, and actual
results could differ from those anticipated. Factors that might cause such
differences include, but are not limited to, the availability and cost of
personnel trained in this area, the ability to locate and correct all relevant
computer code, and similar uncertainties.
35
<PAGE>
DALLAS SYSTEMS CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated financial data of
Dallas Systems as of and for the years ended December 31, 1995 and 1996, and as
of and for the eight and one-half month period ended September 15, 1997. The
following selected consolidated financial data of Dallas Systems should be read
in conjunction with the consolidated financial statements of Dallas Systems
Corporation and the notes thereto and the Dallas Systems Corporation
Management's Discussion and Analysis of Financial Condition and Results of
Operations included elsewhere herein. The selected financial data for Dallas
Systems as of and for the years ended December 31, 1995 and 1996, and as of and
for the eight and one-half month period ended September 15, 1997 have been
derived from the consolidated financial statements included elsewhere in this
Prospectus which have been audited by Ernst & Young LLP, independent auditors.
<TABLE>
<CAPTION>
EIGHT AND
ONE-HALF MONTH
YEAR ENDED DECEMBER PERIOD ENDED
31, SEPTEMBER 15,
-------------------- --------------
1995 1996 1997
--------- --------- --------------
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenues:
Software licenses..................................................... $ 5,591 $ 7,002 $ 3,038
Services and maintenance.............................................. 16,627 22,055 22,117
Resale software and equipment......................................... 5,025 5,133 7,948
--------- --------- --------------
Total revenues.................................................... 27,243 34,190 33,103
--------- --------- --------------
Cost and expenses:
Cost of licenses, services and maintenance............................ 14,399 17,926 17,039
Cost of resale software and equipment................................. 3,300 3,170 5,668
Sales and marketing................................................... 2,131 2,663 2,972
Research and development.............................................. 3,980 5,502 3,908
General and administrative............................................ 3,408 3,179 3,437
--------- --------- --------------
Total costs and expenses.......................................... 27,218 32,440 33,024
--------- --------- --------------
Operating income (loss)................................................. 25 1,750 79
Other income (expense)................................................ (131) (302) (191)
--------- --------- --------------
Income (loss) before income taxes..................................... (106) 1,448 (112)
Provision (benefit) for income taxes.................................. (96) 339 515
--------- --------- --------------
Net income (loss)..................................................... $ (10) $ 1,109 $ (627)
--------- --------- --------------
--------- --------- --------------
CONSOLIDATED BALANCE SHEET DATA
(AT PERIOD END):
Cash and cash equivalents............................................... $ 183 $ 1,575 $ 1,580
Working capital......................................................... 1,307 3,835 4,348
Total assets............................................................ 12,165 14,778 18,046
Long-term debt (less current portion)................................... 1,649 2,595 419
Stockholders' equity.................................................... 5,350 6,536 6,650
</TABLE>
36
<PAGE>
DALLAS SYSTEMS CORPORATIONS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE DALLAS
SYSTEMS SELECTED CONSOLIDATED FINANCIAL DATA, THE COMPANY SELECTED CONSOLIDATED
FINANCIAL DATA, THE COMPANY'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, THE COMPANY SELECTED UNAUDITED PRO FORMA
FINANCIAL INFORMATION AND THE FINANCIAL STATEMENTS OF THE COMPANY AND OF DALLAS
SYSTEMS AND THE NOTES THERETO INCLUDED ELSEWHERE IN THE PROSPECTUS.
OVERVIEW
Dallas Systems was formed in 1980 to provide warehouse management systems
integration and implementation services and, in 1980, introduced its first
warehouse management software, which operated on the mainframe platform. In
1993, Dallas Systems began developing a version of its software for the UNIX
operating system, and introduced the UNIX version of its software in 1995.
Since its inception, Dallas Systems' revenues were derived primarily from
the licensing of its mainframe and UNIX software products, consulting,
implementation, training and maintenance services, and the resale of third party
software and computer equipment. In accordance with its original services-based
business approach, Dallas Systems was primarily focused on pursuing consulting
projects for its large professional services organization using its services
relationships to introduce software products to customers. As a result, Dallas
Systems maintained a relatively small sales and marketing operation and did not
devote substantial resources to sales and marketing of its software. In
addition, Dallas Systems experienced seasonality in its business with a
disproportionately greater amount of its revenue for any fiscal year being
recognized in its fourth quarter and a disproportionately lesser amount therof
being recognized in third quarter.
Dallas Systems' separate existence ended with completion of the Acquisition
on September 15, 1997.
The following table sets forth operating data as a percentage of total
revenues represented for the periods indicated:
<TABLE>
<CAPTION>
EIGHT AND ONE-
YEAR ENDED DECEMBER HALF MONTHS
31, ENDED
-------------------- SEPTEMBER 15,
1995 1996 1997
--------- --------- ---------------
<S> <C> <C> <C>
AS A PERCENTAGE OF TOTAL REVENUES:
Revenues:
Software licenses....................................................... 20.5% 20.5% 9.2%
Services and maintenance................................................ 61.0 64.5 66.8
Resale software and equipment........................................... 18.5 15.0 24.0
--------- --------- -------
Total revenues...................................................... 100.0 100.0 100.0
--------- --------- -------
Cost and expenses:
Cost of licenses, services and maintenance.............................. 52.9 52.4 51.5
Cost of resale software and equipment................................... 12.1 9.3 17.1
Sales and marketing..................................................... 7.8 7.8 9.0
Research and development................................................ 14.6 16.1 11.8
General and administrative.............................................. 12.5 9.3 10.4
--------- --------- -------
Total costs and expenses............................................ 99.9 94.9 99.8
--------- --------- -------
Operating income (loss)................................................... 0.1 5.1 0.2
Other income (expense).................................................. (0.5) (0.9) (0.5)
--------- --------- -------
Income (loss) before income taxes....................................... (0.4) 4.2 (0.3)
Provision (benefit) for income taxes.................................... (0.4) 1.0 1.6
--------- --------- -------
Net income (loss)....................................................... 0.0% 3.2% (1.9%)
--------- --------- -------
--------- --------- -------
</TABLE>
37
<PAGE>
EIGHT AND ONE-HALF MONTHS ENDED SEPTEMBER 15, 1997, AND YEARS ENDED DECEMBER 31,
1996 AND 1995
REVENUES
Dallas Systems' revenues consisted of: revenues from the licensing of its
mainframe and UNIX software products; fees derived from consulting
implementation, training and maintenance services; and revenues generated from
the resale of third party software and computer equipment. Total revenues
increased 25.5% to $34.2 million in 1996 from $27.2 million in 1995. Revenues
for the eight and one-half months ended September 15, 1997 (the "September 1997
Period") were $33.1 million.
SOFTWARE LICENSE REVENUES. Software license revenues were derived from
licensing Dallas Systems' mainframe and UNIX supply chain execution software.
Dallas Systems' software license revenues were generally recognized upon
delivery of software product, receipt of a signed license agreement and after
any customer cancellation right has expired, provided no significant vendor
obligations remain outstanding and collection is probable. Software license
revenues increased 25.2% from $5.6 million in 1995 to $7.0 million in 1996, and
were $3.0 million in the September 1997 Period. Software license revenues
constituted 20.5% of total revenues in 1995 and 1996, and 9.2% of total revenues
in the September 1997 Period. The increase in the absolute amount of such
revenues in 1996 compared to 1995 was primarily a result of additional sales in
1996 of Dallas Systems' UNIX-based software. Software license revenues in the
September 1997 Period declined as a percentage of total revenues primarily due
to the absence of results for the fourth quarter of 1997, which was typically
Dallas Systems' strongest quarter in terms of license revenues.
SERVICES AND MAINTENANCE REVENUES. Services revenues were primarily derived
from fees for consulting implementation and training services and were
recognized as the services were performed. Maintenance revenues were derived
from customer support agreements generally entered into in connection with
initial license sales and subsequent renewals and were recognized ratably over
the term of the maintenance period, which was typically one year. Payments for
maintenance fees were generally made in advance. Services and maintenance
revenues increased 32.7% from $16.6 million in 1995 to $22.1 million in 1996,
and were $22.1 million in the September 1997 Period. Services and maintenance
revenues constituted 61.0%, 64.5% and 66.8% of total revenues in 1995, 1996 and
the September 1997 Period, respectively. The increase in services and
maintenance revenues in absolute amount and as a percentage of total revenues in
1996 compared to 1995 was primarily a result of increased demand for Dallas
Systems' services in connection with higher levels of sales of UNIX-based
software. Services and maintenance revenues increased as a percentage of total
revenues in the September 1997 Period as compared to the prior periods as a
result of continued demand for services associated with Dallas Systems'
UNIX-based software. The higher level of services activity in 1996 and the
September 1997 Period was due in part to the relatively higher level of
consulting requested by customers to implement the relatively newer UNIX-based
software.
RESALE SOFTWARE AND EQUIPMENT REVENUES. Resale software and equipment
revenues were generated from the resale of a variety of third-party software and
hardware products that were integrated with Dallas Systems' software solution at
the customers' request. These products included relational database software,
computer hardware and radio frequency-based equipment. Resale software and
equipment revenues were recognized upon shipment. Resale software and equipment
revenues were essentially unchanged in absolute amount between 1995 and 1996,
having increased from $5.0 million in 1995 to $5.1 million in 1996, and were
$7.9 million in the September 1997 Period. Resale software and equipment
revenues constituted 18.5%, 15.0% and 24.0% of total revenues in 1995, 1996 and
the September 1997 Period, respectively. The decrease in resale software and
equipment revenues as a percentage of total revenues in 1996 as compared to 1995
was due to the growth in service and maintenance revenues as a percentage of
total revenues. The increase in resale of software and equipment revenues in the
September 1997 Period as a percentage of total revenues over the prior
38
<PAGE>
periods was primarily a result of customers accelerating their purchases of
database software in anticipation of price increases by the database software
vendor.
COST OF REVENUES
COST OF LICENSES, SERVICES AND MAINTENANCE. Cost of licenses, services and
maintenance consists primarily of salaries of professional staff and costs
associated with consulting, implementation and training services. Cost of
licenses, service and maintenance also includes the cost of reproducing software
and user documentation, which was immaterial in all periods, and the cost of
providing software maintenance such as hotline telephone support, new releases
of software and updated user documentation. Cost of licenses, services and
maintenance represented 86.6%, 81.3% and 77.0% of the services and maintenance
revenues in 1995, 1996 and the September 1997 Period, respectively. The decrease
in cost of licenses, services and maintenance as a percentage of the licenses,
services and maintenance revenues in 1996 and the September 1997 Period compared
to prior periods was primarily a result of improved efficiency in the consulting
and implementation services provided to customers.
COST OF RESALE SOFTWARE AND EQUIPMENT. Cost of resale software and
equipment revenues consists of costs related to the purchase of software and
equipment that the Company resells to its customers. Cost of resale software and
equipment represented 65.7%, 61.8% and 71.3% of the related revenues in 1995,
1996 and the September 1997 Period, respectively. The decrease in the cost of
resale software and equipment revenues as a percentage of the related revenues
in 1996 was due to the higher volume of reselling activities and a resulting
increased ability to obtain better pricing from the Company's suppliers of such
software and equipment. The increase in such costs as a percentage of the
related revenues in the September 1997 Period was primarily a result of a change
in the mix of such products sold to a greater percentage of lower margin
products.
OPERATING EXPENSES
SALES AND MARKETING. Sales and marketing expenses include salaries and
other personnel-related costs, sales commissions, travel expenses, advertising
programs and other promotional activities. Sales and marketing expenses were
$2.1 million, or 7.8% of total revenues, in 1995; $2.7 million, or 7.8% of total
revenues, in 1996; and $3.0 million, or 9.0% of total revenues, in the September
1997 Period. The increase in sales and marketing expenses in absolute amount in
each period reflects the generally higher level of business activities. Sales
and marketing expenses as a percentage of total revenues in 1996 remained
constant with the 1995 level as a result of the more rapid growth in revenues
from period to period. The increase in sales and marketing expenses as a
percentage of total revenues for the September 1997 Period reflects the timing
of certain marketing activities which generally have a delayed impact on
revenues.
RESEARCH AND DEVELOPMENT. Research and development expenses principally
consist of salaries and other personnel-related costs for Dallas Systems'
product development activities. Research and development expenses were $4.0
million, or 14.6% of total revenues, in 1995; $5.5 million, or 16.1% of total
revenues, in 1996; and $3.9 million, or 11.8% of total revenues in the September
1997 Period. Research and development expenses increased in absolute amount in
1996 as a result of continued development efforts devoted to enhancing the
functionality of Dallas Systems' UNIX-based software. The increase of such
expenses as a percentage of total revenues in 1996 reflected the significant
investments necessary to refine and enhance the features of the UNIX-based
software following its launch in 1995. The lower level of research and
development expenses as a percentage of total revenues in the September 1997
Period reflects reduced investment level required to enhance the base
functionality of Dallas Systems' UNIX-based software.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of salaries and other personnel-related costs of the finance, human
resources, information systems, administrative
39
<PAGE>
and executive departments of the Company, insurance costs, and the fees and
expenses associated with legal, accounting and other administrative services.
General and administrative expenses were $3.4 million, or 12.5% of total
revenues, in 1995; $3.2 million, or 9.3% of total revenues, in 1996; and $3.4
million, or 10.4% of total revenues in the September 1997 Period. The decrease
in general and administrative expenses as a percentage of total revenues in 1996
was primarily due to the increase in total revenues and the Company's ability to
leverage its base of resources to support a larger organization. The increase in
such expenses as a percentage of total revenues in the September 1997 Period was
primarily the result of increased staffing and related costs associated with the
growth of the Dallas Systems business and additional legal and accounting
expenses incurred in connection with the Acquisition.
OTHER EXPENSE
Other expense consists of interest expenses on outstanding debt net of
interest income on short-term investments. Other expense was $131,000 in 1995,
$302,000 in 1996 and $191,000 in the September 1997 Period, and represented less
than 1% of total revenues in each period.
INCOME TAXES
Dallas Systems recorded an income tax benefit of $96,000 in 1995 and
provisions for income taxes of $339,000 and $515,000 for the year ended December
31, 1996 and the September 1997 Period, respectively. The effective tax rate in
1995 and 1996 differs from the statutory rate principally as a result of
research and development credits. The effective tax rate for the September 1997
Period differs from the statutory rate as a result of the $632,000 tax liability
resulting from the gain for tax purposes associated with the transfer of the
Dallas Systems corporate headquarters to the principal shareholder. This amount
was partially offset by research and development credits.
40
<PAGE>
SELECTED UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information of the Company for
the year ended December 31, 1997 has been derived from the audited financial
statements of the Company for the year ended December 31, 1997 and the audited
financial statements of Dallas Systems for the eight and one-half months ended
September 15, 1997, all included herein. The unaudited pro forma financial
information for the Company reflects the Acquisition as if it had taken place on
January 1, 1997. The Company was formed as a result of simultaneous transactions
through which the stockholders of Neptune and Dallas Systems exchanged their
stock in Neptune and Dallas Systems for stock in EXE. The Acquisition included a
$15 million purchase by an investment group of shares of the Company's Preferred
Stock which was used to acquire 50% of the equity interest of former Dallas
Systems shareholders. The $30 million value of the Acquisition was based upon
the $15 million paid for 50% of the former equity interest of Dallas Systems.
The merger was accounted for as a purchase of Dallas Systems by Neptune. The
unaudited pro forma condensed consolidated financial information set forth below
reflects certain adjustments including (i) the amortization of purchased
intangible assets as though the business had been combined for the full period,
(ii) the elimination of the one time write-off of in-process research and
development, and (iii) the elimination of certain non-recurring merger-related
costs. The information set forth below should be read in conjunction with the
other information contained in Selected Consolidated Financial Data of the
Company, Selected Financial Data of Dallas Systems, and the Management's
Discussion and Analysis of Financial Condition and Results of Operations of the
Company and of Dallas Systems and the Consolidated Financial Statements of the
Company and Dallas Systems and Notes thereto included elsewhere in this
Prospectus. This information is unaudited and does not purport to represent the
actual operating results had the Acquisition taken place January 1, 1997, nor
does it purport to be indicative of the results that would be obtained in the
future.
41
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
DALLAS PRO FORMA
EXE SYSTEMS ADJUSTMENTS PRO FORMA
-------- ------- ------------ -----------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Revenues:
Software licenses......................................... $ 8,429 $ 3,038 $ -- $11,467
Services and maintenance.................................. 12,781 22,117 -- 34,898
Resale software and equipment............................. 5,562 7,948 -- 13,510
-------- ------- ------------ -----------
Total revenues.......................................... 26,772 33,103 -- 59,875
-------- ------- -----------
Costs and expenses:
Cost of software licenses................................. 749 -- -- 749
Cost of services and maintenance.......................... 9,967 17,039 (75)(a) 26,931
Cost of resale software and equipment..................... 4,129 5,668 -- 9,797
Sales and marketing....................................... 6,721 2,972 (8)(a) 9,685
Research and development.................................. 3,534 3,908 (91)(a) 7,351
General and administrative................................ 4,263 3,437 (864)(a) 6,836
Amortization of intangibles............................... 588 -- 1,105(b) 1,693
Write-off of in-process research and development.......... 19,700 -- (19,700)(c) --
-------- ------- ------------ -----------
Total costs and expenses................................ 49,651 33,024 (19,633) 63,042
-------- ------- ------------ -----------
Operating income (loss)..................................... (22,879) 79 19,633 (3,167)
Other income (expense):
Interest income........................................... 177 28 -- 205
Interest expense.......................................... (158) (239) 397(d) --
Other..................................................... (227) 20 -- (207)
-------- ------- ------------ -----------
Total other income (expense)................................ (208) (191) 397 (2)
-------- ------- ------------ -----------
Loss before minority interest and taxes..................... (23,087) (112) 20,030 (3,169)
Minority interest in subsidiary loss........................ 76 -- -- 76
-------- ------- ------------ -----------
Loss before taxes........................................... (23,011) (112) 20,030 (3,093)
Provision (benefit) for income taxes........................ (225) 515 (517)(e) (227)
-------- ------- ------------ -----------
Net loss.................................................... $(22,786) $ (627) $ 20,547 $(2,866)
-------- ------- ------------ -----------
-------- ------- ------------ -----------
Net loss per share.......................................... $ (0.26)(f)
Shares used in computing net loss per share................. 11,228(f)
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated statement
of operations.
42
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
The accompanying unaudited pro forma condensed consolidated statement of
operations of the Company for the year ended December 31, 1997 reflect the pro
forma adjustments associated with the Acquisition as if it had taken place on
January 1, 1997.
The Unaudited Pro Forma Condensed Consolidated Statement of Operations gives
effect to the following unaudited pro forma adjustments:
(a) Represents the (i) elimination of certain expenses totaling $458,000
associated with legal, consulting and travel expenses related to the Acquisition
which were not capitalizable as part of the purchase price, (ii) elimination of
certain expenses totaling $443,000 associated with severance costs incurred
related to the termination of former Dallas Systems employees prior to and as a
negotiated component of the Acquisition and related recruiting costs to retain
their replacements and (iii) elimination of other expenses consisting
principally of the elimination of depreciation associated with the allocation of
purchase price to acquired computer equipment totaling $137,000.
(b) Represents amortization of intangible assets totaling $1,105,000
resulting from the Acquisition. The estimated value of the intangibles will be
amortized over periods ranging from three to six years.
(c) Represents the elimination of the write-off of the in-process research
and development associated with the Acquisition.
(d) Represents the elimination of interest expense totaling $397,000
eliminated as a result of the repayment of certain Dallas Systems and Neptune
debt with the funds available as a result of the Acquisition.
(e) Represents the elimination of the tax provision of Dallas Systems
totaling $632,000 associated with the sale of a building to the former major
shareholder of Dallas Systems as part of the Acquisition transaction and the tax
effect of the pro forma adjustments.
(f) Pro forma basic and diluted net loss per share is computed by dividing
pro forma net loss by the weighted average common shares of the Company.
43
<PAGE>
BUSINESS
OVERVIEW
EXE is a leading provider of supply chain execution software. Supply chain
execution encompasses ordering, transporting, handling, storing and delivering
inventory as it moves through the supply chain from manufacturer to the point of
sale. The Company's software solution, EXceed, allows businesses to optimize the
operations of warehouses, distribution centers and other supply chain nodes and
to enhance the tracking and logistical control of inventory through the supply
chain. Combining elements of traditional warehouse, transportation and order
management systems, EXceed is designed to provide companies with an
enterprise-wide view of inventory regardless of its handling state or location.
By enabling better visibility and logistical control over inventory through the
supply chain, EXceed allows businesses to improve inventory turnover, reduce
carrying costs and more efficiently satisfy customer demand by delivering the
right product to the right place at the right time. In addition, EXceed is
designed to enable businesses to reduce operating costs through more efficient
management of labor, materials and other resources within warehouses and
distribution centers. AMR Research estimates that the supply chain execution
market will reach $1.4 billion in 1998 and continue to grow at a compound annual
growth rate of approximately 40% through 2002.
EXE commenced operations in September 1997 following Neptune's acquisition
of Dallas Systems. The transaction combined Neptune's leading Windows NT
technology, rapid implementation focus and packaged applications business model
with Dallas Systems' large installed base, strong vertical domain expertise and
experience in designing and implementing mainframe and UNIX systems for high
transaction volume distribution environments. In addition, the Acquisition
provided international market leverage through the companies' complementary
strengths in Europe and Asia, and vertical market leverage, primarily in the
grocery, retail/wholesale and 3PL market segments.
INDUSTRY BACKGROUND
Today's increasingly competitive business environment demands that
businesses continuously improve manufacturing and distribution efficiency,
product quality and customer service. To address these challenges, businesses
have been forced to enhance their ability to move raw materials, components and
finished goods through the supply chain in order to deliver the right product to
the right place at the right time at a competitive cost. A number of trends,
however, have made it increasingly difficult to satisfy these demands,
including: (i) globalization of manufacturing, component sourcing and sales;
(ii) expanded product variety leading to the proliferation of stock keeping
units ("SKUs"); and (iii) increased reliance on just in time, vendor managed and
continuous replenishment inventory management practices. Further complicating
the matter, enterprises are increasingly utilizing strategies such as
manufacturing postponement and value-added distribution, which require
traditional warehouses to evolve into complex work centers capable of providing
value-added services such as product assembly and customized packaging. In
addition, the growth of electronic commerce and the emergence of the Internet
have resulted in new distribution models and increased customer expectations for
rapid order fulfillment. Many enterprises are attempting to meet these
challenges either by improving their internal logistics operations through the
use of information technology or by outsourcing such operations to 3PL
companies.
Enterprise resource planning ("ERP") systems and advanced planning systems
("APS") have enabled businesses to improve their capabilities in forecasting,
scheduling and supply chain planning. These systems, however, typically do not
address the execution of the operational plans that they generate. The Company
believes that enterprises are now realizing that a supply chain execution
system, which focuses on the ordering, transporting, handling, storing and
delivery of product, represents a critical element in the effort to optimize
overall supply chain operations. Supply chain execution
44
<PAGE>
systems can also enhance the effectiveness of APS and ERP systems by providing
feedback of real-time data about the handling state and location of inventory to
such systems.
Companies have traditionally addressed supply chain execution challenges
with disparate, heterogeneous software systems, deployed at single locations
within the supply chain and focused separately on warehouse, transportation and
order management challenges. These solutions are generally not well-integrated
with one another or with other enterprise software systems, restricting the flow
of information across the supply chain. As a result, such solutions are limited
in their ability to enable enterprise-wide inventory management and to optimize
overall supply chain execution. In addition, these point solutions are often
based on legacy computing architectures, require extensive and costly
customization to meet customer needs and are often difficult to upgrade.
Furthermore, many of these systems historically have not been able to scale to
accommodate the high transaction volume requirements of large,
distribution-intensive enterprises.
THE EXE SOLUTION
The Company believes its EXceed software solution offers a fundamentally new
approach to supply chain execution by addressing many of the limitations
inherent in traditional systems. The EXceed product combines elements of the
functionality of warehouse, transportation and order management systems to offer
an integrated platform for supply chain logistics optimization. EXceed's
component architecture, which includes core functionality in a base system and
optional modules for additional capabilities, provides a scalable,
multi-platform solution that companies can efficiently adapt to their specific
supply chain execution needs. EXceed is designed to enhance revenue growth and
reduce the operating costs of businesses by improving their ability to manage
inventory and address evolving and increasingly complex customer demands. Key
elements of the EXE solution include:
"BEST-OF-BREED" PRODUCT FUNCTIONALITY. The EXceed solution provides leading
warehouse management functionality designed to enable dynamic logistical control
and optimization of warehouses and distribution centers throughout the supply
chain. In addition to the base warehouse management system, EXE also offers a
number of functional modules including labor management, transportation
management, performance monitoring and specific functionality targeted toward
3PL providers.
INTEGRATED, ENTERPRISE-WIDE SOLUTION. EXceed is designed to enable
businesses to deploy an integrated, single-vendor, enterprise-wide supply chain
execution solution that reaches beyond the four walls of a single facility. EXE
offers a full suite of products designed to blend traditional warehouse,
transportation and order management solutions and provide inventory visibility
across all locations and handling states. As a result, customers are afforded a
higher level of logistical control and flexibility, enabling improved inventory
turnover, lower carrying costs and enhanced ability to rapidly and accurately
fulfill customer demand. The EXceed platform also provides the enterprise-wide
scalability necessary to address increasingly complex and distributed logistics
environments.
PACKAGED APPLICATION. In a market which has been characterized by software
systems requiring significant customization and a lengthy implementation
process, EXceed is designed for rapid installation and deployment. The product
architecture offers the customer the flexibility to add additional features to
the base system, while still maintaining a standardized upgrade path for future
versions. In addition, EXceed incorporates a broad set of application program
interfaces ("APIs") that simplify integration with other enterprise software
systems and facilitate product upgrades.
MULTIPLE PLATFORM AVAILABILITY. EXE offers versions of EXceed for
mainframe, UNIX and Windows NT environments. Accordingly, the Company is able to
deliver its solutions to customers regardless of their computing infrastructure,
allowing enterprises to leverage their existing computer system investments.
Moreover, certain versions of EXceed include a sophisticated message broker that
allows applications to share information across architectural barriers.
45
<PAGE>
COMPLEMENTARY TO APS AND ERP SYSTEMS. EXceed operates in conjunction with
APS, ERP and legacy systems by executing planning or other operational
instructions generated by such systems. EXceed can also enhance the
effectiveness of APS and ERP systems by providing feedback of real-time
inventory data to such systems.
GLOBAL PRESENCE AND CAPABILITIES. The Company has established a substantial
international presence, including eleven offices worldwide, enabling it to
rapidly meet the demands of multinational customers that maintain global supply
chains. The EXceed product line includes versions in English, French, German,
Spanish, Japanese, Chinese, Arabic, Thai and Malaysian, all of which are capable
of interacting with one another.
[GRAPHIC: Depiction of EXE's coverage of the Order Execution, WMS, and
Transportation Execution space.]
STRATEGY
The Company's objective is to be the leading provider of supply chain
execution software. The following outlines the Company's strategy for achieving
this objective:
EXPAND GLOBAL DISTRIBUTION. The Company intends to continue to make
significant investments in the expansion of its worldwide sales and marketing
organization and alliance efforts in order to capitalize on the substantial
growth opportunities in the global supply chain execution market. The Company
has established a presence in Europe, Asia and the Middle East and intends to
expand aggressively in these regions, as well as to launch operations in Latin
America.
EXTEND PRODUCT OFFERINGS AND TECHNOLOGY LEADERSHIP. The Company intends to
leverage EXceed's component architecture by continuing to add differentiating
features and functionality to its product offerings. For example, the Company
has a number of software modules under development, including modules that
address product slotting and virtual inventory management.
EXPAND AND ENHANCE VERTICAL MARKET FOCUS. The Company has tailored its
products and services to address the requirements of participants in the
retail/wholesale, manufacturing/CPG and 3PL markets. The Company intends to
deepen penetration into these broad markets by offering focused product, sales
and service packages designed to address their unique requirements. Targeted
market segments within these broader categories include such areas as automotive
parts, pharmaceuticals and electronics.
STRENGTHEN AND EXTEND STRATEGIC ALLIANCES. The Company intends to
supplement its professional service capabilities by attracting additional
partners to its Global Consulting Alliance Program. This program is intended to
provide additional leverage to the Company's product implementation and sales
and marketing activities through agreements with consulting firms such as
PricewaterhouseCoopers LLP. The Company also maintains, and intends to build
upon, strategic relationships with a number of enterprise software providers,
including i2 Technologies, Inc., Manugistics Group, Inc., and Oracle
Corporation.
INCREASE SALES TO EXISTING CUSTOMER BASE. The Company has a significant
installed base of customers, many of which use only the warehouse management
system and selected associated modules. The Company intends to intensify its
efforts to sell additional modules, as well as upgrades, to its existing
customer base.
DELIVER WORLD CLASS SERVICE, SUPPORT AND TRAINING. The Company intends to
continue to standardize its service offerings in order to provide consistent,
high quality service, support and training. The Company has launched a branding
effort to develop and promote its service, support and training offerings as
products, thus providing the same awareness and leverage that characterizes its
packaged software applications. In particular, the Company intends to expand EXE
University, its global training organization, in order to offer enhanced
training capabilities to the Company's customers and alliance partners.
46
<PAGE>
PRODUCTS
EXceed is a flexible, integrated supply chain execution solution available
for single sites or global enterprise-wide supply chains. EXceed consists of a
core warehouse management system, which includes order management functionality,
and a number of optional modules which can be interchangeably packaged as needed
and are available for deployment on mainframe, UNIX and Windows NT platforms.
The following chart sets forth a brief description of EXceed's features and
functions.
<TABLE>
<CAPTION>
PRODUCT DESCRIPTION
- --------------------------------------------------------------------------------------------
<S> <C> <C>
WAREHOUSE MANAGEMENT
WAREHOUSE - Provides dynamic control and enables optimization of warehouses
MANAGEMENT SYSTEM and distribution centers
- Optimizes receiving, putaway, quality control, replenishment,
cycle counting, physical inventory, picking, shipping and other
traditional warehouse functions
- Enables electronic data interchange, order wave planning, and
order allocation, along with other order management activities
- --------------------------------------------------------------------------------------------
WAREHOUSE MANAGEMENT MODULES
RADIO FREQUENCY SERVER - Provides real time data collection and task dispatching through
AND CLIENT hand carried or vehicle mounted computers connected to a wireless
network
- Supports receiving, putaway, quality control, replenishment,
cycle counting, picking and shipping
LABOR MANAGEMENT - Provides for development and use of discrete, engineered labor
standards for task management and measurement of worker
efficiency
- Enables linking with incentive pay plans
THIRD PARTY LOGISTICS - Provides components unique to 3PL providers including billing and
product expediting modules
- Enables bar code labeling, consolidation, and transmission of
advanced shipment notifications ("ASNs") in work centers such as
air freight and container freight stations
CROSS DOCK & FLOW - Automates the process by which a warehouse receives and tranships
THROUGH product when product destination is known at receipt time (cross
docking)
- Provides built-in flexibility to react to changes in requirements
at product or order level when final destination is not known at
receipt time (flow through)
KEY PERFORMANCE - Serves as a "dash board" application that collects, measures and
INDICATOR MONITOR presents detailed statistics on the performance of a single
warehouse facility
- Provides notification when certain thresholds are crossed
- --------------------------------------------------------------------------------------------
TRANSPORTATION EXECUTION MODULES
YARD & DOCK - Provides a link between the warehouse and transportation
components
- Controls dock scheduling, facility doors and equipment in the
yard
TRANSPORTATION - Provides shipping request entry, routing, trip scheduling,
EXECUTION MANAGEMENT tracking, accounting and analysis features
- Integrates seamlessly with transportation planning packages from
third party software vendors
</TABLE>
47
<PAGE>
The Company also engages in the resale of hardware and software primarily
for the convenience of its customers, and in support of its core licensing and
services business. Hardware resale items are composed mainly of servers and
radio frequency data collection units. Resale software consists primarily of
relational databases.
PRODUCT DEVELOPMENT
The following table describes products currently under development by the
Company:
<TABLE>
<CAPTION>
PRODUCT DESCRIPTION
<S> <C> <C>
PRODUCT SLOTTING - Optimizes product arrangement in facilities based on
(ANTICIPATED RELEASE DATE: LATE product attributes, order patterns, facility
1998) information and labor attributes
- Transfers movement instructions directly to the
systems task manager allowing workers to optimize
warehouse layout during slow periods
- Assists in the design of new warehouses and re-design
of existing facilities
- Integrates with task management functionality of third
party software
- --------------------------------------------------------------------------------------------
VIRTUAL INVENTORY MANAGEMENT
SUPPLY CHAIN EVENT MONITOR - Defines supply chain events and responses, such as
(ANTICIPATED RELEASE DATE: EARLY automatic notification or order initiation
1999)
SUPPLY CHAIN INVENTORY - Receives and accepts messages regarding inventory
VISIBILITY MONITOR location, handling state and quantity from EXE or
(ANTICIPATED RELEASE DATE: EARLY third party systems throughout the supply chain
1999)
</TABLE>
Ongoing product development efforts are focused on broadening the
functionality of EXceed to more fully address various aspects of supply chain
execution, in particular those that target specific market segments, such as
automotive parts, pharmaceuticals and electronics. There can be no assurance
that the Company will be successful in developing these or any other new
products, will not experience difficulties that could delay or prevent
successful development, or will successfully identify new product opportunities
and develop and bring new products to market on a timely and efficient manner or
that its products will achieve market acceptance.
The Company's research and development expenses for the years ended December
31, 1996 and 1997 were $600,000 and $3.5 million, respectively. For the three
months ended March 31, 1998, the Company expensed approximately $3.1 million on
research and development activities. The Company intends to continue to increase
its investment in product development in the future.
TECHNOLOGY
EXceed employs an N-tier, component-based architecture that was designed
using object-oriented development tools, and features a CORBA-compliant message
broker and robust application interfaces to systems provided by ERP, warehouse,
transportation and order management and APS vendors. This architecture provides
the flexibility to assemble products rapidly to new vertical markets, in
addition to offering high performance, reliability and scalability for
mission-critical supply chain activities. The N-tier architecture also allows
for separate data and application servers with a thin, low maintenance client
layer. The Company believes that this approach substantially reduces the cost
and complexity of operations at the desktop, a design objective that is now
being pursued by most enterprise software
48
<PAGE>
vendors. The object-oriented development environment and component architecture
enable EXE to bring major new functions to market quickly and allow customers to
add such functionality with minimal adjustment to their existing systems.
EXceed's Interoperability Layer, which is a CORBA-compliant message broker,
enables EXE to add new modules to both the current base architecture and EXE's
legacy architectures, allowing customers to capitalize on their investment in
purchases of prior EXE solutions. Designed through the message broker, API's to
ERP, warehouse, transportation and order management and APS vendors, as well as
to customer legacy systems, enable complete integration of the supply chain. The
design of these interfaces not only permits rapid release upgrade, but also
allows customers and consultants to develop interfaces to customer-built systems
and packages that are not supported as "off the shelf" interfaces from EXE.
[GRAPHIC: DEPICTION OF EXE ARCHITECTURE]
SERVICES, SUPPORT AND TRAINING
The Company believes that a high level of customer service and support
provides differentiation in the marketplace and is critical to the successful
implementation of its products. Accordingly, the Company is committed to
expanding its professional services group that is responsible for implementation
services and consulting, training and product maintenance, response center
support and upgrades.
PROFESSIONAL SERVICES AND CONSULTING. The Company offers an array of
services to facilitate successful implementation of EXceed and integration with
the customers' existing systems. Services include implementation project
management, on-site software training, operational engineering, industrial
engineering, software customization and supply chain consulting. Professional
services and consulting are generally billed on a time and materials basis,
although the Company expects fixed price contracts to represent a growing
percentage of the business in the future.
The Company utilizes a standardized implementation methodology, known as GEM
(Global Execution Methodology), which enables the Company and its alliance
partners to provide a consistent, high quality level of implementation services.
GEM includes a globally deployed application that provides planning, change
management and quality control of system implementations. The application
enables customers, EXE personnel and alliance partners to access project
information on a global basis, allowing for centralized quality checks and
project monitoring.
The Company also believes that a strong alliance program with third-party
consulting and service providers is an important component of its strategy to
expand its professional implementation and service business and support growth
in licensing revenues. Through the Global Consulting Alliance Program, the
Company partners with providers of complementary consulting and implementation
services, such as PricewaterhouseCoopers LLP. This program requires a financial
commitment from both parties and the development of a practice plan for every
partner. The Global Consulting Alliance Program reduces the need for the Company
to increase its internal professional services organization in support of the
Company's growing software licensing business.
TRAINING. The Company offers intensive education and training for its
customers, employees and third party implementation providers, either at Company
locations or at customer sites through the EXE University. Students who are
certified by EXE University are qualified to implement the Company's products.
EXE University also offers an accreditation program for those who wish to train
others. The Company offers training currently in North America, Europe and Asia.
MAINTENANCE AND SUPPORT. The Company provides a comprehensive maintenance
program under which subscribing customers receive upgrades to licensed software
components and are entitled to support services. The Company has the ability to
remotely access the customer's system in order to perform diagnostics, on-line
assistance and software upgrades. The Company also runs a response center in
Dallas 24 hours, 7 days a week, 365 days per year, with additional support
centers in the United
49
<PAGE>
Kingdom, Singapore and Australia. The Company offers a standard annual
maintenance option providing for customer telephone support during normal
business hours for 15% of the current software license fee and 24 hour
maintenance for 20% percent of the current software license fee.
CUSTOMERS
The Company's customers fall primarily into three broad market segments:
retail/wholesale, manufacturing/CPG and 3PL. Since the Acquisition, the Company
has provided products and services to approximately 200 customers. The following
table sets forth a list of the Company's customers who purchased over $300,000
of software licenses and/or services in the period from September 15, 1997
through June 30, 1998.
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------- --------------------- ----------------------------
RETAIL/WHOLESALE MANUFACTURING/CPG THIRD PARTY LOGISTICS
Ahold, Inc. Metro Richilieu Ford Motor Company BAX Global Logistics
American Stores National Grocers General Motors Bekins/GEO Logistics
CompUSA Neiman-Marcus Hewlett-Packard British Oxygen Corp.
Consolidated Stores PetsMart Caliber Logistics
Consumer Value Stores (CVS) Provigo Fritz Companies
Dairy Farm Publix Supermarkets GE/Penske Logistics
Davids Roundy's Kintetsu World Express (KWE)
Eckerd Drugs Selco TNT Canada
Fabri-Centers of America Shoppers USF Logistics
Foodstuff Sobeys Zero Mountain
Hannaford Staples
Harris Teeter StarMarket
Hy-Vee Food Tru-Serve
IPC Wellcome
Kmart Woolworths
</TABLE>
The Company's top five customers for the year ended December 31, 1997 and
three months ended March 31, 1998 in the aggregate accounted for 29.1% and
28.0%, respectively, of the Company's revenues. No customer accounted for more
than 10% of total revenues during the year ended December 31, 1997, except for
Tru-Serve Corporation, which accounted for 11.4% of total revenues during such
period.
SALES AND MARKETING
The Company generates most of its revenues through its direct sales force.
The direct sales organization consists of geographically-based business
development managers supported by sales consultants with particular experience
in industries such as retail/wholesale, manufacturing/CPG and 3PL. The Company
currently employs sales personnel throughout North America, Europe and Asia. The
Company conducts comprehensive marketing programs that include advertising,
public relations, trade shows, direct mail, joint marketing and an ongoing
customer communication program.
The Company has developed a global sales support system that provides status
information on sales prospects and a complete global report of the Company's
sales process, which it believes offers an important competitive advantage in
its sales efforts. The sales support system is accessible to each of the
Company's business development managers and sales consultants in real-time.
The sales cycle for the Company's products typically begins with the
generation of a sales lead or the receipt of a request for proposal from a
prospective customer. The Company follows a strict methodology for
qualification, tracking and closing of the prospect and has deployed a return on
investment tool that is used by all sales staff to present the Company's value
proposition to potential
50
<PAGE>
customers. The sales cycle can vary substantially from customer to customer but
typically requires three to nine months.
COMPETITION
The market for the Company's products is intensely competitive, highly
fragmented and characterized by rapid technological change. The Company believes
the principal competitive factors affecting the market for the Company's
products include product architecture, functionality and features, ease and
speed of implementation, return on investment, product quality, price and
performance, level of support, geographical location, vendor and product
reputation and alliance partner relationships. The Company's competitors are
numerous and diverse and offer a variety of solutions directed at various
aspects of the supply chain, as well as the enterprise as a whole. Competitors
tend to vary greatly depending on the customer's geographical location or
vertical market segment. The Company's existing competitors include: (i)
warehouse and transportation software vendors such as Catalyst International,
Inc., Manhattan Associates, Inc. and McHugh Software International, Inc.; (ii)
ERP and APS vendors that offer warehouse or transportation modules as part of
their suites, such as J.D. Edwards & Company and SAP Aktiengesellschaft; (iii)
smaller independent companies that have developed or are attempting to develop
warehouse and transportation management software solutions; and (iv) corporate
information technology departments of potential customers capable of internally
developing solutions. Many of the Company's competitors have longer operating
histories, significantly greater financial, technical, marketing and other
resources, greater name recognition, a broader range of products to offer and a
larger installed base of customers than the Company, any of which could provide
them with a significant competitive advantage.
The Company expects to face increased competition in the future from its
current competitors. In addition, new competitors, or alliances among current
and new competitors, may emerge and rapidly gain significant market share. The
Company also may face increased competition in the future from business
application software vendors, such as ERP and APS providers, that may broaden
their product offerings to include supply chain execution software. To the
extent such vendors develop or acquire systems with functionality comparable or
superior to the Company's products, their significant installed customer bases,
long-standing customer relationships, ability to offer a broad solution and
ability to price such products as incremental add-ons to existing systems could
provide a significant competitive advantage over the Company.
In order to succeed in the future, the Company must continue to respond
promptly and effectively to technological change and competitors' innovations.
There can be no assurance that current or potential competitors of the Company
will not develop products comparable or superior in terms of price and
performance features to those developed by the Company. In addition, no
assurance can be given that the Company will not be required to make substantial
additional investments in connection with its research, development, marketing,
sales and customer service efforts in order to meet any competitive threat, or
that the Company will be able to compete successfully in the future. Increased
competition could result in reductions in market share, pressure for price
reductions and related reductions in gross margins, any of which could
materially and adversely affect the Company's ability to achieve its financial
and business goals. There can be no assurance that in the future the Company
will be able to successfully compete against current and future competitors.
PROPRIETARY RIGHTS
The Company relies on a combination of copyright, trade secret, trademark,
service mark and trade dress laws, confidentiality procedures and contractual
provisions to protect its proprietary rights in its products and technology. The
Company generally enters into confidentiality agreements with its employees,
consultants, clients and potential clients and limits access to, and
distribution of, its proprietary information. The Company restricts its
customer's use of the licensed products to internal purposes
51
<PAGE>
without the right to sublicense, and, at times, licenses EXceed to its customers
in source code format. In certain foreign markets, the Company utilizes hardware
based locks to control the number of sites and users that can access the
software. Failure to have the hardware lock disables the software.
The Company believes, however, that the foregoing measures afford only
limited protection and there can be no assurance that such measures will be
adequate. The Company also may be subject to additional risks as it enters into
transactions in countries where intellectual property laws are not well
developed or are poorly enforced. Legal protections of the Company's rights may
be ineffective in such countries. Despite the Company's efforts to safeguard and
maintain its proprietary rights both in the United States and abroad, there can
be no assurance that the Company will be successful in doing so or that the
steps taken by the Company in this regard will be adequate to deter
misappropriation or independent third party development of the Company's
technology or to prevent an unauthorized third party from copying or otherwise
obtaining and using the Company's products or technology. In addition, policing
unauthorized use of the Company's products is difficult, and while the Company
is unable to determine the extent to which piracy of its software products
exist, software piracy could become a problem. Litigation to defend and enforce
the Company's intellectual property rights could result in substantial costs and
diversion of resources and could have a material adverse effect on the Company's
business, financial condition or results of operations, regardless of the final
outcome of such litigation.
As the number of supply chain execution applications in the industry
increases and the functionality of these products further overlaps, software
development companies, like the Company, may become increasingly subject to
claims of infringement or misappropriation of the intellectual property rights
of others. There can be no assurance that third parties will not assert
infringement or misappropriation claims against the Company in the future with
respect to current or future products. Any claims or litigation, with or without
merit, could be time-consuming, result in costly litigation, divert management's
attention, cause product shipment delays or require the Company to enter into
royalty or licensing arrangements. Such royalty or licensing arrangements, if
required, may not be available on terms acceptable to the Company, if at all,
which could have a material adverse effect on the Company's business, financial
condition and results of operations. Such claims or litigation, regardless of
the outcome, could have a material adverse effect on the Company's business,
financial condition and results of operations. The Company has recently received
a notice from a third party that holds a patent on a container monitoring
software system and method asserting that certain products or services offered
by the Company may infringe such patent, and offering the Company a license to
such patent. The Company believes that its products and services do not infringe
on such patent. The Company is currently investigating this matter.
The Company has in the past and may in the future, resell, under license,
certain third party software that enables the Company's products to interact
with other software systems or databases. In addition, the Company licenses
certain software tools used to develop the Company's software products. There
can be no assurance that the third party software or software tools will
continue to be available to the Company on commercially reasonable terms. The
loss or inability to maintain any of these software licenses could result in
delays or reductions in product shipments until equivalent software could be
identified and licensed or compiled, which could adversely affect the Company's
business, financial condition or results of operations.
EMPLOYEES
As of June 30, 1998 the Company had 614 full-time employees and 1 part-time
employee. None of the employees of the Company is covered by a collective
bargaining agreement. The Company considers its relations with its employees to
be good.
The Company believes its future success will depend in large part on its
ability to recruit and retain qualified employees, especially experienced
software engineering personnel. The competition for such
52
<PAGE>
personnel is intense, and there can be no assurance that the Company will be
successful in retaining or recruiting key personnel. See "Risk Factors--Ability
to Manage Growth" and "--Dependence on Personnel."
PROPERTIES
The Company maintains three offices in the United States and eight
international offices located in London, Dubai, Tokyo, Hong Kong, Kuala Lumpau,
Singapore, Melbourne and Sidney. The Company's principal administrative, sales,
marketing, support, and research and development facility is located in
approximately 65,000 square feet of office space in Dallas, Texas. The Company
leases this facility from an entity owned and controlled by Lyle Baack, the
Company's Chairman, under a lease agreement that expires in August 2002 and
which provides for a monthly rental payment of $86,569. Mr. Baack has signed a
definitive agreement to sell the premises covered by the lease, subject to
certain conditions, and the Company intends to vacate this space to move to a
120,000 square foot facility also located in Dallas. The Company has entered
into an agreement with Mr. Baack pursuant to which the Company's obligations
under its lease will terminate upon the sale of the premises by Mr. Baack;
provided that the Company has vacated the premises by December 1, 1998.
Following the sale of the premises, the Company has the option to remain on the
premises through February 28, 1999 for an aggregate cost of $435,000. If the
premises are not sold, the Company will remain obligated under the lease. See
"Certain Transactions".
LEGAL PROCEEDINGS
The Company from time to time is a party to litigation arising in the
ordinary course of its business. Except as set forth below, the Company is not a
party to any pending material litigation.
Gary D. Canales, a former employee, filed a lawsuit against the Company and
Raymond Hood, the Company's Chief Executive Officer, and Adam Belsky, the
Company's Chief Financial Officer, on April 30, 1998, in the District Court of
Dallas County, Texas, M-298th Judicial District, no. DV98-03467 alleging
tortious interference with contract and prospective business relationships,
breach of contract, fraud and defamation. Mr. Canales is seeking compensatory
damages in excess of $18,000,000, plus unspecified exemplary damages. The
Company is vigorously defending the lawsuit and believes that Mr. Canales's
claims are without merit.
53
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company and their ages as of
June 30, 1998, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------- ----------- ------------------------------------------------------
<S> <C> <C>
Lyle A. Baack(1)(a).......... 55 Chairman of the Board
Raymond R. Hood(2)(3)(b)..... 38 President, Chief Executive Officer and Director
Adam C. Belsky(3)(c)......... 37 Senior Vice President, Chief Financial Officer and
Director
David A. Alcala.............. 51 Senior Vice President, Industry Marketing
Thomas R. Cooper............. 39 Senior Vice President, Sales and Alliances
C. Donald Scales............. 42 Senior Vice President, Professional Services
George Van Ness.............. 49 Senior Vice President, Research & Development
Christopher F. Wright........ 38 Senior Vice President and General Counsel
Richard Morgan-Evans......... 52 Managing Director, Europe/Middle East/Africa
Kenichi Tsumura.............. 51 Managing Director, Japan
Mark R. Weaser............... 35 Managing Director, Asia/Pacific
Steven A. Denning(1)(2)(b)... 49 Director
J. Michael Cline(1)(2)(a).... 38 Director
</TABLE>
- -------
(1) Member of Compensation Committee.
(2) Member of Audit Committee.
(3) Member of Option Committee.
(a) Term as director expires in 2001.
(b) Term as director expires in 2000.
(c) Term as director expires in 1999.
LYLE A. BAACK has served as the Company's Chairman of the Board since
September 1997. From August 1980 to September 1997, Mr. Baack served as
President and Chief Executive Officer of Dallas Systems, which he founded. Mr.
Baack holds a BS in Electrical Engineering from Colorado State University and a
MS in Computer Information and Control Engineering from the University of
Michigan.
RAYMOND R. HOOD has served as the Company's President, Chief Executive
Officer and a director since September 1997. From 1990 to September 1997, Mr.
Hood served as Chief Executive Officer of Neptune, which he co-founded. Mr. Hood
holds a BS in Economics from the Wharton School at the University of
Pennsylvania.
ADAM C. BELSKY has served as the Company's Senior Vice President, Chief
Financial Officer, Secretary and a director since September 1997. From 1990 to
September 1997, Mr. Belsky served as Chief Financial Officer of Neptune, which
he co-founded. Mr. Belsky holds a BS in Economics from the Wharton School at the
University of Pennsylvania and received a certified public accountant license in
1984.
DAVID A. ALCALA has served as the Company's Senior Vice President, Industry
Marketing since April 1998 after having served as the Company's Senior Vice
President, Sales and Marketing since September 1997. From January 1997 to
September 1997, Mr. Alcala served as the Senior Vice President and Chief
Operating Officer of Neptune. From July 1995 to November 1996, Mr. Alcala served
as Senior Vice President/General Manager of the Logistics Systems Division of HK
Systems, Inc., a materials handling equipment firm. From October 1993 to July
1995, Mr. Alcala served as President and Chief Executive Officer of MTA, Inc., a
management consulting firm. Mr. Alcala holds a BS in Electrical Engineering from
the University of Wisconsin.
54
<PAGE>
THOMAS R. COOPER has served as the Company's Senior Vice President, Sales
and Alliances since March 1998. From November 1994 to February 1998, Mr. Cooper
was Group Vice President of Major Accounts for Oracle Corporation, a database
software company. From January 1983 to November 1994, Mr. Cooper served in
various positions at Data General Corporation, a database software firm, the
most recent of which was Vice President, Worldwide Alliances. Mr. Cooper holds a
BS in Computer Science from Southwest Missouri State.
C. DONALD SCALES has served as the Company's Senior Vice President,
Professional Services since November 1997. From December 1995 to October 1997,
Mr. Scales was a Group Vice President for Services at Oracle Corporation. From
March 1994 to December 1995, Mr. Scales was a Vice President with A.T.
Kearney/EDS, a consulting company. From 1990 to March 1994, Mr. Scales was a
Vice President with Arthur D. Little, a consulting firm. Mr. Scales holds a BS
in Chemical Engineering, a BS in Mathematical Physics, and a M.Ch.E. in Chemical
Engineering from Rice University. He also holds an MBA degree from the Harvard
Business School.
GEORGE VAN NESS has served as the Company's Senior Vice President, Research
and Development since March 1998. From March 1996 to March 1998, Mr. Van Ness
was Vice President, Development for the Consumer Package Goods and Oil and Gas
Industries at Oracle Corporation. From May 1993 to March 1996, Mr. Van Ness was
Group Vice President for Central US Consulting at Oracle Corporation. Mr. Van
Ness holds a BS in Electrical Engineering from the University of Texas.
CHRISTOPHER F. WRIGHT has served as the Company's Senior Vice President and
General Counsel since July 1998. Prior thereto, Mr. Wright was a partner with
Pepper Hamilton LLP, which he joined as an associate in 1990. Pepper Hamilton
LLP currently provides legal services to the Company. Mr. Wright holds a JD
degree from the University of Pennsylvania and a BA degree from Brown
University.
RICHARD MORGAN-EVANS has served as the Company's Managing Director,
Europe/Middle East/ Africa since April 1998. From 1995 to 1998, Mr. Morgan-Evans
was President of SSA Europe, a computer software firm, and served as its General
Manager and Sales Director from 1988 to 1995. Mr. Morgan-Evans is a graduate of
the Royal Military Academy, Sandhurst and the Graduate School of Languages in
London.
KENICHI TSUMURA has served as the Company's Managing Director, Japan since
April 1998. From 1992 to 1998, Mr. Tsumura was President of Fuji Logitech
America, a logistics firm. Mr. Tsumura holds a BS degree in Economics from
Waseda University.
MARK R. WEASER has served as the Company's Managing Director, Asia/Pacific
or its predecessor since September 1997 and had served in the same position for
Neptune since August 1996. From July 1995 to July 1996, he was the Asia Vice
President for Telxon Corporation, a radio frequency hardware supplier. From
February 1993 to June 1995, Mr. Weaser was the Sales Director for American
President Lines, a shipping firm, in Hong Kong, Taiwan and Vietnam. Mr. Weaser
holds a BS in Business Administration from the University of Southern
California.
STEVEN A. DENNING has served as a director of the Company since September
1997. Mr. Denning is a Managing Member of General Atlantic Partners, LLC, a
private equity fund. Mr. Denning has been with General Atlantic and its
predecessors since 1980. He holds a BS in Industrial Management from the Georgia
Institute of Technology, a MS in Management Science from the Naval Postgraduate
School, and a MBA from Stanford University. Mr. Denning also serves on the board
of directors of GT Interactive Software Corp. and several private companies in
the software and information technology industry.
J. MICHAEL CLINE has served as a director of the Company since September
1997. Mr. Cline is a Managing Member of General Atlantic Partners, LLC. Mr.
Cline has been with General Atlantic and its predecessors since 1989. He holds a
BS in Business from Cornell University and a MBA from Harvard
55
<PAGE>
Business School. Mr. Cline also serves on the board of directors of Manugistics
Group, Inc. and several private companies in the software and information
technology industry.
CLASSIFIED BOARD OF DIRECTORS
The Board of Directors of the Company is divided into three classes of
directors each containing, as nearly as possible, an equal number of directors.
Directors within each class are elected to serve three-year terms and
approximately one-third of the directors sit for election at each annual meeting
of the Company's stockholders. The year of expiration of the term of each of the
Company's directors is set forth above under the caption "Executive Officers and
Directors." A classified board of directors may have the effect of deterring or
delaying any attempt by any group to obtain control of the Company by a proxy
contest since such third party would be required to have its nominees elected at
two separate annual meetings of the Board of Directors in order to elect a
majority of the members of the Board of Directors. See "Risk Factors--Certain
Anti-takeover Provisions."
BOARD COMMITTEES
The Audit Committee, which was established in October 1997, currently
consists of Messrs. Hood, Cline and Denning. The Audit Committee recommends
independent auditors, reviews with the independent auditors the scope and
results of the audit engagement, monitors the Company's financial policies and
internal control procedures and reviews and monitors the provisions of non-audit
services by the Company's auditors. The Compensation Committee, which was also
established in October 1997, consists of Messrs. Baack, Cline, and Denning. The
Compensation Committee reviews and recommends salaries, bonuses and other
compensation for the Company's officers. The Compensation Committee also
establishes an annual budget for the number of options to be authorized for
issuance under the Company's stock option plan. The Option Committee, which was
established in January 1998, consists of Messrs. Hood and Belsky. The Option
Committee currently administers the Company's stock option plans and establishes
the terms and conditions for the issuance of stock options to employees and
certain independent contractors of the Company. The Option Committee has the
authority to grant options within the limits of the annual budget established by
the Compensation Committee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to October 1997, the Company had no compensation committee or other
committee of the Board of Directors performing similar functions. Decisions
concerning compensation of executive officers were made by the entire Board of
Directors. None of the members of the Compensation Committee was at any time
since the formation of the Company an officer or employee of the Company. No
interlocking relationship exists between the Company's executive officers or
directors and the compensation committee of any other entity.
DIRECTOR COMPENSATION
Directors currently do not receive any compensation for their services as
directors; however, directors are reimbursed for reasonable expenses incurred in
attending board and committee meetings. In the future, the Company intends to
grant stock options to the non-employee members of the Board of Directors under
its stock option plan for non-employee directors. See "--Stock Option Plans."
EXECUTIVE COMPENSATION
The following table sets forth the total compensation paid or accrued by the
Company, Neptune and Dallas Systems in 1997 for its Chief Executive Officer and
the other four most highly compensated executive officers of the Company, each
of whose total annual salary and bonuses determined for the year ended December
31, 1997 exceeded $100,000 (collectively, the "Named Executive Officers").
56
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ---------------
------------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION(*) SALARY($) BONUS($) COMPENSATION($) OPTIONS(#) COMPENSATION($)
- ------------------------------------ ----------- ----------- ----------------- --------------- -------------------
<S> <C> <C> <C> <C> <C>
Raymond R. Hood..................... $ 110,283 -- -- -- $ 1,044(1)
President, Chief Executive
Officer and Director
Lyle A. Baack....................... 321,668 -- -- -- 9,500(2)
Chairman of the Board
Adam C. Belsky...................... 113,589 -- -- -- 1,044(1)
Senior Vice President,
Chief Financial Officer and
Director
David E. Alcala..................... 163,156 200,000(3) -- 300,000 --
Senior Vice President,
Industry Marketing
Mark R. Weaser...................... 145,200(4) -- $ 63,600(5) 75,000 --
Managing Director,
Asia Pacific
</TABLE>
- ------------------------
* All summary compensation data represents amounts received in 1997 from the
Company Neptune and Dallas Systems.
(1) Represents premiums paid by the Company with respect to a life insurance
policy for the benefit of the referenced officer.
(2) Represents the amount contributed by the Company to the 401(k) account of
Mr. Baack.
(3) Represents an incentive bonus earned and accrued in 1997 (payment of which
was deferred until 1998).
(4) Includes a $31,200 cost of living adjustment.
(5) Represents a $15,600 automobile expense allowance and a $48,000 housing
expense allowance.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth all individual grants of stock options during
the year ended December 31, 1997 to each of the Named Executive Officers:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
INDIVIDUAL GRANTS ANNUAL RATES OF
----------------------------------------------- STOCK
NUMBER OF PERCENT OF PRICE APPRECIATION
SECURITIES TOTAL OPTIONS FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION --------------------
NAME GRANTED(#) FISCAL YEAR(1) PER SHARE($) DATE 5% 10%
- -------------------------------- ----------- ----------------- --------------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Raymond R. Hood................. -- -- -- -- -- --
Lyle A. Baack................... -- -- -- -- -- --
Adam C. Belsky.................. -- -- -- -- -- --
David E. Alcala................. 300,000 24.2% $ 0.75 3/1/07 $ 156,547 $ 377,657
Mark R. Weaser.................. 75,000(3) 6.1% $ 0.75 3/1/07 $ 50,421 $ 108,713
59,896(4) 4.8% $ 2.00 9/16/07 90,383 209,982
</TABLE>
- ------------------------
(1) Based on an aggregate of 1,239,013 shares subject to options granted in
1997.
(2) Assumes stock price appreciation of 5% and 10% compounded annually from the
date the respective options were granted to their expiration date, as
mandated by the rules of the Securities and Exchange Commission and does not
represent the Company's estimate or projection of the future appreciation of
the Company's stock price. Actual gains, if any, are dependent upon the
timing of such exercise and the future performance of the Company's Common
Stock and may be greater or less than the potential realizable value set
forth in the table.
(3) This option is fully vested.
(4) This option is vested with respect to 34,896 shares. The remaining 25,000
shares vest annually in equal amounts over two years.
57
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
No Named Executive Officer exercised any stock option during 1997. The
following table summarizes the value of the outstanding options granted by the
Company held by the Named Executive Officers at December 31, 1997:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-THE-
UNDERLYING MONEY
UNEXERCISED OPTIONS AT FISCAL OPTIONS AT FISCAL YEAR-
YEAR-END END(1)
----------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------------------------- ------------ --------------- ------------ --------------
<S> <C> <C> <C> <C>
Raymond R. Hood...................................... -- -- -- --
Lyle A. Baack........................................ -- -- -- --
Adam C. Belsky....................................... -- -- -- --
David E. Alcala...................................... 300,000 -- $ 375,000 --
Mark R. Weaser....................................... 109,896 25,000 $ 93,750 --
</TABLE>
- ------------------------------
(1) Based on the fair market value of the Company's Common Stock as of December
31, 1997 of $2.00 per share (as determined by the Board of Directors), less
the exercise price payable upon exercise of such options.
STOCK OPTION PLANS
1997 INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN. On September 15, 1997,
the Company adopted the 1997 Incentive and Non-Qualified Stock Option Plan (the
"1997 Plan") which replaced all previous plans of the predecessor companies.
Under the 1997 Plan, an aggregate of 4,500,000 shares of Common Stock are
authorized for issuance. The 1997 Plan provides for the grant of incentive stock
options ("ISOs") to employees (other than employees who are also directors) of
the Company and nonqualified stock options ("NQSOs") to employees or
consultants. Exercise prices for ISOs may not be less than fair market value on
the date of grant, and exercise prices for NQSOs may be greater or less than
fair market on the date of grant. Unless altered pursuant to the terms of an
option agreement, the options vest and become exercisable ratably over a
four-year period and expire after 10 years.
The 1997 Plan is administered by the Option Committee of the Board of
Directors. The Option Committee has the authority to adopt, amend and repeal the
administrative rules, guidelines and practices relating to the 1997 Plan
generally and to interpret the provisions thereof. The Compensation Committee of
the Board of Directors is responsible for establishing an annual budget for the
total number of options authorized for issuance under the 1997 Plan. The Option
Committee has the authority to grant options to the Company's employees and
consultants within limits of the annual budget established by the Compensation
Committee. The Option Committee determines, with respect to each option grant,
(i) the number of shares of Common Stock issuable upon the exercise of options,
(ii) the exercise price, (iii) the vesting schedule and (iv) the duration of the
options. The 1997 Plan permits the payment of the exercise price of options to
be in the form of cash, check, or such other form of consideration and method of
payment as determined by the Option Committee.
No award may be made under the 1997 Plan after September 15, 2007, but
awards previously granted may extend beyond that time. The Board of Directors
may at any time terminate the 1997 Plan. Any such termination will not affect
outstanding options.
In the event of a change in control of the Company (as defined in the 1997
Plan), the Board of Directors shall have the right, in its sole discretion, to
accelerate the vesting of all options that have not vested as of the date of the
change in control. In addition, in the event of a change in control of the
Company, the Board shall have the right, in its sole discretion: (a) to arrange
for the successor company (or other entity) to assume all of the rights and
obligations of the Company under the 1997 Plan; or (b) to terminate the 1997
Plan and (i) to pay to all optionees cash with respect to those options that are
vested as of the date of the change in control in an amount equal to the
difference between the exercise price of each option and the fair market value
of a share of Common Stock (determined as of the date the 1997
58
<PAGE>
Plan is terminated) multiplied by the number of options that are vested as of
the date of the Sale of the Company which are held by the optionee as of such
date, or (ii) to arrange for the exchange of all options for options to purchase
common stock in the successor corporation, or (iii) to distribute to each
optionee other property in an amount equal to and in the same form as the
optionee would have received from the successor corporation if the optionee had
owned the shares subject to options that are vested as of the date of the change
in control of the Company rather than the option at the time of the change in
control of the Company. The form of payment or distribution to the optionees
shall be determined by the Board of Directors in its sole discretion.
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS. In September 1997, the
Company adopted the Stock Option Plan for Non-Employee Directors (the "Directors
Plan") and reserved an aggregate of 300,000 shares of Common Stock for issuance
thereunder. Members of the Board who are not employees of the Company, or of any
parent or subsidiary of the Company, are eligible to participate in the
Directors Plan. The Company expects to amend the Directors Plan such that each
eligible director who is or becomes a member of the Board on or after the public
offering ("Effective Date") will automatically be granted an option for 12,000
shares (an "Initial Option") on the later of the Effective Date or the date such
director first becomes a director. At each annual meeting of stockholders
thereafter, each eligible director who is re-elected for another term at such
meeting will automatically be granted an additional option to purchase 12,000
shares. All options will vest as to 33 1/3% of the total shares on each of the
first three anniversaries of the date of grant. Any unvested options will
terminate upon the termination of the optionee's service as a director; provided
that if the optionee has completed his or her current term as a director and is
not re-elected, all options shall vest on the last day of the optionee's term.
Options will terminate at the earliest of: (a) ten years after the date on which
the option was granted; (b) twelve months after the cessation of services
resulting from the individuals death or disability; or (c) three months after
the cessation of services resulting from any other reason. The exercise price of
all options granted under the Directors Plan will be the fair market value of
the Common Stock on the date of the grant.
401(K) PLAN
The Company maintains a 401(k) Plan (the "401(k) Plan") which is intended to
be a tax-qualified retirement plan under Section 401(k) of the Internal Revenue
Code (the "Code"). Pursuant to the 401(k) Plan, a participant may contribute,
subject to certain Code limitations, up to 15% of compensation, as defined in
the Code, to the 401(k) Plan. Employees are eligible to participate upon
completion of their first calendar month of employment. The Company will match
contributions made by employees pursuant to the 401(k) Plan at a rate of 100% of
the participant's contributions, up to 5% of the compensation contributed by the
participant, provided the participant is employed on the last day of the
calendar quarter for which the match is made, subject to certain Code
limitations. The Company may make an additional contribution to participants'
accounts each year at the discretion of the Board of Directors. All employees of
the Company who have completed one year of service with the Company consisting
of at least 1,000 hours of employment and are employed on the last day of the
plan year are eligible for the discretionary contribution. The portion of a
participant's account attributable to his or her own contributions is 100%
vested. The portion of the account attributable to Company contributions
(including matching and discretionary contributions) vests over two to five
years of service with the Company. Distributions from the 401(k) Plan may be
made in the form of an annuity or lump-sum cash payment.
EMPLOYMENT AGREEMENTS
DAVID ALCALA. In November 1996, Neptune entered into an employment
agreement with Mr. Alcala. The employment agreement's initial three year term
expires on December 31, 1999; however, the employment agreement automatically
renews for successive one year terms unless terminated by
59
<PAGE>
either party with at least 180 days' prior written notice. Under the employment
agreement, Mr. Alcala is employed as the Company's Senior Vice President,
Industry Marketing and receives an annual base salary of $175,000 as well as
certain other benefits including term life insurance in the amount of $300,000.
Mr. Alcala is also eligible to participate in any incentive compensation plan
for executive officers of the Company that may be established in the future.
Pursuant to the employment agreement, the Company has granted to Mr. Alcala: (i)
options to purchase 300,000 shares of Common Stock at an exercise price of $0.75
per share, which options vested in full upon the Acquisition; and (ii) options
to purchase 39,583 shares of Common Stock at an exercise price of $2.00 per
share, which options immediately vested in full. Notwithstanding the employment
agreement, the Company may terminate Mr. Alcala's employment, with or without
cause, upon 90 days' written notice. If Mr. Alcala is terminated without cause,
he is entitled to receive a severance payment equal to the greater of his
remaining base salary for the term of his employment agreement and $160,000.
However, Mr. Alcala in his discretion may waive the Company's obligation to make
such severance payment for the right to terminate all non-competition provisions
in the employment agreement. If Mr. Alcala is terminated for cause, his base
salary and benefits and bonuses shall cease at the date of such termination if
the Company releases Mr. Alcala from certain non-competition obligations
contained in the employment agreement.
MARK WEASER. In July 1996, Neptune entered into an employment agreement
with Mr. Weaser. The employment agreement is for an unspecified term and is
terminable by either party upon two weeks' prior written notice. Under the
employment agreement, Mr. Weaser is employed as the Company's Managing Director,
Asia/Pacific and receives an annual base salary of $114,000 as well as certain
other benefits. Mr. Weaser is also eligible to participate in any incentive
compensation plan for executive officers of the Company that may be established
in the future. Pursuant to the Employment Agreement, the Company has granted to
Mr. Weaser: (i) options to purchase 75,000 shares of Common Stock at an exercise
price of $0.75 per share, which options vested in full upon the Acquisition;
(ii) options to purchase 9,896 shares of Common Stock at an exercise price of
$2.00 per share, which options immediately vested in full; and (iii) options to
purchase 50,000 shares of Common Stock at an exercise price of $2.00 per share,
25,000 of which vested immediately and the remaining 25,000 of which will vest
in two equal installments on September 16, 1998 and 1999. If Mr. Weaser is
terminated without cause, the Company is obligated to pay him severance equal to
six months' of his total compensation.
LIMITATION OF LIABILITY OF DIRECTORS AND INDEMNIFICATION OF DIRECTORS AND
OFFICERS
As permitted by the Delaware General Corporation Law ("DGCL"), the Company's
Certificate of Incorporation provides that, subject to certain limited
exceptions, no director of the Company shall be liable to the Company for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the Company or
its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) for the unlawful
payment of dividends on or redemption of the Company's capital stock, or (iv)
for any transaction from which the director derived an improper personal
benefit. The effect of this provision is to limit the ability of the Company and
its stockholders (through stockholder derivative suits on behalf of the Company)
to recover monetary damages against a director for the breach of certain
fiduciary duties as a director (including breaches resulting from grossly
negligent conduct). In addition, the Company's Certificate of Incorporation and
By-Laws provide that the Company shall, to the full extent permitted by the
DGCL, indemnify all directors and officers of the Company and that the Company
may, to the extent permitted by the DGCL, indemnify employees and agents of the
Company.
The Company intends to procure a directors' and officers' insurance policy
to afford officers and directors coverage for losses arising from claims based
on breaches of duty, negligence, error and other wrongful acts. The Company also
may enter into indemnification agreements with each director of the Company. See
"Certain Transactions."
60
<PAGE>
CERTAIN TRANSACTIONS
During the year ended December 31, 1997, the Company advanced $923,432 to
Astrid Holdings, Inc. ("Astrid"), a company which was then owned by Messrs.
Hood, the Company's Chief Executive Officer, Belsky, the Company's Chief
Financial Officer, and Nigel Bahadur, the former principal shareholders of
Neptune each of whom is a Selling Stockholder. At December 31, 1997, these
advances, which were the result of a $750,000 cash advance and $173,432 in
services and expense reimbursements provided by EXE, remained outstanding. As
part of the Acquisition, EXE was granted an option to acquire Astrid for an
aggregate purchase of $1.5 million, which became exercisable (i) ninety days
prior to the expected closing date of the initial public offering of EXE or (ii)
from November 2, 1998 through November 1, 2002. On May 21, 1998, Messrs. Hood,
Belsky and Bahadur sold their entire interest in Astrid. In connection with that
transaction, Astrid's outstanding obligations to the Company were satisfied and
the Company's option to purchase Astrid was terminated.
Immediately following the Acquisition, certain of the Company's stockholders
entered into a stockholders agreement. The agreement, which terminates by its
terms upon completion of this offering, provided for the nomination and election
of each of the Company's current directors.
On September 15, 1997, the Company issued 6,764,043 Series A Preferred Stock
and 4,573,519 shares of Series B Preferred Stock, for an aggregate purchase
price of $25 million, to two investment limited partnerships that are affiliates
of J. Michael Cline and Steven A. Denning, directors of the Company.
On September 15, 1997, the Company repurchased 6,763,513 shares of Common
Stock of the Company from Lyle Baack, the Company's Chairman, for an aggregate
purchase price of $14,788,421.
In June and July 1998, pursuant to certain commitments by the Company that
were approved by the Board of Directors on April 6, 1998, the Company issued an
aggregate of 83,333 shares of Common Stock to the following executive officers
of the Company: Thomas Cooper, Senior Vice President, Sales and Alliances
purchased an aggregate of 33,333 shares of Common Stock for an aggregate
purchase price of $99,999; Richard Morgan-Evans, Managing Director,
Europe/Middle East/Africa, purchased an aggregate of 33,333 shares of Common
Stock for an aggregate purchase price of $99,999; and Mark Weaser, Managing
Director, Asia Pacific purchased an aggregate of 16,667 shares of Common Stock
for an aggregate purchase price of $50,001.
In July 1998, the Company issued 10,000 shares to C. Donald Seales, Senior
Vice President, Professional Services, for an aggregate purchase price of
$50,000.
The Company currently leases office space in Dallas from an entity owned and
controlled by Lyle Baack, the Company's Chairman. This lease, which expires in
August 2002, provides for a current monthly rental payment of $86,569. Mr. Baack
has signed a definitive agreement to sell the premises covered by the lease,
subject to certain conditions, and the Company intends to vacate the premises by
December 1, 1998. The Company has entered into an agreement with Mr. Baack
pursuant to which the Company's obligations under the lease will terminate upon
the sale of the premises by Mr. Baack; provided that the Company has vacated the
premises by December 1, 1998. Following the sale of the premises, the Company
has the option to remain on the premises through February 28, 1999 for an
aggregate cost of $435,000. If the premises are not sold, the Company will
remain obligated under the lease.
The Company considers the terms of the above-referenced transactions to be
at arm's length and reasonably equivalent to terms it could have obtained
through negotiations with an unaffiliated third parties under similar economic
conditions. All future transactions, including loans, between the Company and
its officers, directors and principal stockholders and their affiliates will be
approved by a majority of the Board of Directors, including a majority of the
independent and disinterested directors of the Board of Directors, and will be
on terms no less favorable to the Company than could be obtained from
unaffiliated third parties.
61
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of July 15, 1998, and as
adjusted to reflect the sale of Common Stock by the Company and the Selling
Stockholders in the offerings, with respect to: (i) each director of the
Company; (ii) each of the Named Executive Officers; (iii) each stockholder known
by the Company to be the beneficial owner of more than 5% of the Company's
Common Stock; (iv) the Selling Stockholders; and (v) all executive officers and
directors as a group. Except as otherwise noted, the persons or entities named
in the table have sole voting and investment power with respect to all the
shares of Common Stock beneficially owned by them.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO NUMBER OF AFTER THE
THE OFFERINGS (2) SHARES OFFERINGS (2)(3)
--------------------------- BEING ---------------------------
NAME(1) SHARES PERCENTAGE OFFERED SHARES PERCENTAGE
- --------------------------------------------- ---------- --------------- ----------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Raymond R. Hood(4)........................... 3,612,500 12.5% 361,250 3,251,250 9.1%
Adam C. Belsky(5)............................ 3,612,500 12.5 361,250 3,251,250 9.1
Nigel Bahadur................................ 1,275,000 4.4 127,500 1,147,500 3.2
Lyle A. Baack................................ 5,002,188 17.4 -- 5,002,188 14.0
David E. Alcala(6)........................... 408,186 1.4 -- 408,186 1.1
Mark R. Weaser(7)............................ 200,636 * -- 200,636 *
J. Michael Cline(8).......................... 11,337,562 39.4 -- 11,337,562 31.8
Steven A. Denning(8)......................... 11,337,562 39.4 -- 11,337,562 31.8
General Atlantic Partners, LLC(8)............ 11,337,562 39.4 -- 11,337,562 31.8
Michael S. Dell(9)........................... 1,600,000 5.6 -- 1,600,000 4.5
All executive officer and directors as a
group (13 persons)(10)..................... 24,599,312 83.1 722,500 23,876,812 65.2
</TABLE>
- ------------------------
* Less than 1% of the Company's outstanding Common Stock.
(1) Except as set forth herein, the street address of the named beneficial owner
is c/o EXE Technologies, Inc., 12740 Hillcrest Road, Dallas, Texas 75230.
(2) For purposes of calculating the percentage beneficially owned, the number of
shares of Common Stock deemed outstanding prior to the offerings includes
(i) 28,802,167 shares outstanding as of July 15, 1998 and (ii) shares
issuable by the Company pursuant to options held by the respective person or
group which may be exercised within 60 days following July 15, 1998
("Presently Exercisable Options"). Beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission that
deem shares to be beneficially owned by any person or group who has or
shares voting and investment power with respect to such shares. Presently
Exercisable Options are deemed to be outstanding and to be beneficially
owned by the person or group holding such options for the purpose of
computing the percentage ownership of such person or group but are not
treated as outstanding for the purpose of computing the percentage ownership
of any other person or group.
(3) Assumes no exercise of the Underwriters' over-allotment options.
(4) Includes 131,000 shares held by the Adam Belsky Irrevocable GST Exempt
Trust, of which Mr. Hood is the sole trustee.
(5) Includes 131,000 shares held by the Raymond Hood Irrevocable GST Exempt
Trust, of which Mr. Belsky is the sole trustee.
(6) Includes 339,583 shares issuable upon the exercise of Presently Exercisable
Options. Also includes 57,760 shares that Mr. Alcala has the option to
purchase from General Atlantic Partners 41, L.P. ("GAP 41") and 10,843
shares that he has the option to purchase from GAP Coinvestment Partners,
L.P. ("GAPCO")
(7) Includes 109,896 shares issuable upon the exercise of Presently Exercisable
Options.
(8) Includes 9,544,746 shares of Common Stock held by GAP 41 and 1,792,816
shares of Common Stock held by GAPCO. The general partner of GAP 41 is
General Atlantic Partners, LLC ("GAP LLC"). The managing members of GAP LLC
are also the general partners of GAPCO. Each of Messrs. Steven A. Denning
and J. Michael Cline is a managing member of GAP LLC and a general partner
of GAPCO. Each of Messrs. Denning and Cline disclaims beneficial ownership
of the securities held by GAP 41 and GAPCO except to the extent of his
pecuniary interest therein. In addition, pursuant to the Option Agreement,
dated as
62
<PAGE>
of September 15, 1997, among GAP 41, GAPCO and David Alcala, GAP 41 granted
to Mr. Alcala an option to purchase 57,760 shares of Common Stock held by
GAP 41 and GAPCO granted to Mr. Alcala an option to purchase 10,843 shares
of Common Stock held by GAPCO. The address for each of Messrs. Denning and
Cline and GAP LLC is c/o General Atlantic Service Corporation, 3 Pickwick
Plaza, Greenwich, CT 06830.
(9) Includes 1,600,000 shares of Common Stock held by MSD Capital L.P. ("MSD
Capital"), Triple Marlin Investments LLC ("Triple Marlin") and Rothko
Investments LLC ("Rothko"), of which Mr. Dell disclaims beneficial ownership
of 400,000 shares. Mr. Dell is the general partner of MSD Capital, which is
a member of each of Triple Marlin and Rothko. The address for Mr. Dell is
c/o Dell Computer Corporation, One Dell Way, Round Rock, Texas 78682.
(10) Includes an aggregate of 793,082 shares issuable upon the exercise of
Presently Exercisable Options.
63
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of (i) 50,000,000 shares of
Common Stock, par value $0.01 per share, and (ii) 15,000,000 shares of Preferred
Stock, par value $0.01 per share. Immediately prior to the offerings, there were
15,771,730 shares of Class A Common Stock issued and outstanding, 2,875 shares
of Class B Common Stock issued and outstanding, and 12,937,562 shares of
Preferred Stock issued and outstanding held of record by 109 stockholders. Upon
completion of the offerings, the Company's authorized capital stock will consist
of (i) 185,000,000 shares of Common Stock and (ii) 15,000,000 shares of
Preferred Stock, of which there will be 35,652,167 shares of Common Stock and no
shares of Preferred Stock outstanding.
The following description of the capital stock of the Company is a summary
and is qualified in its entirety by the provisions of the Company's Certificate
of Incorporation and Bylaws, copies of which have been filed as exhibits to the
Registration Statement of which this Prospectus is a part.
COMMON STOCK
Upon the closing of the offerings, the Class A Common Stock will be renamed
to "Common Stock" and all outstanding shares of Class B Common Stock will
convert into shares of Common Stock on a one-for-one basis. The holders of
Common Stock are entitled to one vote per share. In the event of a liquidation,
dissolution or winding up of the Company, holders of the Common Stock are
entitled to share proportionally in all assets of the Company, if any, remaining
after payment of the Company's liabilities and the liquidation preference of any
outstanding shares of Preferred Stock. The outstanding shares of Common Stock
are, and the shares of Common Stock offered by the Company hereby when issued
will be, fully paid and nonassessable. The rights, preferences and privileges of
holders of Common Stock are subject to any series of Preferred Stock that the
Company has issued or may issue in the future. The holders of Common Stock have
no preemptive or conversion rights (other than with respect to an initial public
offering as described above) and are not subject to future calls or assessments
by the Company.
PREFERRED STOCK
Upon the closing of the offerings, all outstanding shares of Preferred Stock
(the "Convertible Preferred") will be converted into shares of Common Stock and
there will be no shares of Preferred Stock outstanding. See Note 12 of Notes to
Financial Statements of the Company for a description of the Convertible
Preferred. The Board is authorized, subject to limitations prescribed by
Delaware law, to provide for the issuance of additional shares of Preferred
Stock in one or more series, to establish from time to time the number of shares
to be included in each such series, to fix the powers, designations, preferences
and rights of the shares of each wholly unissued series and designate any
qualifications, limitations or restrictions thereon and to increase or decrease
the number of shares of any such series (but not below the number of shares of
such series then outstanding) without any further vote or action by the
stockholders. The issuance of Preferred Stock could adversely affect the voting
power of the holders of Common Stock of the Company or have the effect of
deterring or delaying any attempt by a person, entity or group to obtain control
of the Company. See "Risk Factors--Certain Anti-takeover Provisions." The
Company has no current plan to issue any shares of Preferred Stock.
REGISTRATION RIGHTS
Pursuant to an Amended and Restated Registration Rights Agreement dated July
10, 1998 (the "Registration Rights Agreement") among GAP 41, GAPCO (together
with GAP 41, the "GAP Stockholders"), MSD Capital L.P. ("MSD Capital"), Triple
Marlin Investments LLC ("Triple Marlin"), Rothko Investments LLC ("Rothko," and
collectively with MSD Capital and Triple Marlin, the "Series C Investors"), Lyle
64
<PAGE>
Baack ("Baack"), Nigel Bahadur, Adam Belsky and Raymond Hood (collectively, the
"Neptune Stockholders," and together with Baack, the "Major Stockholders"), each
of the GAP Stockholders, the Series C Investors and the Major Stockholders are
entitled to specific rights with respect to the registration under the
Securities Act, for resale to the public, of the shares of Common Stock owned by
them concurrently with and after the offerings.
The Registration Rights Agreement permits the Neptune Stockholders to
include in the offerings the 850,000 shares being offered by them in the
offerings (the "Neptune IPO Shares"), subject to certain limitations and
restrictions. These limitations and restrictions include the right of the
Underwriters to exclude all or a portion of the Neptune IPO Shares from the
offerings.
The Registration Rights Agreement permits the GAP Stockholders and the
Series C Investors, as a group, and the Major Stockholders, as a group, each to
twice require the Company, whether or not the Company proposes to register its
Common Stock for sale, to register all or part of the total number of shares of
Common Stock held by each such group for sale to the public under the Securities
Act, subject to certain conditions and limitations. The Company is required to
bear the expenses of such registrations and to use its best efforts to effect
such registrations, subject to certain conditions and limitations. In addition
to the demand registration rights describe above, the Registration Rights
Agreement permits the GAP Stockholders and the Series C Investors, as a group,
and the Major Stockholders, as a group, to require the Company to register the
shares held by each group on a Form S-3 once the Company has qualified to use
Form S-3, subject to certain conditions and limitations. The Registration Rights
Agreement also provides that, after the offering and subject to certain
exceptions, in the event the Company proposes to file a registration statement
under the Securities Act with respect to an offering by the Company for its own
account, each of the GAP Stockholders, the Series C Investors and the Major
Stockholders are entitled to include their shares in such registration, subject
to certain conditions and limitations.
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN PROVISIONS OF THE CERTIFICATE OF
INCORPORATION
AND BY-LAWS
The Company is a Delaware corporation and consequently is subject to certain
anti-takeover provisions of the DGCL. The business combination provision
contained in Section 203 of the DGCL ("Section 203") defines an interested
stockholder of a corporation as any person that (i) owns, directly or
indirectly, 15% or more of the outstanding voting stock of the corporation or
(ii) is an affiliate or associate of the corporation and was the owner of 15% or
more of the outstanding voting stock of the corporation at any time within the
three-year period immediately prior to the date on which it is sought to be
determined whether such person is an interested stockholder, and the affiliates
and the associates of such person and defines business combination to include
certain mergers, consolidations, asset sales, transfers and other transactions
resulting in a financial benefit to the interested stockholder. Under Section
203, a Delaware corporation may not engage in any business combination with any
interested stockholder for a period of three years following the date such
stockholder became an interested stockholder, unless (i) prior to such date the
board of directors of the corporation approved either the business combination
or the transaction which resulted in the stockholder becoming an interested
stockholder, or (ii) upon completion of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested stockholder owned
at least 85% of the voting stock of the corporation outstanding at the time the
transaction commenced (excluding, for determining the number of shares
outstanding, (a) shares owned by persons who are directors and also officers and
(b) employee stock plans, in certain instances), or (iii) on or subsequent to
such date the business combination is approved by the board of directors and
authorized at an annual or special meeting of stockholders by at least 66% of
the outstanding voting stock that is not owned by the interested stockholder.
The restrictions imposed by Section 203 will not apply to a corporation if
(i) the corporation's original certificate of incorporation contains a provision
expressly electing not to be governed by Section 203 or
65
<PAGE>
(ii) the corporation by the action of its stockholders holding a majority of
outstanding stock adopts an amendment to its certificate of incorporation or
by-laws expressly electing not to be governed by Section 203 (such amendment
will not be effective until 12 months after adoption and shall not apply to any
business combination between such corporation and any person who became an
interested stockholder of such corporation on or prior to such adoption). The
Company has not elected out of Section 203, and upon completion of the offering
the restrictions imposed by Section 203 will apply to the Company. Section 203
could under certain circumstances make it more difficult for a third party to
gain control of the Company, deny stockholders the receipt of a premium on their
Common Stock and have a depressive effect on the market price of the Common
Stock.
Upon completion of the offerings, the Company's Board of Directors will be
divided into three classes of directors each containing, as nearly as possible,
an equal number of directors. Directors within each class will be elected to
serve three-year terms and approximately one-third of the directors sit for
election at each annual meeting of the Company's stockholders. A classified
board of directors may have the effect of deterring or delaying any attempt by
any group to obtain control of the Company by a proxy contest since such third
party would be required to have its nominees elected at two separate annual
meetings in order to elect a majority of the members of the Board of Directors.
In addition, the Company's By-Laws allow the Board of Directors to increase the
number of directors from time to time and to fill any vacancies on the Board of
Directors, including vacancies resulting from an increase in the number of
directors.
The Company's By-Laws also provide that special meetings of the stockholders
may be called only by the Board or by the President or Secretary of the Company.
Stockholders are not generally permitted to call, or to require that the Board
of Directors call, a special meeting of stockholders. This provision may prevent
a stockholder from forcing stockholder consideration of a proposal over the
opposition of the Board of Directors by calling a special meeting of
stockholders prior to the time the Board believes such consideration to be
appropriate.
The provisions of the By-Laws summarized in the preceding paragraphs contain
provisions that may have the effect of delaying, deferring or preventing a
non-negotiated merger or other business combination involving the Company. These
provisions are intended to encourage any person interested in acquiring the
Company to negotiate with and obtain the approval of the Board of Directors in
connection with the transaction. Certain of these provisions may, however,
discourage a future acquisition of the Company not approved by the Board of
Directors in which stockholders might receive an attractive value for their
shares or that a substantial number or even a majority of the Company's
stockholders might believe to be in their best interest. As a result,
stockholders who desire to participate in such a transaction may not have the
opportunity to do so. Such provisions could also discourage bids for the Common
Stock at a premium, as well as create a depressive effect on the market price of
the Common Stock. See "Risk Factors--Certain Anti-takeover Provisions."
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company's Common Stock is
.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the offerings, there has been no public market for the Common Stock
of the Company. Future sales of substantial amounts of Common Stock in the
public market, or the perception that such sales could occur, could adversely
affect market prices prevailing from time to time. Furthermore, since only a
limited number of shares will be available for sale shortly after the offerings
because of certain contractual and legal restrictions on resale described below,
sales of substantial amounts of Common Stock of the Company in the public market
after the restrictions lapse could adversely affect the
66
<PAGE>
prevailing market price and the ability of the Company to raise equity capital
in the future. See "Risk Factors--Shares Eligible for Future Sale."
Upon completion of the offerings, the Company will have outstanding
35,652,167 shares of Common Stock (assuming no exercise of the underwriters'
over-allotment options or options to purchase the Company's Common Stock
outstanding as of July 15, 1998). Of these shares, the 7,700,000 shares sold in
the offerings will be freely tradable without restriction or further
registration under the Securities Act unless such shares are purchased by
"affiliates" of the Company as that term is defined in Rule 144 under the
Securities Act (which sales would be subject to certain limitations and
restrictions described below). The remaining 27,952,167 shares held by existing
stockholders are Restricted Shares. Restricted Shares may be sold in the public
market only if registered under the Securities Act or if they qualify for an
exemption from registration under Rule 144, Rule 144(k) or Rule 701 promulgated
under the Securities Act. As a result of the Lock-Ups described below and the
provisions of Rules 144, 144(k) and 701, the Restricted Shares will be available
for sale in the public market as follows: (i) 2,875 shares will become eligible
for sale 90 days after the date of this Prospectus under Rule 701, (ii) 45,735
shares will become eligible for sale from time to time between the 90th day and
the 180th day after the date of this Prospectus, (iii) 25,841,891 shares will
become eligible for sale upon expiration of the Lock-Ups 180 days after the date
of this Prospectus, and (iv) the remaining 2,061,666 shares will become eligible
for sale from time to time thereafter.
Pursuant to the Lock-Ups signed by the officers, directors and certain
stockholders and option holders of the Company, the holders of 25,831,230 shares
and options to purchase 1,849,896 shares have agreed not to offer, pledge, sell,
offer to sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer or dispose of, directly or indirectly any shares
of Common Stock or any securities convertible into or exercisable or
exchangeable for shares of Common Stock (other than gifts subject to certain
restrictions) until 180 days after the date of this Prospectus without the prior
written consent of Goldman, Sachs & Co. The Company has also agreed not to sell,
grant any option to purchase or otherwise dispose of any shares of Common Stock
or any securities convertible into or exercisable or exchangeable for Common
Stock for a period of 180 days following the date of the Prospectus without the
prior written consent of Goldman, Sachs & Co. on behalf of the Underwriters,
subject to certain limited exceptions. See "Underwriting." Goldman, Sachs & Co.
in its sole discretion and without notice may earlier release for sale in the
public market all or any portion of the shares subject to the Lock-Ups.
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, a person (or persons whose shares are aggregated)
who has beneficially owned shares for a least one year (including the holding
period of any prior owner except an affiliate) is entitled to sell in "brokers'
transactions" or to market makers, within any three-month period a number of
shares that does not exceed the greater of: (i) one percent of the number of
shares of Common Stock then outstanding (approximately 356,000 shares
immediately after the offerings) or (ii) the average weekly trading volume in
the Common Stock during the four calendar weeks preceding the required filing of
a Form 144 with respect to such sale. Sales under Rule 144 are subject to the
availability of current public information about the Company. Under Rule 144(k),
a person who is not deemed to have been an affiliate of the Company at any time
during the 90 days preceding a sale, and who has beneficially owned the shares
proposed to be sold for at least two years, is entitled to sell such shares
without having to comply with the manner of sale, public information, volume
limitation or notice filing provisions of Rule 144. Unless otherwise restricted,
"144(k) shares" may therefore be sold immediately upon the completion of the
offerings.
Under Rule 701 under the Securities Act, persons who purchase shares upon
exercise of options granted prior to the offerings are entitled to sell such
shares 90 days after the closing of the offerings in reliance on Rule 144,
without having to comply with the holding period requirements of Rule 144 and,
in the case of non-affiliates, without having to comply with the volume
limitation or notice filing provisions of
67
<PAGE>
Rule 144. The Securities and Exchange Commission has indicated that Rule 701
will apply to typical stock options granted by an issuer before it becomes
subject to the reporting requirements of the Exchange Act, along with the shares
acquired upon exercise of such options (including exercises after the date of
the offerings). Upon completion of the offerings, assuming no exercise of
options outstanding as of July 15, 1998, the Company will have outstanding
options to purchase 4,313,376 shares of Common Stock. If such options are
exercised when vested, as a result of Rule 701 and the Lock-Ups, the shares
underlying such options would be available for sale in the public market as
follows: (i) 785,050 shares will become eligible for sale 90 days following the
date of this Prospectus, (ii) 251,152 shares will become eligible for sale from
time to time between the 90th day and the 180th day after the date of this
Prospectus, (iii) 720,666 shares will become eligible for sale 180 days after
the date of this Prospectus, and (iv) the remaining 2,556,508 shares will become
eligible for sale from time to time thereafter. As soon as practicable after the
completion of this offering, the Company intends to file a Registration
Statement on Form S-8 (the "Form S-8") under the Securities Act to register the
4,800,000 shares of Common Stock reserved for issuance under the 1997 Plan and
the Directors Plan. After the date of such filing, if not otherwise subject to a
lock-up agreement, shares purchased pursuant to such plans and options generally
would be available for resale in the public market. See "Management-- Stock
Option Plans."
Holders of approximately 25,589,750 shares of Common Stock are currently
entitled to certain demand and piggyback registration rights with respect to
such shares. See "Description of Capital Stock--Registration Rights."
68
<PAGE>
LEGAL MATTERS
The validity of the issuance of the shares of the Common Stock offered
hereby will be passed upon for the Company by Pepper Hamilton LLP. Certain legal
matters in connection with the offerings will be passed upon for the
Underwriters by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo
Alto, California.
EXPERTS
The consolidated financial statements of EXE at December 31, 1997 and for
the year then ended, and the consolidated financial statements of Dallas Systems
at December 31, 1996 and for each of the two years in the period then ended, and
at September 15, 1997 and for the eight and one-half months then ended,
appearing in this Prospectus and Registration Statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in their reports thereon
appearing elsewhere herein, and are included in reliance upon such reports given
upon the authority of such firm as experts in accounting and auditing.
The financial statements of Neptune as of December 31,1996 and for each of
the two years in the period ended December 31, 1996 included in this Prospectus
have been so included in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Prior to the Acquisition, Neptune had retained Price Waterhouse LLP as its
independent accountants and Dallas Systems had retained Ernst & Young LLP as its
independent accountant. On July 17, 1997, the Company dismissed Price Waterhouse
LLP and retained Ernst & Young LLP as its independent accountant. During the two
years ended December 31, 1996 and through the date of change in accountants,
there were no disagreements between Neptune and Price Waterhouse LLP on any
matter of accounting principles or practices, financial statement disclosure or
auditing scope or procedure, which disagreements if not resolved to the
satisfaction of Price Waterhouse LLP would have caused them to make reference
thereto in their report on the financial statements for such years. The reports
of Price Waterhouse LLP on Neptune's financial statements as of December 31,
1995 and 1996 and for the years then ended did not contain an adverse opinion or
a disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principles. The change in independent accountants was
approved by the Board of Directors of the Company in connection with the
Acquisition.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (together with all
amendments, schedules and exhibits thereto, the "Registration Statement") under
the Securities Act with respect to the shares of Common Stock offered hereby.
This Prospectus, which constitutes a part of the Registration Statement, does
not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. For further information with respect to the Company and the
Common Stock offered hereby, reference is made to the Registration Statement.
Statements made in this Prospectus as to the contents of any contract, agreement
or other document are not necessarily complete, and in each instance, reference
is made to the copy of such contract or other document filed as an exhibit to
the Registration Statement, each such statement being qualified in all respects
by such reference. The Registration Statement and the exhibits and schedules
thereto may be inspected without charge at the public reference facilities
maintained by the Commission in Room 1024, 450 Fifth Street, N. W., Washington,
D.C. 20549, and at the following regional offices of the Commission:
69
<PAGE>
Seven World Trade Center, Room 1400, New York, New York 10048 and Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N. W., Washington, D.C. 20549, Room 1024, at
prescribed rates. In addition, the Company is required to file electronic
versions of these documents with the Commission through the Commission's
Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system. The
Commission maintains a World Wide Web Site at HTTP://WWW.SEC.GOV that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission.
The Company intends to furnish to its stockholders annual reports containing
financial statements audited by an independent public accounting firm and
quarterly reports for the first three quarters of each fiscal year containing
unaudited financial information.
70
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
EXE Technologies, Inc. and Subsidiaries
Report of Ernst & Young LLP, Independent Auditors.................................... F-2
Report of Price Waterhouse LLP, Independent Accountants.............................. F-3
Consolidated Balance Sheets as of December 31, 1996 and 1997 and March 31, 1998
(Unaudited)........................................................................ F-4
Consolidated Statements of Operations for the Years Ended December 31, 1995, 1996,
and 1997 and the Three-Month Periods Ended March 31, 1997 and 1998 (Unaudited)..... F-5
Consolidated Statements of Stockholders' Equity for the Years Ended December 31,
1995, 1996, and 1997 and the Three-Month Period Ended March 31, 1998 (Unaudited)... F-6
Consolidated Statements of Cash Flows for the Years Ended December 31, 1995, 1996,
and 1997 and the Three-Month Periods Ended March 31, 1997 and 1998 (Unaudited)..... F-7
Notes to Consolidated Financial Statements........................................... F-9
Dallas Systems Corporation and Subsidiary
Report of Ernst & Young LLP, Independent Auditors.................................... F-28
Consolidated Balance Sheets as of December 31, 1996 and September 15, 1997........... F-29
Consolidated Statements of Operations for the Years Ended December 31, 1995 and 1996,
and the Eight and One-Half Month Period Ended September 15, 1997................... F-30
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1995
and 1996, and the Eight and One-Half Month Period Ended September 15, 1997......... F-31
Consolidated Statements of Cash Flows for the Years Ended December 31, 1995 and 1996,
and the Eight and One-Half Month Period Ended September 15, 1997................... F-32
Notes to Consolidated Financial Statements........................................... F-33
</TABLE>
F-1
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors
EXE Technologies, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheet of EXE
Technologies, Inc. and Subsidiaries (the Company) as of December 31, 1997, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of EXE
Technologies, Inc. and Subsidiaries at December 31, 1997, and the consolidated
results of its operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles.
Ernst & Young LLP
Dallas, Texas
July 10, 1998
F-2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of
Neptune Systems, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, stockholders' equity and cash flows
present fairly, in all material respects, the financial position of Neptune
Systems, Inc. and its subsidiary at December 31, 1996, and the results of their
operations and their cash flows for each of the two years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
Philadelphia, PA
April 18, 1997
F-3
<PAGE>
EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
------------------------ MARCH 31,
1996 1997 1998
---------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................................. $1,803,589 $ 6,652,628 $ 2,164,168
Investments................................................................ 235,428 -- --
Accounts receivable, net of allowance for doubtful accounts of
approximately $57,000 and $990,000 at December 31, 1996 and 1997,
respectively, and approximately $848,000 at March 31, 1998............... 1,245,194 17,622,538 17,685,571
Other receivables and advances............................................. 459,925 1,331,045 1,438,448
Deferred income taxes...................................................... -- 1,262,277 862,255
Prepaid and other current assets........................................... 57,952 1,200,126 1,409,382
---------- ------------ ------------
Total current assets....................................................... 3,802,088 28,068,614 23,559,824
Property and equipment, net................................................ 693,412 4,313,194 5,093,315
Other assets............................................................... 230,938 496,948 1,268,216
Capitalized software, net of amortization of $102,000 at December 31,
1996..................................................................... 481,535 -- --
Intangible assets, net of amortization of $588,000 at December 31, 1997 and
$984,000 at March 31, 1998............................................... -- 7,370,097 6,974,563
---------- ------------ ------------
Total assets............................................................... $5,207,973 $ 40,248,853 $ 36,895,918
---------- ------------ ------------
---------- ------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable......................................................... $ 622,835 $ 6,427,054 $ 3,915,521
Current portion of long-term debt........................................ 666,300 8,717 8,717
Accrued payroll and benefits............................................. 131,614 1,717,181 2,303,827
Deferred revenue......................................................... 731,773 4,913,404 5,270,962
Accrual for acquired contract obligations................................ -- 1,233,805 748,164
Income tax payable....................................................... -- 58,656 426,835
Accrued expenses......................................................... 131,783 1,670,639 1,160,800
---------- ------------ ------------
Total current liabilities.................................................. 2,284,305 16,029,456 13,834,826
Long-term liabilities:
Long-term debt, net of current portion................................... 589,672 17,090 15,174
Deferred income taxes.................................................... -- 2,380,487 1,793,954
---------- ------------ ------------
Total long-term liabilities................................................ 589,672 2,397,577 1,809,128
Commitments and contingencies
Minority interest.......................................................... 300,323 215,153 196,739
Stockholders' equity:
Preferred stock, Series A, $.01 par value:
Issued and outstanding shares--none at December 31, 1996 and 6,764,043
at December 31, 1997 and March 31, 1998
Aggregate liquidation value--$15,000,000............................... -- 15,000,000 15,000,000
Preferred stock, Series B, $.01 par value:
Issued and outstanding shares--none at December 31, 1996 and 4,573,519
at December 31, 1997 and March 31, 1998
Aggregate liquidation value--$10,000,000............................... -- 10,000,000 10,000,000
Common stock, Class A voting, $.01 par value: Authorized
shares--45,000,000
Issued shares--8,500,000 at December 31, 1996 and 16,318,254 at
December 31, 1997 and March 31, 1998................................. 85,000 163,183 163,183
Common stock, Class B non-voting, $.01 par value: Authorized shares--
5,000,000
Issued shares--none at December 31, 1996 and 1997 and March 31, 1998... -- -- --
Additional paid-in capital............................................... -- 19,395,389 20,206,599
Treasury stock, at cost, none and 4,177 shares of Class A at December 31,
1996 and 1997, respectively, and 417,388 at March 31, 1998............. -- (9,262) (925,606)
Retained earnings (accumulated deficit).................................. 1,949,752 (22,785,842) (22,610,698)
Deferred compensation.................................................... -- -- (685,260)
Foreign currency translation adjustment.................................. (1,079) (156,801) (92,993)
---------- ------------ ------------
Total stockholders' equity................................................. 2,033,673 21,606,667 21,055,225
---------- ------------ ------------
Total liabilities and stockholders' equity................................. $5,207,973 $ 40,248,853 $ 36,895,918
---------- ------------ ------------
---------- ------------ ------------
</TABLE>
See accompanying notes.
F-4
<PAGE>
EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31 MARCH 31
------------------------------------------ ---------------------------
1995 1996 1997 1997 1998
------------ ------------ -------------- ------------ -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Software licenses...................... $ 1,085,253 $ 4,326,319 $ 8,428,538 $ 1,231,549 $ 7,146,241
Services and maintenance............... 1,430,965 3,389,989 12,781,016 750,745 12,301,697
Resale software and equipment.......... 251,982 697,860 5,561,963 140,427 1,156,939
------------ ------------ -------------- ------------ -------------
Total revenues........................... 2,768,200 8,414,168 26,771,517 2,122,721 20,604,877
Costs and expenses:
Cost of software licenses.............. -- 205,833 748,777 64,877 71,462
Cost of services and maintenance....... 988,654 2,145,992 9,966,923 458,059 9,266,328
Cost of resale software and
equipment............................ 192,932 607,997 4,128,525 133,982 819,384
Sales and marketing.................... 555,590 1,258,520 6,720,882 529,758 4,425,156
Research and development............... -- 600,219 3,533,875 392,600 3,149,306
General and administrative............. 588,781 2,218,642 4,263,402 622,841 2,233,666
Amortization of intangibles............ -- -- 588,343 -- 395,534
Write-off of in-process research and
development.......................... -- -- 19,700,000 -- --
------------ ------------ -------------- ------------ -------------
Total costs and expenses................. 2,325,957 7,037,203 49,650,727 2,202,117 20,360,836
------------ ------------ -------------- ------------ -------------
Operating income (loss).................. 442,243 1,376,965 (22,879,210) (79,396) 244,041
Other income (expense):
Interest and dividend income........... 27,329 64,750 177,250 24,843 58,354
Interest expense....................... (45,379) (86,808) (157,627) (28,847) (2,435)
Other.................................. 6,986 -- (227,085) -- 18,808
------------ ------------ -------------- ------------ -------------
Total other income (expense)............. (11,064) (22,058) (207,462) (4,004) 74,727
------------ ------------ -------------- ------------ -------------
Income (loss) before minority interest
and taxes.............................. 431,179 1,354,907 (23,086,672) (83,400) 318,768
Minority interest in subsidiary loss
(income)............................... -- 93,571 75,729 (12,014) 36,339
------------ ------------ -------------- ------------ -------------
Income (loss) before taxes............... 431,179 1,448,478 (23,010,943) (95,414) 355,107
Income tax provision (benefit)........... -- -- (225,101) (22,873) 179,963
------------ ------------ -------------- ------------ -------------
Historical net income (loss)............. $ 431,179 $ 1,448,478 $ (22,785,842) $ (72,541) $ 175,144
------------ ------------ -------------- ------------ -------------
------------ ------------ -------------- ------------ -------------
Historical net income (loss) per common
share.................................. $ 0.05 $ 0.17 $ (2.03) $ (0.01) $ 0.01
------------ ------------ -------------- ------------ -------------
------------ ------------ -------------- ------------ -------------
Historical net income (loss) per common
share--assuming dilution............... $ 0.05 $ 0.17 $ (2.03) $ (0.01) $ 0.01
------------ ------------ -------------- ------------ -------------
------------ ------------ -------------- ------------ -------------
Unaudited pro forma information:
Historical net income.................. $ 431,179 $ 1,448,478
Pro forma income taxes................. 157,596 608,576
------------ ------------
Pro forma net income................... $ 273,583 $ 839,902
------------ ------------
------------ ------------
Pro forma net income per common
share................................ $ 0.03 $ 0.10
------------ ------------
------------ ------------
Pro forma net income per common
share--assuming dilution............. $ 0.03 $ 0.10
------------ ------------
------------ ------------
</TABLE>
See accompanying notes.
F-5
<PAGE>
EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK, CLASS A PREFERRED STOCK, PREFERRED STOCK,
SERIES A SERIES B ADDITIONAL TREASURY STOCK
---------------------- --------------------- --------------------- PAID-IN ----------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL SHARES AMOUNT
--------- ----------- --------- ---------- --------- ---------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at December
31, 1994............. 8,500,000 $ 85,000 -- $ -- -- $ -- $ -- -- $ --
Historical net
income............. -- -- -- -- -- -- -- -- --
--------- ----------- --------- ---------- --------- ---------- ----------- ----------- ---------
Balances at December
31, 1995............. 8,500,000 85,000 -- -- -- -- -- -- --
Historical net
income............... -- -- -- -- -- -- -- -- --
Distributions to
shareholders......... -- -- -- -- -- -- -- -- --
Unrealized foreign
currency translation
loss................. -- -- -- -- -- -- -- -- --
--------- ----------- --------- ---------- --------- ---------- ----------- ----------- ---------
Balances at December
31, 1996............. 8,500,000 85,000 -- -- -- -- -- -- --
Net loss............. -- -- -- -- -- -- -- -- --
Issuance of common
stock.............. 1,365,179 13,652 -- -- -- -- 3,686,348 -- --
Distributions to
shareholders....... -- -- -- -- -- -- -- -- --
Reclassification of
retained earnings
to paid-in
capital............ -- -- -- -- -- -- 573,572 -- --
The Acquisition
Transaction:
Net proceeds from
issuance of
preferred
stock............ -- -- 6,764,043 15,000,000 4,573,519 10,000,000 -- -- --
Buyback of common
stock............ (6,764,043) (67,640) -- -- -- -- (14,932,360) -- --
Acquisition of
Dallas........... 13,217,118 132,171 -- -- -- -- 30,067,829 -- --
Purchase of treasury
stock.............. -- -- -- -- -- -- -- 4,177 (9,262)
Unrealized foreign
currency
translation loss... -- -- -- -- -- -- -- -- --
--------- ----------- --------- ---------- --------- ---------- ----------- ----------- ---------
Balances at December
31, 1997............. 16,318,254 163,183 6,764,043 15,000,000 4,573,519 10,000,000 19,395,389 4,177 (9,262)
Net income
(unaudited)........ -- -- -- -- -- -- -- -- --
Purchase of treasury
stock
(unaudited)........ -- -- -- -- -- -- -- 413,211 (916,344)
Deferred compensation
related to stock
options
(unaudited)........ -- -- -- -- -- -- 811,210 -- --
Amortization of
deferred
compensation
(unaudited)........ -- -- -- -- -- -- -- -- --
Unrealized foreign
currency
translation gain
(unaudited)........ -- -- -- -- -- -- -- -- --
--------- ----------- --------- ---------- --------- ---------- ----------- ----------- ---------
Balances at March 31,
1998 (unaudited)..... 16,318,254 $ 163,183 6,764,043 $15,000,000 4,573,519 $10,000,000 2$0,206,599 417,388 $(925,606)
--------- ----------- --------- ---------- --------- ---------- ----------- ----------- ---------
--------- ----------- --------- ---------- --------- ---------- ----------- ----------- ---------
<CAPTION>
RETAINED FOREIGN
EARNINGS CURRENCY
(ACCUMULATED DEFERRED TRANSLATION
DEFICIT) COMPENSATION ADJUSTMENT TOTAL
-------------- --------------- ------------- ----------
<S> <C> <C> <C> <C>
Balances at December
31, 1994............. $ 300,245 -- $ -- $ 385,245
Historical net
income............. 431,179 -- -- 431,179
-------------- --------------- ------------- ----------
Balances at December
31, 1995............. 731,424 -- -- 816,424
Historical net
income............... 1,448,478 -- -- 1,448,478
Distributions to
shareholders......... (230,150) -- -- (230,150)
Unrealized foreign
currency translation
loss................. -- -- (1,079) (1,079)
-------------- --------------- ------------- ----------
Balances at December
31, 1996............. 1,949,752 -- (1,079) 2,033,673
Net loss............. (22,785,842) -- -- (22,785,842)
Issuance of common
stock.............. -- -- -- 3,700,000
Distributions to
shareholders....... (1,376,180) -- -- (1,376,180)
Reclassification of
retained earnings
to paid-in
capital............ (573,572) -- -- --
The Acquisition
Transaction:
Net proceeds from
issuance of
preferred
stock............ -- -- -- 25,000,000
Buyback of common
stock............ -- -- -- (15,000,000)
Acquisition of
Dallas........... -- -- -- 30,200,000
Purchase of treasury
stock.............. -- -- -- (9,262)
Unrealized foreign
currency
translation loss... -- -- (155,722) (155,722)
-------------- --------------- ------------- ----------
Balances at December
31, 1997............. (22,785,842) -- (156,801) 21,606,667
Net income
(unaudited)........ 175,144 -- -- 175,144
Purchase of treasury
stock
(unaudited)........ -- -- -- (916,344)
Deferred compensation
related to stock
options
(unaudited)........ -- (811,210) -- --
Amortization of
deferred
compensation
(unaudited)........ -- 125,950 -- 125,950
Unrealized foreign
currency
translation gain
(unaudited)........ -- -- 63,808 63,808
-------------- --------------- ------------- ----------
Balances at March 31,
1998 (unaudited)..... $(22,610,698) $(685,260) $ (92,993) $21,055,225
-------------- --------------- ------------- ----------
-------------- --------------- ------------- ----------
</TABLE>
See accompanying notes.
F-6
<PAGE>
EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
YEAR ENDED DECEMBER 31 31
----------------------------------- ------------------------
1995 1996 1997 1997 1998
--------- ---------- ------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Operating Activities
Historical net income
(loss)...................... $ 431,179 $1,448,478 $(22,785,842) $ (72,541) $ 175,144
Adjustments to reconcile net
income (loss) to net cash
provided by (used in)
operating activities, net of
the effect of the Dallas
acquisition:
Depreciation and
amortization.............. 74,660 303,981 1,800,198 111,160 815,626
Provision for losses on
receivables............... 20,721 368,948 634,449 -- --
Amortization of deferred
compensation.............. -- -- -- -- 125,950
Deferred income taxes....... -- -- 768,766 (22,873) (186,511)
Write-off of in-process
research and development.. -- -- 19,700,000 -- --
Minority interest........... -- (93,571) (85,170) 12,014 (18,414)
Changes in operating assets
and liabilities:
Accounts receivable....... (287,726) (793,968) (5,715,607) (727,693) (63,033)
Other receivables and
advances................ (12,110) (174,151) (239,208) (46,500) (107,403)
Prepaids and other
assets.................. (25,338) (477,695) (205,228) (88,515) (209,256)
Accounts payable.......... 86,221 442,129 3,094,483 (176,286) (2,511,533)
Accrued payroll and
benefits................ 111,554 (5,885) 886,915 (21,881) 586,646
Deferred revenue and
accrual for acquired
contract obligations.... 520,011 211,762 2,531,525 (232,747) (128,083)
Income tax payable........ -- -- (1,169,491) -- 368,179
Accrued expenses.......... 52,038 52,081 (637,752) 103,983 (509,839)
Other..................... -- (1,079) (249,739) 90,940 (707,460)
--------- ---------- ------------ ----------- -----------
Net cash provided by (used in)
operating activities........ 971,210 1,281,030 (1,671,701) (1,070,939) (2,369,987)
Investing Activities
Sales of investments.......... -- -- 235,428 -- --
Purchase of investments....... (16,089) (6,407) -- -- --
Purchases of property and
equipment................... (170,539) (683,913) (2,296,252) (260,136) (1,200,313)
Additions to capitalized
software.................... (308,514) (275,859) -- -- --
</TABLE>
F-7
<PAGE>
EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
YEAR ENDED DECEMBER 31 31
----------------------------------- ------------------------
1995 1996 1997 1997 1998
--------- ---------- ------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash acquired in
Transaction................. -- -- 1,579,591 -- --
--------- ---------- ------------ ----------- -----------
Net cash used in investing
activities.................. (495,142) (966,179) (481,233) (260,136) (1,200,213)
Financing Activities
Issuance of preferred stock... -- -- 25,000,000 -- --
Issuance of common stock...... -- -- 3,700,000 1,200,000 --
Buyback of common stock....... -- -- (15,000,000) -- --
Distributions to
shareholders................ -- (230,150) (1,376,180) -- --
Payments on long-term debt.... -- -- (1,386,468) (16,666) (1,916)
Proceeds from long-term
debt........................ -- 755,972 -- -- --
Payments on revolving line of
credit...................... -- -- (3,926,117) -- --
Purchase of treasury stock.... -- -- (9,262) -- (916,344)
Cash received from minority
interest.................... 393,891 -- -- --
--------- ---------- ------------ ----------- -----------
Net cash provided by (used in)
financing activities........ -- 919,713 7,001,973 1,183,334 (918,260)
--------- ---------- ------------ ----------- -----------
Net increase (decrease) in
cash and cash equivalents... 476,068 1,234,564 4,849,039 (147,741) (4,488,460)
Cash and cash equivalents at
beginning of year........... 92,957 569,025 1,803,589 1,803,589 6,652,628
--------- ---------- ------------ ----------- -----------
Cash and cash equivalents at
end of period............... $ 569,025 $1,803,589 $ 6,652,628 $ 1,655,848 $ 2,164,168
--------- ---------- ------------ ----------- -----------
--------- ---------- ------------ ----------- -----------
Supplemental Cash Flows
Information
Cash paid for interest........ $ 45,379 $ 91,672 $ 194,618 $ 16,692 $ 2,435
--------- ---------- ------------ ----------- -----------
--------- ---------- ------------ ----------- -----------
</TABLE>
See accompanying notes.
F-8
<PAGE>
EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF MARCH 31, 1998, AND FOR THE THREE-MONTH PERIODS
ENDED MARCH 31, 1998 AND 1997 IS UNAUDITED)
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
EXE Technologies, Inc. (the Company or EXE), is a global leader in providing
software and services for use in supply chain execution with an emphasis on
warehouse, distribution, and transportation management solutions. EXE was formed
on September 15, 1997, by the merger of Neptune Systems, Inc. and Dallas Systems
Corporation (Dallas Systems). Both Neptune, which was incorporated in 1992, and
Dallas Systems, which was established in 1980, have been providing logistic
solutions since their inception. The Company operates from its headquarters
located in Dallas, Texas and through its various subsidiary and sales offices
serving Asia Pacific and the Middle East from Melbourne, Australia; Hong Kong,
China; Dubai, United Arab Emirates; Kuala Lumpur, Malaysia; and Europe from
Bracknell, United Kingdom. In addition, the Company has a 51% interest in a
joint venture with Fuji SystemHouse, a Japanese corporation, to operate EXE
Technologies (SEA) Pte. Ltd. (formed in 1996 and formerly known as Triton
SystemHouse Pte. Ltd.), a Singapore corporation which also is engaged in
licensing software and providing services for the logistics industry in
Southeast Asia.
The consolidated financial statements of the Company include the accounts of
the Company and its majority owned subsidiaries. All significant intercompany
transactions and balances have been eliminated. Minority interest relates to EXE
Technologies (SEA) Pte. Ltd. Sales and net income (loss) of this joint venture
were approximately $906,000 and ($191,000) for the year ended December 31, 1996,
$2,942,000 and ($155,000) for the year ended December 31, 1997, $860,000 and
$25,000 for the three months ended March 31, 1997, and $457,000 and $(74,000)
for the three months ended March 31, 1998.
2. FORMATION OF EXE
EXE was formed as a result of simultaneous interdependent transactions (the
Transaction) through which ultimately the stockholders of Neptune and Dallas
Systems exchanged their stock in Neptune and Dallas Systems for stock in EXE.
The Transaction included capital investments from an investment group in two
separate transactions. First, $15 million was received from the investment group
to acquire 50% of the equity interest of former Dallas Systems shareholders. The
$15 million was distributed to these shareholders at the transaction date, and
the investment group received Series A Convertible Participating Preferred Stock
(Series A Preferred Stock) in EXE. In the second capital investment transaction,
$10 million was received from the investment group for operating purposes in
exchange for Series B Convertible Preferred Stock (Series B Preferred Stock) in
EXE. The Transaction was accounted for as a purchase of Dallas Systems by
Neptune. As such, the historical financial statements of Neptune are presented
as the historical financial statements of the combined companies, and the assets
and liabilities of Dallas Systems have been recorded at fair value.
Additionally, the equity of Neptune has been presented as the equity of the
combined companies. However, all share and per share amounts of Neptune have
been retroactively restated to reflect the par value of the new Class A Common
Stock. The consolidated results of operations and cash flows for EXE exclude the
results of operations and cash flows of Dallas Systems prior to the date of
acquisition.
Based on the results of an independent appraisal, $19.7 million of the
Dallas Systems purchase price was allocated to in-process research and
development costs at the date of acquisition and was recorded as an expense in
the Company's consolidated statement of operations for the year ended December
31, 1997. The per share value of the consideration exchanged was based upon the
capital transaction in which $15 million was paid for 50% of the former equity
interest of Dallas Systems. The
F-9
<PAGE>
EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1998, AND FOR THE THREE-MONTH PERIODS
ENDED MARCH 31, 1998 AND 1997 IS UNAUDITED)
2. FORMATION OF EXE (CONTINUED)
breakdown of the consideration, including transaction costs, exchanged in excess
of the fair value of the net assets acquired is as follows:
<TABLE>
<CAPTION>
<S> <C>
Consideration exchanged....................................... $30,200,000
Fair value of tangible assets acquired, net of fair value of
liabilities assumed......................................... 2,541,560
-----------
Excess of consideration received over the fair value of
tangible net assets acquired................................ $27,658,440
-----------
-----------
Excess of consideration received over the fair value of net
tangible assets acquired, applied:
Purchased research and development.......................... $19,700,000
Intangible assets:
Developed technology...................................... 3,700,000
Assembled work force...................................... 1,350,000
Customer base............................................. 1,800,000
Goodwill.................................................. 1,108,440
-----------
$27,658,440
-----------
-----------
</TABLE>
The intangible assets, excluding assembled work force and goodwill,
resulting from the Transaction are amortized over six years based upon the
associated estimated revenue stream noted in the independent appraisal analysis.
Assembled work force and goodwill are amortized on a straight-line basis over a
three- and six-year period, respectively. The carrying value of intangible
assets will be reviewed if the facts and circumstances suggest that they may be
permanently impaired. If a comparison of the undiscounted cash flow method to
the carrying value of intangible assets indicates that the intangible assets
will not be recoverable, the asset will be reduced to its estimated recoverable
value. The amortization of intangibles related to the acquisition was $588,343
during the year ended December 31, 1997 and $395,534 for the three months ended
March 31, 1998.
The following table presents unaudited pro forma information for EXE as if
the merger had taken place on January 1, 1997. This information is unaudited and
does not purport to represent the actual operating results had the Transaction
taken place January 1, 1997, nor does it purport to be indicative of the results
that will be obtained in the future. The $19.7 million write-off of the
in-process research and development costs at the date of acquisition, as well as
certain other non-recurring transaction related costs of approximately
$1,038,000, have been excluded from the pro forma statement of operations since
they represent non-recurring charges against operations resulting directly from
the Transaction.
F-10
<PAGE>
EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1998, AND FOR THE THREE-MONTH PERIODS
ENDED MARCH 31, 1998 AND 1997 IS UNAUDITED)
2. FORMATION OF EXE (CONTINUED)
Additionally, amortization of intangibles and interest expense have been
adjusted to reflect a full year of amortization expense and the use of proceeds
from the sale of the preferred stock to retire debt as if the Transaction took
place on January 1, 1997.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
--------------
<S> <C>
(UNAUDITED)
Revenues:
Software licenses......................................... $ 11,466,531
Services and maintenance.................................. 34,897,999
Resale software and equipment............................. 13,510,132
--------------
Total revenues.............................................. 59,874,662
Cost and expenses:
Cost of licenses.......................................... 748,777
Cost of services and maintenance.......................... 26,931,453
Cost of resale software and equipment..................... 9,797,026
Sales and marketing....................................... 9,684,679
Research and development.................................. 7,351,183
General and administrative................................ 6,835,808
Amortization of intangibles............................... 1,692,631
--------------
Total costs and expenses.................................... 63,041,557
Operating loss.............................................. (3,166,895)
Other expense............................................... (2,566)
--------------
Loss before minority interest and taxes..................... (3,169,461)
Minority interest in subsidiary loss........................ 75,729
--------------
Loss before taxes........................................... (3,093,732)
Income tax benefit.......................................... (227,256)
--------------
Net loss.................................................... $ (2,866,476)
--------------
--------------
</TABLE>
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
The Company's revenues consist of software license revenues, consulting
service revenues, maintenance revenues and revenues from the resale of software
and equipment. Software license revenues for periods subsequent to December
31,1997, are recognized in accordance with the American Institute of Certified
Public Accountants' Statement of Position (SOP) 97-2, "Software Revenue
Recognition." Under SOP 97-2, software license revenues are recognized upon
execution of a contract and delivery of software, provided that the license fee
is fixed and determinable, no significant production, modification or
customization of the software is required, and collection is considered probable
by management. For
F-11
<PAGE>
EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1998, AND FOR THE THREE-MONTH PERIODS
ENDED MARCH 31, 1998 AND 1997 IS UNAUDITED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
periods prior to December 31, 1997, software license revenues were recognized in
accordance with SOP 91-1, "Software Revenue Recognition." Under SOP 91-1,
software license revenues were recognized upon execution of a contract and
shipment of the software and after any customer cancellation right has expired,
provided that no significant vendor obligations remained outstanding, amounts
were due within one year, and collection was considered probable by management.
The application of SOP 97-2 did not have a material impact on the Company's
consolidated financial statements for the quarter ended March 31, 1998.
Revenue from consulting services is recognized as the services are provided.
Maintenance is recognized on a straight-line basis over the period of the
obligation. Revenue from the resale of software and equipment is recognized as
equipment is shipped to the customer.
During 1996, the Company terminated an existing license/royalty agreement of
version 1.0 of its Trident system. The Company received $1,431,000 and $377,000
in 1996 and 1997, respectively, which it recognized as revenue upon receipt. The
termination of this agreement gives the licensee royalty free rights to version
1.0 of the Trident system, but no rights to any future versions.
The Company warrants that its products will function substantially in
accordance with the documentation provided to customers for periods ranging from
three to twelve months. As of December 31, 1997, the Company has not incurred
any expenses related to warranty claims.
During the year ended December 31, 1997, one customer represented
approximately 11% of the total revenues. There were no significant customers
with revenues greater than 10% of total revenues during the years ended December
31, 1996 or 1995.
UNAUDITED INTERIM FINANCIAL STATEMENTS
The unaudited interim consolidated financial statements as of March 31,
1998, and for the three months ended March 31, 1997 and 1998, have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with Rule 10-01 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. They do
reflect all adjustments (consisting only of normal recurring entries) which, in
the opinion of the Company's management, are necessary for a fair presentation
of the results for the interim periods presented.
The results of operations for the three-month period ended March 31, 1998,
are not necessarily indicative of the results that may be expected for any other
interim period or for the full year.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with original maturities
of three months or less to be cash equivalents. The carrying value of cash
equivalents approximates fair market value.
INVESTMENTS
The Company held investments in four mutual funds at December 31, 1996,
which are stated at market value based on quoted market prices. All such
investments are classified as trading securities in
F-12
<PAGE>
EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1998, AND FOR THE THREE-MONTH PERIODS
ENDED MARCH 31, 1998 AND 1997 IS UNAUDITED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
accordance with Statement of Financial Accounting Standards (SFAS) No. 115
"Accounting for Certain Investments in Debt and Equity Securities" and
accordingly unrealized changes in value along with transaction gains and losses
are reflected in the statements of operations.
ACCOUNTS RECEIVABLE AND CONCENTRATION OF CREDIT RISK
Financial instruments, which potentially subject the Company to
concentration of credit risk, principally consist of temporary cash investments
and accounts receivables, including receivables from license contracts. The
Company places temporary cash investments with financial institutions and limits
its exposure with any one financial institution. At December 31, 1997, one
customer represented approximately 11% of the total receivable balance. There
were no significant customers with a receivable balance of greater than 10% of
the total receivables balance at December 31, 1996. The Company's billings are
due upon receipt with collections generally occurring within 30 to 60 days, and
the Company does not require collateral on accounts. A large portion of the
Company's customer base is composed of FORTUNE 1000 companies or foreign
equivalents, which mitigate credit risk.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation. The
straight-line method of depreciation was adopted for all computer equipment
placed into service after January 1, 1997. For computer equipment acquired prior
to January 1, 1997, depreciation is computed using an accelerated method. All
other property and equipment is depreciated using the straight-line method. The
Company believes the new method will more appropriately reflect its financial
results by better allocating costs of computer equipment over the useful lives
of these assets. The effect of this change on net loss and net loss per share
for 1997 was not material.
The estimated useful lives of property and equipment are as follows:
<TABLE>
<CAPTION>
<S> <C>
Computer equipment................................................... 3-5
Furniture and equipment.............................................. 5-7
Leasehold improvements............................................... 9-15
Other................................................................ 30
</TABLE>
Depreciation expense for the years ended December 31, 1995, 1996, and 1997
was $74,660, $201,143, and $730,320, respectively. Depreciation expense for the
three-month periods ended March 31, 1997 and 1998, was $51,160 and $420,092,
respectively.
INCOME TAXES
Effective February 1, 1997, the Company changed its taxable status from an S
Corporation to a C Corporation. Prior to February 1, 1997, the Company was an S
Corporation under the provisions of the Internal Revenue Code of 1986, as
amended; therefore, the Company was not subject to federal income taxes. The
income or loss of the Company was included in the owners' individual federal and
state tax returns, and as such, no provision for income taxes has been recorded
on a historical basis in the accompanying statements of operations for the years
ended December 31, 1995 and 1996. Subsequent
F-13
<PAGE>
EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1998, AND FOR THE THREE-MONTH PERIODS
ENDED MARCH 31, 1998 AND 1997 IS UNAUDITED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
to January 31, 1997, the Company accounts for income taxes using the liability
method under the provisions of SFAS 109, "Accounting for Income Taxes."
A provision for income taxes on a pro forma basis as if the Company were
liable for federal and state income taxes as a taxable corporate entity for the
years ended December 31, 1995 and 1996 is presented. The impact was not material
for 1997. The pro forma income tax provision has been computed by applying the
Company's anticipated statutory tax rate to pretax income, adjusted for
permanent tax differences. (See Note 6.)
SOFTWARE DEVELOPMENT COSTS
In accordance with SFAS 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. Prior to the merger, Neptune incurred amortization expense
of $258,737 and $102,838 during the eight-and-one-half-month period ended
September 15, 1997 and the year ended December 31, 1996, respectively, utilizing
a straight-line method of amortization with a useful life of three years.
Subsequent to the merger, a revaluation of the technology associated with the
capitalization of software was conducted and the remaining unamortized software
cost of $222,798 was written off due to the diminished value the software would
have to the ongoing operations of the Company post merger. In general and during
the current year, the establishment of technological feasibility of the
Company's products and general release of such software have substantially
coincided. As a result, software development costs qualifying for capitalization
have been insignificant and, therefore, the Company has expensed all software
development costs.
STOCK-BASED COMPENSATION PLANS
The Company accounts for its stock-based compensation plans utilizing the
provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," because, as discussed in Note 7, the alternative fair
value accounting provided for under SFAS 123, "Accounting for Stock-Based
Compensation," requires the use of option valuation models that were not
developed for use in valuing employee stock options. However, SFAS 123 requires
disclosure of pro forma information regarding net income and net income per
share based on fair value accounting for stock-based compensation plans.
FOREIGN CURRENCY TRANSLATION
Foreign currency financial statements of foreign operations, where the local
currency is the functional currency, are translated using exchange rates in
effect at period end for assets and liabilities and average exchange rates
during the period for results of operations.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1995 and 1996 balances to
conform with the 1997 presentation.
F-14
<PAGE>
EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1998, AND FOR THE THREE-MONTH PERIODS
ENDED MARCH 31, 1998 AND 1997 IS UNAUDITED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
DEFERRED REVENUE
Deferred revenue primarily represents amounts collected prior to complete
performance of maintenance services. Deferred revenue also consists of amounts
billed or received in advance of satisfying revenue recognition criteria.
EARNINGS PER SHARE
Net income (loss) per common share is computed using the weighted average
number of shares of common stock outstanding during each period. Net income
(loss) per common share assuming dilution is computed using the weighted average
number of shares of common stock outstanding during each period and common
equivalent shares consisting of preferred stock and stock options (using the
treasury stock method).
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 130
In 1997, the FASB issued SFAS No. 130, REPORTING COMPREHENSIVE INCOME. SFAS
No. 130 establishes standards for the reporting and display of comprehensive
income and its components in a full set of general-purpose financial statements,
and was effective for the Company beginning January 1, 1998. For the periods
presented, the Company had unrealized foreign currency translation gains (loss),
which are components of comprehensive income, of $(1,079), $(155,722), $(4,571),
and $63,808 for the years ended December 31, 1996 and 1997, and the three months
ended March 31, 1997 and March 31, 1998, respectively.
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 131
In 1997, the FASB issued SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION. SFAS No. 131 establishes standards for the
way that public business enterprises report information about operating segments
in annual financial statements and requires that those enterprises report
selected information about operating segments in interim financial reports
issued to shareholders. SFAS No. 131 is effective for financial statements for
fiscal years beginning after December 15, 1997, and will be adopted by the
Company in connection with its 1998 annual financial statements. The Company is
still evaluating the impact of SFAS No. 131 on its reporting requirements.
F-15
<PAGE>
EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1998, AND FOR THE THREE-MONTH PERIODS
ENDED MARCH 31, 1998 AND 1997 IS UNAUDITED)
4. PROPERTY AND EQUIPMENT
Property and equipment, stated at cost, consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31
----------------------- MARCH 31,
1996 1997 1998
---------- ----------- -----------
<S> <C> <C> <C>
Computer equipment.................... $ 669,336 $ 3,965,746 $ 5,092,874
Furniture and equipment............... 160,663 704,917 774,052
Leasehold improvements................ 171,894 389,091 389,091
Other................................. -- 274,522 278,472
---------- ----------- -----------
1,001,893 5,334,276 6,534,489
Accumulated depreciation.............. (308,481) (1,021,082) (1,441,174)
---------- ----------- -----------
$ 693,412 $ 4,313,194 $ 5,093,315
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
5. DEBT
On December 1, 1997, the Company finalized a $13.5 million secured revolving
line of credit agreement (the Revolver) with a bank. At December 31, 1997 and
March 31, 1998, no borrowings were outstanding under the Revolver. The
Revolver's initial term is for thirty-six months and is renewable annually with
payments of interest monthly and any principal due at maturity. Interest rates
under the Revolver are at the bank's prime rate less 1/2% or at the bank's LIBOR
rate plus 1 1/2 to 2% LIBOR margin points depending on the ratio achieved of
debt to cash flow per a predefined matrix in the agreement. The Revolver is
secured by receivables and fixed assets.
Advances under the Revolver are up to 2 1/2 times a rolling four quarter
calculation of cash flow (as defined by the agreement which includes adjustments
for depreciation, amortization, and other non cash expenses plus an allowance
for cash expenses of $2 million in year one, $1 million in year two and $500,000
in year three). The Revolver also includes specific performance covenants which
include minimum defined debt and interest coverage ratios.
At December 31, 1996, the Company had a $500,000 note payable for working
capital needs with interest at 8% and $755,972 outstanding under a revolving
line of credit and equipment loan facility with interest at prime plus .5% and
prime plus .75%, respectively. All balances were paid during 1997.
F-16
<PAGE>
EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1998, AND FOR THE THREE-MONTH PERIODS
ENDED MARCH 31, 1998 AND 1997 IS UNAUDITED)
6. INCOME TAXES
Components of the provision (benefit) for income taxes are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31 MARCH 31
--------------------------------- --------------------
1995 1996 1997 1997 1998
--------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
Current:
Federal........................... $ -- $ -- $(1,019,161) $ -- $ --
State............................. -- -- (1,406) -- --
Foreign........................... -- -- 26,700 -- 366,474
Deferred:
Federal........................... -- -- 683,027 (30,575) (171,159)
State............................. -- -- 85,739 (2,401) (15,352)
Foreign........................... -- -- -- 10,103 --
--------- --------- ----------- --------- ---------
Total............................... $ -- $ -- $ (225,101) $ (22,873) $ 179,963
--------- --------- ----------- --------- ---------
--------- --------- ----------- --------- ---------
</TABLE>
The provision (benefit) for income taxes is reconciled with the federal
statutory rate as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------
1995 1996 1997
--------- --------- -----------
<S> <C> <C> <C>
Expense (benefit) computed at federal $ 146,601 $ 492,483 $(7,828,811)
statutory rate........................
Non-deductible in-process research and -- -- 6,774,127
development expense and merger costs..
State income taxes, net of federal tax 5,608 48,940 33,324
effect................................
Net operating loss...................... -- -- 178,181
S Corporation loss...................... -- -- 88,093
Conversion from S Corporation to C -- -- 267,394
Corporation...........................
Increase in valuation allowance......... -- 64,791 87,128
Other, net.............................. 5,387 2,362 175,463
Income taxed directly to shareholders... (157,596) (608,576) --
--------- --------- -----------
Income tax provision (benefit).......... $ -- $ -- $ (225,101)
--------- --------- -----------
--------- --------- -----------
</TABLE>
The provision for income taxes for the three month periods March 31, 1997
and 1998 differ from the amounts computed at the federal statutory rate
primarily as a result of state income taxes.
F-17
<PAGE>
EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1998, AND FOR THE THREE-MONTH PERIODS
ENDED MARCH 31, 1998 AND 1997 IS UNAUDITED)
6. INCOME TAXES (CONTINUED)
Components of the provision (benefit) for income taxes on an unaudited
proforma basis for the years ended December 31, 1995 and 1996 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Current:
Federal............................................. $ 201,977 $ 330,748
State............................................... 15,824 43,845
Deferred:
Federal............................................. (52,877) 203,676
State............................................... (7,328) 30,307
--------- ---------
Total................................................. $ 157,596 $ 608,576
--------- ---------
--------- ---------
</TABLE>
The provision (benefit) for income taxes is reconciled with the federal
statutory rate on an unaudited proforma basis for the years ended December 31,
1995 and 1996 as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Benefit (expense) computed at federal statutory $ 146,601 $ 492,483
rate................................................
State income taxes, net of federal tax effect......... 5,608 48,940
Increase in valuation allowance....................... -- 64,791
Other, net............................................ 5,387 2,362
--------- ---------
Income tax provision (benefit)........................ $ 157,596 $ 608,576
--------- ---------
--------- ---------
</TABLE>
F-18
<PAGE>
EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1998, AND FOR THE THREE-MONTH PERIODS
ENDED MARCH 31, 1998 AND 1997 IS UNAUDITED)
6. INCOME TAXES (CONTINUED)
The significant components of the Company's deferred tax liabilities and
assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1997
--------------
<S> <C>
Deferred tax liabilities:
Identifiable intangible assets............................ $ (2,333,496)
--------------
Total deferred tax liabilities.............................. (2,333,496)
Deferred tax assets:
Bad debt reserves......................................... 332,730
Fixed assets.............................................. 26,558
Net operating losses...................................... 140,372
Accrued contract obligations.............................. 332,730
Accrued expenses.......................................... 370,453
Other, net................................................ 99,571
--------------
Total deferred tax assets................................... 1,302,414
Valuation allowance......................................... (87,128)
--------------
Total deferred tax assets, net.............................. 1,215,286
--------------
Deferred income tax liabilities, net of deferred income tax $ (1,118,210)
assets....................................................
--------------
--------------
</TABLE>
At December 31, 1997, the Company had a federal net operating loss
carryforward and research and development credits of approximately $160,000 and
$50,000, respectively, both of which will expire in the year 2013. The Company
also had net operating loss carryforwards of approximately $250,000 in foreign
jurisdictions.
7. STOCK OPTIONS
On February 18, 1997, the Company adopted an incentive and non-qualified
stock option plan (the Plan). The Board of Directors, at their discretion, may
grant stock options to eligible participants, as defined. The options generally
vest over three years and the exercise price must be equal to or greater than
the market value of the Company's stock on the date of grant. The Company has
reserved 1,500,000 shares of the convertible Class B common stock for potential
distribution under the Plan, of which 557,650 shares were granted prior to the
Transaction.
In July 1997, Dallas adopted a non-qualified stock option plan (the Dallas
Plan) to permit certain key employees to purchase Class B common stock of
Dallas. Dallas recorded compensation expense of $139,000 for the difference
between the estimated fair market value of the Dallas stock and the grant price
related to certain grants prior to the Transaction. The options vested
immediately upon grant. No exercises, cancellations, or expirations occurred
preceding the Transaction. In connection with the Transaction, the options
outstanding under the Dallas Plan were converted into 310,967 options to
purchase Class B common shares of the Company at substantially the same terms
and conditions, which were subsequently canceled and reissued at $2.00.
F-19
<PAGE>
EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1998, AND FOR THE THREE-MONTH PERIODS
ENDED MARCH 31, 1998 AND 1997 IS UNAUDITED)
7. STOCK OPTIONS (CONTINUED)
On September 16, 1997, the Company adopted the 1997 Incentive and
Nonqualified Stock Option Plan (the 1997 Plan) which replaced all previous plans
of Neptune and Dallas. Under the 1997 Plan, an aggregate of 4,500,000 shares of
Class B common stock are authorized for issuance. The 1997 Plan provides for the
grant of incentive stock options (ISOs) to employees of the Company and
nonqualified stock options (NQSOs) to employees or consultants. Exercise prices
for ISOs may not be less than fair market value and exercise prices for NQSOs
may be greater or less than fair market on the date of grant. The options vest
and become exercisable ratably over a four-year period and expire after 10
years.
On September 16, 1997, the Company adopted the Non-Employee Directors Plan
(the Directors Plan). Under the Directors Plan, an aggregate of 300,000 shares
of Class B common stock are authorized for issuance. The Directors Plan provides
for the grant of a specified number of NQSOs to non-employee directors of the
Company as defined in the Directors Plan at exercise prices equal to the market
value of the Company's stock on the date of grant. The options vest over three
years. No grants were made under the Directors Plan.
Under the 1997 Plan, in the event of a change of control, the Board shall
have the right, in its sole discretion, to accelerate the vesting of all options
that have not vested as of the date of the change of control and/or establish an
earlier date for the expiration of the exercise of an option. In addition, in
the event of a change of control of the Company, the Board shall have the right,
in its sole discretion, subject to and conditioned upon a sale of the Company:
(a) to arrange for the successor company (or other entity) to assume all of the
rights and obligations of the Company under this Plan; or (b) to terminate this
Plan and (i) to pay to all optionees cash with respect to those options that are
vested as of the date of the sale of the Company in an amount equal to the
difference between the option price and the fair market value of a share of
common stock (determined as of the date the Plan is terminated) multiplied by
the number of options that are vested as of the date of the sale of the Company
which are held by the optionee as of the date of the sale of the Company, or
(ii) to arrange for the exchange of all options for options to purchase common
stock in the successor corporation, or (iii) to distribute to each optionee
other property in an amount equal to and in the same form as the optionee would
have received from the successor corporation if the optionee had owned the
shares subject to options that are vested as of the date of the sale of the
Company rather than the option at the time of the sale of the Company. The form
of payment or distribution to the optionee pursuant to this section shall be
determined by the Board in its sole discretion.
F-20
<PAGE>
EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1998, AND FOR THE THREE-MONTH PERIODS
ENDED MARCH 31, 1998 AND 1997 IS UNAUDITED)
7. STOCK OPTIONS (CONTINUED)
Stock option transactions under the 1997 Plan for the year ended December
31, 1997 and the three months ended March 31, 1998, are summarized as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
SHARES ------------------------------
AVAILABLE WEIGHTED
FOR NUMBER OF AVERAGE
GRANT SHARES EXERCISE PRICE
------------ ----------- -----------------
<S> <C> <C> <C>
Balance at December 31, 1996
Authorized..................... 3,300,000 -- $ --
Grants......................... (1,239,013) 1,239,013 1.46
Transferred from the Dallas (310,967) 310,967 .66
Plan.........................
Forfeitures.................... 42,150 (42,150) .75
Canceled....................... 310,967 (310,967) .66
------------ ----------- -----
Balance at December 31, 1997..... 2,103,137 1,196,863 1.48
Authorized..................... 300,000 -- --
Grants......................... (2,470,258) 2,470,258 2.00
Forfeitures.................... 121,756 (121,756) 1.99
------------ ----------- -----
Balance at March 31, 1998........ 54,635 3,545,365 $ 1.83
------------ ----------- -----
------------ ----------- -----
</TABLE>
The weighted average fair value of options granted during the year ended
December 31, 1997, using a minimum value option pricing model was $.22 per
option resulting in pro forma net expense to the Company of approximately
$199,000 if the Company had accounted for its stock options granted in 1997
under the fair value method set forth in SFAS 123. At December 31, 1997, 913,363
shares are exercisable at the weighted average price of $1.39. The remaining
estimated contractual life of the 1,196,863 options outstanding is approximately
9.5 years at December 31, 1997.
As of July 8, 1998 the Company has reserved 4,500,000 shares of the Class B
common stock for potential distribution under the 1997 Plan, 300,000 shares of
the Class B common stock for potential distribution under the Directors Plan and
200,000 shares for other grants outside the plans. The Company has granted
102,656 options at $2.00 per share outside the plans to a former employee.
SFAS 123, ACCOUNTING FOR STOCK BASED COMPENSATION (SFAS 123), requires the
disclosure of pro forma net income and earnings per share information computed
as if the Company had accounted for its employee stock options granted under the
fair value method set forth in SFAS 123. The fair value for these options was
estimated at the date of grant using a Black-Scholes option pricing model with
no volatility and the following weighted-average assumptions for 1997: a
risk-free interest rate ranging from 5.72% to 6.57%, no dividends, and an
expected life of three years.
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, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable
F-21
<PAGE>
EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1998, AND FOR THE THREE-MONTH PERIODS
ENDED MARCH 31, 1998 AND 1997 IS UNAUDITED)
7. STOCK OPTIONS (CONTINUED)
single measure of the fair value of its employee stock options. In addition,
because options vest over several years and additional option grants are
expected, the effects of these hypothetical calculations are not likely to be
representative of similar future calculations.
The Company recorded deferred compensation expense of $811,210 for the
difference between the grant price and the deemed fair market value of certain
of the Company's common stock options granted during the three months ended
March 31, 1998. This amount is being amortized ratably over the vesting period
of the individual options, generally three to four years. Compensation expense
recognized in the three months ended March 31, 1998 totaled $125,950 and at
March 31, 1998 deferred compensation totaled $685,260.
8. RELATED PARTY TRANSACTIONS
During the year ended December 31, 1997, the Company advanced $923,432 to a
company which was owned by the former principal shareholders of Neptune. At
December 31, 1997, these advances, which were the result of a $750,000 cash
advance and $173,432 in services and expense reimbursements provided by EXE,
were outstanding. During 1998, the above amounts were paid in full. As part of
the Merger Transaction, EXE was granted an option to acquire this entity for an
aggregate purchase of $1.5 million and this option can be exercised ninety days
prior to the expected closing date of any initial public offering or from
November 2, 1998 through November 1, 2002. In May 1998, the former principal
shareholders of Neptune sold their entire interest in the company. In connection
with that transaction, the company's outstanding obligations to EXE were
satisfied and EXE's option to purchase the company was terminated.
The Company also loaned $200,000 to a shareholder at an interest rate of
8.5% and secured with EXE stock held by the shareholder. The note was repaid in
May 1998.
The Company also has various advances to officers and shareholders of the
Company. The total balance of these receivables at December 31, 1997 and March
31, 1998 was $52,574. Additionally, the Company has long-term notes receivable
from employees and shareholders which bear interest ranging from 7.8% to 8.5%
and have a remaining balance of $87,800 and $72,000 at December 31, 1997 and
March 31, 1998, respectively.
9. LEASE COMMITMENTS
The Company leases certain facilities and property and equipment for use in
operations. In May 1998, the Company entered into new ten and one-half year
leases of office space for the North American operations. The Company also
entered into a ten and one-half month sub-lease from the leases. The sub-lease
is with the original lessor of the facility. The leases provide for free rent
during the first six months and contain an escalation clause in year five of the
leases. The Company leases office space from a shareholder which expires in
August 2002 with monthly rental payments of $86,569. The shareholder has a
definitive agreement to sell the premises. The Company has entered into an
agreement with the shareholder pursuant to which the Company's obligations under
the lease will terminate upon the sale of the premises by the shareholder,
provided that the Company vacates the premises by December 1, 1998. Following
the sale of the premises, the Company has the option to remain on the
F-22
<PAGE>
EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1998, AND FOR THE THREE-MONTH PERIODS
ENDED MARCH 31, 1998 AND 1997 IS UNAUDITED)
9. LEASE COMMITMENTS (CONTINUED)
premises through February 28, 1999 for an aggregate cost of $435,000. If the
premises are not sold, the Company will remain obligated under the lease. The
minimum rental commitments under operating leases and the sub-lease, which
includes the new leases described above and the lease commitments with the
shareholder through November 30, 1998, and other leases with terms exceeding one
year are as follows:
<TABLE>
<CAPTION>
LEASE SUB-LEASE
EXPENSE INCOME
----------- ----------
<S> <C> <C>
1998.............................................. $ 2,196,526 $ --
1999.............................................. 3,648,748 218,016
2000.............................................. 4,730,541 421,524
2001.............................................. 4,551,253 421,524
2002.............................................. 4,505,095 421,524
Thereafter........................................ 25,866,440 2,831,472
----------- ----------
$45,498,603 $4,314,060
----------- ----------
----------- ----------
</TABLE>
Total rental expense was approximately $196,000, $401,000, $1,264,000 for
the years ended December 31, 1995, 1996, and 1997, respectively. Total rent
expense for the three months periods ended March 31, 1997 and 1998 was $178,000
and $622,000, respectively. Included in rent expense is $297,514 and $255,012
paid to a shareholder for facility rental in 1997 and 1998, respectively.
F-23
<PAGE>
EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1998, AND FOR THE THREE-MONTH PERIODS
ENDED MARCH 31, 1998 AND 1997 IS UNAUDITED)
10. GEOGRAPHIC SEGMENT INFORMATION
Information about the Company's operations in different geographic areas as
of and for the years ended December 31, 1995, 1996 and 1997 and for the three
months ended March 31, 1997 and 1998 is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31 MARCH 31
------------------------------------ -----------------------
1995 1996 1997 1997 1998
---------- ---------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated customers:
North America.................. $2,768,200 $7,508,464 $ 18,492,435 $1,262,563 $14,321,930
East Asia...................... -- 905,704 3,136,032 860,158 1,053,523
Europe......................... -- -- 3,718,086 -- 3,520,886
Other.......................... -- -- 1,424,964 -- 1,708,538
---------- ---------- ------------ ---------- -----------
Total............................ $2,768,200 $8,414,168 $ 26,771,517 $2,122,721 $20,604,877
---------- ---------- ------------ ---------- -----------
---------- ---------- ------------ ---------- -----------
Total assets:
North America.................. $2,234,342 $3,692,010 $ 30,845,734 $4,644,622 $28,185,447
East Asia...................... -- 1,515,963 1,480,914 1,460,865 2,148,025
Europe......................... -- -- 5,589,137 -- 5,077,720
Other.......................... -- -- 2,333,068 -- 1,484,726
---------- ---------- ------------ ---------- -----------
Total............................ $2,234,342 $5,207,973 $ 40,248,853 $6,105,487 $36,895,918
---------- ---------- ------------ ---------- -----------
---------- ---------- ------------ ---------- -----------
Income (loss) before taxes:
North America.................. $ 431,179 $1,639,440 $(22,980,135) $ (277,879) $(1,223,383)
East Asia...................... -- (190,962) (252,247) 182,465 (64,718)
Europe......................... -- -- 122,485 -- 990,872
Other.......................... -- -- 98,954 -- 652,336
---------- ---------- ------------ ---------- -----------
Total............................ $ 431,179 $1,448,478 $(23,010,943) $ (95,414) $ 355,107
---------- ---------- ------------ ---------- -----------
---------- ---------- ------------ ---------- -----------
</TABLE>
Revenues of geographic areas are primarily comprised of the licensing of
software products; fees derived from implementation, training and maintenance
services; and revenue generated from the resale of database software and
computer equipment by the Company's operating subsidiaries.
Identifiable assets of geographic areas are those assets related to the
Company's operations in each area. North American assets consists of all other
operating assets of the Company.
Income (loss) before taxes is determined by deducting from net revenues the
related costs and operating expenses attributable to the region. General
corporate expenses and research and development expenses have been included in
North American operations for purposes of computing income (loss) before taxes.
11. EMPLOYEE BENEFIT PLAN
As part of the Transaction, the Company assumed the obligations and adopted
the defined contribution plan of Dallas. The plan covers all employees located
in the United States which have completed
F-24
<PAGE>
EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1998, AND FOR THE THREE-MONTH PERIODS
ENDED MARCH 31, 1998 AND 1997 IS UNAUDITED)
11. EMPLOYEE BENEFIT PLAN (CONTINUED)
one month of service and have attained the age of twenty-one. The Company's
contribution to the plan matches the first 5% of the employee's contributions of
eligible earnings. Additionally, discretionary contributions may also be made.
The Company recognized expenses of approximately $226,000 and $243,000 for the
defined contribution plan during the year ended December 31, 1997 and the three
months ended March 31, 1998, respectively.
12. STOCKHOLDERS' EQUITY
PREFERRED STOCK
The Company has authorized a total of $15 million shares of Preferred Stock.
The Company sold preferred stock to an investment group in two separate
transactions. In the first transaction, the Company received $15 million in
exchange for 6,764,043 of Series A Preferred Stock, par value $.01 per share. In
the second transaction, the Company received $10 million in exchange for
4,573,519 shares of Series B Preferred Stock, par value $.01 per share.
SERIES A PREFERRED STOCK
The Company has designated 7 million shares of Series A Preferred Stock.
These shares rank senior to all classes of common stock and rank pari passu with
Series B Preferred Stock. Each share of the Series A Preferred Stock is
convertible at the option of the holder into one share of EXE common stock,
subject to certain adjustments, and have voting rights equal to the common
shares. Any dividends paid to common stockholders shall also be paid to these
shareholders in the same amount and at the same time. These shares have
liquidation preference at an amount equal to $2.21 per share plus all
outstanding dividends.
Upon occurrence of a "Trigger Event" (defined as a sale, merger, or initial
public offering), these shareholders are entitled to a participating payment
based upon the "Trigger Value" or market price of the shares as defined in the
agreement. If the Trigger Value is greater than five times the initial
investment price, no participation payment is required. If the Trigger Value is
less than four times the initial investment price, the participation payment
will be $15 million. If the Trigger Value is between four and five times the
initial investment price, the participation payment will be based on a pro rata
formula. The preferred shareholders retain their equity investment regardless of
any participation payment.
The holders of the Series A Preferred Stock have agreed to waive the
participation payment based upon the mid-point of the anticipated price range
per share of the shares of Common Stock of the Company to be offered in the
Company's initial public offering, as indicated in the Company's first
Registration Statement on Form S-1 filed with Securities and Exchange
Commission, being greater than or equal to $11 per share. The waiver terminates
under certain conditions including failure of the Registration Statement to
become effective by January 1, 1999.
The Company has reserved 6,764,043 shares of Class A common stock for
potential distribution upon the conversion of the Series A Preferred Stock.
F-25
<PAGE>
EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1998, AND FOR THE THREE-MONTH PERIODS
ENDED MARCH 31, 1998 AND 1997 IS UNAUDITED)
12. STOCKHOLDERS' EQUITY (CONTINUED)
SERIES B PREFERRED STOCK
The Company has designated 5 million shares of Series B Preferred Stock.
These shares rank senior to all classes of common stock and rank pari passu with
Series A Preferred Stock. Each share of the Series B Preferred Stock is
convertible at the option of the holder into one share of EXE common stock,
subject to certain adjustments, and have voting rights equal to the common
shares. Any dividends paid to common stockholders shall also be paid to these
shareholders in the same amount and at the same time. These shares have
liquidation preference at an amount equal to $2.19 per share plus all
outstanding dividends.
The Company has reserved 4,573,519 shares of Class A Common Stock for
potential distribution upon the conversion of the Series B Preferred Stock.
SERIES C PREFERRED STOCK
On June 29, 1998, the Company designated 2 million shares of Series C
Preferred Stock. These shares rank pari passu with Series A and B Preferred
Stock. Each share of the Series C Preferred Stock is convertible at the option
of the holder into one share of EXE common stock subject to certain adjustments,
and have voting rights equal to the common shares. Any dividends paid to common
stockholders shall also be paid to these shareholders in the same amount and at
the same time. These shares have liquidation preference at a price equal to $5
per share plus all outstanding dividends.
In the event the Company pays a participation payment to the holders of
Series A Preferred Stock, in accordance with the Company's Certificate of
Incorporation, the Company will repay to the purchasers of the Series C
Preferred Stock, a purchase price adjustment of up to $3 million. The total
amount of the purchase price adjustment owed to the purchasers of the Series C
Preferred Stock will be equal to 20% of the amount of the participation payment
actually received by the holders of the Series A Preferred Stock.
The holders of the Series C Preferred Stock have agreed to waive the
purchase price adjustment if the holders of the Series A Preferred Stock waive
their rights to the Participation Payment.
The Company has reserved 1.6 million shares of Class A Common Stock for
potential distribution upon the conversion of the Series C Preferred Stock.
CLASS B COMMON STOCK
The Company has authorized 5,000,000 shares of non-voting Class B Common
Stock. Each share outstanding and each outstanding stock option to purchase
Class B Common Stock will convert to Class A Common Stock upon an initial public
offering of the Company's stock.
F-26
<PAGE>
EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1998, AND FOR THE THREE-MONTH PERIODS
ENDED MARCH 31, 1998 AND 1997 IS UNAUDITED)
13. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings
per share (in thousands, except share and per share data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31 MARCH 31
------------------------------------ -----------------------
1995 1996 1997 1997 1998
---------- ---------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C>
Numerator:
Net income (loss) for basic and net
income (loss)--assuming
dilution.......................... $ 431,179 $1,448,478 $(22,785,842) $ (72,541) $ 175,144
---------- ---------- ------------ ---------- -----------
---------- ---------- ------------ ---------- -----------
Denominator:
Denominator for net income per
share--weighted average shares.... 8,500,000 8,500,000 11,228,407 8,666,564 15,992,691
Effect of dilutive securities:
Preferred Stock..................... -- -- -- -- 11,337,562
Employee stock options.............. -- -- -- -- 633,507
---------- ---------- ------------ ---------- -----------
Dilutive potential common shares.... -- -- -- -- 11,971,069
---------- ---------- ------------ ---------- -----------
Denominator for net income (loss)
per share--assuming
dilution--adjusted
weighted-average shares and
assumed conversion................ 8,500,000 8,500,000 11,228,407 8,666,564 27,963,760
---------- ---------- ------------ ---------- -----------
---------- ---------- ------------ ---------- -----------
Net income (loss) per common share.... $ 0.05 $ 0.17 $ (2.03) $ (0.01) $ 0.01
---------- ---------- ------------ ---------- -----------
---------- ---------- ------------ ---------- -----------
Net income (loss) per common share--
assuming dilution................... $ 0.05 $ 0.17 $ (2.03) $ (0.01) $ 0.01
---------- ---------- ------------ ---------- -----------
---------- ---------- ------------ ---------- -----------
</TABLE>
Upon the effectiveness of the proposed common stock offering, the Series A,
B and C Preferred Stock will convert to common stock. Supplemental basic
earnings per share as if the conversion of the Series A and B occurred would
equal net income per common share assuming dilution for the three months ended
March 31, 1998. The assumed conversion is antidilutive for the year ended
December 31, 1997.
14. CONTINGENCIES
On April 30, 1998, a former employee filed a lawsuit against the Company and
several of its officers alleging tortious interference with contract and
prospective business relationships, breach of contract, fraud and defamation.
The former employee is seeking compensatory damages in excess of $18,000,000.
The Company is vigorously defending the lawsuit and believes that the claim is
without merit.
The Company is involved in various other legal actions and claims which
arise in the normal course of business. In the opinion of management, the final
disposition of these matters will not have a material adverse effect on the
Company's financial position or results of operations.
F-27
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors
Dallas Systems Corporation and Subsidiary
We have audited the accompanying consolidated balance sheets of Dallas
Systems Corporation and Subsidiary (the Company) as of December 31, 1996 and
September 15, 1997, and the related consolidated statements of operations,
stockholders' equity and cash flows for the years ended December 31, 1995 and
1996 and the eight and one-half month period ended September 15, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Dallas Systems
Corporation and Subsidiary at December 31, 1996 and September 15, 1997, and the
consolidated results of its operations and its cash flows for the years ended
December 31, 1995 and 1996 and the eight and one-half month period ended
September 15, 1997 in conformity with generally accepted accounting principles.
Ernst & Young LLP
Dallas, Texas
July 10, 1998
F-28
<PAGE>
DALLAS SYSTEMS CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 15,
1996 1997
-------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................. $ 1,574,604 $ 1,579,591
Accounts receivable, net of allowance for doubtful accounts
of $300,000 and $931,000 at December 31, 1996 and
September 15, 1997, respectively......................... 7,174,157 11,296,186
Receivable from related party.............................. -- 631,912
Prepaid and other current assets........................... 535,030 840,469
Deferred income taxes...................................... 192,965 977,441
-------------- --------------
Total current assets......................................... 9,476,756 15,325,599
Property and equipment, net.................................. 4,897,091 2,397,035
Other assets................................................. 324,684 248,052
Intangible assets, net of amortization of $29,000 and $33,000
at December 31, 1996 and September 15, 1997,
respectively............................................... 79,123 75,498
-------------- --------------
Total assets................................................. $ 14,777,654 $ 18,046,184
-------------- --------------
-------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................... $ 1,677,503 $ 3,637,852
Current portion of long-term debt.......................... 232,974 337,773
Revolving line of credit................................... 817,001 2,398,001
Accrued payroll and benefits............................... 951,117 698,652
Deferred revenue........................................... 915,980 1,598,221
Income tax payable......................................... 180,834 1,228,147
Accrued expenses........................................... 866,221 1,079,005
-------------- --------------
Total current liabilities.................................... 5,641,630 10,977,651
Long-term liabilities:
Long-term debt, net of current portion..................... 2,594,540 418,530
Other long-term liabilities................................ 5,426 --
-------------- --------------
Total long-term liabilities.................................. 2,599,966 418,530
Commitments and contingencies
Stockholders' equity:
Common stock, Class A voting--$0.0005 par value:
Authorized shares--1,000,000
Issued and outstanding shares--200,000................... 100 100
Common stock, Class B non-voting--$0.0005 par value:
Authorized shares--1,000,000
Issued shares--23,193 and 26,340 at December 31, 1996 and
September 15, 1997, respectively....................... 12 13
Additional paid-in capital................................. 485,781 1,333,000
Treasury stock, at cost, 1,492 and 1,902 shares Class B at
December 31, 1996 and September 15, 1997, respectively... (49,036) (87,146)
Retained earnings.......................................... 6,029,429 5,402,683
Foreign currency translation adjustment.................... 69,772 1,353
-------------- --------------
Total stockholders' equity................................... 6,536,058 6,650,003
-------------- --------------
Total liabilities and stockholders' equity................... $ 14,777,654 $ 18,046,184
-------------- --------------
-------------- --------------
</TABLE>
See accompanying notes.
F-29
<PAGE>
DALLAS SYSTEMS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
EIGHT AND
ONE-HALF MONTH
DECEMBER 31 PERIOD ENDED
------------------------ SEPTEMBER 15,
1995 1996 1997
----------- ----------- --------------
<S> <C> <C> <C>
Revenues:
Software licenses.............................. $ 5,591,344 $ 7,001,880 $ 3,037,993
Services and maintenance....................... 16,627,131 22,054,630 22,116,983
Resale software and equipment.................. 5,024,871 5,133,473 7,948,169
----------- ----------- --------------
Total revenues................................... 27,243,346 34,189,983 33,103,145
Costs and expenses:
Cost of licenses, services and maintenance..... 14,398,584 17,926,481 17,039,193
Cost of resale software and equipment.......... 3,299,607 3,170,074 5,668,090
Sales and marketing............................ 2,131,074 2,662,638 2,972,020
Research and development....................... 3,980,004 5,502,176 3,908,150
General and administrative..................... 3,408,495 3,178,766 3,436,597
----------- ----------- --------------
Total costs and expenses......................... 27,217,764 32,440,135 33,024,050
----------- ----------- --------------
Operating income................................. 25,582 1,749,848 79,095
Other income (expense):
Interest expense............................... (218,450) (279,086) (238,695)
Interest income................................ 52,107 37,085 27,496
Other.......................................... 34,975 (59,454) 19,775
----------- ----------- --------------
Total other income (expense)..................... (131,368) (301,455) (191,424)
----------- ----------- --------------
Income (loss) before income taxes................ (105,786) 1,448,393 (112,329)
Provision (benefit) for income taxes............. (95,525) 339,395 514,417
----------- ----------- --------------
Net income (loss)................................ $ (10,261) $ 1,108,998 $ (626,746)
----------- ----------- --------------
----------- ----------- --------------
</TABLE>
See accompanying notes.
F-30
<PAGE>
DALLAS SYSTEMS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK, COMMON STOCK, TREASURY
CLASS A CLASS B ADDITIONAL STOCK
---------------------- ---------------------- PAID-IN -----------
SHARES AMOUNT SHARES AMOUNT CAPITAL SHARES
--------- ----------- --------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1994.................... 200,000 $ 100 22,023 $ 11 $ 454,593 227
Net loss..................................... -- -- -- -- -- --
Proceeds from sale of Class B Common Stock... -- -- 1,170 1 31,188 --
Purchase of treasury stock................... -- -- -- -- -- 639
Unrealized foreign currency translation
loss....................................... -- -- -- -- -- --
--------- ----- --------- --- ------------ -----------
Balances, December 31, 1995.................... 200,000 100 23,193 12 485,781 866
Net income................................... -- -- -- -- -- --
Purchase of treasury stock................... -- -- -- -- -- 626
Unrealized foreign currency translation
gain....................................... -- -- -- -- -- --
--------- ----- --------- --- ------------ -----------
Balances, December 31, 1996.................... 200,000 100 23,193 12 485,781 1,492
Net loss..................................... -- -- -- -- -- --
Proceeds from sale of Class B Common Stock... -- -- 3,147 1 76,307 --
Purchase of treasury stock................... -- -- -- -- -- 410
Stock option compensation expense............ -- -- -- -- 139,000 --
Contribution of capital...................... -- -- -- -- 631,912 --
Unrealized foreign currency translation
loss....................................... -- -- -- -- -- --
--------- ----- --------- --- ------------ -----------
Balances, September 15, 1997................... 200,000 $ 100 26,340 $ 13 $ 1,333,000 1,902
--------- ----- --------- --- ------------ -----------
--------- ----- --------- --- ------------ -----------
<CAPTION>
FOREIGN
CURRENCY
RETAINED TRANSLATION
AMOUNT EARNINGS ADJUSTMENT TOTAL
---------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Balances, December 31, 1994.................... $ (5,838) $ 4,930,692 $ (17,170) $ 5,362,388
Net loss..................................... -- (10,261) -- (10,261)
Proceeds from sale of Class B Common Stock... -- -- -- 31,189
Purchase of treasury stock................... (23,145) -- -- (23,145)
Unrealized foreign currency translation
loss....................................... -- -- (14,830) (14,830)
---------- ------------ ----------- ------------
Balances, December 31, 1995.................... (28,983) 4,920,431 (32,000) 5,345,341
Net income................................... -- 1,108,998 -- 1,108,998
Purchase of treasury stock................... (20,053) -- -- (20,053)
Unrealized foreign currency translation
gain....................................... -- -- 101,772 101,772
---------- ------------ ----------- ------------
Balances, December 31, 1996.................... (49,036) 6,029,429 69,772 6,536,058
Net loss..................................... -- (626,746) -- (626,746)
Proceeds from sale of Class B Common Stock... -- -- -- 76,308
Purchase of treasury stock................... (38,110) -- -- (38,110)
Stock option compensation expense............ -- -- -- 139,000
Contribution of capital...................... -- -- -- 631,912
Unrealized foreign currency translation
loss....................................... -- -- (68,419) (68,419)
---------- ------------ ----------- ------------
Balances, September 15, 1997................... $ (87,146) $ 5,402,683 $ 1,353 $ 6,650,003
---------- ------------ ----------- ------------
---------- ------------ ----------- ------------
</TABLE>
See accompanying notes.
F-31
<PAGE>
DALLAS SYSTEMS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
EIGHT AND
ONE-HALF MONTH
DECEMBER 31 PERIOD ENDED
------------------------ SEPTEMBER 15,
1995 1996 1997
----------- ----------- ----------------
<S> <C> <C> <C>
Operating Activities
Net (loss) income................................. $ (10,261) $ 1,108,998 $ (626,746)
Adjustments to reconcile net (loss) income to net
cash provided by (used in) operating activities:
Depreciation and amortization................... 1,193,982 1,292,608 834,450
Provision for losses on receivables............. 95,000 200,000 630,604
Gain on sale of equipment....................... -- -- (145,887)
Stock option compensation expense............... -- -- 139,000
Deferred income taxes........................... (96,516) (52,816) (784,476)
Changes in operating assets and liabilities:
Accounts receivable........................... 172,181 (1,426,510) (4,752,633)
Receivables from related parties.............. -- -- (631,912)
Prepaids and other assets..................... (80,169) (293,949) (293,250)
Accounts payable.............................. 303,622 52,360 1,960,349
Accrued profit sharing and bonus.............. 51,083 734,396 (252,465)
Deferred revenue.............................. (429,762) (53,794) 682,241
Income tax payable............................ (230,095) (136,502) 1,047,313
Accrued expenses.............................. 131,144 (142,922) 212,784
Other......................................... (90,353) 84,938 (54,032)
----------- ----------- ----------------
Net cash provided by (used in) operating
activities...................................... 1,009,856 1,366,807 (2,034,660)
Investing Activities
Purchases of property and equipment............... (1,993,412) (810,228) (1,054,327)
Proceeds from asset deposits...................... -- -- 523,505
Increase in surrender value of life insurance..... (10,617) (10,277) --
----------- ----------- ----------------
Net cash used in investing activities............. (2,004,029) (820,505) (530,822)
Financing Activities
Borrowings (payments) on revolving line of
credit.......................................... 141,001 (24,000) 1,581,000
Proceeds from refinancing of building and land.... -- 1,119,845 --
Contribution of capital........................... -- -- 631,912
Borrowings (payments) on long-term debt........... 131,771 (228,309) 324,785
Purchase of treasury stock........................ (23,145) (20,053) (38,110)
Proceeds from stock sale.......................... 31,189 -- 76,308
Refund of security deposits....................... (13,572) (1,735) (5,426)
----------- ----------- ----------------
Net cash provided by financing activities......... 267,244 845,748 2,570,469
----------- ----------- ----------------
Net increase (decrease) in cash and cash
equivalents..................................... (726,929) 1,392,050 4,987
Cash and cash equivalents at beginning of year.... 909,483 182,554 1,574,604
----------- ----------- ----------------
Cash and cash equivalents at end of year.......... $ 182,554 $ 1,574,604 $ 1,579,591
----------- ----------- ----------------
----------- ----------- ----------------
Supplemental Cash Flows Information
Cash paid for interest............................ $ 218,550 $ 284,323 $ 221,527
----------- ----------- ----------------
----------- ----------- ----------------
Cash paid for income taxes........................ $ 190,000 $ 305,000 $ 215,000
----------- ----------- ----------------
----------- ----------- ----------------
</TABLE>
See accompanying notes.
F-32
<PAGE>
DALLAS SYSTEMS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 15, 1997
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Dallas Systems Corporation and Subsidiary (the Company) is a global leader
in providing high quality integrated software products and consulting services
in partnership with its customers, addressing all phases of the logistics
process from manufacturing to consumer. The Company has been providing software
products and services to the logistics market since its incorporation in 1980
and presently operates from its headquarters located in Dallas, Texas, a sales
office serving Asia Pacific from Melbourne, Australia, and through its European
Subsidiary, Dallas Systems Plc, located in Bracknell, U.K.
The consolidated financial statements of the Company include the accounts of
the Company and its subsidiary. All significant intercompany transactions and
balances have been eliminated.
On July 31, 1997, the Company entered into a definitive agreement with
Neptune Systems, Inc. (Neptune) and an investment group to form EXE
Technologies, Inc. (EXE). EXE was formed as a result of a simultaneous
transaction (the Merger Transaction) in which the stockholders of Neptune and
the Company effectively exchanged their stock in the predecessor companies for
stock in EXE. The merger, which was completed September 15, 1997, was accounted
for pursuant to the purchase method of accounting as a reverse acquisition with
Neptune acquiring the Company. The consolidated financial statements of the
Company as of and for the eight and one-half month period ended September 15,
1997 do not reflect the Merger Transaction since the Company was the acquired
entity.
2. SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with original maturities
of three months or less to be cash equivalents. The carrying value of cash
equivalents approximates fair market value.
REVENUE RECOGNITION
The Company's revenues consist of software license revenues, consulting
service revenues, maintenance revenues and revenues from the resale of software
and equipment. The Company recognizes revenue from software licenses upon the
delivery and acceptance of the software product to a customer, the receipt of a
signed license agreement, and after any customer cancellation right has expired,
provided no significant vendor obligations remain outstanding and collection is
probable. Revenue from consulting services is recognized as the services are
provided. Maintenance revenue is recognized on a straight-line basis over the
period of the obligation. Revenue from the resale of software and equipment is
recognized as equipment shipped to the customer.
The Company generally warrants that its products will function substantially
in accordance with the documentation provided to customers for periods ranging
from six to twelve months. As of September 15, 1997, the Company has not
incurred any expenses related to warranty claims.
ACCOUNTS RECEIVABLE AND CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to concentration
of credit risk, principally consist of temporary cash investments and accounts
receivable, including receivables from license contracts. The Company places
temporary cash investments with financial institutions and limits its exposure
with any one financial institution. At December 31, 1996 and September 15, 1997,
one
F-33
<PAGE>
DALLAS SYSTEMS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
customer represented approximately 11% and 12%, respectively, of the total
receivable balance. The Company's billings are due upon receipt, with
collections generally occurring within 30 to 60 days, and the Company does not
require collateral on accounts. A large portion of the Company's customer base
is composed of Fortune 1000 companies or foreign equivalents, which mitigates
credit risk.
PROPERTY AND EQUIPMENT
Provisions are made for depreciation of property and equipment over the
estimated lives of the assets using an accelerated method. The estimated useful
lives of the assets range from 3 to 7 years. Depreciation expense for the years
ended December 31, 1995 and 1996, and the eight and one-half month period ended
September 15, 1997 was $1,188,544, $1,284,519, and $780,769, respectively.
SOFTWARE DEVELOPMENT 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 general release of such software have substantially coincided.
As a result, software development costs qualifying for capitalization have
been insignificant and, therefore, the Company has not capitalized any software
development costs.
STOCK-BASED COMPENSATION PLANS
The Company accounts for its stock-based compensation plan utilizing the
provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," because, as discussed in Note 9, the alternative fair
value accounting provided for under SFAS No. 123, "Accounting for Stock-Based
Compensation," requires use of option valuation models that were not developed
for use in valuing employee stock options. However, SFAS No. 123 requires
disclosure of pro forma information regarding net income based on fair value
accounting for stock-based compensation plans.
FOREIGN CURRENCY TRANSLATION
Foreign currency financial statements of foreign operations, where the local
currency is the functional currency, are translated using exchange rates in
effect at period end for assets and liabilities and average exchange rates
during the period for results of operations.
The Company's European subsidiary had total assets, total net revenues, and
total net income (loss) of approximately $2,824,000, $5,562,000, and $(51,000)
for the year ended December 31, 1995, respectively, approximately $2,986,000,
$5,596,000, and $29,000 for the year ended December 31, 1996, respectively, and
approximately $3,116,000, $4,427,000, and $(552,000) for the eight and one-half
month period ended September 15, 1997, respectively.
F-34
<PAGE>
DALLAS SYSTEMS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
3. PROPERTY AND EQUIPMENT
Property and equipment, stated at cost, consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 15,
1996 1997
-------------- --------------
<S> <C> <C>
Building and land........................... $ 2,039,968 $ --
Computer equipment.......................... 5,080,751 5,703,128
Furniture and equipment..................... 1,940,841 1,721,012
Leasehold improvements...................... 579,407 --
Townhouses.................................. 563,179 158,179
Other....................................... 238,665 321,750
-------------- --------------
10,442,811 7,904,069
Accumulated depreciation.................... (5,545,720) (5,507,034)
-------------- --------------
$ 4,897,091 $ 2,397,035
-------------- --------------
-------------- --------------
</TABLE>
During the eight and one-half month period ended September 15, 1997, the
Company sold a townhouse for $478,517 and recognized a gain of $138,561, which
has been included in other income on the statement of operations.
4. DEBT OBLIGATIONS
The Company's revolving line of credit (the Revolver) is secured by accounts
receivable and equipment. Interest, which is paid monthly, is charged at the
bank's prime rate plus 1/2%. The Revolver agreement is dated March 21, 1997, and
expires March 21, 2000. Under the agreement, the Company receives funds as
needed for operations and is limited to a defined advance rate on the underlying
collateral up to a maximum of $2,500,000. The Revolver requires compliance with
certain financial covenants for minimum current ratio, net worth, and debt and
interest coverage ratios which are defined by the agreement. As of December 31,
1996 and September 15, 1997, the balances outstanding on the revolving line of
credit were $817,001 and $2,398,001, respectively.
F-35
<PAGE>
DALLAS SYSTEMS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. DEBT OBLIGATIONS (CONTINUED)
The Company's long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 15,
1996 1997
-------------- --------------
<S> <C> <C>
Note payable to a bank, original amount of $750,000 with
$20,833 due monthly with interest at 1/2% above the bank
prime rate. Payment in full due by April 2005 and
collateral includes equipment and townhouses.............. $ -- $ 645,835
$2,700,000 mortgage note to a financial institution, payable
$25,414 monthly beginning May 1, 1996 to March 1, 2011.
Remaining principal and interest due in full April 1,
2011. Interest at 7.75% and collateral includes building
and improvements, leases, and deposits.................... 2,626,325 --
Note payable to a bank. Original amount of $215,000 with
$5,972 due monthly with interest at 1/4% above the bank
prime rate. Payment in full due by April 1998 and
collateral includes communications equipment.............. 95,560 47,784
Note payable to a bank. Original amount of $94,500 with
$2,625 due monthly with interest at 1/2% above the bank
prime rate. Payment in full due by October 1998 and
collateral includes computer equipment.................... 55,127 34,127
Note payable to a bank. Original amount of $300,000 with
$8,333 due monthly with interest at 1/2% above the bank
prime rate. Payment in full due by February 1997 and
collateral includes computer equipment.................... 16,667 --
Note payable to a financial institution with monthly
payments of $877 which includes interest at 8.25%. Final
payment due by September 2000, collateralized by an
automobile................................................ 33,835 28,557
-------------- --------------
2,827,514 756,303
Less current maturities..................................... 232,974 337,773
-------------- --------------
$ 2,594,540 $ 418,530
-------------- --------------
-------------- --------------
</TABLE>
Maturities of long-term debt are as follows:
<TABLE>
<S> <C>
Remainder of 1997................................................ $ 106,075
1998............................................................. 493,529
1999............................................................. 155,828
2000............................................................. 871
---------
$ 756,303
---------
---------
</TABLE>
The bank's prime rate at September 15, 1997, was 8.25%.
F-36
<PAGE>
DALLAS SYSTEMS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. INCOME TAXES
The Company accounts for income taxes using the liability method under the
provisions of Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes."
Components of the provision (benefit) for income taxes were as follows:
<TABLE>
<CAPTION>
EIGHT AND
YEAR ENDED ONE-HALF MONTH
DECEMBER 31 PERIOD ENDED
-------------------- SEPTEMBER 15,
1995 1996 1997
--------- --------- --------------
<S> <C> <C> <C>
Current provision:
Federal............................................ $ 48,109 $ 381,004 $1,101,826
State.............................................. 3,012 32,717 9,846
Deferred tax benefit:
Federal............................................ (138,715) (41,232) (677,085)
State.............................................. (5,063) (25,138) (93,837)
Foreign tax expense.................................. (2,868) (7,956) 173,667
--------- --------- --------------
Total income tax provision (benefit)................. $ (95,525) $ 339,395 $ 514,417
--------- --------- --------------
--------- --------- --------------
</TABLE>
The provision (benefit) for income taxes is reconciled with the federal
statutory rate as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31 PERIOD ENDED
-------------------- SEPTEMBER 15,
1995 1996 1997
--------- --------- --------------
<S> <C> <C> <C>
Provision computed at federal statutory rate........... $ (34,943) $ 496,341 $ (49,754)
Research and development tax credits................... (62,000) (166,000) (56,000)
State income taxes, net of federal tax effect.......... 1,354 5,002 (34,561)
Disposition of building................................ -- 631,912
Capitalized merger costs............................... -- 54,701
Other.................................................. 64 4,052 (31,881)
--------- --------- --------------
$ (95,525) $ 339,395 $ 514,417
--------- --------- --------------
--------- --------- --------------
</TABLE>
F-37
<PAGE>
DALLAS SYSTEMS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. INCOME TAXES (CONTINUED)
The significant components of the Company's deferred tax liabilities and
assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 15,
1996 1997
-------------- --------------
<S> <C> <C>
Deferred tax liabilities:
Depreciation.............................................. $ (13,554) $ --
-------------- --------------
Total deferred tax liabilities.............................. (13,554) --
Deferred tax assets:
Bad debt reserves......................................... 110,910 502,646
Accrued vacation.......................................... 86,367 124,083
Accrued bonus and profit sharing.......................... -- 260,136
Other, net................................................ 9,242 90,576
-------------- --------------
Deferred income tax assets.................................. 206,519 977,441
-------------- --------------
Deferred income tax assets, net of deferred income tax
liabilities............................................... $ 192,965 $ 977,441
-------------- --------------
-------------- --------------
</TABLE>
6. LEASE COMMITMENTS
The Company leases certain facilities and property and equipment for use in
operations. The minimum rental commitments under operating leases with terms
exceeding one year are as follows:
<TABLE>
<S> <C>
Remainder of 1997.............................................. $ 421,450
1998........................................................... 1,598,824
1999........................................................... 1,488,236
2000........................................................... 1,434,040
2001........................................................... 1,284,347
2002........................................................... 816,825
Thereafter..................................................... 307,838
----------
$7,351,560
----------
----------
</TABLE>
Total rental expense for the years ended December 31, 1995 and 1996, and the
eight and one-half month period ended September 15, 1997 was approximately
$353,000, $382,000, and $483,000, respectively.
7. RELATED PARTY TRANSACTION
In August 1997, the Company formed a wholly owned subsidiary, LAB Holdings,
Inc. (LAB), for the purpose of disposing of the Company's ownership of a
building and certain other property and equipment (the LAB Assets) and related
liabilities. An agreement was entered between the Company and LAB in advance of
the Merger Transaction whereby the LAB Assets were transferred in a tax free
exchange to LAB along with the associated mortgage payable. The net book value
of the LAB Assets and the associated mortgage payable on the date of transfer
was $2.4 million. Subsequent to the transfer to LAB, the stock of LAB was
distributed to the principal stockholder of the Company, which resulted in the
recognition of a $1.8 million gain for tax purposes and an associated $632,000
tax liability to the
F-38
<PAGE>
DALLAS SYSTEMS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. RELATED PARTY TRANSACTION (CONTINUED)
Company. No gain or loss was recognized on the transaction for financial
reporting purposes. This tax liability was assumed by the principal stockholder
in connection with the Merger Transaction. As such, the Company has recognized a
$632,000 receivable from the principal stockholder for the tax liability, and an
associated capital contribution.
The Company subsequently signed a lease with LAB to rent the LAB Assets for
a period of five years at a rate of approximately $85,000 per month. The total
rent expense paid to the related party for the period from the date of the
disposition of the building to September 15, 1997, was approximately $85,000.
Additionally, the Company has long-term notes receivable from employees and
stockholders which bear interest ranging from 7.5% to 8.5% and have a remaining
balance of approximately $50,000.
8. EMPLOYEES' STOCK PURCHASE PLAN
In connection with its Class B non-voting stock, the Company has initiated
the Employees' Stock Purchase Plan (the Plan) in the United States. Under terms
of the Plan, employees with more than two years of service may designate from
15% to 50% (depending upon length of service) of any bonus toward purchase of
this stock. The price of the stock is in inverse proportion to years of service
and varies as a percent of market valuation, as determined as of each December
31. Employees purchased 1,170 shares during the year ended December 31, 1995. No
shares were purchased by employees during the year ended December 31, 1996.
Employees purchased 3,147 shares during the eight and one-half month period
ended September 15, 1997. The Company is required to buy back shares upon
termination, death, or request of employees at the fair market value, or cost,
depending on the length of time the shares were owned. During the years ended
December 31, 1995 and 1996, and the eight and one-half month period ended
September 15, 1997, the Company purchased 639, 626, and 410 shares at a cost of
$23,145, $20,053, and $38,110, respectively.
9. STOCK OPTIONS
In July 1997, the Company adopted a non-qualified stock option plan (the
Plan) to permit certain key employees to purchase Class B common stock of the
Company. Under the Plan, an aggregate of 5,286 shares of Class B common stock
are authorized for issuance, all of which were granted during 1997 at an
exercise price of $38.97. The options vested immediately upon grant. In
connection with the grant, $139,000 of compensation expense was recognized in
the consolidated financial statements. No exercises, cancellations, or
expirations occurred during the eight and one-half month period ended September
15, 1997. The Company has reserved 5,286 shares of the Class B common stock for
potential distribution under the Plan.
The weighted average fair value of options granted during 1997 using a
Minimum Value option pricing model was $32.87 per option; resulting in a pro
forma net expense to the Company of approximately $115,000 if the Company had
accounted for its stock options granted in 1997 under the fair value method set
forth in SFAS No. 123.
At September 15, 1997, 5,286 shares are exercisable at the weighted average
price of $38.97 and the remaining estimated contractual life is 9.8 years.
F-39
<PAGE>
DALLAS SYSTEMS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. EMPLOYEE BENEFIT PLAN
The Company has a defined contribution plan. The plan covers all employees
located in the United States who have completed six months of service, worked a
minimum of 1,000 hours, and attained the age of twenty-one. The Company made
contributions to this plan at a rate of 2% of eligible earnings until January 1,
1997, at which time contributions to the plan were made at a rate of 5% of
eligible earnings. Additionally, discretionary contributions may also be made.
The Company has expensed for the years ended December 31, 1995 and 1996, and the
eight and one-half month period ended September 15, 1997, approximately
$400,000, $516,000, and $369,000, respectively, for the defined contribution
plan.
Additionally, the Company's expenses for the years ended December 31, 1995
and 1996, and the eight and one-half month period ended September 15, 1997,
include a discretionary bonus of approximately $-0-, $575,000, and $425,000,
respectively, for its employees based upon a plan which rewards employees for
achievement of corporate and individual objectives.
11. COMMON STOCK
At December 31, 1995 and 1996, and September 15, 1997, the Company has two
classes of common stock issued and outstanding, Class A voting shares and Class
B non-voting shares. Class B shares are issued in connection with the Plan and
are convertible one-for-one into Class A shares upon certain conditions as
defined by the Plan. All Class B shares are restricted from disposition or
transfer.
12. CONTINGENCIES
The Company is involved in various legal actions and claims which arise in
the normal course of business. In the opinion of management, the final
disposition of these matters will not have a material adverse effect on the
Company's financial position or results of operations.
F-40
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company and the Selling Stockholders have agreed to sell to each of the U.S.
Underwriters named below, and each of such U.S. Underwriters, for whom Goldman,
Sachs & Co., BancAmerica Robertson Stephens, BT Alex. Brown Incorporated and
Piper Jaffray Inc. are acting as representatives, has severally agreed to
purchase from the Company and the Selling Stockholders, the respective number of
shares of Common Stock set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
COMMON
UNDERWRITER STOCK
- ------------------------------------------------------------------------------------------- -----------
<S> <C>
Goldman, Sachs & Co........................................................................
BancAmerica Robertson Stephens.............................................................
BT Alex. Brown Incorporated................................................................
Piper Jaffray Inc..........................................................................
-----------
Total.............................................................................. 6,160,000
-----------
-----------
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the U.S.
Underwriters are committed to take and pay for all of the shares offered hereby,
if any are taken.
The U.S. Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus and in part to certain securities dealers at such
price less a concession of $ per share. The U.S. Underwriters may allow,
and such dealers may reallow, a concession not in excess of $ per share to
certain brokers and dealers. After the shares of Common Stock are released for
sale to the public, the offering price and other selling terms may from time to
time be varied by the representatives.
The Company and the Selling Stockholders have entered into an underwriting
agreement (the "International Underwriting Agreement") with the underwriters of
the international offering (the "International Underwriters") providing for the
concurrent offer and sale of 540,000 shares of Common Stock in an international
offering outside the United States. The offering price and aggregate
underwriting discounts and commissions per share for the two offerings will be
identical. The closing of the offering made hereby is a condition to the closing
of the international offering, and vice versa. The representatives of the
International Underwriters are Goldman Sachs International, BancAmerica
Robertson Stephens, BT Alex. Brown Incorporated and Piper Jaffray Inc.
Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the two offerings, each of the
U.S. Underwriters named herein has agreed that, as a part of the distribution of
the shares offered hereby and subject to certain exceptions, it will offer, sell
or deliver the shares of Common Stock, directly or indirectly, only in the
United States of America (including the States and the District of Columbia),
its territories, its possessions and other areas subject to its jurisdiction
(the "United States") and to U.S. persons, which term shall mean, for purposes
of this paragraph: (a) any individual who is a resident of the United States or
(b) any
U-1
<PAGE>
corporation, partnership or other entity organized in or under the laws of the
United States or any political subdivision thereof and whose office most
directly involved with the purchase is located in the United States. Each of the
International Underwriters has agreed pursuant to the Agreement Between that, as
part of the distribution of the shares offered as part of the international
offering, and subject to certain exceptions, it will (i) not, directly or
indirectly, offer, sell or deliver shares of Common Stock (a) in the United
States or to any U.S. persons or (b) to any person who it believes intends to
reoffer, resell or deliver the shares in the United States or to any U.S.
persons, and (ii) cause any dealer to whom it may sell such shares at any
concession to agree to observe a similar restriction.
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Common Stock as may be mutually agreed. The price of any shares so sold shall be
the initial public offering price, less an amount not greater than the selling
concession.
The Company has granted the U.S. Underwriters an option exercisable for 30
days after the date of this Prospectus to purchase up to an aggregate of 924,000
additional shares of Common Stock solely to cover over-allotments, if any. If
the U.S. Underwriters exercise their over-allotment option, the U.S.
Underwriters have severally agreed, subject to certain conditions, to purchase
approximately the same percentage thereof that the number of shares to be
purchased by each of them, as shown in the foregoing table, bears to the
6,160,000 shares of Common Stock offered. The Company has granted the
International Underwriters a similar option to purchase up to an aggregate of
231,000 additional shares of Common Stock.
The Company and the Selling Stockholders have agreed that, during the period
beginning from the date of this Prospectus and continuing to and including the
date 180 days after the date of this Prospectus, they will not offer, sell,
contract to sell or otherwise dispose of any securities of the Company (other
than pursuant to employee stock option plans existing, or on the conversion or
exchange of convertible or exchangeable securities outstanding, on the date of
this Prospectus) which are substantially similar to the shares of the Common
Stock or which are convertible or exchangeable into securities which are
substantially similar to the shares of the Common Stock without the prior
written consent of the representatives, except for the shares of Common Stock
offered in connection with the concurrent U.S. and international offerings.
The representatives of the Underwriters have informed the Company that they
do not expect sales to accounts over which the Underwriters exercise
discretionary authority to exceed five percent of the total number of shares of
Common Stock offered by them.
Prior to the offerings, there has been no public market for the shares. The
initial public offering price will be negotiated among the Company, the Selling
Stockholders and the representatives of the U.S. Underwriters and the
International Underwriters. Among the factors to be considered in determining
the initial public offering price of the Common Stock, in addition to prevailing
market conditions, will be the Company's historical performance, estimates of
the business potential and earnings prospects of the Company, an assessment of
the Company's management and the consideration of the above factors in relation
to market valuation of companies in related businesses.
In connection with the offerings, the Underwriters may purchase and sell the
Common Stock in the open market. These transactions may include over-allotment
and stabilizing transactions and purchases to cover syndicate short positions
created in connection with the offerings. Stabilizing transactions consist of
certain bids or purchases for the purpose of preventing or retarding a decline
in the market price of the Common Stock; and syndicate short positions involve
the sale by the Underwriters of a greater number of shares of Common Stock than
they are required to purchase from the Company and the Selling Stockholders in
the offerings. The Underwriters also may impose a penalty bid, whereby selling
concessions allowed to syndicate members or other broker-dealers in respect of
the securities sold in the offerings for their account may be reclaimed by the
syndicate if such shares of Common
U-2
<PAGE>
Stock are repurchased by the syndicate in stabilizing or covering transactions.
These activities may stabilize, maintain or otherwise affect the market price of
the Common Stock, which may be higher than the price that might otherwise
prevail in the open market; and these activities, if commenced, may be
discontinued at any time. These transactions may be effected on the Nasdaq
National Market, in the over-the-counter market or otherwise.
This Prospectus may be used by underwriters and dealers in connection with
offers and sales of the Common Stock, including shares initially sold in the
international offering, to persons located in the United States. Application
will be made to list the Common Stock on the Nasdaq National Market. The Company
and the Selling Stockholders have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities Act of
1933.
U-3
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
--------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 6
The Company............................................................... 19
Use of Proceeds........................................................... 19
Dividend Policy........................................................... 19
Capitalization............................................................ 20
Dilution.................................................................. 21
The Company Selected Consolidated Financial Data.......................... 22
The Company Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................... 24
Dallas Systems Corporation Selected Consolidated Financial Data........... 36
Dallas Systems Corporation Management's Discussion and Analysis of
Financial Condition and Results of Operations........................... 37
Selected Unaudited Pro Forma Financial Information........................ 41
Unaudited Pro Forma Condensed Consolidated Statement of Operations........ 42
Business.................................................................. 44
Management................................................................ 54
Certain Transactions...................................................... 61
Principal and Selling Stockholders........................................ 62
Description of Capital Stock.............................................. 64
Shares Eligible for Future Sale........................................... 66
Legal Matters............................................................. 69
Experts................................................................... 69
Additional Information.................................................... 69
Index to Financial Statements............................................. F-1
Underwriting.............................................................. U-1
</TABLE>
THROUGH AND INCLUDING , 1998 (THE 25TH DAY AFTER THE DATE OF
THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
7,700,000 SHARES
EXE TECHNOLOGIES, INC.
COMMON STOCK
(PAR VALUE $0.01 PER SHARE)
---------------------
PROSPECTUS
---------------------
GOLDMAN, SACHS & CO.
BANCAMERICA ROBERTSON STEPHENS
BT ALEX. BROWN
PIPER JAFFRAY INC.
REPRESENTATIVES OF THE UNDERWRITERS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee.............. $ 36,572
NASD and Blue Sky fees and expenses.............................. 12,897
Nasdaq National Market listing fee............................... 95,000
Accountants' fees and expenses................................... 350,000
Legal fees and expenses.......................................... 250,000
Transfer Agent's fees and expenses............................... 25,000
Printing and engraving expenses.................................. 175,000
Miscellaneous.................................................... 5,531
---------
Total Expenses................................................... $ 950,000
---------
---------
</TABLE>
- ------------------------
* To be filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law (the "DGCL") permits
each Delaware business corporation to indemnify its directors, officers,
employees and agents against liability for each such person's acts taken in his
or her capacity as a director, officer, employee or agent of the corporation if
such actions were taken in good faith and in a manner which he or she reasonably
believed to be in or not opposed to the best interests of the corporation, and
with respect to any criminal action, if he or she had no reasonable cause to
believe his or her conduct was unlawful. Section 9 of the Company's Certificate
of Incorporation and Article 8 of the Company's By-Laws provides that the
Company, to the full extent permitted by Section 145 of the DGCL, shall
indemnify all past and present directors or officers of the Company and may
indemnify all past or present employees or other agents of the Company. To the
extent that a director, officer, employee or agent of the Company has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Company's Certificate of Incorporation and By-Laws, or
in defense of any claim, issue or matter therein, he or she shall be indemnified
by the Company against actually and reasonably incurred expenses in connection
therewith. Such expenses may be paid by the Company in advance of the final
disposition of the action upon receipt of an undertaking to repay the advance if
it is ultimately determined that such person is not entitled to indemnification.
As permitted by Section 102(b)(7) of the DGCL, Section 8 of the Company's
Certificate of Incorporation provides that no director of the Company shall be
liable to the Company for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) for the unlawful payment of dividends on or redemption of the
Company's capital stock, or (iv) for any transaction from which the director
derived an improper personal benefit.
The Company intends to obtain a policy insuring it and its directors and
officers against certain liabilities, including liabilities under the Securities
Act.
The Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement provides for indemnification by the Underwriters of the Registrant and
its officers and directors for certain liabilities arising under the Securities
Act or otherwise.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
During the past three years, the Company has sold the securities set forth
below which were not registered under the Securities Act:
1. In March 1997, the Company sold an aggregate of 1,319,444 shares of
Common Stock to certain non-U.S. investors in a private placement exempt
from registration pursuant to Regulation S of the Securities Act, for an
aggregate offering price of $3,600,000.
2. On September 15, 1997, the Company issued an aggregate of 15,354,329
shares of Common Stock to the former stockholders of Neptune and Dallas
Systems for an aggregate offering price of $30.2 million. Simultaneously,
the Company sold an aggregate of 11,337,562 shares of Preferred Stock to GAP
41 and GAPCO, entities affiliated with GAP LLC, for an aggregate offering
price of $25 million.
3. In December 1997, the Company sold an aggregate of 45,735 shares of
Common Stock to a consultant of the Company for a purchase price of
$100,000.
4. In June and July 1998, the Company sold an aggregate of 371,666
shares of Common Stock to certain employees and consultants of the Company
for an aggregate purchase price of $1,114,998 pursuant to certain
commitments therewith, that were subsequently approved by the Company's
Board on April 6, 1998.
5. In July 1998, the Company sold 1,600,000 shares of Preferred Stock
to several accredited investors for an aggregate offering price of
$8,000,000.
6. In July 1998, the Company sold an aggregate of 90,000 shares of
Common Stock to an employee and to two accredited investors of the Company
for an aggregate purchase price of $450,000.
7. In November 1997 and February and June 1998, the Company issued an
aggregate of 2,875 shares of Class B Common Stock to four of its employees
upon exercise of stock options at a weighted average per share exercise
price of $0.75. These employees exercised the options in connection with the
termination of their employment with the Company.
The Company believes that the transaction described in paragraph 1 above was
exempt from registration under the Securities Act because the subject securities
were issued outside the United States in compliance with Regulation S under the
Securities Act. The issuances of the securities described in paragraphs 2, 3, 4,
5 and 6 were deemed to be exempt from registration under Section 3(b) or 4(2) of
the Securities Act because the subject securities were sold to a limited group
of persons, each of whom was believed to have been a sophisticated investor or
to have had a pre-existing business or personal relationship with the Company or
its management and to have been purchasing for investment without a view to
further distribution. The Company believes that the transactions described in
paragraph 7 were exempt from registration under Section 3(b) or 4(2) of the
Securities Act because the subject securities were issued pursuant to a
compensatory benefit plan pursuant to Rule 701 under the Securities Act. In
addition, the recipients of securities in each such transaction represented
their intentions to acquire the securities for investment only and not with a
view to or for sale in connection with any distribution thereof and appropriate
legends were affixed to the share certificates issued in such transactions. All
recipients had adequate access, through their relationships with the Company, to
information about the Company.
II-2
<PAGE>
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------
<S> <C>
1.1 Form of U.S. Underwriting Agreement.
1.2 Form of International Underwriting Agreement.
3.1a Certificate of Incorporation of the Registrant, as amended.
3.1b* Form of Amended and Restated Certificate of Incorporation of the Registrant.
3.2a Bylaws of the Registrant.
3.2b* Form of Amended and Restated Bylaws of the Registrant.
4.1* Specimen Stock Certificate.
5.1* Opinion of Pepper Hamilton LLP, counsel to the Registrant, as to the legality of
the shares being registered.
10.1 EXE Technologies, Inc. 1997 Incentive and Non-Qualified Stock Option Plan.
10.2* EXE Technologies, Inc. Stock Option Plan for Non-Employee Directors.
10.3 Employment Agreement dated November 18, 1996 between Neptune Systems, Inc. and
David E. Alcala, as amended as of September 11, 1997 and April 1, 1998.
10.4 Employment Agreement dated July 11, 1996 between Triton SystemHouse Pte. Ltd.
and Mark R. Weaser, as amended as of March 5, 1997 and September 12, 1997.
10.5 Employment Agreement dated November 17, 1997 between the Company and C. Donald
Scales.
10.6 Employment Agreement dated as of February 16, 1998 between the Company and
Thomas Cooper.
10.7 Employment Agreement dated March 16, 1998 between the Company and George Van
Ness.
10.8 Employment Agreement dated as of March 16, 1998 between the Company and Kenichi
Tsumura.
10.9 Revolving Line of Credit Note dated December 1, 1997 between the Company and
Wells Fargo Bank (Texas), National Association.
10.10 Credit Agreement dated December 1, 1997 between the Company and Wells Fargo Bank
(Texas), National Association.
10.11 Office Lease dated May 21, 1998 between the Company and BLI-8787, Ltd.
10.12 Office Lease dated May 21, 1998 between the Company and BLI-8787, Ltd.
10.13 Sublease dated May 21, 1998 between the Company and BLI-8787, Ltd.
10.14 Office Lease dated April 3, 1995 between Neptune Systems, Inc. and Baldwin
Towers Associates, as amended on July 6, 1995, June 17, 1996, June 26, 1996,
October 29, 1996, and March 23, 1997.
10.15 Lease Agreement dated August 15, 1997 between Dallas Systems Corporation and LAB
Holdings, Inc., as amended by letter dated February 10, 1998 and by letter dated
July 21, 1998 (to be filed).
10.16 Office Building Lease dated July 26, 1994 between Neptune Systems, Inc. and MIP
Properties, Inc.
10.17 Amended and Restated Registration Rights Agreement dated as of July 10, 1998
among the Company, General Atlantic Partners 41, L.P., GAP Coinvestment
Partners, L.P., MSD Capital L.P., Triple Marlin Investments LLC, Rothko
Investments LLC and the stockholders named therein.
10.18* Value-Added Reseller (VAR) License and Services Agreement dated September 30,
1997 between the Company and Forte Software, Inc.
10.19* Technology License Agreement dated April 15, 1998 between the Company and Endura
Software Corporation.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------
<S> <C>
10.20* Employment Agreement dated as of March 1, 1998 between the Company and Richard
Morgan-Evans.
10.21* Employment Agreement dated as of July 13, 1998 between the Company and
Christopher F. Wright.
16.1 Letter dated July 20, 1998, from PricewaterhouseCoopers LLP regarding change in
Certifying Accountant.
21.1 List of Subsidiaries.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of PricewaterhouseCoopers LLP.
23.3* Consent of Pepper Hamilton LLP (included in Exhibit 5.1).
24.1 Powers of Attorney (included on signature page).
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
* To be filed by amendment.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the Underwriting Agreements
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(c) The Registrant hereby undertakes that:
(i) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of the
Registration Statement as of the time it was declared effective.
(ii) For purposes of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Dallas, State of Texas on
the 21st day of July, 1998.
<TABLE>
<S> <C> <C>
EXE TECHNOLOGIES, INC.
By: /s/ RAYMOND HOOD
-----------------------------------------
Raymond Hood
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears
below constitutes and appoints Raymond Hood and Adam Belsky, and each or any of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and other registration statements and
amendments thereto relating to the Offering contemplated by this Registration
Statement (including registration statements under Rule 462 promulgated under
the Securities Act of 1933, as amended), and to file the same, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their,
his substitutes or substitute, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the securities act, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ LYLE BAACK
- ------------------------------ Chairman of The Board July 22, 1998
Lyle Baack
President, Chief Executive
/s/ RAYMOND HOOD Officer and Director
- ------------------------------ (Principal Executive July 22, 1998
Raymond Hood Officer)
Chief Financial Officer,
/s/ ADAM BELSKY Treasurer and Director
- ------------------------------ (Principal Financial and July 22, 1998
Adam Belsky Accounting Officer)
/s/ STEVEN DENNING
- ------------------------------ Director July 22, 1998
Steven Denning
/s/ J. MICHAEL CLINE
- ------------------------------ Director July 22, 1998
J. Michael Cline
</TABLE>
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -------------------------------------------------------------------------------------------------------
<S> <C>
1.1 Form of U.S. Underwriting Agreement.
1.2 Form of International Underwriting Agreement.
3.1a Certificate of Incorporation of the Registrant, as amended.
3.1b* Form of Amended and Restated Certificate of Incorporation of the Registrant.
3.2a Bylaws of the Registrant.
3.2b* Form of Amended and Restated Bylaws of the Registrant.
4.1* Specimen Stock Certificate.
5.1* Opinion of Pepper Hamilton LLP, counsel to the Registrant, as to the legality of the shares being
registered.
10.1 EXE Technologies, Inc. 1997 Incentive and Non-Qualified Stock Option Plan.
10.2* EXE Technologies, Inc. Stock Option Plan for Non-Employee Directors.
10.3 Employment Agreement dated November 18, 1996 between Neptune Systems, Inc. and David E. Alcala, as
amended as of September 11, 1997 and April 1, 1998.
10.4 Employment Agreement dated July 11, 1996 between Triton SystemHouse Pte. Ltd. and Mark R. Weaser, as
amended as of March 5, 1997 and September 12, 1997.
10.5 Employment Agreement dated November 17, 1997 between the Company and C. Donald Scales.
10.6 Employment Agreement dated as of February 16, 1998 between the Company and Thomas Cooper.
10.7 Employment Agreement dated March 16, 1998 between the Company and George Van Ness.
10.8 Employment Agreement dated as of March 16, 1998 between the Company and Kenichi Tsumura.
10.9 Revolving Line of Credit Note dated December 1, 1997 between the Company and Wells Fargo Bank (Texas),
National Association.
10.10 Credit Agreement dated December 1, 1997 between the Company and Wells Fargo Bank (Texas), National
Association.
10.11 Office Lease dated May 21, 1998 between the Company and BLI-8787, Ltd.
10.12 Office Lease dated May 21, 1998 between the Company and BLI-8787, Ltd.
10.13 Sublease dated May 21, 1998 between the Company and BLI-8787, Ltd.
10.14 Office Lease dated April 3, 1995 between Neptune Systems, Inc. and Baldwin Towers Associates, as
amended on July 6, 1995, June 17, 1996, June 26, 1996, October 29, 1996, and March 23, 1997.
10.15 Lease Agreement dated August 15, 1997 between Dallas Systems Corporation and LAB Holdings, Inc., as
amended by letter dated February 10, 1998 and by letter dated July 21, 1998 (to be filed).
10.16 Office Building Lease dated July 26, 1994 between Neptune Systems, Inc. and MIP Properties, Inc.
10.17 Amended and Restated Registration Rights Agreement dated as of July 10, 1998 among the Company, General
Atlantic Partners 41, L.P., GAP Coinvestment Partners, L.P., MSD Capital L.P., Triple Marlin
Investments LLC, Rothko Investments LLC and the stockholders named therein.
10.18* Value-Added Reseller (VAR) License and Services Agreement dated September 30, 1997 between the Company
and Forte Software, Inc.
10.19* Technology License Agreement dated April 15, 1998 between the Company and Endura Software Corporation.
10.20* Employment Agreement dated as of March 1, 1998 between the Company and Richard Morgan-Evans.
10.21* Employment Agreement dated as of July 13, 1998 between the Company and Christopher F. Wright.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -------------------------------------------------------------------------------------------------------
<S> <C>
16.1 Letter dated July 20, 1998, from PricewaterhouseCoopers LLP regarding change in Certifying Accountant.
21.1 List of Subsidiaries.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of PricewaterhouseCoopers LLP.
23.3* Consent of Pepper Hamilton LLP (included in Exhibit 5.1).
24.1 Powers of Attorney (included on signature page).
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
* To be filed by amendment.
<PAGE>
EXHIBIT 1.1
EXE TECHNOLOGIES, INC.
COMMON STOCK, PAR VALUE $0.01 PER SHARE
UNDERWRITING AGREEMENT
(U.S. VERSION)
_________ __, 1998
Goldman, Sachs & Co.,
BancAmerica Robertson Stephens & Co.
BT Alex. Brown Incorporated
Piper Jaffray Inc.
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.
85 Broad Street,
New York, New York 10004.
Ladies and Gentlemen:
EXE Technologies, Inc., a Delaware corporation (the "Company"), proposes,
subject to the terms and conditions stated herein, to issue and sell to the
Underwriters named in Schedule I hereto (the "Underwriters") an aggregate of
5,480,000 shares and, at the election of the Underwriters, up to 924,000
additional shares of Common Stock, par value $0.01 per share ("Stock") of the
Company and the stockholders of the Company named in Schedule II hereto (the
"Selling Stockholders") propose, subject to the terms and conditions stated
herein, to sell to the Underwriters an aggregate of 680,000 shares of Stock.
The aggregate of 6,160,000 shares to be sold by the Company and the Selling
Stockholders is herein called the "Firm Shares" and the aggregate of
924,000 additional shares to be sold by the Company is herein called the
"Optional Shares". The Firm Shares and the Optional Shares that the
Underwriters elect to purchase pursuant to Section 2 hereof are herein
collectively called the "Shares".
It is understood and agreed to by all parties that the Company and the
Selling Stockholders are concurrently entering into an agreement (the
"International Underwriting Agreement") providing for the sale by the Company
and the Selling Stockholders of up to a total of 1,771,000 shares of Stock (the
"International Shares"), including the overallotment option thereunder, through
arrangements with certain underwriters outside the United States (the
"International Underwriters"), for whom Goldman Sachs International is acting as
lead manager. Anything herein or therein to the contrary notwithstanding, the
respective closings under this Agreement and the International Underwriting
<PAGE>
Agreement are hereby expressly made conditional on one another. The
Underwriters hereunder and the International Underwriters are simultaneously
entering into an Agreement between U.S. and International Underwriting
Syndicates (the "Agreement between Syndicates") which provides, among other
things, for the transfer of shares of Stock between the two syndicates. Two
forms of prospectus are to be used in connection with the offering and sale of
shares of Stock contemplated by the foregoing, one relating to the Shares
hereunder and the other relating to the International Shares. The latter form
of prospectus will be identical to the former except for certain substitute
pages as included in the registration statement and amendments thereto as
mentioned below. Except as used in Sections 2, 3, 4, 9 and 11 herein, and except
as the context may otherwise require, references hereinafter to the Shares shall
include all the shares of Stock which may be sold pursuant to either this
Agreement or the International Underwriting Agreement, and references herein to
any prospectus whether in preliminary or final form, and whether as amended or
supplemented, shall include both the U.S. and the international versions
thereof.
1. (a) The Company represents and warrants to, and agrees with, each of
the Underwriters that:
(i) A registration statement on Form S-1 (File No. 333-________)
(the "Initial Registration Statement") in respect of the Shares has been
filed with the Securities and Exchange Commission (the "Commission"); the
Initial Registration Statement and any post-effective amendment thereto,
each in the form heretofore delivered to you, and, excluding exhibits
thereto, to you for each of the other Underwriters, have been declared
effective by the Commission in such form; other than a registration
statement, if any, increasing the size of the offering (a "Rule 462(b)
Registration Statement"), filed pursuant to Rule 462(b) under the
Securities Act of 1933, as amended (the "Act"), which became effective upon
filing, no other document with respect to the Initial Registration
Statement has heretofore been filed with the Commission; and no stop order
suspending the effectiveness of the Initial Registration Statement, any
post-effective amendment thereto or the Rule 462(b) Registration Statement,
if any, has been issued and no proceeding for that purpose has been
initiated or threatened by the Commission (any preliminary prospectus
included in the Initial Registration Statement or filed with the Commission
pursuant to Rule 424(a) of the rules and regulations of the Commission
under the Act is hereinafter called a "Preliminary Prospectus"; the
various parts of the Initial Registration Statement and the Rule 462(b)
Registration Statement, if any, including all exhibits thereto and
including the information contained in the form of final prospectus filed
with the Commission pursuant to Rule 424(b) under the Act in accordance
with Section 5(a) hereof and deemed by virtue of Rule 430A under the Act to
be part of the Initial Registration Statement at the time it was declared
effective, each as amended at the time such part of the Initial
Registration Statement became effective, or such part of the Rule 462(b)
Registration Statement, if any, became or hereafter becomes effective are
hereinafter collectively called the "Registration Statement"; and such
final prospectus, in the form first filed pursuant to Rule 424(b) under the
Act, is hereinafter called the "Prospectus";
(ii) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the Act and the rules and regulations
2
<PAGE>
of the Commission thereunder, and did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; PROVIDED,
HOWEVER, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an Underwriter through
Goldman, Sachs & Co. expressly for use therein or by a Selling Stockholder
expressly for use in the preparation of the answers therein to Items 7 and
11(l) of Form S-1;
(iii) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of
the Act and the rules and regulations of the Commission thereunder and do
not and will not, as of the applicable effective date as to the
Registration Statement and any amendment thereto and as of the applicable
filing date as to the Prospectus and any amendment or supplement thereto,
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading; PROVIDED, HOWEVER, that this representation and
warranty shall not apply to any statements or omissions made in reliance
upon and in conformity with information furnished in writing to the Company
by an Underwriter through Goldman, Sachs & Co. expressly for use therein or
by a Selling Stockholder expressly for use in the preparation of the
answers therein to Items 7 and 11(l) of Form S-1;
(iv) Neither the Company nor any of its subsidiaries has sustained
since the date of the latest audited financial statements included in the
Prospectus any material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or
from any labor dispute or court or governmental action, order or decree,
otherwise than as set forth or contemplated in the Prospectus; and, since
the respective dates as of which information is given in the Registration
Statement and the Prospectus, there has not been any change in the capital
stock or long-term debt of the Company or any of its subsidiaries or any
material adverse change, or any development involving a prospective
material adverse change, in or affecting the general affairs, management,
financial position, stockholders' equity or results of operations of the
Company and its subsidiaries, otherwise than as set forth or contemplated
in the Prospectus;
(v) The Company and its subsidiaries have good and marketable title
in fee simple to all real property and good and marketable title to all
personal property owned by them, in each case free and clear of all liens,
encumbrances and defects except such as are described in the Prospectus or
such as do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company and its subsidiaries; and any real property and buildings held
under lease by the Company and its subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of
such property and buildings by the Company and its subsidiaries;
(vi) The Company and each of its subsidiaries own or possess
adequate licenses or other rights to use all patents, patent rights
inventions, trade secrets, copyrights, trademarks,
3
<PAGE>
service marks, trade names, technology and know-how currently employed or
proposed to be employed by them in connection with their business as
described in the Prospectus; the Company is not obligated to pay a royalty,
grant a license, or provide other consideration to any third party in
connection with its patents, copyrights, trademarks, service marks, trade
names, technology or know-how other than as disclosed in the Prospectus,
and, except as disclosed in the Prospectus, neither the Company nor any of
its subsidiaries has received any notice of infringement or conflict with
(and neither the Company nor any of its subsidiaries knows of any
infringement or conflict with) rights of others with respect to any
patents, patent rights, inventions, trade secrets, copyrights, trademarks,
service marks, trade names, technology or know-how which could result in
any material adverse effect upon the Company and its subsidiaries, taken as
a whole; and, except as disclosed in the Prospectus, the discoveries,
inventions, products or processes of the Company and its subsidiaries
referred to in the Prospectus do not, to the best knowledge of the Company
or any of its subsidiaries, infringe or conflict with any right or patent
of any third party, or any discovery, invention, product or process which
is the subject of a patent application filed by any third party, known to
the Company or any of its subsidiaries which could have a material adverse
effect on the Company and its subsidiaries, taken as a whole; and no third
party, including any academic or governmental organization, possesses
rights to the Company's patents, copyrights, trademarks, service marks,
trade names, technology or know-how which, if exercised, could enable such
third party to develop products competitive to those of the Company or
could have a material adverse effect on the ability of the Company to
conduct its business in the manner described in the Prospectus;
(vii) The Company and its subsidiaries possess all consents,
licenses, certificates, authorizations and permits issued by the
appropriate federal, state or foreign regulatory authorities necessary to
conduct their respective businesses, and neither the Company nor any such
subsidiary has received any notice of proceedings relating to the
revocation or modification of any such certificate, authorization or permit
which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would have a materially adverse effect on or
constitute a material adverse change, or constitute a development involving
a prospective material adverse change, in or affecting the general affairs,
management, financial position, stockholders' equity or results of
operations of the Company and its subsidiaries, otherwise than as set forth
or contemplated in the Prospectus;
(viii) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Delaware,
with power and authority (corporate and other) to own its properties and
conduct its business as described in the Prospectus, and has been duly
qualified as a foreign corporation for the transaction of business and is
in good standing under the laws of each other jurisdiction in which it owns
or leases properties or conducts any business so as to require such
qualification, or is subject to no material liability or disability by
reason of the failure to be so qualified in any such jurisdiction; and each
subsidiary of the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation;
4
<PAGE>
(ix) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued, are fully paid
and non-assessable and conform to the description of the Stock contained in
the Prospectus; and all of the issued shares of capital stock of each
subsidiary of the Company have been duly and validly authorized and issued,
are fully paid and non-assessable and (except for directors' qualifying
shares) are owned directly or indirectly by the Company, free and clear of
all liens, encumbrances, equities or claims;
(x) The unissued Shares to be issued and sold by the Company to the
Underwriters hereunder and under the International Underwriting Agreement
have been duly and validly authorized and, when issued and delivered
against payment therefor as provided herein, will be duly and validly
issued and fully paid and non-assessable and will conform to the
description of the Stock contained in the Prospectus;
(xi) The issue and sale of the Shares to be sold by the Company
hereunder and under the International Underwriting Agreement and the
compliance by the Company with all of the provisions of this Agreement and
the International Underwriting Agreement and the consummation of the
transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company or any of
its subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the
Company or any of its subsidiaries is subject, nor will such action result
in any violation of the provisions of the Certificate of Incorporation or
By-laws of the Company or any statute or any order, rule or regulation of
any court or governmental agency or body having jurisdiction over the
Company or any of its subsidiaries or any of their properties; and no
consent, approval, authorization, order, registration or qualification of
or with any such court or governmental agency or body is required for the
issue and sale of the Shares or the consummation by the Company of the
transactions contemplated by this Agreement and the International
Underwriting Agreement, except the registration under the Act of the Shares
and such consents, approvals, authorizations, registrations or
qualifications as may be required under state or foreign securities or Blue
Sky laws in connection with the purchase and distribution of the Shares by
the Underwriters and the International Underwriters;
(xii) Neither the Company nor any of its subsidiaries is in violation
of its Certificate of Incorporation or By-laws or in default in the
performance or observance of any material obligation, agreement, covenant
or condition contained in any indenture, mortgage, deed of trust, loan
agreement lease or other agreement or instrument to which it is a party or
by which it or any of its properties may be bound;
(xiii) The statements set forth in the Prospectus under the caption
"Description of Capital Stock", insofar as they purport to constitute a
summary of the terms of the Stock, and under the caption "Underwriting",
insofar as they purport to describe the provisions of the laws and
documents referred to therein, are accurate, complete and fair;
5
<PAGE>
(xiv) Other than as set forth in the Prospectus, there are no legal
or governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property of the Company or any of
its subsidiaries is the subject which, if determined adversely to the
Company or any of its subsidiaries, would individually or in the aggregate
have a material adverse effect on the current or future consolidated
financial position, stockholders' equity or results of operations of the
Company and its subsidiaries; and, to the best of the Company's knowledge,
no such proceedings are threatened or contemplated by governmental
authorities or threatened by others;
(xv) Except for the Shares and [_______] shares of Stock, all
outstanding shares of Stock (representing all shares held by the holders of
at least 45,000 shares of Stock, or 97.42% of the outstanding shares of
Stock), all outstanding securities convertible into or exchangeable for
shares of Stock other than options issued pursuant to the Company's equity
incentive plans (the "Plans") and all options to acquire at least [45,000]
shares of Stock issued pursuant to the Plans are subject to valid and
binding agreements (collectively, the "Lock-up Agreements") that restrict
the holders thereof from selling, making any short sale of, granting any
option for the purchase of, pledging, or otherwise transferring or
disposing of, any of such shares of Stock, or any such securities
convertible into or exercisable or exchangeable for Stock, for a period of
180 days after the date of the Prospectus without the prior written consent
of Goldman, Sachs & Co.;
(xvi) There is no legal or beneficial owner of any securities of the
Company who has any rights, not effectively satisfied or waived, to require
registration of any shares of capital stock of the Company in connection
with the filing of the Registration Statement;
(xvii) The election by Neptune Systems, Inc. ("Neptune"), and the
consent to such election by its shareholders (and, if applicable, by the
spouses of such shareholders), to cause Neptune to be taxed as an S
corporation as provided in Section 1362 of the Internal Revenue Code of
1986, as amended (and the predecessor Code) (the "Code"), was valid and
effective at all times from [______], 1990 through and including [February
1, 1997], and neither the Internal Revenue Service nor any other person or
entity has challenged or indicated a present intention to challenge the
status of Neptune as an S Corporation during any portion of such period;
the Company has incurred no liability for taxes under Section 1374 or 1375
of the Code during or for any year in such period;
(xviii) The Company is not and, after giving effect to the offering and
sale of the Shares, will not be an "investment company" or an entity
"controlled" by an "investment company", as such terms are defined in the
Investment Company Act of 1940, as amended (the "Investment Company Act");
(xix) Neither the Company nor any of its affiliates does business
with the government of Cuba or with any person or affiliate located in Cuba
within the meaning of Section 517.075, Florida Statutes;
(xx) With respect to the Acquisition (as that term is defined in the
Registration Statement and Prospectus), the Company further represents and
warrants that (i) the Agreement and Plan of Merger among the Company,
Neptune and Dallas Systems Corporation ("Dallas") dated July 31, 1997
("Agreement of Merger") was duly and validly authorized by the Boards of
Directors
6
<PAGE>
of the Company, Neptune and Dallas, as applicable, and by the record
holders of sufficient share interests in each such entity, as applicable,
to properly effect the Acquisition, in each case in accordance with the
respective charter documents of, and laws applicable to, each such entity;
(ii) the Acquisition has been duly effected as of September 15, 1997, in
accordance with the respective charter documents of and laws applicable to
each of the Company, Neptune and Dallas and there are no further actions
required to be taken by any of the Company, Neptune or Dallas to effect
the transactions contemplated by the Agreement of Merger; and (iii) the
Acquisition did not, and will not, result in or create, with respect to the
Company, Neptune or Dallas, any liability for state or federal income tax
other than such taxes as have been paid or accrued for in the financial
statements of the Company; and
(xxi) Ernst & Young, LP, who have certified certain financial
statements of the Company and its subsidiaries, and Price Waterhouse
Coopers LP, who have certified certain financial statements of Dallas, are
each independent public accountants as required by the Act and the rules
and regulations of the Commission thereunder.
(b) Each of the Selling Stockholders severally represents and warrants to,
and agrees with, each of the Underwriters and the Company that:
(i) All consents, approvals, authorizations and orders necessary
for the execution and delivery by such Selling Stockholder of this
Agreement, the International Underwriting Agreement, the Power of Attorney
and the Custody Agreement hereinafter referred to, and for the sale and
delivery of the Shares to be sold by such Selling Stockholder hereunder and
under the International Underwriting Agreement, have been obtained; and
such Selling Stockholder has full right, power and authority to enter into
this Agreement, the International Underwriting Agreement, the Power of
Attorney and the Custody Agreement and to sell, assign, transfer and
deliver the Shares to be sold by such Selling Stockholder hereunder and
under the International Underwriting Agreement;
(ii) The sale of the Shares to be sold by such Selling Stockholder
hereunder and under the International Underwriting Agreement and the
compliance by such Selling Stockholder with all of the provisions of this
Agreement, the International Underwriting Agreement, the Power of Attorney
and the Custody Agreement and the consummation of the transactions herein
and therein contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, any statute, indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which such Selling Stockholder is a party
or by which such Selling Stockholder is bound, or to which any of the
property or assets of such Selling Stockholder is subject, nor will such
action result in any violation of the provisions of any statute or any
order, rule or regulation of any court or governmental agency or body
having jurisdiction over such Selling Stockholder or the property of such
Selling Stockholder;
(iii) Such Selling Stockholder has, and immediately prior to each
Time of Delivery (as defined in Section 4 hereof) such Selling Stockholder
will have, good and valid title to the Shares to be sold by such Selling
Stockholder hereunder and under the International Underwriting Agreement,
free and clear of all liens, encumbrances, equities or claims; and, upon
delivery of such Shares and payment therefor pursuant hereto and thereto,
good and valid title
7
<PAGE>
to such Shares, free and clear of all liens, encumbrances, equities or
claims, will pass to the several Underwriters or the International
Underwriters, as the case be;
(iv) During the period beginning from the date hereof and continuing
to and including the date 180 days after the date of the Prospectus, not to
offer, sell, contract to sell or otherwise dispose of, except as provided
hereunder or under the International Underwriting Agreement, any securities
of the Company that are substantially similar to the Shares, including but
not limited to any securities that are convertible into or exchangeable
for, or that represent the right to receive, Stock or any such
substantially similar securities (other than pursuant to employee stock
option plans existing on, or upon the conversion or exchange of convertible
or exchangeable securities outstanding as of, the date of this Agreement),
without your prior written consent;
(v) Such Selling Stockholder has not taken and will not take,
directly or indirectly, any action which is designed to or which has
constituted or which might reasonably be expected to cause or result in
stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of the Shares;
(vi) To the extent that any statements or omissions made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto are made in reliance upon and in conformity
with written information furnished to the Company by such Selling
Stockholder expressly for use therein, such Preliminary Prospectus and the
Registration Statement did, and the Prospectus and any further amendments
or supplements to the Registration Statement and the Prospectus, when they
become effective or are filed with the Commission, as the case may be, will
conform in all material respects to the requirements of the Act and the
rules and regulations of the Commission thereunder and will not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading;
(vii) In order to document the Underwriters' compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal
Responsibility Act of 1982 with respect to the transactions herein
contemplated, such Selling Stockholder will deliver to you prior to or at
the First Time of Delivery (as hereinafter defined) a properly completed
and executed United States Treasury Department Form W-9 (or other
applicable form or statement specified by Treasury Department regulations
in lieu thereof);
(viii) Certificates in negotiable form representing all of the Shares
to be sold by such Selling Stockholder hereunder and under the
International Underwriting Agreement have been placed in custody under a
Custody Agreement, in the form heretofore furnished to you (the "Custody
Agreement"), duly executed and delivered by such Selling Stockholder to
[___________], as custodian (the "Custodian"), and such Selling Stockholder
has duly executed and delivered a Power of Attorney, in the form heretofore
furnished to you (the "Power of Attorney"), appointing the persons
indicated in Schedule II hereto, and each of them, as such Selling
Stockholder's attorneys-in-fact (the "Attorneys-in-Fact") with authority to
execute and deliver this Agreement and the International Underwriting
Agreement on behalf of such Selling Stockholder, to determine the purchase
price to be paid by the Underwriters and the
8
<PAGE>
International Underwriters to the Selling Stockholders as provided in
Section 2 hereof, to authorize the delivery of the Shares to be sold by
such Selling Stockholder hereunder and otherwise to act on behalf of such
Selling Stockholder in connection with the transactions contemplated by
this Agreement, the International Underwriting Agreement and the Custody
Agreement; and
(ix) The Shares represented by the certificates held in custody for
such Selling Stockholder under the Custody Agreement are subject to the
interests of the Underwriters hereunder and the International Underwriters
under the International Underwriting Agreement; the arrangements made by
such Selling Stockholder for such custody, and the appointment by such
Selling Stockholder of the Attorneys-in-Fact by the Power of Attorney, are
to that extent irrevocable; the obligations of the Selling Stockholders
hereunder shall not be terminated by operation of law, whether by the death
or incapacity of any individual Selling Stockholder or, in the case of an
estate or trust, by the death or incapacity of any executor or trustee or
the termination of such estate or trust, or in the case of a partnership or
corporation, by the dissolution of such partnership or corporation, or by
the occurrence of any other event; if any individual Selling Stockholder or
any such executor or trustee should die or become incapacitated, or if any
such estate or trust should be terminated, or if any such partnership or
corporation should be dissolved, or if any other such event should occur,
before the delivery of the Shares hereunder, certificates representing the
Shares shall be delivered by or on behalf of the Selling Stockholders in
accordance with the terms and conditions of this Agreement, of the
International Underwriting Agreement and of the Custody Agreements; and
actions taken by the Attorneys-in-Fact pursuant to the Powers of Attorney
shall be as valid as if such death, incapacity, termination, dissolution or
other event had not occurred, regardless of whether or not the Custodian,
the Attorneys-in-Fact, or any of them, shall have received notice of such
death, incapacity, termination, dissolution or other event.
2. Subject to the terms and conditions herein set forth, (a) the Company
and each of the Selling Stockholders agree, severally and not jointly, to sell
to each of the Underwriters, and each of the Underwriters agrees, severally and
not jointly, to purchase from the Company and each of the Selling Stockholders,
at a purchase price per share of $[_________], the number of Firm Shares (to be
adjusted by you so as to eliminate fractional shares) determined by multiplying
the aggregate number of Firm Shares to be sold by the Company and each of the
Selling Stockholders as set forth opposite their respective names in Schedule II
hereto by a fraction, the numerator of which is the aggregate number of Firm
Shares to be purchased by such Underwriter as set forth opposite the name of
such Underwriter in Schedule I hereto and the denominator of which is the
aggregate number of Firm Shares to be purchased by all of the Underwriters from
the Company and all of the Selling Stockholders hereunder and (b) in the event
and to the extent that the Underwriters shall exercise the election to purchase
Optional Shares as provided below, the Company agrees to sell to each of the
Underwriters, and each of the Underwriters agrees, severally and not jointly, to
purchase from the Company at the purchase price per share set forth in clause
(a) of this Section 2, that portion of the number of Optional Shares as to which
such election shall have been exercised (to be adjusted by you so as to
eliminate fractional shares) determined by multiplying such number of Optional
Shares by a fraction the numerator of which is the maximum number of Optional
Shares which such Underwriter is entitled to
9
<PAGE>
purchase as set forth opposite the name of such Underwriter in Schedule I hereto
and the denominator of which is the maximum number of Optional Shares that all
of the Underwriters are entitled to purchase hereunder.
The Company hereby grants to the Underwriters the right to purchase at
their election up to 924,000 Optional Shares, at the purchase price per share
set forth in the paragraph above, for the sole purpose of covering over
allotments in the sale of the Firm Shares. Any such election to purchase
Optional Shares may be exercised only by written notice from you to the Company,
given within a period of 30 calendar days after the date of this Agreement and
setting forth the aggregate number of Optional Shares to be purchased and the
date on which such Optional Shares are to be delivered, as determined by you but
in no event earlier than the First Time of Delivery (as defined in Section 4
hereof) or, unless you and the Company otherwise agree in writing, earlier than
two or later than ten business days after the date of such notice.
3. Upon the authorization by you of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus.
4. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in such
names as Goldman, Sachs & Co. may request upon at least forty-eight hours' prior
notice to the Company and the Selling Stockholders shall be delivered by or on
behalf of the Company and the Selling Stockholders to Goldman, Sachs & Co.,
through the facilities of The Depository Trust Company ("DTC") for the account
of such Underwriter, against payment by or on behalf of such Underwriter of the
purchase price therefor by wire transfer of Federal (same-day) funds to the
account specified by the Company and the Custodian to Goldman, Sachs & Co. at
least forty-eight hours in advance. The Company will cause the certificates
representing the Shares to be made available for checking and packaging at least
twenty-four hours prior to the Time of Delivery (as defined below) with respect
thereto at the office of DTC or its designated custodian (the "Designated
Office"). The time and date of such delivery and payment shall be, with respect
to the Firm Shares, 9:30 a.m., New York City time, on _________, 1998 on such
other time and date as Goldman, Sachs & Co., the Company and the Selling
Stockholders may agree upon in writing, and, with respect to the Optional
Shares, 9:30 a.m., New York City time, on the date specified by Goldman, Sachs &
Co. in the written notice given by Goldman, Sachs & Co. of the Underwriters'
election to purchase such Optional Shares, or such other time and date as
Goldman, Sachs & Co. and the Company may agree upon in writing. Such time and
date for delivery of the Firm Shares is herein called the "First Time of
Delivery", such time and date for delivery of the Firm Optional Shares, if not
the First Time of Delivery, is herein called the "Second Time of Delivery", and
each such time and date for delivery is herein called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by or on behalf
of the parties hereto pursuant to Section 7 hereof, including the cross-receipt
for the Shares and any additional documents requested by the Underwriters
pursuant to Section 7(l) hereof, will be delivered at the offices of Wilson
Sonsini Goodrich & Rosati, P.C., 650 Page Mill Road, Palo Alto, California (the
"Closing Location"), and the Shares will be delivered at the Designated Office,
all at each Time of Delivery. A meeting will be held at the Closing Location at
[______] p.m., New York City time, on the New York Business Day next preceding
each Time of Delivery, at which meeting the final drafts of the documents
10
<PAGE>
to be delivered pursuant to the preceding sentence will be available for review
by the parties hereto. For the purposes of this Section 4, "New York Business
Day" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is
not a day on which banking institutions in New York are generally authorized or
obligated by law or executive order to close.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file such
Prospectus pursuant to Rule 424(b) under the Act not later than the Commission's
close of business on the second business day following the execution and
delivery of this Agreement, or, if applicable, such earlier time as may be
required by Rule 430A(a)(3) under the Act; to make no further amendment or any
supplement to the Registration Statement or Prospectus which shall be
disapproved by you promptly after reasonable notice thereof; to advise you,
promptly after it receives notice thereof, of the time when any amendment to the
Registration Statement has been filed or becomes effective or any supplement to
the Prospectus or any amended Prospectus has been filed and to furnish you
copies thereof; to advise you, promptly after it receives notice thereof, of the
issuance by the Commission of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or prospectus, of the
suspension of the qualification of the Shares for offering or sale in any
jurisdiction, of the initiation or threatening of any proceeding for any such
purpose, or of any request by the Commission for the amending or supplementing
of the Registration Statement or Prospectus or for additional information; and,
in the event of the issuance of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or prospectus or suspending any
such qualification, promptly to use its best efforts to obtain the withdrawal of
such order;
(b) Promptly from time to time to take such action as you may reasonably
request to qualify the Shares for offering and sale under the securities laws of
such jurisdictions as you request and to comply with such laws so as to permit
the continuance of sales and dealings therein in such jurisdictions for as long
as may be necessary to complete the distribution of the Shares, provided that in
connection therewith the Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any
jurisdiction;
(c) Prior to 10:00 A.M., New York City time, on the New York Business Day
next succeeding the date of this Agreement and from time to time, to furnish the
Underwriters with copies of the Prospectus in New York City in such quantities
as you may reasonably request, and, if the delivery of a prospectus is required
at any time prior to the expiration of nine months after the time of issue of
the Prospectus in connection with the offering or sale of the Shares and if at
such time any events shall have occurred as a result of which the Prospectus as
then amended or supplemented would include an untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were made
when such Prospectus is delivered, not misleading, or, if for any other reason
it shall be necessary during such period to amend or supplement the Prospectus
in order to comply with the Act to notify you and upon your request to prepare
and furnish without charge to each Underwriter and to any dealer in securities
as many copies as you may from time to time reasonably request of an amended
Prospectus or a supplement to the Prospectus which will correct such statement
or omission or effect such compliance, and in case any Underwriter is required
to deliver a prospectus in connection with sales of any of the Shares at any
time nine months or more after the time of issue of the Prospectus, upon your
request
11
<PAGE>
but at the expense of such Underwriter, to prepare and deliver to such
Underwriter as many copies as you may request of an amended or supplemented
Prospectus complying with Section 10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the effective
date of the Registration Statement (as defined in Rule 158(c) under the Act), an
earnings statement of the Company and its subsidiaries (which need not be
audited) complying with Section 11(a) of the Act and the rules and regulations
of the Commission thereunder (including, at the option of the Company, Rule
158);
(e) During the period beginning from the date hereof and continuing to and
including the date 180 days after the date of the Prospectus, not to offer,
sell, contract to sell or otherwise dispose of, except as provided hereunder and
under the International Underwriting Agreement, any securities of the Company
that are substantially similar to the Shares, including but not limited to any
securities that are convertible into or exchangeable for, or that represent the
right to receive, Stock or any such substantially similar securities (other than
pursuant to employee stock option plans existing on, or upon the conversion or
exchange of convertible or exchangeable securities outstanding as of, the date
of this Agreement), without your prior written consent;
(f) To furnish to its stockholders as soon as practicable after the end of
each fiscal year an annual report (including a balance sheet and statements of
income, stockholders' equity and cash flows of the Company and its consolidated
subsidiaries certified by independent public accountants) and, as soon as
practicable after the end of each of the first three quarters of each fiscal
year (beginning with the fiscal quarter ending after the effective date of the
Registration Statement), consolidated summary financial information of the
Company and its subsidiaries for such quarter in reasonable detail;
(g) During a period of five years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to stockholders, and to deliver to
you (i) as soon as they are available, copies of any reports and financial
statements furnished to or filed with the Commission or any national securities
exchange on which any class of securities of the Company is listed; and (ii)
such additional information concerning the business and financial condition of
the Company as you from time to time reasonably request (such financial
statements to be on a consolidated basis to the extent the accounts of the
Company and its subsidiaries are consolidated in reports furnished to its
stockholders generally or to the Commission);
(h) To use the net proceeds received by it from the sale of the Shares
pursuant to this Agreement and the International Underwriting Agreement in the
manner specified in the Prospectus under the caption "Use of Proceeds";
(i) To use its best efforts to list for quotation the Shares on the Nasdaq
National Market ("NASDAQ");
(j) To file with the Commission such information on Form 10-Q or Form 10-K
as may be required by Rule 463 under the Act;
(k) If the Company elects to rely upon Rule 462(b), to file a Rule 462(b)
Registration Statement with the Commission in compliance with Rule 462(b) by
10:00 P.M., Washington, D.C. time, on the date of this Agreement, and the
Company shall at the time of filing either pay to the Commission
12
<PAGE>
the filing fee for the Rule 462(b) Registration Statement or give irrevocable
instructions for the payment of such fee pursuant to Rule 111(b) under the Act;
(l) To (i) enforce the terms of each Lock-up Agreement (as defined in
Section 1 (a) (xv)), (ii) issue stop-transfer instructions to the transfer agent
for the Stock with respect to any transaction or contemplated transaction that
would constitute a breach of or default under the applicable Lock-up Agreement
and (iii) upon written request of Goldman, Sachs & Co., release from the Lock-up
Agreements those shares of Stock held by those holders set forth in such
request. In addition, except with the prior written consent of Goldman, Sachs &
Co., the Company agrees (i) not to amend or terminate, or waive any right under,
any Lock-up Agreement, or take any other action that would directly or
indirectly have the same effect as an amendment or termination, or waiver of any
right under, any Lock-up Agreement, that would permit any holder of shares of
Stock subject to such Lock-up Agreement, or any options or securities
convertible into, or exercisable or exchangeable for, Stock subject to such
Lock-up Agreement, to (x) offer, pledge, sell, offer to sell, contract to sell,
sell any option or contract to purchase, purchase any option to sell, grant any
option, right or warrant to purchase, or otherwise transfer or dispose of,
directly or indirectly, such shares of Stock or other securities, or (y) enter
into any swap or other agreement that transfers, in whole or in part, any of the
economic consequences of ownership of such shares of Stock or other securities,
and (ii) not to consent to any sale, short sale, grant of an option for the
purchase of, or other disposition or transfer of shares of Stock, or securities
convertible into or exercisable or exchangeable for Stock, subject to a Lock-up
Agreement; and
(m) To place a restrictive legend on any shares of Stock acquired pursuant
to the exercise, after the date hereof and prior to the expiration of the
180-day period after the date of the Prospectus, of any option granted under the
Plans and subject to a Lock-up Agreement, which legend shall restrict the
transfer of such shares prior to the expiration of such 180-day period.
6. The Company and each of the Selling Stockholders, jointly and
severally, covenant and agree with one another and with the several Underwriters
that (a) the Company will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Shares under the Act and all other
expenses in connection with the preparation, printing and filing of the
Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers; (ii) the cost of printing or producing
any Agreement among Underwriters, this Agreement, the International Underwriting
Agreement, the Agreement between Syndicates, the Selling Agreements, the Blue
Sky Memorandum, closing documents (including any compilations thereof) and any
other documents in connection with the offering, purchase, sale and delivery of
the Shares; (iii) all expenses in connection with the qualification of the
Shares for offering and sale under state securities laws as provided in Section
5(b) hereof, including the fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection with the
Blue Sky survey; (iv) all fees and expenses in connection with listing the
Shares on NASDAQ; (v) the filing fees incident to, and the fees and
disbursements of counsel for the Underwriters in connection with, securing any
required review by the National Association of Securities Dealers, Inc. of the
terms of the sale of the Shares; (vi) the cost of preparing stock certificates;
(vii) the cost and charges of any transfer agent or registrar; and (viii) all
other costs and expenses incident to the
13
<PAGE>
performance of its obligations hereunder which are not otherwise specifically
provided for in this Section; and (b) such Selling Stockholder will pay or cause
to be paid all costs and expenses incident to the performance of such Selling
Stockholder's obligations hereunder which are not otherwise specifically
provided for in this Section, including (i) any fees and expenses of counsel for
such Selling Stockholder, (ii) such Selling Stockholder's pro rata share of the
fees and expenses of the Attorneys-in-Fact and the Custodian and (iii) all
expenses and taxes incident to the sale and delivery of the Shares to be sold by
such Selling Stockholder to the Underwriters hereunder. In connection with
Clause (b) (iii) of the preceding sentence, Goldman, Sachs & Co. agrees to pay
New York State stock transfer tax, and the Selling Stockholder agrees to
reimburse Goldman, Sachs & Co. for associated carrying costs if such tax payment
is not rebated on the day of payment and for any portion of such tax payment not
rebated. It is understood, however, that except as provided in this Section,
and Sections 8 and 11 hereof, the Underwriters will pay all of their own costs
and expenses, including the fees of their counsel, stock transfer taxes on
resale of any of the Shares by them, and any advertising expenses connected with
any offers they may make.
7. The obligations of the Underwriters hereunder, as to the Shares to be
delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company and of the Selling Stockholders herein are, at and as of such Time
of Delivery, true and correct, the condition that the Company and the Selling
Stockholders shall have performed all of its and their obligations hereunder
theretofore to be performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed for
such filing by the rules and regulations under the Act and in accordance
with Section 5(a) hereof; if the Company has elected to rely upon Rule
462(b), the Rule 462(b) Registration Statement shall have become effective
by 10:00 P.M., Washington, D.C. time, on the date of this Agreement; no
stop order suspending the effectiveness of the Registration Statement or
any part thereof shall have been issued and no proceeding for that purpose
shall have been initiated or threatened by the Commission; and all requests
for additional information on the part of the Commission shall have been
complied with to your reasonable satisfaction;
(b) Wilson Sonsini Goodrich & Rosati, P.C., counsel for the
Underwriters, shall have furnished to you such written opinion or opinions
(a draft of each such opinion is attached as Annex II(a) hereto), dated
such Time of Delivery, with respect to the matters covered in paragraphs
(i), (ii), (viii), (xii) and (xiv) of subsection (c) below as well as such
other related matters as you may reasonably request, and such counsel shall
have received such papers and information as they may reasonably request to
enable them to pass upon such matters;
(c) Pepper Hamilton LP, counsel for the Company, shall have
furnished to you their written opinion (a draft of such opinion is attached
as Annex II(b) hereto), dated such Time of Delivery, in form and substance
satisfactory to you, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, with power and
14
<PAGE>
authority (corporate and other) to own its properties and conduct its
business as described in the Prospectus;
(ii) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the
Company (including the Shares being delivered at such Time of
Delivery) have been duly and validly authorized and issued and are
fully paid and non-assessable; and the Shares conform to the
description of the Stock contained in the Prospectus;
(iii) The Company has been duly qualified as a foreign corporation
for the transaction of business and is in good standing under the laws
of each other jurisdiction in which it owns or leases properties or
conducts any business so as to require such qualification, or is
subject to no material liability or disability by reason of failure to
be so qualified in any such jurisdiction (such counsel being entitled
to rely in respect of the opinion in this clause upon opinions of
local counsel and in respect of matters of fact upon certificates of
officers of the Company, provided that such counsel shall state that
they believe that both you and they are justified in relying upon such
opinions and certificates);
(iv) Each subsidiary of the Company has been duly incorporated
and is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation; and all of the issued
shares of capital stock of each such subsidiary have been duly and
validly authorized and issued, are fully paid and non-assessable, and
(except for directors' qualifying shares are owned directly or
indirectly by the Company, free and clear of all liens, encumbrances,
equities or claims (such counsel being entitled to rely in respect of
the opinion in this clause upon opinions of local counsel and in
respect of matters of fact upon certificates of officers of the
Company or its subsidiaries, provided that such counsel shall state
that they believe that both you and they are justified in relying upon
such opinions and certificates);
(v) The Company and its subsidiaries have good and marketable
title in fee simple to all real property owned by them, in each case
free and clear of all liens, encumbrances and defects except such as
are described in the Prospectus or such as do not materially affect
the value of such property and do not interfere with the use made and
proposed to be made of such property by the Company and its
subsidiaries; and any real property and buildings held under lease by
the Company and its subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be
made of such property and buildings by the Company and its
subsidiaries (in giving the opinion in this clause, such counsel may
state that no examination of record titles for the purpose of such
opinion has been made, and that they are relying upon a general review
of the titles of the Company and its subsidiaries, upon opinions of
local counsel and abstracts, reports and policies of title companies
rendered or issued at or subsequent to the time of acquisition of such
property by the Company or its subsidiaries, upon opinions of counsel
to the lessors of such property and, in respect of matters of fact,
upon certificates of officers of the Company or its subsidiaries,
provided that such counsel shall state that they believe that both you
and
15
<PAGE>
they are justified in relying upon such opinions, abstracts, reports,
policies and certificates);
(vi) To the best of such counsel's knowledge and other than as
set forth in the Prospectus, there are no legal or governmental
proceedings pending to which the Company or any of its subsidiaries is
a party or of which any property of the Company or any of its
subsidiaries is the subject which, if determined adversely to the
Company or any of its subsidiaries, would individually or in the
aggregate have a material adverse effect on the current or future
consolidated financial position, stockholders' equity or results of
operations of the Company and its subsidiaries; and, to the best of
such counsel's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others;
(vii) To the best of such counsel's knowledge, there are no claims
against the Company or any of its subsidiaries that the products or
services offered by the Company or its subsidiaries infringe the
intellectual property rights of any third party;
(viii) This Agreement and the International Underwriting Agreement
have been duly authorized, executed and delivered by the Company;
(ix) The issue and sale of the Shares being delivered at such
Time of Delivery to be sold by the Company and the compliance by the
Company with all of the provisions of this Agreement and the
International Underwriting Agreement and the consummation of the
transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of,
or constitute a default under, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument known to such counsel
to which the Company or any of its subsidiaries is a party or by which
the Company or any of its subsidiaries is bound or to which any of the
property or assets of the Company or any of its subsidiaries is
subject, nor will such action result in any violation of the
provisions of the Certificate of Incorporation or By-laws of the
Company or any statute or any order, rule or regulation known to such
counsel of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of
their properties;
(x) No consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body
is required for the issue and sale of the Shares or the consummation
by the Company of the transactions contemplated by this Agreement and
the International Underwriting Agreement, except the registration
under the Act of the Shares, and such consents, approvals,
authorizations, registrations or qualifications as may be required
under state or foreign securities or Blue Sky laws in connection with
the purchase and distribution of the Shares by the Underwriters and
the International Underwriters;
(xi) Neither the Company nor any of its subsidiaries is in
violation of its Certificate of Incorporation or By-laws or in default
in the performance or observance of any material obligation,
agreement, covenant or condition contained in any indenture, mortgage,
deed
16
<PAGE>
of trust, loan agreement, lease or other agreement or instrument to
which it is a party or by which it or any of its properties may be
bound;
(xii) The statements set forth in the Prospectus under the caption
"Description of Capital Stock", insofar as they purport to constitute
a summary of the terms of the Stock, and under the caption
"Underwriting", insofar as they purport to describe the provisions of
the laws and documents referred to therein, are accurate, complete and
fair;
(xiii) The Company is not an "investment company" or an entity
"controlled" by an "investment company", as such terms are defined in
the Investment Company Act; and
(xiv) The Registration Statement and the Prospectus and any
further amendments and supplements thereto made by the Company prior
to such Time of Delivery (other than the financial statements and
related schedules therein, as to which such counsel need express no
opinion) comply as to form in all material respects with the
requirements of the Act and the rules and regulations thereunder;
although they do not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the
Registration Statement or the Prospectus, except for those referred to
in the opinion in subsection (xii) of this Section 7(c), they have no
reason to believe that, as of its effective date, the Registration
Statement or any further amendment thereto made by the Company prior
to such Time of Delivery (other than the financial statements and
related schedules therein, as to which such counsel need express no
opinion) contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or that, as of its date,
the Prospectus or any further amendment or supplement thereto made by
the Company prior to such Time of Delivery (other than the financial
statements and related schedules therein, as to which such counsel
need express no opinion) contained an untrue statement of a material
fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading or that, as of such Time of Delivery, either
the Registration Statement or the Prospectus or any further amendment
or supplement thereto made by the Company prior to such Time of
Delivery (other than the financial statements and related schedules
therein, as to which such counsel need express no opinion) contains an
untrue statement of a material fact or omits to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and they do
not know of any amendment to the Registration Statement required to be
filed or of any contracts or other documents of a character required
to be filed as an exhibit to the Registration Statement or required to
be described in the Registration Statement or the Prospectus which are
not filed or described as required.
In rendering such opinion, such counsel may state that they express no
opinion as to the laws of any jurisdiction outside the United States;
(d) The respective counsel for each of the Selling Stockholders, as
indicated in Schedule II hereto, each shall have furnished to you their written
opinion with respect to each of the Selling
17
<PAGE>
Stockholders for whom they are acting as counsel, dated the First Time of
Delivery, in form and substance satisfactory to you, to the effect that:
(i) A Power of Attorney and a Custody Agreement have been duly
executed and delivered by such Selling Stockholder and constitute
valid and binding agreements of such Selling Stockholder in accordance
with their terms;
(ii) This Agreement and the International Underwriting Agreement
have been duly executed and delivered by or on behalf of such Selling
Stockholder; and the sale of the Shares to be sold by such Selling
Stockholder hereunder and thereunder and the compliance by such
Selling Stockholder with all of the provisions of this Agreement and
the International Underwriting Agreement, the Power of Attorney and
the Custody Agreement and the consummation of the transactions herein
and therein contemplated will not conflict with or result in a breach
or violation of any terms or provisions of, or constitute a default
under, any statute, indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument known to such counsel to which such
Selling Stockholder is a party or by which such Selling Stockholder is
bound, or to which any of the property or assets of such Selling
Stockholder is subject, nor will such action result in any violation
of the provisions of or any order, rule or regulation known to such
counsel of any court or governmental agency or body having
jurisdiction over such Selling Stockholder or the property of such
Selling Stockholder;
(iii) No consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation of the
transactions contemplated by this Agreement and the International
Underwriting Agreement in connection with the Shares to be sold by
such Selling Stockholder hereunder or thereunder, except such as have
been obtained under the Act and such as may be required under state or
foreign securities or Blue Sky laws in connection with the purchase
and distribution of such Shares by the Underwriters or the
International Underwriters;
(iv) Immediately prior to the First Time of Delivery such Selling
Stockholder had good and valid title to the Shares to be sold at the
First Time of Delivery by such Selling Stockholder under this
Agreement and the International Underwriting Agreement, free and clear
of all liens, encumbrances, equities or claims, and full right, power
and authority to sell, assign, transfer and deliver the Shares to be
sold by such Selling Stockholder hereunder and thereunder; and
(v) Good and valid title to such Shares, free and clear of all
liens, encumbrances, equities or claims, has been transferred to each
of the several Underwriters or International Underwriters, as the case
may be, who have purchased such Shares in good faith and without
notice of any such lien, encumbrance, equity or claim or any other
adverse claim within the meaning of the Uniform Commercial Code.
In rendering such opinion, such counsel may state that they express no
opinion as to the laws of any jurisdiction outside the United States and in
rendering the opinion in subparagraph (iv) such counsel may rely upon a
certificate of such Selling Stockholder in respect of matters of fact as to
ownership of, and liens, encumbrances, equities or claims on the Shares sold by
such Selling Stockholder, provided
18
<PAGE>
that such counsel shall state that they believe that both you and they are
justified in relying upon such certificate;
(e) On the date of the Prospectus at a time prior to the execution of this
Agreement, at 9:30 a.m., New York City time, on the effective date of any
post-effective amendment to the Registration Statement filed subsequent to the
date of this Agreement and also at each Time of Delivery, (i) Ernest & Young, LP
shall have furnished to you a letter or letters, dated the respective dates of
delivery thereof, in form and substance satisfactory to you, to the effect set
forth in Annex I hereto (the executed copy of the letter delivered prior to the
execution of this Agreement is attached as Annex I(a) hereto and a draft of the
form of letter to be delivered on the effective date of any post-effective
amendment to the Registration Statement and as of each Time of Delivery is
attached as Annex I(b) hereto); and (ii) Price Waterhouse Coopers LP shall have
furnished to you a letter or letters, dated the respective dates of delivery
thereof, in form and substance satisfactory to you, to the effect set forth in
Annex I hereto (the executed copy of the letter delivered prior to the execution
of this Agreement is attached as Annex 1(c) hereto and a draft of the form of
letter to be delivered on the effective date of any post-effective amendment to
the Registration Statement and as of each Time of Delivery is attached as Annex
I(d) hereto);
(f) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements included in
the Prospectus any loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise than as set
forth or contemplated in the Prospectus, and (ii) since the respective dates as
of which information is given in the Prospectus there shall not have been (A)
any change in the capital stock or long-term debt of the Company or any of its
subsidiaries or any change, or any development involving a prospective change,
in or affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, (B) the commencement of litigation against the Company or its
subsidiaries or (C) the assertion against the Company or any of its subsidiaries
of any claim that the products or services offered by the Company or its
subsidiaries infringe the intellectual property rights of any third party,
otherwise than as set forth or contemplated in the Prospectus, the effect of
which, in any such case described in Clause (i) or (ii), is in the judgment of
the Representatives so material and adverse as to make it impracticable or
inadvisable to proceed with the public offering or the delivery of the Shares
being delivered at such Time of Delivery on the terms and in the manner
contemplated in the Prospectus;
(g) On or after the date hereof (i) no downgrading shall have occurred in
the rating accorded the Company's debt securities by any "nationally recognized
statistical rating organization", as that term is defined by the Commission for
purposes of Rule 436(g)(2) under the Act, and (ii) no such organization shall
have publicly announced that it has under surveillance or review, with possible
negative implications, its rating of any of the Company's debt securities;
(h) On or after the date hereof there shall not have occurred any of the
following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange or on NASDAQ; (ii) a suspension or
material limitation in trading in the Company's securities on; (iii) a general
moratorium on commercial banking activities declared by either Federal or New
York or, Texas State authorities; or (iv) the outbreak or escalation of
hostilities involving the United States or the
19
<PAGE>
declaration by the United States of a national emergency or war, if the effect
of any such event specified in this Clause (iv) in the judgment of the
Representatives makes it impracticable or inadvisable to proceed with the public
offering or the delivery of the Shares being delivered at such Time of Delivery
on the terms and in the manner contemplated in the Prospectus;
(i) The Shares to be sold by the Company and the Selling Stockholders at
such Time of Delivery shall have been duly listed, for quotation on NASDAQ;
(j) The Company has obtained and delivered to the Underwriters executed
copies of an agreement from each director and officer of the Company and from
each beneficial owner of at least 45,000 shares of Stock (as defined and
determined according to Rule 13d-3 under the Exchange Act, except that a one
hundred eighty day period shall be used rather than the sixty day period set
forth therein) to the effect set forth in Subsection 1(b)(iv) hereof in form and
substance satisfactory to you;
(k) The Company shall have complied with the provisions of Section 5(c)
hereof with respect to the furnishing of prospectuses on the New York Business
Day next succeeding the date of this Agreement; and
(l) The Company and the Selling Stockholders shall have furnished or
caused to be furnished to you at such Time of Delivery certificates of officers
of the Company and of the Selling Stockholders, respectively, satisfactory to
you as to the accuracy of the representations and warranties of the Company and
the Selling Stockholders, respectively, herein at and as of such Time of
Delivery, as to the performance by the Company and the Selling Stockholders of
all of their respective obligations hereunder to be performed at or prior to
such Time of Delivery, and as to such other matters as you may reasonably
request, and the Company shall have furnished or caused to be furnished
certificates as to the matters set forth in subsections (a) and (f) of this
Section, and as to such other matters as you may reasonably request.
8. (a) The Company and each of the Selling Stockholders, jointly and
severally, will indemnify and hold harmless each Underwriter against any losses,
claims, damages or liabilities, joint or several, to which such Underwriter may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse each Underwriter for any legal or other expenses reasonably
incurred by such Underwriter in connection with investigating or defending any
such action or claim as such expenses are incurred; PROVIDED, HOWEVER, that the
Company and the Selling Stockholders shall not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in any Preliminary Prospectus, the Registration Statement or the
Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through Goldman, Sachs & Co. expressly for use therein.
(b) Each Underwriter will indemnify and hold harmless the Company and each
Selling Stockholder against any losses, claims, damages or liabilities to which
the Company or such Selling Stockholder
20
<PAGE>
may become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
in each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in any
Preliminary Prospectus, the Registration Statement or the Prospectus or any such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by such Underwriter through Goldman, Sachs
& Co. expressly for use therein; and will reimburse the Company and each Selling
Stockholder for any legal or other expenses reasonably incurred by the Company
or such Selling Stockholder in connection with investigating or defending any
such action or claim as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection (a)
above of notice of the commencement of any action, such indemnified party shall,
if a claim in respect thereof is to be made against an indemnifying party under
such subsection, notify the indemnifying party in writing of the commencement
thereof; but the omission so to notify the indemnifying party shall not relieve
it from any liability which it may have to any indemnified party otherwise than
under such subsection. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate therein and, to
the extent that it shall wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel satisfactory to
such indemnified party (which shall not, except with the consent of the
indemnified party, be counsel to the indemnifying party), and, after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified party under such subsection for any legal expenses of other counsel
or any other expenses, in each case subsequently incurred by such indemnified
party, in connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the written consent of the
indemnified party, effect the settlement or compromise of, or consent to the
entry of any judgment with respect to, any pending or threatened action or claim
in respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified party is an actual or potential party to such
action or claim) unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability arising out of
such action or claim and (ii) does not include a statement as to or an admission
of fault, culpability or a failure to act, by or on behalf of any indemnified
party.
(d) If the indemnification provided for in this Section 8 is unavailable to
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company and the Selling Stockholders on the one hand and the Underwriters
on the other from the offering of the Shares. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law or if the indemnified party failed to give the notice
21
<PAGE>
required under subsection(c) above, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Company and the Selling Stockholders on the one hand
and the Underwriters on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities (or actions in
respect thereof), as well as any other relevant equitable considerations. The
relative benefits received by the Company and the Selling Stockholders on the
one hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Shares purchased
under this Agreement (before deducting expenses) received by the Company and the
Selling Stockholders bear to the total underwriting discounts and commissions
received by the Underwriters with respect to the Shares purchased under this
Agreement, in each case as set forth in the table on the cover page of the
Prospectus. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Selling Stockholders on the one hand or the
Underwriters on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company, each of the Selling Stockholders and the Underwriters agree that it
would not be just and equitable if contributions pursuant to this subsection (d)
were determined by PRO RATA allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this
subsection (d). The amount paid or payable by an indemnified party as a result
of the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in this subsection (d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the Shares underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such Underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this subsection (d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Company and the Selling Stockholders under this
Section 8 shall be in addition to any liability which the Company and the
respective Selling Stockholders may otherwise have and shall extend, upon the
same terms and conditions, to each person, if any, who controls any Underwriter
within the meaning of the Act; and the obligations of the Underwriters under
this Section 8 shall be in addition to any liability which the respective
Underwriters may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Company and to each person, if
any, who controls the Company within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase
the Shares which it has agreed to purchase hereunder at a Time of Delivery, you
may in your discretion arrange for you or another party or other parties to
purchase such Shares on the terms contained herein. If within thirty-six
22
<PAGE>
hours after such default by any Underwriter you do not arrange for the purchase
of such Shares, then the Company and the Selling Stockholders shall be entitled
to a further period of thirty-six hours within which to procure another party or
other parties satisfactory to you to purchase such Shares on such terms. In the
event that, within the respective prescribed periods, you notify the Company and
the Selling Stockholders that you have so arranged for the purchase of such
Shares, or the Company and the Selling Stockholders notify you that they have so
arranged for the purchase of such Shares, you or the Company and the Selling
Stockholders shall have the right to postpone such Time of Delivery for a period
of not more than seven days, in order to effect whatever changes may thereby be
made necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus which in your opinion
may thereby be made necessary. The term "Underwriter" as used in this Agreement
shall include any person substituted under this Section with like effect as if
such person had originally been a party to this Agreement with respect to such
Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
the Selling Stockholders as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased does not exceed one-eleventh of
the aggregate number of all of the Shares to be purchased at such Time of
Delivery, then the Company and the Selling Stockholders shall have the right to
require each non-defaulting Underwriter to purchase the number of Shares which
such Underwriter agreed to purchase hereunder at such Time of Delivery and, in
addition, to require each non-defaulting Underwriter to purchase its pro rata
share (based on the number of Shares which such Underwriter agreed to purchase
hereunder) of the Shares of such defaulting Underwriter or Underwriters for
which such arrangements have not been made; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
the Selling Stockholders as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased exceeds one-eleventh of the
aggregate number of all of the Shares to be purchased at such Time of Delivery,
or if the Company and the Selling Stockholders shall not exercise the right
described in subsection (b) above to require non-defaulting Underwriters to
purchase Shares of a defaulting Underwriter or Underwriters, then this Agreement
(or, with respect to the Second Time of Delivery, the obligations of the
Underwriters to purchase and of the Company to sell the Optional Shares) shall
thereupon terminate, without liability on the part of any non-defaulting
Underwriter or the Company or the Selling Stockholders, except for the expenses
to be borne by the Company and the Selling Stockholders and the Underwriters as
provided in Section 6 hereof and the indemnity and contribution agreements in
Section 8 hereof; but nothing herein shall relieve a defaulting Underwriter from
liability for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company, the Selling Stockholders and the several
Underwriters, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of any Underwriter or any controlling person of any
Underwriter, or the Company, or any of the Selling
23
<PAGE>
Stockholders, or any officer or director or controlling person of the Company,
or any controlling person of any Selling Stockholder, and shall survive delivery
of and payment for the Shares.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
neither the Company nor the Selling Stockholders shall then be under any
liability to any Underwriter except as provided in Sections 6 and 8 hereof; but,
if for any other reason any Shares are not delivered by or on behalf of the
Company and the Selling Stockholders as provided herein, the Company and each of
the Selling Stockholders pro rata (based on the number of Shares to be sold by
the Company and such Selling Stockholder hereunder) will reimburse the
Underwriters through you for all out-of-pocket expenses approved in writing by
you, including fees and disbursements of counsel, reasonably incurred by the
Underwriters in making preparations for the purchase, sale and delivery of the
Shares not so delivered, but the Company and the Selling Stockholders shall then
be under no further liability to any Underwriter in respect of the Shares not so
delivered except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives; and in all dealings with any Selling Stockholder hereunder, you
and the Company shall be entitled to act and rely upon any statement, request,
notice or agreement on behalf of such Selling Stockholder made or given by any
or all of the Attorneys-in-Fact for such Selling Stockholder.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 32 Old Slip, 9th Floor, New York, New York 10004, Attention: Registration
Department; if to any Selling Stockholder shall be delivered or sent by mail,
telex or facsimile transmission to counsel for such Selling Stockholder at its
address set forth in Schedule II hereto; and if to the Company shall be
delivered or sent by mail, telex or facsimile transmission to the address of the
Company set forth in the Registration Statement, Attention: Secretary; provided,
however, that any notice to an Underwriter pursuant to Section 8 (c) hereof
shall be delivered or sent by mail, telex or facsimile transmission to such
Underwriter at its address set forth in its Underwriters' Questionnaire or telex
constituting such Questionnaire, which address will be supplied to the Company
or the Selling Stockholders by you upon request. Any such statements, requests,
notices or agreements shall take effect upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company and the Selling Stockholders and, to the
extent provided in Sections 8 and 10 hereof, the officers and directors of the
Company and each person who controls the Company, any Selling Stockholder or any
Underwriter, and their respective heirs, executors, administrators, successors
and assigns, and no other person shall acquire or have any right under or by
virtue of this Agreement. No purchaser of any of the Shares from any
Underwriter shall be deemed a successor or assign by reason merely of such
purchase.
14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
24
<PAGE>
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
16. This Agreement be executed by any one or more of the parties hereto
in any number of counterparts, each of which shall be deemed to be an original,
but all such counterparts shall together constitute one and the same instrument.
If the foregoing is in accordance with your understanding, please sign and
return to us eight counterparts hereof, and upon the acceptance hereof by you,
on behalf of each of the Underwriters, this letter and such acceptance hereof
shall constitute a binding agreement among each of the Underwriters, the Company
and each of the Selling Stockholders. It is understood that your acceptance of
this letter on behalf of each of the Underwriters is pursuant to the authority
set forth in a form of Agreement among Underwriters (U.S. Version), the form of
which shall be submitted to the Company and the Selling Stockholders for
examination upon request, but without warranty on your part as to the authority
of the signers thereof.
25
<PAGE>
Any person executing and delivering this Agreement as Attorney-in-Fact for
a Selling Stockholder represents by so doing that he has been duly appointed as
Attorney-in-Fact by such Selling Stockholder pursuant to a validly existing and
binding Power of Attorney which authorizes such Attorney-in-Fact to take such
action.
Very truly yours,
EXE TECHNOLOGIES, INC.
By:
---------------------------------
Name:
Title:
RAYMOND HOOD
ADAM BELSKY
NIGEL BAHADUR
By:
---------------------------------
Name:
Title:
As Attorney-in-Fact acting on behalf of
each of the Selling Stockholders named
in Schedule II to this Agreement.
Accepted as of the date hereof
at ____________, ____________:
GOLDMAN, SACHS & CO.
BANCAMERICA ROBERTSON STEPHENS & CO.
BT ALEX. BROWN INC.
PIPER JAFFRAY INC.
BY:
--------------------------------------
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
26
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF
OPTIONAL
SHARES TO BE
TOTAL NUMBER OF PURCHASED IF
FIRM SHARES MAXIMUM OPTION
UNDERWRITER TO BE PURCHASED EXERCISED
<S> <C> <C>
Goldman, Sachs & Co. . . . . . . . . . . .
BancAmerica Robertson Stephens & Co.
BT Alex. Brown Incorporated
Piper Jaffray Inc.
[NAMES OF OTHER UNDERWRITERS]. . . . . . .
</TABLE>
27
<PAGE>
Total
SCHEDULE II
<TABLE>
<CAPTION>
NUMBER OF
OPTIONAL
SHARES TO BE
TOTAL NUMBER OF SOLD IF
FIRM SHARES MAXIMUM OPTION
TO BE SOLD EXERCISED
<S> <C> <C>
The Company. . . . . . . . . . . . . . . 5,480,000 924,000
The Selling Stockholders:
Raymond Hood (a). . . . . . . . . . 289,000 0
Adam Belsky (a) . . . . . . . . . . 289,000 0
Nigel Bahadur (a) . . . . . . . . . 102,000 0
Total. . . . . . . . . . . . . . . . . . 6,160,000 924,000
</TABLE>
(a) This Selling Stockholder is represented by [Pepper Hamilton LLP] and
has appointed [__________] and [__________] and each of them, as the
Attorneys-in-Fact for such Selling Stockholder.
28
<PAGE>
ANNEX I
Pursuant to Section 7(d) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect to
the Company and its subsidiaries within the meaning of the Act and the
applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any supplementary
financial information and schedules (and, if applicable, financial
forecasts and/or pro forma financial information) examined by them and
included in the Prospectus or the Registration Statement comply as to form
in all material respects with the applicable accounting requirements of the
Act and the related published rules and regulations thereunder; and, if
applicable, they have made a review in accordance with standards
established by the American Institute of Certified Public Accountants of
the unaudited consolidated interim financial statements, selected financial
data, pro forma financial information, financial forecasts and/or condensed
financial statements derived from audited financial statements of the
Company for the periods specified in such letter, as indicated in their
reports thereon, copies of which have been separately furnished to the
representatives of the Underwriters (the "Representatives");
(iii) They have made a review in accordance with standards established
by the American Institute of Certified Public Accountants of the unaudited
condensed consolidated statements of income, consolidated balance sheets
and consolidated statements of cash flows included in the Prospectus as
indicated in their reports thereon copies of which have been separately
furnished to the Representatives; and on the basis of specified procedures
including inquiries of officials of the Company who have responsibility for
financial and accounting matters regarding whether the unaudited condensed
consolidated financial statements referred to in paragraph (vi)(A)(i) below
comply as to form in all material respects with the applicable accounting
requirements of the Act and the related published rules and regulations,
nothing came to their attention that caused them to believe that the
unaudited condensed consolidated financial statements do not comply as to
form in all material respects with the applicable accounting requirements
of the Act and the related published rules and regulations;
(iv) The unaudited selected financial information with respect to the
consolidated results of operations and financial position of the Company
for the five most recent fiscal years included in the Prospectus agrees
with the corresponding amounts (after restatements where applicable) in the
audited consolidated financial statements for such five fiscal years which
were included or incorporated by reference in the Company's Annual Reports
on Form 10-K for such fiscal years;
(v) They have compared the information in the Prospectus under
selected captions with the disclosure requirements of Regulation S-K and on
the basis of limited procedures specified in such letter nothing came to
their attention as a result of the foregoing procedures that caused them to
believe that this information does not conform in all material respects
with the disclosure requirements of Items 301, 302, 402 and 503(d),
respectively, of Regulation S-K;
<PAGE>
(vi) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available interim
financial statements of the Company and its subsidiaries, inspection of the
minute books of the Company and its subsidiaries since the date of the
latest audited financial statements included in the Prospectus, inquiries
of officials of the Company and its subsidiaries responsible for financial
and accounting matters and such other inquiries and procedures as be
specified in such letter, nothing came to their attention that caused them
to believe that:
(A) (i) the unaudited consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included in the Prospectus do not comply as to form in all material
respects with the applicable accounting requirements of the Act and
the related published rules and regulations, or (ii) any material
modifications should be made to the unaudited condensed consolidated
statements of income, consolidated balance sheets and consolidated
statements of cash flows included in the Prospectus for them to be in
conformity with generally accepted accounting principles;
(B) any other unaudited income statement data and balance sheet
items included in the Prospectus do not agree with the corresponding
items in the unaudited consolidated financial statements from which
such data and items were derived, and any such unaudited data and
items were not determined on a basis substantially consistent with the
basis for the corresponding amounts in the audited consolidated
financial statements included in the Prospectus;
(C) the unaudited financial statements which were not included
in the Prospectus but from which were derived any unaudited condensed
financial statements referred to in Clause (A) and any unaudited
income statement data and balance sheet items included in the
Prospectus and referred to in Clause (B) were not determined on a
basis substantially consistent with the basis for the audited
consolidated financial statements included in the Prospectus;
(D) any unaudited pro forma consolidated condensed financial
statements included in the Prospectus do not comply as to form in all
material respects with the applicable accounting requirements of the
Act and the published rules and regulations thereunder or the pro
forma adjustments have not been properly applied to the historical
amounts in the compilation of those statements;
(E) as of a specified date not more than five days prior to the
date of such letter, there have been any changes in the consolidated
capital stock (other than issuances of capital stock upon exercise of
options and stock appreciation rights, upon earn-outs of performance
shares and upon conversions of convertible securities, in each case
which were outstanding on the date of the latest financial statements
included in the Prospectus) or any increase in the consolidated
long-term debt of the Company and its subsidiaries, or any decreases
in consolidated net current assets or stockholders' equity or other
items specified by the Representatives, or any increases in any items
specified by the Representatives, in each case as compared with
amounts shown in the latest balance
2
<PAGE>
sheet included in the Prospectus, except in each case for changes,
increases or decreases which the Prospectus discloses have occurred or
occur or which are described in such letter; and
(F) for the period from the date of the latest financial
statements included in the Prospectus to the specified date referred
to in Clause (E) there were any decreases in consolidated net revenues
or operating profit or the total or per share amounts of consolidated
net income or other items specified by the Representatives, or any
increases in any items specified by the Representatives, in each case
as compared with the comparable period of the preceding year and with
any other period of corresponding length specified by the
Representatives, except in each case for decreases or increases which
the Prospectus discloses have occurred or occur or which are
described in such letter; and
(vii) In addition to the examination referred to in their
report(s) included in the Prospectus and the limited procedures, inspection
of minute books, inquiries and other procedures referred to in paragraphs
(iii) and (vi) above, they have carried out certain specified procedures,
not constituting an examination in accordance with generally accepted
auditing standards, with respect to certain amounts, percentages and
financial information specified by the Representatives, which are derived
from the general accounting records of the Company and its subsidiaries,
which appear in the Prospectus, or in Part II of, or in exhibits and
schedules to, the Registration Statement specified by the Representatives,
and have compared certain of such amounts, percentages and financial
information with the accounting records of the Company and its subsidiaries
and have found them to be in agreement.
3
<PAGE>
EXHIBIT 1.2
EXE TECHNOLOGIES, INC.
Common Stock,
par value $0.01 per share
UNDERWRITING AGREEMENT
(INTERNATIONAL VERSION)
__________ __, 1998
Goldman Sachs International
BancAmerica Robertson Stephens & Co.
BT Alex. Brown Incorporated
Piper Jaffray Inc.
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman Sachs International,
Peterborough Court,
133 Fleet Street,
London EC4A 2BB, England.
Ladies and Gentlemen:
EXE Technologies, Inc., a Delaware corporation (the "Company"), proposes,
subject to the terms and conditions stated herein, to issue and sell to the
Underwriters named in Schedule I hereto (the "Underwriters") an aggregate of
1,370,000 shares and, at the election of the Underwriters, up to 231,000
additional shares of Common Stock par value $0.01 per share ("Stock") of the
Company and the stockholders of the Company named in Schedule II hereto (the
"Selling Stockholders") propose, subject to the terms and conditions stated
herein, to sell to the Underwriters an aggregate of 170,000 shares of Stock.
The aggregate of 1,540,000 shares to be sold by the Company and the Selling
Stockholders is herein called the "Firm Shares" and the aggregate of
231,000 additional shares to be sold by the Company is herein called the
"Optional Shares". The Firm Shares and the Optional Shares which the
Underwriters elect to purchase pursuant to Section 2 hereof are herein
collectively called, the "Shares"
It is understood and agreed to by all parties that the Company and the
Selling Stockholders are concurrently entering into an agreement, a copy of
which is attached hereto (the "U.S. Underwriting Agreement"), providing for the
sale by the Company and the Selling Stockholders of up to a total of 7,084,000
shares of Stock (the "U.S. Shares"), through arrangements with certain
underwriters in the United States (the "U.S. Underwriters"), for whom Goldman,
Sachs & Co., BancAmerica Robertson Stephens & Co., BT Alex. Brown Incorporated,
and Piper Jaffray Inc. are acting as representatives. Anything herein or
therein to the contrary notwithstanding, the respective closings under this
Agreement and the U.S. Underwriting Agreement are hereby expressly made
conditional on one another. The Underwriters hereunder and the U.S.
Underwriters are simultaneously entering into an Agreement between U.S. and
International Underwriting Syndicates (the "Agreement between Syndicates")
which provides, among
<PAGE>
other things, for the transfer of shares of Stock between the two syndicates and
for consultation by the Lead Managers hereunder with Goldman, Sachs & Co. prior
to exercising the rights of the Underwriters under Section 7 hereof. Two forms
of prospectus are to be used in connection with the offering and sale of shares
of Stock contemplated by the foregoing, one relating to the Shares hereunder and
the other relating to the U.S. Shares. The latter form of prospectus will be
identical to the former except for certain substitute pages as included in the
registration statement and amendments thereto as mentioned below. Except as
used in Sections 2, 3, 4, 9 and 11 herein, and except as context may otherwise
require, references hereinafter to the Shares shall include all of the shares of
Stock which may be sold pursuant to either this Agreement or the
U.S. Underwriting Agreement, and references herein to any prospectus whether in
preliminary or final form, and whether as amended or supplemented, shall include
both the U.S. and the international versions thereof.
In addition, this Agreement incorporates by reference certain provisions
from the U.S. Underwriting Agreement (including the related definitions of
terms, which are also used elsewhere herein) and, for purposes of applying the
same, references (whether in these precise words or their equivalent) in the
incorporated provisions to the "Underwriters" shall be to the Underwriters
hereunder, to the "Shares" shall be to the Shares hereunder as just defined, to
"this Agreement" (meaning therein the U.S. Underwriting Agreement) shall be to
this Agreement (except where this Agreement is already referred to or as the
context may otherwise require) and to the representatives of the Underwriters or
to Goldman, Sachs & Co. shall be to the addressees of this Agreement and to
Goldman Sachs International ("GSI"), and, in general, all such provisions and
defined terms shall be applied MUTATIS MUTANDIS as if the incorporated
provisions were set forth in full herein having regard to their context in this
Agreement as opposed to the U.S. Underwriting Agreement.
1. The Company and each of the several Selling Stockholders hereby make
to the Underwriters the same respective representations, warranties and
agreements as are set forth in Section 1 of the U.S. Underwriting Agreement,
which Section is incorporated herein by this reference.
2. Subject to the terms and conditions herein set forth, (a) the Company
and each of the Selling Stockholders agree, severally and not jointly, to sell
to each of the Underwriters, and each of the Underwriters agrees, severally and
not jointly, to purchase from the Company and each of the Selling Stockholders,
at a purchase price per share of $[__________], the number of Firm Shares (to be
adjusted by you so as to eliminate fractional shares) determined by multiplying
the aggregate number of Firm Shares to be sold by the Company and each of the
Selling Stockholders as set forth opposite their respective names in Schedule II
hereto by a fraction, the numerator of which is the aggregate number of Firm
Shares to be purchased by such Underwriter as set forth opposite the name of
such Underwriter in Schedule I hereto and the denominator of which is the
aggregate number of Firm Shares to be purchased by all the Underwriters from the
Company and all the Selling Stockholders hereunder and (b) in the event and to
the extent that the Underwriters shall exercise the election to purchase
Optional Shares as provided below, the Company agrees to sell to each of the
Underwriters, and each of the Underwriters agrees, severally and not jointly, to
purchase from the Company, at the purchase price per share set forth in clause
(a) of this Section 2, that portion of the number of Optional Shares as to which
such election shall have been exercised (to be adjusted by you so as to
eliminate fractional shares) determined by multiplying such number of Optional
Shares by a fraction the numerator of which is the maximum number of Optional
Shares which such Underwriter is entitled to purchase as set forth opposite the
name of such Underwriter in Schedule I hereto and the denominator of which is
the maximum number of Optional Shares that all of the Underwriters are entitled
to purchase hereunder.
2
<PAGE>
The Company hereby grants to the Underwriters the right to purchase at
their election up to 231,000 Optional Shares, at the purchase price per
share set forth in the paragraph above, for the sole purpose of covering
overallotments in the sale of the Firm Shares. Any such election to purchase
Optional Shares may be exercised only by written notice from you to the Company,
given within a period of 30 calendar days after the date of this Agreement and
setting forth the aggregate number of Optional Shares to be purchased and the
date on which such Optional Shares are to be delivered, as determined by you but
in no event earlier than the First Time of Delivery (as defined in Section 4
hereof) or, unless you and the Company otherwise agree in writing, earlier than
two or later than ten business days after the date of such notice.
3. Upon the authorization by GSI of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus and in the forms of Agreement among
Underwriters (International Version) and Selling Agreements, which have been
previously submitted to the Company by you. Each Underwriter hereby makes to
and with the Company and the Selling Stockholders the representations and
agreements of such Underwriter as a member of the selling group contained in
Sections 3(d) and 3(e) of the form of Selling Agreements.
4. (a) The Shares to be purchased by each Underwriter hereunder, in definitive
form, and in such authorized denominations and registered in such names as
Goldman, Sachs & Co. may request upon at least forty-eight hours' prior notice
to the Company and the Selling Stockholders shall be delivered by or on behalf
of the Company and the Selling Stockholders to Goldman, Sachs & Co., through the
facilities of The Depository Trust Company ("DTC") for the account of such
Underwriter, against payment by or on behalf of such Underwriter of the purchase
price therefor by wire transfer of Federal (same-day) funds to the account
specified by the Company and the Custodian, as their interests may appear, to
Goldman, Sachs & Co. at least forty-eight hours in advance. The Company will
cause the certificates representing the Shares to be made available for checking
and packaging at least twenty-four hours prior to the Time of Delivery (as
defined below) with respect thereto at the office of DTC or its designated
custodian (the "Designated Office"). The time and date of such delivery and
payment shall be, with respect to the Firm Shares, 9:30 a.m., New York City
time, on [________], 1998 on such other time and date as Goldman, Sachs & Co.,
the Company and the Selling Stockholders may agree upon in writing, and, with
respect to the Optional Shares, 9:30 a.m., New York time, on the date specified
by Goldman, Sachs & Co. in the written notice given by Goldman, Sachs & Co. of
the Underwriters' election to purchase such Optional Shares, or such other time
and date as Goldman, Sachs & Co. and the Company may agree upon in writing.
Such time and date for delivery of the Firm Shares is herein called the "First
Time of Delivery", such time and date for delivery of the Firm Optional Shares,
if not the First Time of Delivery, is herein called the "Second Time of
Delivery", and each such time and date for delivery is herein called a "Time of
Delivery".
(b) The documents to be delivered at each Time of Delivery by or on
behalf of the parties hereto pursuant to Section 7 of the U.S. Underwriting
Agreement, including the cross-receipt for the Shares and any additional
documents requested by the Underwriters pursuant to Section 7(l) of the
U.S. Underwriting Agreement, will be delivered at the offices of Wilson
Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo Alto, California (the
"Closing Location"), and the Shares will be delivered at the Designated
Office, all at each Time of Delivery. A meeting will be held at the
Closing Location at [_______] p.m., New York City time, on the New York
Business Day next preceding each Time of Delivery, at which meeting the
final drafts of the documents to be delivered pursuant to the preceding
sentence will be available for review by the parties hereto. For the
purposes of this Section 4, "New York Business Day" shall mean
3
<PAGE>
each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on
which banking institutions in New York are generally authorized or
obligated by law or executive order to close.
5. The Company hereby makes with the Underwriters the same agreements as
are set forth in Section 5 of the U.S. Underwriting Agreement, which Section is
incorporated herein by this reference.
6. The Company, each of the Selling Stockholders, and the Underwriters
hereby agree with respect to certain expenses on the same terms as are set forth
in Section 6 of the U.S. Underwriting Agreement, which Section is incorporated
herein by this reference.
7. Subject to the provisions of the Agreement between Syndicates, the
obligations of the Underwriters hereunder shall be subject, in their discretion,
at each Time of Delivery to the condition that all representations and
warranties and other statements of the Company and the Selling Stockholders
herein are, at and as of such Time of Delivery, true and correct, the condition
that the Company and the Selling Stockholders shall have performed all of their
respective obligations hereunder theretofore to be performed, and additional
conditions identical to those set forth in Section 7 of the U.S. Underwriting
Agreement, which Section is incorporated herein by this reference.
8. (a) The Company and each of the Selling Stockholders, jointly and
severally, will indemnify and hold harmless each Underwriter against any losses,
claims, damages or liabilities, joint or several, to which such Underwriter may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse each Underwriter for any legal or other expenses reasonably
incurred by such Underwriter in connection with investigating or defending any
such action or claim as such expenses are incurred; PROVIDED, HOWEVER, that the
Company and the Selling Stockholders shall not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in any Preliminary Prospectus, the Registration Statement or the
Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through GSI expressly for use therein.
(b) Each Underwriter will indemnify and hold harmless the Company and each
Selling Stockholder against any losses, claims, damages or liabilities to which
the Company or such Selling Stockholder may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in any Preliminary Prospectus, the Registration
Statement or the Prospectus or any such amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by such
Underwriter through GSI expressly for use therein; and will reimburse the
Company and each Selling Stockholder for any legal or other expenses reasonably
incurred by the Company or such Selling Stockholder in connection with
investigating or defending any such action or claim as such expenses are
incurred.
4
<PAGE>
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against an indemnifying party
under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the written
consent of the indemnified party, effect the settlement or compromise of, or
consent to the entry of any judgment with respect to, any pending or threatened
action or claim in respect of which indemnification or contribution may be
sought hereunder (whether or not the indemnified party is an actual or potential
party to such action or claim) unless such settlement, compromise or judgment
(i) includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act, by or
on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 8 is unavailable to
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company and the Selling Stockholders on the one hand and the Underwriters
on the other from the offering of the Shares. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law or if the indemnified party failed to give the notice required under
subsection (c) above, then each indemnifying party shall contribute to such
amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company and the Selling Stockholders on the one hand and the
Underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Selling Stockholders on the one hand
and the Underwriters on the other shall be deemed to be in the same proportion
as the total net proceeds from the offering of the Shares purchased under this
Agreement (before deducting expenses) received by the Company and the Selling
Stockholders bear to the total underwriting discounts and commissions received
by the Underwriters with respect to the Shares purchased under this Agreement,
in each case as set forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company or the Selling Stockholders on the one hand or the Underwriters on the
other and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company, each
of the Selling Stockholders and the Underwriters agree that it would not be just
and equitable if contributions pursuant to this subsection (d) were determined
by PRO RATA allocation (even if the Underwriters were treated as
5
<PAGE>
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this
subsection (d). The amount paid or payable by an indemnified party as a result
of the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in this subsection (d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the Shares underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such Underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this subsection (d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Company and the Selling Stockholders under this
Section 8 shall be in addition to any liability which the Company and the
respective Selling Stockholders may otherwise have and shall extend, upon the
same terms and conditions, to each person, if any, who controls any Underwriter
within the meaning of the Act; and the obligations of the Underwriters under
this Section 8 shall be in addition to any liability which the respective
Underwriters may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Company and to each person, if
any, who controls the Company within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase
the Shares which it has agreed to purchase hereunder at a Time of Delivery, you
may in your discretion arrange for you or another party or other parties to
purchase such Shares on the terms contained herein. If within thirty-six hours
after such default by any Underwriter you do not arrange for the purchase of
such Shares, then the Company and the Selling Stockholders shall be entitled to
a further period of thirty-six hours within which to procure another party or
other parties satisfactory to you to purchase such Shares on such terms. In the
event that, within the respective prescribed periods, you notify the Company and
the Selling Stockholders that you have so arranged for the purchase of such
Shares, or the Company and the Selling Stockholders notify you that they have so
arranged for the purchase of such Shares, you or the Company and the Selling
Stockholders shall have the right to postpone such Time of Delivery for a period
of not more than seven days, in order to effect whatever changes may thereby be
made necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus which in your opinion
may thereby be made necessary. The term "Underwriter" as used in this Agreement
shall include any person substituted under this Section with like effect as if
such person had originally been a party to this Agreement with respect to such
Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
the Selling Stockholders as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased does not exceed one-eleventh of
the aggregate number of all the Shares to be purchased at such Time of Delivery,
then the Company and the Selling Stockholders shall have the right to require
each non-defaulting Underwriter to purchase the number of shares which such
Underwriter agreed to purchase hereunder at such Time of Delivery and, in
addition, to require each non-defaulting Underwriter to purchase its pro rata
share (based on the number of Shares which such Underwriter agreed to purchase
hereunder) of the Shares of such defaulting Underwriter or Underwriters for
which
6
<PAGE>
such arrangements have not been made; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
the Selling Stockholders as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased exceeds one-eleventh of the
aggregate number of all the Shares to be purchased at such Time of Delivery, or
if the Company and the Selling Stockholders shall not exercise the right
described in subsection (b) above to require non-defaulting Underwriters to
purchase Shares of a defaulting Underwriter or Underwriters, then this Agreement
(or, with respect to the Second Time of Delivery, the obligations of the
Underwriters to purchase and of the Company to sell the Optional Shares) shall
thereupon terminate, without liability on the part of any non-defaulting
Underwriter or the Company or the Selling Stockholders, except for the expenses
to be borne by the Company and the Selling Stockholders and the Underwriters as
provided in Section 6 hereof and the indemnity and contribution agreements in
Section 8 hereof; but nothing herein shall relieve a defaulting Underwriter from
liability for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company, the Selling Stockholders and the several
Underwriters, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of any Underwriter or any controlling person of any
Underwriter, or the Company or any of the Selling Stockholders, or any officer
or director or controlling person of the Company or any controlling person of
any Selling Stockholders, and shall survive delivery of and payment for the
Shares.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
neither the Company nor the Selling Stockholders shall then be under any
liability to any Underwriter except as provided in Section 6 and Section 8
hereof; but, if for any other reason, any Shares are not delivered by or on
behalf of the Company and the Selling Stockholders as provided herein, the
Company and each of the Selling Stockholders pro rata (based on the number of
Shares to be sold by the Company and such Selling Stockholder hereunder) will
reimburse the Underwriters through GSI for all out-of-pocket expenses approved
in writing by GSI, including fees and disbursements of counsel, reasonably
incurred by the Underwriters in making preparations for the purchase, sale and
delivery of the Shares not so delivered, but the Company and the Selling
Stockholders shall then be under no further liability to any Underwriter in
respect of the Shares not so delivered except as provided in Sections 6 and 8
hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by GSI on behalf of you as the representatives of the
Underwriters; and in all dealings with any Selling Stockholder hereunder, you
and the Company shall be entitled to act and rely upon any statement, request,
notice or agreement on behalf of such Selling Stockholder made or given by any
or all of the Attorneys-in-Fact for such Selling Stockholder.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to the Underwriters in care of GSI, Peterborough Court,
133 Fleet Street, London EC4A 2BB, England, Attention: Equity Capital Markets,
Telex No. 94012165, facsimile transmission No. (071) 774-1550; if to any Selling
Stockholder shall be delivered or sent by mail, telex or facsimile transmission
to counsel for such Selling Stockholder at its address set forth in Schedule II
hereto; and if to the Company shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Company set forth in the
Registration Statement, Attention: Secretary; provided, however, that any notice
to an Underwriter pursuant to
7
<PAGE>
Section 8(c) hereof shall be delivered or sent by mail, telex or facsimile
transmission to such Underwriter at its address set forth in its Underwriters'
Questionnaire, or telex constituting such Questionnaire, which address will be
supplied to the Company or the Selling Stockholders by GSI upon request. Any
such statements, requests, notices or agreements shall take effect upon receipt
thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company and the Selling Stockholders and, to the
extent provided in Sections 8 and 10 hereof, the officers and directors of the
Company and each person who controls the Company, any Selling Stockholder or any
Underwriter, and their respective heirs, executors, administrators, successors
and assigns, and no other person shall acquire or have any right under or by
virtue of this Agreement. No purchaser of any of the Shares from any
Underwriter shall be deemed a successor or assign by reason merely of such
purchase.
14. Time shall be of the essence of this Agreement.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
If the foregoing is in accordance with your understanding, please sign and
return to us eight counterparts hereof, and upon the acceptance hereof by you,
on behalf of each of the Underwriters, this letter and such acceptance hereof
shall constitute a binding agreement among each of the Underwriters, the Company
and each of the Selling Stockholders. It is understood that your acceptance of
this letter on behalf of each of the Underwriters is pursuant to the authority
set forth in a form of Agreement among Underwriters (International Version), the
form of which shall be furnished to the Company and the Selling Stockholders for
examination upon request, but without warranty on your part as to the authority
of the signers thereof.
8
<PAGE>
Any person executing and delivering this Agreement as Attorney-in-Fact for
a Selling Stockholder represents by so doing that he has been duly appointed as
Attorney-in-Fact by such Selling Stockholder pursuant to a validly existing and
binding Power of Attorney which authorizes such Attorney-in-Fact to take such
action.
Very truly yours,
EXE TECHNOLOGIES, INC.
By:
--------------------------------
Name:
Title:
RAYMOND HOOD
ADAM BELSKY
NIGEL BAHADUR
By:
--------------------------------
Name:
Title:
As Attorney-in-Fact acting on behalf of
each of the Selling Stockholders named
in Schedule II to this Agreement.
Accepted as of the date hereof
at ___________, ____________:
Goldman Sachs International
BancAmerica Robertson Stephens & Co.
BT Alex. Brown Incorporated
Piper Jaffray Inc.
By: Goldman Sachs International
By:
--------------------------------
(Attorney-in-fact)
On behalf of each of the Underwriters
9
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF
OPTIONAL
SHARES TO BE
TOTAL NUMBER OF PURCHASED IF
FIRM SHARES MAXIMUM OPTION
UNDERWRITER TO BE PURCHASED EXERCISED
<S> <C> <C>
Goldman Sachs International . . . . . . .
BancAmerica Robertson Stephens & Co.. . .
BT Alex. Brown Incorporated . . . . . . .
Piper Jaffray Inc.. . . . . . . . . . . .
[NAMES OF OTHER MANAGERS] . . . . . . . .
Total
</TABLE>
10
<PAGE>
SCHEDULE II
<TABLE>
<CAPTION>
NUMBER OF
OPTIONAL
SHARES TO BE
TOTAL NUMBER OF SOLD IF
FIRM SHARES MAXIMUM OPTION
TO BE SOLD EXERCISED
<S> <C> <C>
The Company . . . . . . . . . . . . . . . 1,370,000 231,000
The Selling Stockholders:
Raymond Hood(a). . . . . . . . . . . 72,250 0
Adam Belsky(a) . . . . . . . . . . . 72,250 0
Nigel Bahadur(a) . . . . . . . . . . 25,500 0
Total . . . . . . . . . . . . . . . . . . 1,540,000 231,000
</TABLE>
(a) This Selling Stockholder is represented by [Pepper Hamilton LLP] and
has appointed [_______] and [_______], and each of them, as the
Attorneys-in-Fact for such Selling Stockholder.
11
<PAGE>
CERTIFICATE OF INCORPORATION
of
EXE TECHNOLOGIES, INC.
The undersigned incorporator, in order to form a corporation under the
General Corporation Law of the State of Delaware (the "General Corporation
Law"), certifies as follows:
1. NAME. The name of the corporation is EXE Technologies, Inc..
2. ADDRESS; REGISTERED OFFICE AND AGENT. The address of the
Corporation's registered office is 9 East Lookerman Street, City of Dover,
County of Kent, State of Delaware; and its registered agent at such address is
National Corporate Research.
3. PURPOSES. The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law.
4. NUMBER OF SHARES. The total number of shares of stock that the
Corporation shall have authority to issue is: 65,000,000, consisting of
45,000,000 shares of voting Class A Common Stock, par value of one cent ($.01)
per share (the "Class A Shares"), and 5,000,000 shares of non-voting Class B
Common Stock, par value of one cent ($.01) per share (the "Class B Shares," and,
together with the Class A Shares, the "Common Stock") and 15,000,000 shares of
Preferred Stock, par value of one cent ($.01) per share (the "Preferred Stock").
<PAGE>
5. The shares of Preferred Stock may be issued from time to time in
one or more series of any number of shares, provided that the aggregate number
of shares issued and not cancelled of any and all such series shall not exceed
the total number of shares of Preferred Stock hereinabove authorized, and with
distinctive serial designations, all as shall hereafter be stated and expressed
in the resolution or resolutions providing for the issue of such shares of
Preferred Stock from time to time adopted by the Board of Directors pursuant to
authority so to do which is hereby vested in the Board of Directors. Each
series of shares of Preferred Stock (a) may have such voting powers, full or
limited, or may be without voting powers; (b) may be subject to redemption at
such time or times and at such prices; (c) may be entitled to receive dividends
(which may be cumulative or non-cumulative) at such rate or rates, on such
conditions and at such times, and payable in preference to, or in such relation
to, the dividends payable on any other class or classes or series of stock;
(d) may have such rights upon the dissolution of, or upon any distribution of
the assets of, the Corporation; (e) may be made convertible into or exchangeable
for, shares of any other class or classes or of any other series of the same or
any other class or classes of shares of the Corporation at such price or prices
or at such rates of exchange and with such adjustments; (f) may be entitled to
the benefit of a sinking fund to be applied to the purchase or redemption of
shares of such series in such amount or amounts; (g) may be entitled to the
benefit of conditions and restrictions upon the creation of indebtedness of the
Corporation or any subsidiary, upon the issue of any
2
<PAGE>
additional shares (including additional shares of such series or of any other
series) and upon the payment of dividends or the making of other
distributions on, and the purchase, redemption or other acquisition by the
Corporation or any subsidiary of, any outstanding shares of the Corporation
and (h) may have such other relative, participating, optional or other
special rights, qualifications, limitations or restrictions thereof; all as
shall be stated in said resolution or resolutions providing for the issue of
such shares of Preferred Stock. Shares of Preferred Stock of any series that
have been redeemed (whether through the operation of a sinking fund or
otherwise) or that, if convertible or exchangeable, have been converted into
or exchanged for shares of any other class or classes shall have the status
of authorized and unissued shares of Preferred Stock of the same series and
may be reissued as a part of the series of which they were originally a part
or may be reclassified and reissued as part of a new series of shares of
Preferred Stock to be created by resolution or resolutions of the Board of
Directors or as part of any other series of shares of Preferred Stock, all
subject to the conditions or restrictions on issuance set forth in the
resolution or resolutions adopted by the Board of Directors providing for the
issue of any series of shares of Preferred Stock.
5.1 Subject to the provisions of any applicable law or of the By-laws
of the Corporation, as from time to time amended, with respect to the closing of
the transfer books or the fixing of a record date for the determination of
stockholders entitled to vote and except as otherwise provided by law or by the
resolution or resolutions providing for the issue of any series of shares of
Preferred Stock, the holders of outstanding shares of
3
<PAGE>
Class A Shares shall exclusively possess voting power for the election of
directors and for all other purposes, each holder of record of shares of
Class A Shares being entitled to one vote for each share of Class A Shares
standing in his or her name on the books of the Corporation. Except as
otherwise provided by the resolution or resolutions providing for the issue
of any series of shares of Preferred Stock, the holders of shares of Common
Stock shall be entitled, to the exclusion of the holders of shares of
Preferred Stock of any and all series, to receive such dividends as from time
to time may be declared by the Board of Directors. In the event of any
liquidation, dissolution or winding up of the Corporation, whether voluntary
or involuntary, after payment shall have been made to the holders of shares
of Preferred Stock of the full amount to which they shall be entitled
pursuant to the resolution or resolutions providing for the issue of any
series of shares of Preferred Stock, the holders of shares of Common Stock
shall be entitled, to the exclusion of the holders of shares of Preferred
Stock of any and all series, to share, ratably according to the number of
shares of Common Stock held by them, in all remaining assets of the
Corporation available for distribution to its stockholders.
5.2 Subject to the provisions of this Certificate of Incorporation
and except as otherwise provided by law, the stock of the Corporation,
regardless of class, may be issued for such consideration and for such corporate
purposes as the Board of Directors may from time to time determine.
4
<PAGE>
6. NAME AND MAILING ADDRESS OF INCORPORATOR. The name and mailing
address of the incorporator are: Michael H. Shaw, 1285 Avenue of the Americas,
New York, New York 10019-6064.
7. ELECTION OF DIRECTORS. Members of the Board of Directors of the
Corporation (the "Board") may be elected either by written ballot or by voice
vote.
8. LIMITATION OF LIABILITY. No director of the Corporation shall be
personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, provided that this provision shall
not eliminate or limit the liability of a director (a) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (b) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (c) under section 174 of the General Corporation Law
or (d) for any transaction from which the director derived any improper personal
benefits.
Any repeal or modification of the foregoing provision shall not
adversely affect any right or protection of a director of the Corporation
existing at the time of such repeal or modification.
9. INDEMNIFICATION.
9.1 To the extent not prohibited by law, the Corporation shall
indemnify any person who is or was made, or threatened to be made, a party to
any
5
<PAGE>
threatened, pending or completed action, suit or proceeding (a
"Proceeding"), whether civil, criminal, administrative or investigative,
including, without limitation, an action by or in the right of the Corporation
to procure a judgment in its favor, by reason of the fact that such person, or a
person of whom such person is the legal representative, is or was a director or
officer of the Corporation, or, at the request of the Corporation, is or was
serving as a director or officer of any other corporation or in a capacity with
comparable authority or responsibilities for any partnership, joint venture,
trust, employee benefit plan or other enterprise (an "Other Entity"), against
judgments, fines, penalties, excise taxes, amounts paid in settlement and costs,
charges and expenses (including attorneys' fees, disbursements and other
charges). Persons who are not directors or officers of the Corporation (or
otherwise entitled to indemnification pursuant to the preceding sentence) may be
similarly indemnified in respect of service to the Corporation or to an Other
Entity at the request of the Corporation to the extent the Board at any time
specifies that such persons are entitled to the benefits of this Section 9.
9.2 The Corporation shall, from time to time, reimburse or
advance to any director or officer or other person entitled to indemnification
hereunder the funds necessary for payment of expenses, including attorneys' fees
and disbursements, incurred in connection with any Proceeding, in advance of the
final disposition of such Proceeding; PROVIDED, HOWEVER, that, if required by
the General Corporation Law, such expenses incurred by or on behalf of any
director or officer or other person may be paid in advance of the final
disposition of a Proceeding only upon receipt by the Corporation of
6
<PAGE>
an undertaking, by or on behalf of such director or officer (or other person
indemnified hereunder), to repay any such amount so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right of appeal that such director, officer or other person is not
entitled to be indemnified for such expenses.
9.3 The rights to indemnification and reimbursement or
advancement of expenses provided by, or granted pursuant to, this Section 9
shall not be deemed exclusive of any other rights to which a person seeking
indemnification or reimbursement or advancement of expenses may have or
hereafter be entitled under any statute, this Certificate of Incorporation, the
By-laws of the Corporation (the "By-laws"), any agreement, any vote of
stockholders or disinterested directors or otherwise, both as to action in his
or her official capacity and as to action in another capacity while holding such
office.
9.4 The rights to indemnification and reimbursement or
advancement of expenses provided by, or granted pursuant to, this Section 9
shall continue as to a person who has ceased to be a director or officer (or
other person indemnified hereunder) and shall inure to the benefit of the
executors, administrators, legatees and distributees of such person.
9.5 The Corporation shall have power to 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 an Other Entity, against any
liability asserted against such
7
<PAGE>
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
this Section 9, the By-laws or under section 145 of the General Corporation
Law or any other provision of law.
9.6 The provisions of this Section 9 shall be a contract between
the Corporation, on the one hand, and each director and officer who serves in
such capacity at any time while this Section 9 is in effect and any other person
entitled to indemnification hereunder, on the other hand, pursuant to which the
Corporation and each such director, officer, or other person intend to be, and
shall be, legally bound. No repeal or modification of this Section 9 shall
affect any rights or obligations with respect to any state of facts then or
theretofore existing or thereafter arising or any proceeding theretofore or
thereafter brought or threatened based in whole or in part upon any such state
of facts.
9.7 The rights to indemnification and reimbursement or
advancement of expenses provided by, or granted pursuant to, this Section 9
shall be enforceable by any person entitled to such indemnification or
reimbursement or advancement of expenses in any court of competent jurisdiction.
The burden of proving that such indemnification or reimbursement or advancement
of expenses is not appropriate shall be on the Corporation. Neither the failure
of the Corporation (including its Board, its independent legal counsel and its
stockholders) to have made a determination prior to the commencement of such
action that such indemnification or
8
<PAGE>
reimbursement or advancement of expenses is proper in the circumstances nor
an actual determination by the Corporation (including its Board, its
independent legal counsel and its stockholders) that such person is not
entitled to such indemnification or reimbursement or advancement of expenses
shall constitute a defense to the action or create a presumption that such
person is not so entitled. Such a person shall also be indemnified for any
expenses incurred in connection with successfully establishing his or her
right to such indemnification or reimbursement or advancement of expenses, in
whole or in part, in any such proceeding.
9.8 Any director or officer of the Corporation serving in any
capacity of (a) another corporation of which a majority of the shares entitled
to vote in the election of its directors is held, directly or indirectly, by the
Corporation or (b) any employee benefit plan of the Corporation or any
corporation referred to in clause (a) shall be deemed to be doing so at the
request of the Corporation.
9.9 Any person entitled to be indemnified or to reimbursement or
advancement of expenses as a matter of right pursuant to this Section 9 may
elect to have the right to indemnification or reimbursement or advancement of
expenses interpreted on the basis of the applicable law in effect at the time of
the occurrence of the event or events giving rise to the applicable Proceeding,
to the extent permitted by law, or on the basis of the applicable law in effect
at the time such indemnification or reimbursement or advancement of expenses
is sought. Such election shall be made, by a notice in writing to the
Corporation, at the time indemnification or reimbursement or
9
<PAGE>
advancement of expenses is sought; PROVIDED, HOWEVER, that if no such notice
is given, the right to indemnification or reimbursement or advancement of
expenses shall be determined by the law in effect at the time indemnification
or reimbursement or advancement of expenses is sought.
10. ADOPTION, AMENDMENT AND/OR REPEAL OF BY-LAWS. The Board may from
time to time adopt, amend or repeal the By-laws of the Corporation; PROVIDED,
HOWEVER, that any By-laws adopted or amended by the Board may be amended or
repealed, and any By-laws may be adopted, by the stockholders of the Corporation
by vote of a majority of the holders of shares of stock of the Corporation
entitled to vote in the election of directors of the Corporation.
WITNESS the signature of this Certificate this 28th of July, 1997.
/s/ Michael H. Shaw
----------------------
Michael H. Shaw
Incorporator
10
<PAGE>
CERTIFICATE OF AMENDMENT OF THE
CERTIFICATE OF INCORPORATION
OF
EXE TECHNOLOGIES, INC.
------------------------------------------
Pursuant to Section 242 of the General
Corporation Law of the State of Delaware
------------------------------------------
EXE Technologies, Inc., a Delaware corporation (the "CORPORATION"),
does hereby certify as follows:
1. The Certificate of Incorporation of the Corporation (the
"CERTIFICATE") is hereby amended by adding the following new provision as
Section 11 thereof:
"At the time (the "RECORD TIME") which is (i) subsequent to
the filing of the Certificate of Amendment of the Certificate of
Incorporation of the Corporation, dated as of September 15, 1997, by the
Secretary of State of the State of Delaware, and (ii) concurrent with
the effective time of the Certificate of Merger effecting the merger of
Dallas Systems Corporation, a Texas corporation, with and into the
Corporation, every Class A Share and every Class B Share issued and
outstanding at the Record Time shall, only at such time, without any
action on the part of the holder thereof, be changed into 58.82850497
Class A Shares."
The Certificate is hereby further amended by adding the following new
provisions as Sections 4.1 through 4.4 thereof:
"4.1 RANK. With respect to payment of dividends and the
distribution of assets upon the voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation, the Class A
Shares and the Class B Shares shall rank PARI PASSU with each other and
junior to the Preferred Stock.
4.2 DIVIDENDS. Subject to the rights of the holders of shares of the
Preferred Stock, dividends may be declared and paid to the holders of the
<PAGE>
Common Stock, and any such dividends shall be declared and paid pro rata on
a share-by-share basis among all of the Class A Shares and Class B Shares
then outstanding.
4.3 LIQUIDATION. Subject to the rights of the holders of shares of
the Preferred Stock, upon the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of the shares of
Common Stock shall be entitled to receive as a group all assets of the
Corporation remaining to be distributed, and such funds shall be paid pro
rata on a share-by-share basis among all of the Class A Shares and the
Class B Shares then outstanding.
4.4 VOTING RIGHTS. Except as expressly provided by law and subject
to the rights of the holders of shares of the Preferred Stock, (a) all
voting rights shall be vested in the holders of the Class A Shares and
(b) the holders of the Class B Shares shall not be entitled or permitted to
vote on any matter required or permitted to be voted upon by the
stockholders of the Corporation. At each meeting of stockholders of the
Corporation, each holder of Class A Shares shall be entitled to one vote
for each such share on each matter to come before the meeting, except as
otherwise provided by law.
4.5 AUTOMATIC CONVERSION.
(i) CLASS A SHARES. The Class A Shares shall not be
convertible.
(ii) CLASS B SHARES.
(a) Each outstanding Class B Share shall be deemed
automatically converted into one fully paid and non-assessable Class A
Share (as such Class A Share shall then be constituted) upon the earlier
of: (I) immediately prior to the closing of a firm commitment underwritten
initial public offering of the Corporation pursuant to an effective
registration statement under the Securities Act of 1933, as amended;
(II) immediately prior to (x) the merger or consolidation of the
Corporation with one or more other persons or (y) the merger or
consolidation of one or more persons into or with the Corporation, if, in
the case of (x) or (y), the stockholders of the Corporation prior to such
merger or consolidation do not retain at least a majority of the voting
power of the surviving person; and (III) the sale, conveyance, exchange or
transfer to another person of (x) the voting capital stock of the
Corporation if after such sale, conveyance, exchange or transfer the
stockholders of the Corporation prior to such sale, conveyance, exchange or
transfer do not retain at least a majority of the voting power of the
Corporation, or (y) all or substantially all of the assets of the
Corporation. Any such event as described above is herein referred to as a
"CLASS B CONVERSION EVENT." On or after a Class B Conversion Event, and in
any event
<PAGE>
within ten (10) days after receipt of notice, sent by telecopier,
personal delivery or certified mail, return receipt requested, from the
Corporation of the occurrence of the Class B Conversion Event, each holder
of record of Class B Shares shall surrender such holder's certificates
evidencing such shares at the principal office of the Corporation or at
such other place as the Corporation shall designate, and shall thereupon be
entitled to receive certificates evidencing the number of Class A Shares
into which such Class B Shares are converted. On the date of the
occurrence of a Class B Conversion Event, each holder of record of Class B
Shares shall be deemed to be the holder of record of the Class A Shares
issuable upon such conversion, and at such time the rights of the holder as
holder of the converted Class B Shares shall cease and no Class B Shares
shall be considered outstanding, without any further action by the holders
of such shares and whether or not the certificates representing such Class
B Shares are then or subsequently surrendered to the Corporation or its
transfer agent.
(b) The Corporation will at all times reserve and keep
available out of its authorized but unissued Class A Shares, solely for the
purpose of issuance upon the conversion of Class B Shares, the maximum
number of Class A Shares as could be issuable upon the conversion of all
then outstanding Class B Shares. All Class A Shares which are issuable
upon conversation of Class B Shares in accordance with this Certificate of
Incorporation will, when so issued, be duly authorized, validly issued,
fully paid and nonassessable. The Corporation will take all action that
may be necessary to assure that all Class A Shares issuable upon such
conversion may be so issued without violation of any law, regulation or
agreement applicable to the Corporation.
(c) The issuance of certificates representing Class A
Shares upon conversion of Class B Shares as hereinabove set forth shall be
made without charge for any expense or issuance tax in respect thereof,
provided that the Corporation shall not be required to pay any taxes which
may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than that of the holder of
shares converted.
(d) No fractional Class A Shares issued upon the conversion
of Class B Shares. Instead of any fractional Class A Shares which would
otherwise be issuable upon conversion of Class B Shares, the Corporation
shall pay to the holder of the Class B Shares which were converted a cash
adjustment in respect of such fractional shares in an amount equal to the
same fraction of the fair market value per share of the Class A Shares (as
determined in a reasonable manner prescribed by the Board of Directors)
immediately prior to the close of business on the date of conversion.
4.6 STOCK SPLITS, SUBDIVISIONS AND COMBINATIONS. In case the
Corporation shall at any time subdivide its outstanding Class A Shares into
a
<PAGE>
greater number of shares, the number of Class B Shares outstanding
immediately prior to such subdivision shall be proportionately increased,
and in case at any time the outstanding Class A Shares of the Corporation
shall be combined into a smaller number of shares, the number of Class B
Shares outstanding immediately prior to such combination shall be
proportionately reduced.
4.7 OTHER RIGHTS. The Class A Shares and the Class B Shares shall be
PARI PASSU with respect to all other rights, designations, qualifications
or restrictions under applicable law and not specifically modified by the
provisions described above or by the provisions contained in the By-laws of
the Corporation."
2. The Board of Directors of the Corporation duly adopted
resolutions pursuant to Section 242 of the General Corporation Law of the State
of Delaware (the "DGCL") proposing that this Certificate of Amendment of the
Certificate be approved and declaring the adoption of this Certificate of
Amendment of the Certificate to be advisable, and the stockholders of the
Corporation duly approved this Certificate of Amendment of the Certificate in
accordance with Sections 228 and 242 of the DGCL.
<PAGE>
IN WITNESS WHEREOF, Lyle A. Baack has caused this Certificate of
Amendment to be duly executed in its corporate name this 15 day of September,
1997.
EXE TECHNOLOGIES, INC.
By:/s/ Lyle A. Baack
---------------------------------
Name: Lyle A. Baack
Title: President and Secretary
<PAGE>
EXE TECHNOLOGIES, INC.
CERTIFICATE OF THE POWERS, DESIGNATIONS,
PREFERENCES AND RIGHTS OF THE
SERIES A CONVERTIBLE PARTICIPATING PREFERRED STOCK,
PAR VALUE $.01 PER SHARE
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
The following resolution was duly adopted by the Board of Directors of
EXE Technologies, Inc., a Delaware corporation (the "Corporation"), pursuant to
the provisions of Section 151 of the General Corporation Law of the State of
Delaware, on July 31, 1997, by the unanimous written consent of the Board of
Directors:
WHEREAS, the Board of Directors is authorized, within the limitations
and restrictions stated in the Certificate of Incorporation of the Corporation,
to provide by resolution or resolutions for the issuance of shares of Preferred
Stock, par value $.01 per share, of the Corporation, in one or more series with
such voting powers, full or limited, or without voting powers, and such
designations, preferences and relative, participating, optional or other special
rights, and qualifications, limitations or restrictions as shall be stated and
expressed in the resolution or resolutions providing for the issuance thereof
adopted by the Board of Directors, and as are not stated and expressed in the
Certificate of Incorporation, or any amendment thereto, including (but without
limiting the generality of the foregoing) such provisions as may be desired
concerning voting, redemption, dividends, dissolution or the distribution of
assets and such other subjects or matters as may be fixed by resolution or
resolutions of the Board of Directors under the General Corporation Law of the
State of Delaware; and
WHEREAS, it is the desire of the Board of Directors, pursuant to its
authority as aforesaid, to authorize and fix the terms of a series of preferred
stock and the number of shares constituting such series.
NOW, THEREFORE, BE IT RESOLVED:
1. DESIGNATION AND NUMBER OF SHARES. There shall be hereby
established a series of Preferred Stock designated as "Series A Convertible
Participating Preferred Stock" (the "Series A Preferred Stock"). The authorized
number of shares of Series A Preferred Stock shall be 7,000,000.
<PAGE>
2. RANK.
(a) The Series A Preferred Stock shall, with respect to
distributions of assets and rights upon the liquidation, dissolution or winding
up of the Corporation (a "Liquidation"), rank senior to (i) all classes of
common stock of the Corporation (including, without limitation, the Class A
Common Stock, par value $.01 per share, of the Corporation) (the "Common Stock")
and (ii) each other class or series of Capital Stock of the Corporation
hereafter created which does not expressly rank PARI PASSU with or senior to the
Series A Preferred Stock (the "Junior Stock").
(b) The Series A Preferred Stock shall, with respect to payment
of the Participation Amount (as hereinafter defined) upon the occurrence of a
Sale, a Merger or the Initial Public Offering (each a "Trigger Event"), rank
senior to each other class or series of Capital Stock of the Corporation
hereafter created which does not expressly rank PARI PASSU with or senior to the
Series A Preferred Stock with respect to the Participation Amount.
3. DIVIDENDS. Beginning on the date of issuance of the Series A
Preferred Stock, if the Board of Directors of the Corporation shall declare a
dividend or make any other distribution (including, without limitation, in cash
or other property or assets), to holders of shares of Common Stock, then the
holders of each share of Series A Preferred Stock shall be entitled to receive,
out of funds legally available therefor, a dividend or distribution in an amount
equal to the amount of such dividend or distribution received by a holder of the
number of shares of Common Stock for which such share of Series A Preferred
Stock is convertible on the record date for such dividend or distribution. Any
such amount shall be paid to the holders of shares of Series A Preferred Stock
at the same time such dividend or distribution is made to holders of Common
Stock.
4. LIQUIDATION PREFERENCE; PARTICIPATION AMOUNT.
(a) In the event of any voluntary or involuntary Liquidation,
the holders of shares of Series A Preferred Stock then outstanding shall be
entitled to be paid for each share of Series A Preferred Stock held thereby, out
of the assets of the Corporation available for distribution to its stockholders,
before any payment shall be made or any assets distributed to the holders of any
shares of Junior Stock, an amount in cash (the following (i) and (ii) together,
the "Liquidation Amount") equal to (i) $2.217609 per share (subject to
adjustment under conditions, with respect to the Series A Preferred Stock,
analogous to those provided in paragraph 7(d) with respect to the Common Stock)
(the "Liquidation Preference") plus (ii) all declared and unpaid dividends
thereon to the date fixed for the Liquidation. Except as provided in the
preceding sentence, holders of Series A Preferred Stock shall not be entitled to
any distribution in the event of any Liquidation. If the assets of the
Corporation are not sufficient to pay in full the foregoing Liquidation Amount
to the holders of outstanding shares of the Series
<PAGE>
A Preferred Stock, then the holders of all shares of Series A Preferred Stock
shall share ratably in such distribution of assets in accordance with the
amount that would be payable on such distribution if the amounts to which the
holders of outstanding shares of Series A Preferred Stock are entitled were
paid in full.
(b) Subject to the terms of paragraph 4(c) below, upon the
occurrence of a Trigger Event (other than the Neptune Merger, as hereinafter
defined), in addition to the Pro Rata Share (as hereinafter defined) which the
holders of Series A Preferred Stock are entitled to receive pursuant to
paragraph 4(e) below, the holders of Series A Preferred Stock then outstanding
shall be entitled to receive as a class, out of the assets of the Corporation
available for distribution to its stockholders (in the case of a Sale or Merger)
or out of the net proceeds to the Corporation in the case of an Initial Public
Offering (the "Available Assets"), a distribution by the Corporation in an
amount specified in paragraph 4(c), which amount shall be determined based upon
the amount of the Trigger Value (as hereinafter defined) with respect to such
Trigger Event (the "Participation Amount"), before any payment shall be made or
any assets distributed to holders of any shares of each other class or series of
Capital Stock of the Corporation. The Participation Amount will be paid pro
rata among all holders of Series A Preferred Stock of record on the date of the
Trigger Event.
(c) The Participation Amount payable upon the occurrence of a
Trigger Event shall be determined as follows:
(i) if the amount of the Trigger Value with respect to a
Trigger Event shall be less than or equal to four (4) times the amount of the
Liquidation Preference (in effect at the time that such Trigger Value is
determined), then the Participation Amount shall be equal to $15,000,000;
(ii) if the amount of the Trigger Value with respect to a
Trigger Event shall be greater than four (4) times, and less than five (5)
times, the amount of the Liquidation Preference (in effect at the time that such
Trigger Value is determined), then the Participation Amount shall be equal to
the result (rounded to the nearest dollar) obtained through application of the
following mathematical formula: (x) $15,000,000 multiplied by (y) the excess of
5 MINUS (TV/LP), where "TV" means the Trigger Value with respect to such Trigger
Event and "LP" means the Liquidation Preference (in effect at the time that such
Trigger Value is determined); or
(iii) if the amount of the Trigger Value with respect to a
Trigger Event shall be greater than or equal to five (5) times the amount of the
Liquidation Preference (in effect at the time that such Trigger Value is
determined), then there shall be no Participation Amount payable to the holders
of Series A Preferred Stock.
For purposes of this paragraph 4, the "Trigger Value" shall mean: (x) with
respect to a Trigger Event which is a Sale or Merger, the Per Share Value (as
hereinafter defined) of
<PAGE>
one (1) share of Series A Preferred Stock with respect to such Sale or
Merger; (y) with respect to a Trigger Event which is an Initial Public
Offering, the IPO Effectiveness Date of which occurs on or before June 30,
2000, the Trigger Market Price (as hereinafter defined) of one (1) share of
Common Stock with respect to such Initial Public Offering; and (z) with
respect to a Trigger Event which is an Initial Public Offering, the IPO
Effectiveness Date of which occurs after June 30, 2000, the mid-point of the
anticipated price range per share of the shares of Common Stock to be offered
in such Initial Public Offering based on the information provided in the
registration statement to calculate the Commission filing fee. In addition,
for purposes of this paragraph 4(c), the "Per Share Value" of one share of
Series A Preferred Stock, with respect to a Sale or Merger, shall mean the
value of the consideration payable for such one share of Series A Preferred
Stock in such Sale or Merger, calculating the value of any securities
included in such consideration in accordance with paragraphs 4(d)(i) and
4(d)(ii) below and of any other consideration included in such consideration
in accordance with paragraph 4(d) below.
(d) The Participation Amount shall be payable: (i) with respect
to a Sale or Merger, immediately upon the closing of such Sale or Merger, as the
case may be; and (ii) with respect to an Initial Public Offering, on the Payment
Date. The Participation Amount shall be payable in cash, or at the option of
the Corporation with the consent of the holders of a majority of the shares of
Series A Preferred Stock then outstanding, in securities of the Corporation or
the surviving Person (in the event of a Sale or Merger), or in other
consideration (in the form received by the holders of Common Stock in the event
of a Sale or Merger). Any such other consideration (in the event of a Sale or
Merger) otherwise to be delivered to the holders of Series A Preferred Stock
pursuant to this paragraph 4(d) shall be valued to reflect the appropriate fair
market value thereof, as determined by the Board of Directors and consented to
by the holders of a majority of the shares of Series A Preferred Stock then
outstanding, which consent shall not be unreasonably withheld. Any securities
of the surviving Person (in the event of a Sale or Merger) otherwise to be
delivered to the holders of Series A Preferred Stock pursuant to this paragraph
4(d) shall be valued as follows:
(i) With respect to securities that do not constitute
"restricted securities," as such term is defined in Rule 144(a)(3) promulgated
under the Securities Act, the value shall be deemed to be the Current Market
Price of the securities as of three (3) days prior to the date of distribution
of the Participation Amount.
(ii) The method of valuation of securities acquired for
investment in a non-public transaction or otherwise restricted in their
marketability that are of the same class or series as securities that are
publicly traded shall be to make an appropriate discount from the market value
determined as set forth above in clause (i) to reflect the appropriate fair
market value thereof, as reasonably determined by the Board of Directors and
consented to by the holders of a majority of the shares of Series A Preferred
Stock, which consent shall not be unreasonably withheld, or if there is no
active public
<PAGE>
market with respect to such class or series of securities, such securities
shall be valued in accordance with clause (i) above, giving appropriate
weight, if any, to such restriction.
(e) In addition to the Participation Amount to which such
holders are entitled under paragraph 4(b), the holders of Series A Preferred
Stock shall also receive the following (the "Pro Rata Share"):
(i) In the event of a Sale, each share of Series A
Preferred Stock shall be converted into the kind and amount of securities,
assets or cash receivable upon such Sale by a holder of the number of shares of
Common Stock into which such one (1) share of Series A Preferred Stock could
have been converted (subject to adjustment) immediately prior to such Sale.
(ii) In the event of a Merger (whether or not the
stockholders of the Corporation prior to such Merger retain at least a majority
of the voting power of the surviving Person) other than the Neptune Merger, each
share of Series A Preferred Stock shall be converted into the kind and amount of
securities of the surviving Person or other consideration receivable upon such
Merger by a holder of the number of shares of Common Stock into which such one
(1) share of Series A Preferred Stock could have been converted (subject to
adjustment) immediately prior to such Merger.
(iii) In the event of the Initial Public Offering, each
share of Series A Preferred Stock shall be converted into the number of shares
of Common Stock into which such one (1) share of Series A Preferred Stock could
have been converted (subject to adjustment) immediately prior to such Initial
Public Offering.
(iv) On and after a Trigger Event (other than the Neptune
Merger), all rights in respect of the shares of Series A Preferred Stock to be
converted shall cease and terminate, but the holder(s) thereof shall have the
right to receive (x) the Pro Rata Share and (y) the Participation Amount, as
provided in this paragraph 4, and such shares of Series A Preferred Stock shall
no longer be deemed to be outstanding, whether or not the certificates
representing such shares of Series A Preferred Stock have been received by the
Corporation; PROVIDED that if the Corporation defaults in any payment of the
Participation Amount with respect to any shares of Series A Preferred Stock,
then the rights of the holder(s) thereof with respect to such shares of Series A
Preferred Stock shall continue until the Corporation cures such default.
(f) Written notice of a Liquidation, or a Trigger Event, stating
a payment date, the Liquidation Amount, or the Participation Amount and the Pro
Rata Share, as the case may be, and the place where such amount shall be
payable, shall be delivered in person, mailed by certified or registered mail,
return receipt requested, mailed by overnight mail or sent by telecopier, not
less than one (1) day prior to the payment date stated therein, to the holders
of record of the Series A Preferred Stock, such
<PAGE>
notice to be addressed to each such holder at its address as shown by the
records of the Corporation.
5. REDEMPTION. The shares of Series A Preferred Stock shall not be
redeemed or subject to redemption, whether at the option of the Corporation or
any holder thereof, or otherwise.
6. VOTING RIGHTS.
(a) The holders of Series A Preferred Stock, except as otherwise
required under Delaware law or as set forth in paragraph (b) below, shall not be
entitled or permitted to vote on any matter required or permitted to be voted
upon by the stockholders of the Corporation.
(b) So long as the Series A Preferred Stock is outstanding, each
share of Series A Preferred Stock shall entitle the holder thereof to vote, in
person or by proxy, at a special or annual meeting of stockholders, on all
matters entitled to be voted on by holders of Common Stock voting together as a
single class with other shares entitled to vote thereon. With respect to any
such vote, each share of Series A Preferred Stock shall entitle the holder
thereof to cast that number of votes per share as is equal to the number of
votes that such holder would be entitled to cast had such holder converted its
shares of Series A Preferred Stock into shares of Common Stock on the record
date for determining the stockholders of the Corporation eligible to vote on any
such matters.
7. CONVERSION.
(a) Any holder of Series A Preferred Stock shall have the right,
at its option, at any time and from time to time, to convert, subject to the
terms and provisions of this paragraph 7, any or all of such holder's shares of
Series A Preferred Stock into such number of fully paid and non-assessable
shares of Common Stock as is equal to the product of the number of shares of
Series A Preferred Stock being so converted multiplied by the quotient of
(i) the Liquidation Preference divided by (ii) the conversion price of $2.217609
per share, subject to adjustment as provided in paragraph 7(d) (the "Conversion
Price"), then in effect. Such conversion right shall be exercised by the
surrender of the shares of Series A Preferred Stock to be converted to the
Corporation at any time during usual business hours at its principal place of
business, accompanied by written notice that the holder elects to convert such
shares of Series A Preferred Stock and specifying the name or names (with
address) in which a certificate or certificates for shares of Common Stock are
to be issued and (if so required by the Corporation) by a written instrument or
instruments of transfer in form reasonably satisfactory to the Corporation duly
executed by the holder or its duly authorized legal representative and transfer
tax stamps or funds therefor, if required pursuant to paragraph 7(j). All
shares of Series A Preferred Stock surrendered for conversion shall be delivered
to the Corporation
<PAGE>
for cancellation and canceled by it and no shares of Series A Preferred
Stock shall be issued in lieu thereof.
(b) As promptly as practicable after the surrender, as herein
provided, of any shares of Series A Preferred Stock for conversion pursuant to
paragraph 7(a), the Corporation shall deliver to or upon the written order of
the holder of such shares of Series A Preferred Stock so surrendered a
certificate or certificates representing the number of fully paid and
non-assessable shares of Common Stock into which such shares of Series A
Preferred Stock may be or have been converted in accordance with the
provisions of this paragraph 7. Subject to the following provisions of this
paragraph and of paragraph 7(d), such conversion shall be deemed to have been
made immediately prior to the close of business on the date that such shares
of Series A Preferred Stock shall have been surrendered in satisfactory form
for conversion, and the Person or Persons entitled to receive the shares of
Common Stock deliverable upon conversion of such shares of Series A Preferred
Stock shall be treated for all purposes as having become the record holder or
holders of such shares of Common Stock at such appropriate time, and such
conversion shall be at the Conversion Price in effect at such time; PROVIDED,
HOWEVER, that no surrender shall be effective to constitute the Person or
Persons entitled to receive the shares of Common Stock deliverable upon such
conversion as the record holder or holders of such shares of Common Stock
while the share transfer books of the Corporation shall be closed (but not
for any period in excess of five days), but such surrender shall be effective
to constitute the Person or Persons entitled to receive such shares of Common
Stock as the record holder or holders thereof for all purposes immediately
prior to the close of business on the next succeeding day on which such share
transfer books are open, and such conversion shall be deemed to have been
made at, and shall be made at the Conversion Price in effect at, such time on
such next succeeding day.
(c) To the extent permitted by law, when shares of Series A
Preferred Stock are converted, all dividends declared and unpaid on the shares
of Series A Preferred Stock so converted to the date of conversion shall be
immediately due and payable and must accompany the shares of Common Stock issued
upon such conversion.
(d) The Conversion Price shall be subject to adjustment as
follows:
(i) In the event that the Corporation shall at any time or
from time to time (w) pay a dividend or make a distribution (other than a
dividend or distribution paid or made to holders of shares of Series A Preferred
Stock in the manner provided in paragraph 3) on the outstanding shares of Common
Stock in Capital Stock, (x) subdivide the outstanding shares of Common Stock
into a larger number of shares, (y) combine the outstanding shares of Common
Stock into a smaller number of shares or (z) issue any shares of its Capital
Stock in a reclassification of the Common Stock, then, and in each such case,
the Conversion Price in effect immediately prior to such event
<PAGE>
shall be adjusted (and any other appropriate actions shall be taken by the
Corporation) so that the holder of any share of Series A Preferred Stock
thereafter surrendered for conversion shall be entitled to receive the number
of shares of Common Stock or other securities of the Corporation that such
holder would have owned or would have been entitled to receive upon or by
reason of any of the events described above, had such share of Series A
Preferred Stock been converted immediately prior to the occurrence of such
event. An adjustment made pursuant to this paragraph 7(d)(i) shall become
effective retroactively (x) in the case of any such dividend or distribution,
to a date immediately following the close of business on the record date for
the determination of holders of Common Stock entitled to receive such
dividend or distribution or (y) in the case of any such subdivision,
combination or reclassification, to the close of business on the day upon
which such corporate action becomes effective.
(ii) In case the Corporation shall at any time or from time
to time distribute to all holders of shares of its Common Stock (including any
such distribution made in connection with a merger or consolidation in which the
Corporation is the resulting or surviving Person and the Common Stock is not
changed or exchanged) cash, evidences of indebtedness of the Corporation or
another issuer, securities of the Corporation or another issuer or other assets
(excluding dividends or distributions paid or made to holders of shares of
Series A Preferred Stock in the manner provided in paragraph 3, and dividends
payable in shares of Common Stock for which adjustment is made under
paragraph 7(d)(i)) or rights or warrants to subscribe for or purchase securities
of the Corporation (excluding those distributions in respect of which an
adjustment in the Conversion Price is made pursuant to paragraph 7(d)(i)), then,
and in each such case, the Conversion Price then in effect shall be adjusted
(and any other appropriate actions shall be taken by the Corporation) by
multiplying the Conversion Price in effect immediately prior to the date of such
distribution by a fraction (x) the numerator of which shall be the Current
Market Price (as hereinafter defined) of one share of Common Stock on the record
date referred to below less the then fair market value (as determined by the
Board of Directors) of the portion of the cash, evidences of indebtedness,
securities or other assets so distributed or of such subscription rights or
warrants applicable to one share of Common Stock and (y) the denominator of
which shall be such Current Market Price of one share of Common Stock (but such
denominator shall not be less than one); PROVIDED, HOWEVER, that no adjustment
shall be made with respect to any distribution of rights to purchase securities
of the Corporation if the holder of shares of Series A Preferred Stock would
otherwise be entitled to receive such rights upon conversion at any time of
shares of Series A Preferred Stock into Common Stock. Such adjustment shall be
made whenever any such distribution is made and shall become effective
retroactively to a date immediately following the close of business on the
record date for the determination of stockholders entitled to receive such
distribution.
(iii) In the case the Corporation, at any time or from time
to time, shall take any action affecting its Common Stock similar to or having
an effect similar to any of the actions described in any of paragraph 7(d)(i) or
paragraph 7(d)(ii),
<PAGE>
inclusive, or paragraph 7(g) (but not including any action described in any
such paragraph) and the Board of Directors in good faith determines that it
would be equitable in the circumstances to adjust the Conversion Price as a
result of such action, then, and in each such case, the Conversion Price
shall be adjusted in such manner and at such time as the Board of Directors
of the Corporation in good faith determines would be equitable in the
circumstances (such determination to be evidenced in a resolution, a
certified copy of which shall be mailed to the holders of the shares of
Series A Preferred Stock).
(iv) Notwithstanding anything herein to the contrary, no
adjustment under this paragraph 7(d) need be made to the Conversion Price unless
such adjustment would require an increase or decrease of at least 1% of the
Conversion Price then in effect. Any lesser adjustment shall be carried forward
and shall be made at the time of and together with the next subsequent
adjustment, which, together with any adjustment or adjustments so carried
forward, shall amount to an increase or decrease of at least 1% of such
Conversion Price. Any adjustment to the Conversion Price carried forward and
not theretofore made shall be made immediately prior to the conversion of any
shares of Series A Preferred Stock pursuant hereto.
(v) Notwithstanding anything herein to the contrary, no
adjustment under this paragraph 7(d) shall be made upon the grant of options to
employees, consultants or directors of the Corporation pursuant to benefit plans
approved by the Board of Directors to the extent that all of the options issued
to employees, consultants or directors pursuant to such benefit plans represent
10% or less of the total number of shares of Common Stock outstanding on an as
converted basis.
(e) If the Corporation shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or other
distribution, and shall thereafter and before the distribution to stockholders
thereof legally abandon its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment in the Conversion Price then in
effect shall be required by reason of the taking of such record.
(f) Upon any increase or decrease in the Conversion Price, then,
and in each such case, the Corporation promptly shall deliver to each registered
holder of Series A Preferred Stock at least ten (10) Business Days prior to
effecting any of the foregoing transactions a certificate, signed by the
President or a Vice President and by the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary of the Corporation, setting forth in
reasonable detail the event requiring the adjustment and the method by which
such adjustment was calculated and specifying the increased or decreased
Conversion Price then in effect following such adjustment.
(g) In case of any capital reorganization or reclassification or
other change of outstanding shares of Common Stock (other than a change in par
value, or from par value to no par value, or from no par value to par value),
the Corporation
<PAGE>
shall execute and deliver to each holder of Series A Preferred Stock at
least ten (10) Business Days prior to effecting such reorganization or
reclassification a certificate that the holder of each share of Series A
Preferred Stock then outstanding shall have the right thereafter to convert
such share of Series A Preferred Stock into the kind and amount of shares of
stock or other securities, property or cash receivable upon such
reorganization or reclassification by a holder of the number of shares of
Common Stock into which such share of Series A Preferred Stock could have
been converted immediately prior to such reorganization or reclassification,
and provision shall be made therefor in any agreement relating to such
reorganization or reclassification. Such certificate shall provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this paragraph 7. The provisions of this
paragraph 7(g) and any equivalent thereof in any such certificate similarly
shall apply to successive transactions.
(h) In case at any time or from time to time:
(w) the Corporation shall declare a dividend (or any other
distribution) on its shares of Common Stock;
(x) the Corporation shall authorize the granting to the
holders of its Common Stock of rights or warrants to subscribe for or purchase
any shares of stock of any class or of any other rights or warrants;
(y) there shall be any reorganization or reclassification
of the Common Stock, or any Merger (other than the Neptune Merger), or any Sale,
or any Initial Public Offering; or
(z) there shall occur any voluntary or involuntary
Liquidation;
then the Corporation shall mail to each holder of shares of Series A Preferred
Stock at such holder's address as it appears on the transfer books of the
Corporation, as promptly as possible but in any event at least thirty (30) days
prior to the applicable date hereinafter specified, a notice stating (A) the
date on which a record is to be taken for the purpose of such dividend,
distribution or rights or warrants or, if a record is not to be taken, the date
as of which the holders of Common Stock of record to be entitled to such
dividend, distribution or rights are to be determined, or (B) the date on which
such reclassification, reorganization, Merger, Sale, Initial Public Offering or
Liquidation is expected to become effective, PROVIDED that in the case of any
Merger, Sale or any event to which paragraph 7(g) applies, the Corporation shall
give at least thirty (30) days prior written notice as aforesaid. Such notice
also shall specify the date as of which it is expected that holders of Common
Stock of record shall be entitled to exchange their Common Stock for shares of
stock or other securities or property or cash deliverable upon such
reclassification, reorganization, Merger, Sale or Liquidation.
<PAGE>
(i) The Corporation shall at all times reserve and keep
available for issuance upon the conversion of the Series A Preferred Stock, such
number of its authorized but unissued shares of Common Stock as will from time
to time be sufficient to permit the conversion of all outstanding shares of
Series A Preferred Stock, and shall take all action required to increase the
authorized number of shares of Common Stock if at any time there shall be
insufficient authorized but unissued shares of Common Stock to permit such
reservation or to permit the conversion of all outstanding shares of Series A
Preferred Stock.
(j) The issuance or delivery of certificates for Common Stock
upon the conversion of shares of Series A Preferred Stock shall be made without
charge to the converting holder of shares of Series A Preferred Stock for such
certificates or for any tax in respect of the issuance or delivery of such
certificates or the securities represented thereby, and such certificates shall
be issued or delivered in the respective names of, or (subject to compliance
with the applicable provisions of federal and state securities laws) in such
names as may be directed by, the holders of the shares of Series A Preferred
Stock converted; PROVIDED, HOWEVER, that the Corporation shall not be required
to pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any such certificate in a name other than that of the
holder of the shares of Series A Preferred Stock converted, and the Corporation
shall not be required to issue or deliver such certificate unless or until the
Person or Persons requesting the issuance or delivery thereof shall have paid to
the Corporation the amount of such tax or shall have established to the
reasonable satisfaction of the Corporation that such tax has been paid.
8. CERTAIN REMEDIES. Any registered holder of Series A Preferred
Stock shall be entitled to an injunction or injunctions to prevent breaches of
the provisions of this Certificate of Designations and to enforce specifically
the terms and provisions of this Certificate of Designations in any court of the
United States or any state thereof having jurisdiction, this being in addition
to any other remedy to which such holder may be entitled at law or in equity.
9. REISSUANCE OF SERIES A PREFERRED STOCK. Shares of Series A
Preferred Stock that have been issued and reacquired in any manner, including
shares purchased or converted, shall (upon compliance with any applicable
provisions of the laws of Delaware) have the status of authorized and unissued
shares of preferred stock undesignated as to series and may be redesignated and
reissued as part of any series of preferred stock (other than Series A Preferred
Stock).
10. BUSINESS DAY. If any payment shall be required by the terms
hereof to be made on a day that is not a Business Day, such payment shall be
made on the immediately succeeding Business Day.
11. DEFINITIONS. As used in this Certificate of Designations, the
following terms shall have the following meanings (with terms defined in the
singular
<PAGE>
having comparable meanings when used in the plural and VICE VERSA),
unless the context otherwise requires:
"Available Assets" shall have the meaning ascribed to it in
paragraph 4(b) hereof.
"Board of Directors" means the Board of Directors of the Corporation.
"Business Day" means any day except a Saturday, a Sunday, or other day
on which commercial banks in the State of New York are authorized or required by
law or executive order to close.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in, or other equivalents (however designated
and whether voting or non-voting) of, such Person's capital stock and any and
all rights, warrants or options exchangeable for or convertible into such
capital stock (but excluding any debt security that is exchangeable for or
convertible into such capital stock).
"Commission" means the Securities and Exchange Commission or any
similar agency then having jurisdiction to enforce the Securities Act.
"Common Stock" shall have the meaning ascribed to it in paragraph 2(a)
hereof.
"Conversion Price" shall have the meaning ascribed to it in paragraph
7(a) hereof.
"Corporation" shall have the meaning ascribed to it in the first
paragraph of this Resolution.
"Current Market Price" per share shall mean, as of the date of
determination, (a) the average daily Market Price of the Common Stock for those
days during the period of thirty (30) Trading Days, ending on such date, and
(b) if the Common Stock is not then listed or admitted to trading on any
national securities exchange or quoted in the over-counter market, then the
Market Price on such date.
"Exchange Act" means the Securities Exchange Act of 1934, and the
rules and regulations of the Commission promulgated thereunder.
"Initial Public Offering" shall mean a firm commitment underwritten
initial public offering of the Corporation pursuant to an effective registration
statement under the Securities Act.
<PAGE>
"IPO Effectiveness Date" means the date upon which the Corporation
commences its Initial Public Offering.
"Junior Stock" shall have the meaning ascribed to it in paragraph 2(a)
hereof.
"Liquidation" shall have the meaning ascribed to it in paragraph 2(a)
hereof.
"Liquidation Amount" shall have the meaning ascribed to it in
paragraph 4(a) hereof.
"Liquidation Preference" shall have the meaning ascribed to it in
paragraph 4(a) hereof.
"Market Price" shall mean, per share of Common Stock, as of the date
of determination, (a) the closing price per share of Common Stock on such date
published in THE WALL STREET JOURNAL or, if no such closing price on such date
is published in THE WALL STREET JOURNAL, the average of the closing bid and
asked prices on such date, as officially reported on the principal national
securities exchange (including, without limitation, The Nasdaq Stock Market,
Inc.) on which the Common Stock is then listed or admitted to trading; or (b) if
the Common Stock is not then listed or admitted to trading on any national
securities exchange but is designated as a national market system security by
the NASD, the last trading price of the Common Stock on such date; or (c) if
there shall have been no trading on such date or if the Common Stock is not so
designated, the average of the reported closing bid and asked prices of the
common stock, on such date as shown by NASDAQ and reported by any member firm of
the New York Stock Exchange selected by the Corporation; or (d) if none of (a),
(b) or (c) is applicable, a market price per share determined at the
Corporation's expense by an appraiser chosen by the holders of a majority of the
shares of Series A Preferred Stock, or, if no such appraiser is so chosen more
than ten (10) Business Days after notice of the necessity of such calculation
shall have been delivered by the Corporation to the holders of Series A
Preferred Stock, then by an appraiser chosen by the Corporation and reasonably
satisfactory to a majority of the holders of Series A Preferred Stock. Any
determination of the Market Price by an appraiser shall be based on a valuation
of the Corporation as an entirety without regard to any discount for minority
interests or disparate voting rights among classes of Capital Stock.
"Merger" shall mean (x) the merger or consolidation of the Corporation
with one or more other Persons or (y) the merger or consolidation of one or more
Persons into or with the Corporation, if, in the case of (x) or (y), the
stockholders of the Corporation prior to such merger or consolidation do not
retain at least a majority of the voting power of the surviving Person.
<PAGE>
"Neptune Merger" means the merger of Neptune Systems, Inc., a
Pennsylvania corporation, with and into the Corporation, with the Corporation
being the surviving corporation in such merger, pursuant to a certain Agreement
and Plan of Merger.
"Participation Amount" shall have the meaning ascribed to it in
paragraph 4(b) hereof.
"Payment Date" (a) with respect to an Initial Public Offering, the IPO
Effectiveness Date of which occurs sixty (60) or more Unrestricted Trading Days
prior to June 30, 2000, means June 30, 2000, (b) with respect to an Initial
Public Offering, the IPO Effectiveness Date of which occurs within sixty (60)
Unrestricted Trading Days prior to, or on, June 30, 2000, means the Business Day
immediately following the last day of the first period of sixty (60) consecutive
Unrestricted Trading Days beginning on any date after such IPO Effectiveness
Date, and (c) with respect to an Initial Public Offering, the IPO Effectiveness
Date of which occurs after June 30, 2000, means the Business Day immediately
following the day in which the Corporation receives the net proceeds of such
Initial Public Offering.
"Person" means any individual, firm, corporation, partnership, limited
liability company, trust, incorporated or unincorporated association, joint
venture, joint stock company, governmental body or other entity of any kind.
"Per Share Value" shall have the meaning ascribed to it in
paragraph 4(c) hereof.
"Pro Rata Share" shall have the meaning ascribed to it in
paragraph 4(e) hereof.
"Sale" shall mean the sale, conveyance, exchange or transfer to
another Person of (i) the voting Capital Stock of the Corporation if after such
sale, conveyance, exchange or transfer the stockholders of the Corporation prior
to such sale, conveyance, exchange or transfer do not retain at least a majority
of the voting power of the Corporation, or (ii) all or substantially all of the
assets of the Corporation.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"Series A Preferred Stock" shall have the meaning ascribed to it in
paragraph 1 hereof.
"Trading Day" means a day on which the national securities exchanges
are open for trading.
<PAGE>
"Trigger Event" shall have the meaning ascribed to it in
paragraph 2(b) hereof.
"Trigger Market Price" per share means, (a) with respect to an Initial
Public Offering, the IPO Effectiveness Date of which occurs sixty (60) or more
Unrestricted Trading Days prior to June 30, 2000, the highest average daily
Market Price of the Common Stock during any periods of sixty (60) consecutive
Unrestricted Trading Days beginning on any date after such IPO Effectiveness
Date and ending not later than June 30, 2000, and (b) with respect to an Initial
Public Offering, the IPO Effectiveness Date of which occurs within sixty (60)
Unrestricted Trading Days of June 30, 2000, the average daily Market Price of
the Common Stock during the first period of sixty (60) consecutive Unrestricted
Trading Days beginning on any date after such IPO Effectiveness Date.
"Trigger Value" shall have the meaning ascribed to it in
paragraph 4(c) hereof.
"Unrestricted Trading Day" means a day on which (i) the national
securities exchanges are open for trading and (ii) no restriction by the
Corporation or the Commission (including, without limitation, pursuant to the
rules and regulations promulgated thereby) exists which prevents any holder of
shares of Series A Preferred Stock from effecting any public sale or
distribution of Common Stock pursuant to Rule 144 under the Securities Act
(other than applicable volume restrictions under such Rule 144).
<PAGE>
IN WITNESS WHEREOF, EXE Technologies, Inc. has caused this certificate
to be duly executed by its President this 15 day of September, 1997.
EXE TECHNOLOGIES, INC.
By: /s/ Lyle A. Baack
------------------------------------
Name: Lyle A. Baack
Title: President
<PAGE>
EXE TECHNOLOGIES, INC.
CERTIFICATE OF THE POWERS, DESIGNATIONS,
PREFERENCES AND RIGHTS OF THE
SERIES B CONVERTIBLE PREFERRED STOCK,
PAR VALUE $.01 PER SHARE
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
The following resolution was duly adopted by the Board of Directors of
EXE Technologies, Inc., a Delaware corporation (the "Corporation"), pursuant to
the provisions of Section 151 of the General Corporation Law of the State of
Delaware, on July 31, 1997, by the unanimous written consent of the Board of
Directors:
WHEREAS, the Board of Directors is authorized, within the limitations
and restrictions stated in the Certificate of Incorporation of the Corporation,
to provide by resolution or resolutions for the issuance of shares of Preferred
Stock, par value $.01 per share, of the Corporation, in one or more series with
such voting powers, full or limited, or without voting powers, and such
designations, preferences and relative, participating, optional or other special
rights, and qualifications, limitations or restrictions as shall be stated and
expressed in the resolution or resolutions providing for the issuance thereof
adopted by the Board of Directors, and as are not stated and expressed in the
Certificate of Incorporation, or any amendment thereto, including (but without
limiting the generality of the foregoing) such provisions as may be desired
concerning voting, redemption, dividends, dissolution or the distribution of
assets and such other subjects or matters as may be fixed by resolution or
resolutions of the Board of Directors under the General Corporation Law of the
State of Delaware; and
WHEREAS, it is the desire of the Board of Directors, pursuant to its
authority as aforesaid, to authorize and fix the terms of a series of preferred
stock and the number of shares constituting such series.
NOW, THEREFORE, BE IT RESOLVED:
1. DESIGNATION AND NUMBER OF SHARES. There shall be hereby
established a series of Preferred Stock designated as "Series B Convertible
Preferred Stock" (the "Series B Preferred Stock"). The authorized number of
shares of Series B Preferred Stock shall be 5,000,000.
<PAGE>
2. RANK. The Series B Preferred Stock shall, with respect to
distributions of assets and rights upon the liquidation, winding up and
dissolution of the Corporation, rank PARI PASSU with the Series A Convertible
Participating Preferred Stock, par value $.01 per share, of the Corporation (the
"Series A Preferred Stock"), and senior to (a) all classes of common stock of
the Corporation (including, without limitation, the Class A Common Stock, par
value $.01 per share, of the Corporation) (the "Common Stock") and (b) each
other class or series of Capital Stock of the Corporation hereafter created
which does not expressly rank PARI PASSU with or senior to the Series B
Preferred Stock (the "Junior Stock").
3. DIVIDENDS. Beginning on the date of issuance of the Series B
Preferred Stock, if the Board of Directors of the Corporation shall declare a
dividend or make any other distribution (including, without limitation, in cash
or other property or assets), to holders of shares of Common Stock, then the
holders of each share of Series B Preferred Stock shall be entitled to receive,
out of funds legally available therefor, a dividend or distribution in an amount
equal to the amount of such dividend or distribution received by a holder of the
number of shares of Common Stock for which such share of Series B Preferred
Stock is convertible on the record date for such dividend or distribution. Any
such amount shall be paid to the holders of shares of Series B Preferred Stock
at the same time such dividend or distribution is made to holders of Common
Stock.
4. LIQUIDATION PREFERENCE.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of shares of Series B
Preferred Stock then outstanding shall be entitled to be paid for each share of
Series B Preferred Stock held thereby, out of the assets of the Corporation
available for distribution to its stockholders, before any payment shall be made
or any assets distributed to the holders of any shares of Junior Stock, an
amount in cash (the following (i) and (ii) together, the "Liquidation Amount")
equal to (i) $2.1865 per share (subject to adjustment under conditions, with
respect to the Series B Preferred Stock, analogous to those provided in
paragraph 7(d) with respect to the Common Stock) (the "Liquidation Preference")
plus (ii) all declared and unpaid dividends thereon to the date fixed for
liquidation, dissolution or winding up, before any payment shall be made or any
assets distributed to the holders of any shares of Junior Stock. Except as
provided in the preceding sentence, holders of Series B Preferred Stock shall
not be entitled to any distribution in the event of any liquidation, dissolution
or winding up of the affairs of the Corporation. If the assets of the
Corporation are not sufficient to pay in full the foregoing Liquidation Amount
to the holders of outstanding shares of the Series B Preferred Stock, then the
holders of all shares of Series B Preferred Stock shall share ratably in such
distribution of assets in accordance with the amount that would be payable on
such distribution if the amounts to which the holders of outstanding shares of
Series B Preferred Stock are entitled were paid in full.
<PAGE>
(b) After the holders of all shares of Series A Preferred Stock
and Series B Preferred Stock shall have been paid in full the amounts to which
they are entitled under the Certificate of Incorporation of the Corporation, as
amended, the remaining net assets of the Corporation shall be distributed to the
holders of Junior Stock. Written notice of such liquidation, dissolution or
winding up, stating a payment date, the Liquidation Amount and the place where
such Liquidation Amount shall be payable, shall be delivered in person, mailed
by certified or registered mail, return receipt requested, mailed by overnight
mail or sent by telecopier, not less than ten (10) days prior to the payment
date stated therein, to the holders of record of the Series B Preferred Stock,
such notice to be addressed to each such holder at its address as shown by the
records of the Corporation.
5. REDEMPTION. The shares of Series B Preferred Stock shall not be
redeemed or subject to redemption, whether at the option of the Corporation or
any holder thereof, or otherwise.
6. VOTING RIGHTS; ELECTION OF DIRECTOR.
(a) The holders of Series B Preferred Stock, except as otherwise
required under Delaware law or as set forth in paragraphs (b) and (c) below,
shall not be entitled or permitted to vote on any matter required or permitted
to be voted upon by the stockholders of the Corporation.
(b) So long as the Series B Preferred Stock is outstanding, each
share of Series B Preferred Stock shall entitle the holder thereof to vote, in
person or by proxy, at a special or annual meeting of stockholders, on all
matters entitled to be voted on by holders of Common Stock voting together as a
single class with other shares entitled to vote thereon. With respect to any
such vote, each share of Series B Preferred Stock shall entitle the holder
thereof to cast that number of votes per share as is equal to the number of
votes that such holder would be entitled to cast had such holder converted its
shares of Series B Preferred Stock into shares of Common Stock on the record
date for determining the stockholders of the Corporation eligible to vote on any
such matters.
(c) If GAP LP, GAP Coinvestment (each as hereinafter defined)
and/or any affiliate (as defined in Rule 12b-2 under the Exchange Act) thereof
own in the aggregate (i) at least a majority of the outstanding shares of
Series B Preferred Stock and (ii) shares of Common Stock and/or Series A
Preferred Stock, Series B Preferred Stock or other securities of the Corporation
convertible into or exchangeable for shares of voting capital stock of the
Corporation that represent (after giving effect to any adjustments) at least 5%
of the total number of shares of Common Stock outstanding on an as converted
basis, then the holders of the Series B Preferred Stock, voting as a separate
series, shall be entitled to elect one director of the Corporation, which
directorship shall be apportioned among the classes of directors, if any, by the
Board of Directors. The Series B Preferred Stock shall vote together with all
other classes and
<PAGE>
series of stock of the Corporation as a single class with respect to the
election of all of the other directors of the Corporation; PROVIDED, HOWEVER,
that if the conditions set forth in the first sentence of this paragraph 6(c)
necessary for the holders of the Series B Preferred Stock to vote as a
separate series for the election of one director are not satisfied, the
Series B Preferred Stock shall vote together with all other classes and
series of stock of the Corporation as a single class with respect to the
election of all of the directors of the Corporation. At any meeting (or in a
written consent in lieu thereof) held for the purpose of electing directors,
the presence in person or by proxy (or the written consent) of the holders of
a majority of the shares of Series B Preferred Stock then outstanding shall
constitute a quorum of the Series B Preferred Stock for the election of the
director to be elected solely by the holders of the Series B Preferred Stock.
A vacancy in the directorship elected by the holders of the Series B
Preferred Stock pursuant to this Section 6(c) shall be filled only by vote or
written consent of the holders of the Series B Preferred Stock.
7. CONVERSION.
(a) Any holder of Series B Preferred Stock shall have the right,
at its option, at any time and from time to time, to convert, subject to the
terms and provisions of this paragraph 7, any or all of such holder's shares of
Series B Preferred Stock into such number of fully paid and non-assessable
shares of Common Stock as is equal to the product of the number of shares of
Series B Preferred Stock being so converted multiplied by the quotient of
(i) the Liquidation Preference divided by (ii) the conversion price of $2.1865
per share, subject to adjustment as provided in paragraph 7(d) (the "Conversion
Price"), then in effect. Such conversion right shall be exercised by the
surrender of the shares of Series B Preferred Stock to be converted to the
Corporation at any time during usual business hours at its principal place of
business to be maintained by it, accompanied by written notice that the holder
elects to convert such shares of Series B Preferred Stock and specifying the
name or names (with address) in which a certificate or certificates for shares
of Common Stock are to be issued and (if so required by the Corporation) by a
written instrument or instruments of transfer in form reasonably satisfactory to
the Corporation duly executed by the holder or its duly authorized legal
representative and transfer tax stamps or funds therefor, if required pursuant
to paragraph 7(j). All shares of Series B Preferred Stock surrendered for
conversion shall be delivered to the Corporation for cancellation and canceled
by it and no shares of Series B Preferred Stock shall be issued in lieu thereof.
(b) As promptly as practicable after the surrender, as herein
provided, of any shares of Series B Preferred Stock for conversion pursuant
to paragraph 7(a), the Corporation shall deliver to or upon the written order
of the holder of such shares of Series B Preferred Stock so surrendered a
certificate or certificates representing the number of fully paid and
non-assessable shares of Common Stock into which such shares of Series B
Preferred Stock may be or have been converted in accordance with the
provisions of this paragraph 7. Subject to the following provisions of this
paragraph and
<PAGE>
of paragraph 7(d), such conversion shall be deemed to have been made
immediately prior to the close of business on the date that such shares of
Series B Preferred Stock shall have been surrendered in satisfactory form for
conversion, and the Person or Persons entitled to receive the shares of
Common Stock deliverable upon conversion of such shares of Series B Preferred
Stock shall be treated for all purposes as having become the record holder or
holders of such shares of Common Stock at such appropriate time, and such
conversion shall be at the Conversion Price in effect at such time; PROVIDED,
HOWEVER, that no surrender shall be effective to constitute the Person or
Persons entitled to receive the shares of Common Stock deliverable upon such
conversion as the record holder or holders of such shares of Common Stock
while the share transfer books of the Corporation shall be closed (but not
for any period in excess of five days), but such surrender shall be effective
to constitute the Person or Persons entitled to receive such shares of Common
Stock as the record holder or holders thereof for all purposes immediately
prior to the close of business on the next succeeding day on which such share
transfer books are open, and such conversion shall be deemed to have been
made at, and shall be made at the Conversion Price in effect at, such time on
such next succeeding day.
(c) To the extent permitted by law, when shares of Series B
Preferred Stock are converted, all dividends declared and unpaid on the shares
of Series B Preferred Stock so converted to the date of conversion shall be
immediately due and payable and must accompany the shares of Common Stock issued
upon such conversion.
(d) The Conversion Price shall be subject to adjustment as
follows:
(i) In the event that the Corporation shall at any time or
from time to time (w) pay a dividend or make a distribution (other than a
dividend or distribution paid or made to holders of shares of Series B Preferred
Stock in the manner provided in paragraph 3) on the outstanding shares of Common
Stock in Capital Stock, (x) subdivide the outstanding shares of Common Stock
into a larger number of shares, (y) combine the outstanding shares of Common
Stock into a smaller number of shares or (z) issue any shares of its Capital
Stock in a reclassification of the Common Stock, then, and in each such case,
the Conversion Price in effect immediately prior to such event shall be adjusted
(and any other appropriate actions shall be taken by the Corporation) so that
the holder of any share of Series B Preferred Stock thereafter surrendered for
conversion shall be entitled to receive the number of shares of Common Stock or
other securities of the Corporation that such holder would have owned or would
have been entitled to receive upon or by reason of any of the events described
above, had such share of Series B Preferred Stock been converted immediately
prior to the occurrence of such event. An adjustment made pursuant to this
paragraph 7(d)(i) shall become effective retroactively (x) in the case of any
such dividend or distribution, to a date immediately following the close of
business on the record date for the determination of holders of Common Stock
entitled to receive such dividend or distribution or (y) in the case of any
<PAGE>
such subdivision, combination or reclassification, to the close of business
on the day upon which such corporate action becomes effective.
(ii) In case the Corporation shall at any time or from time
to time distribute to all holders of shares of its Common Stock (including any
such distribution made in connection with a merger or consolidation in which the
Corporation is the resulting or surviving Person and the Common Stock is not
changed or exchanged) cash, evidences of indebtedness of the Corporation or
another issuer, securities of the Corporation or another issuer or other assets
(excluding dividends or distributions paid or made to holders of shares of
Series B Preferred Stock in the manner provided in paragraph 3, and dividends
payable in shares of Common Stock for which adjustment is made under
paragraph 7(d)(i)) or rights or warrants to subscribe for or purchase securities
of the Corporation (excluding those distributions in respect of which an
adjustment in the Conversion Price is made pursuant to paragraph 7(d)(i)), then,
and in each such case, the Conversion Price then in effect shall be adjusted
(and any other appropriate actions shall be taken by the Corporation) by
multiplying the Conversion Price in effect immediately prior to the date of such
distribution by a fraction (x) the numerator of which shall be the Current
Market Price (as hereinafter defined) of one share of Common Stock on the record
date referred to below less the then fair market value (as determined by the
Board of Directors) of the portion of the cash, evidences of indebtedness,
securities or other assets so distributed or of such subscription rights or
warrants applicable to one share of Common Stock and (y) the denominator of
which shall be such Current Market Price of one share of Common Stock (but such
denominator shall not be less than one); PROVIDED, HOWEVER, that no adjustment
shall be made with respect to any distribution of rights to purchase securities
of the Corporation if the holder of shares of Series B Preferred Stock would
otherwise be entitled to receive such rights upon conversion at any time of
shares of Series B Preferred Stock into Common Stock. Such adjustment shall be
made whenever any such distribution is made and shall become effective
retroactively to a date immediately following the close of business on the
record date for the determination of stockholders entitled to receive such
distribution.
(iii) In the case the Corporation, at any time or from time
to time, shall take any action affecting its Common Stock similar to or having
an effect similar to any of the actions described in any of paragraph 7(d)(i) or
paragraph 7(d)(ii), inclusive, or paragraph 7(g) (but not including any action
described in any such paragraph) and the Board of Directors in good faith
determines that it would be equitable in the circumstances to adjust the
Conversion Price as a result of such action, then, and in each such case, the
Conversion Price shall be adjusted in such manner and at such time as the Board
of Directors of the Corporation in good faith determines would be equitable in
the circumstances (such determination to be evidenced in a resolution, a
certified copy of which shall be mailed to the holders of the shares of Series B
Preferred Stock).
(iv) Notwithstanding anything herein to the contrary, no
adjustment under this paragraph 7(d) need be made to the Conversion Price unless
such
<PAGE>
adjustment would require an increase or decrease of at least 1% of the
Conversion Price then in effect. Any lesser adjustment shall be carried
forward and shall be made at the time of and together with the next
subsequent adjustment, which, together with any adjustment or adjustments so
carried forward, shall amount to an increase or decrease of at least 1% of
such Conversion Price. Any adjustment to the Conversion Price carried
forward and not theretofore made shall be made immediately prior to the
conversion of any shares of Series B Preferred Stock pursuant hereto.
(v) Notwithstanding anything herein to the contrary, no
adjustment under this paragraph 7(d) shall be made upon the grant of options to
employees, consultants or directors of the Corporation pursuant to benefit plans
approved by the Board of Directors to the extent that all of the options issued
to employees, consultants or directors pursuant to such benefit plans represent
10% or less of the total number of shares of Common Stock outstanding on an as
converted basis.
(e) If the Corporation shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or other
distribution, and shall thereafter and before the distribution to stockholders
thereof legally abandon its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment in the Conversion Price then in
effect shall be required by reason of the taking of such record.
(f) Upon any increase or decrease in the Conversion Price, then,
and in each such case, the Corporation promptly shall deliver to each registered
holder of Series B Preferred Stock at least ten (10) Business Days prior to
effecting any of the foregoing transactions a certificate, signed by the
President or a Vice President and by the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary of the Corporation, setting forth in
reasonable detail the event requiring the adjustment and the method by which
such adjustment was calculated and specifying the increased or decreased
Conversion Price then in effect following such adjustment.
(g) In case of (i) any capital reorganization or
reclassification or other change of outstanding shares of Common Stock (other
than a change in par value, or from par value to no par value, or from no par
value to par value), (ii) any Merger or (iii) any Sale (any of the foregoing
(i), (ii) or (iii), a "Transaction"), the Corporation, or such successor or
purchasing Person, as the case may be, shall execute and deliver to each holder
of Series B Preferred Stock at least fifteen (15) Business Days prior to
effecting any of the foregoing Transactions a certificate that the holder of
each share of Series B Preferred Stock then outstanding shall have the right
thereafter to convert such share of Series B Preferred Stock into the kind and
amount of shares of stock or other securities (of the Corporation or another
issuer) or property or cash receivable upon such Transaction by a holder of the
number of shares of Common Stock into which such share of Series B Preferred
Stock could have been converted immediately prior to such Transaction. Such
certificate shall provide for adjustments which shall be as
<PAGE>
nearly equivalent as may be practicable to the adjustments provided for in
this paragraph 7. If, in the case of any such Transaction, the stock, other
securities, cash or property receivable thereupon by a holder of Common Stock
includes shares of stock or other securities of a Person other than the
successor or purchasing Person and other than the Corporation, which controls
or is controlled by the successor or purchasing Person or which, in
connection with such Transaction, issues stock, securities, other property or
cash to holders of Common Stock, then such certificate also shall be executed
by such Person, and such Person shall, in such certificate, specifically
acknowledge the obligations of such successor or purchasing Person and
acknowledge its obligations to issue such stock, securities, other property
or cash to the holders of Series B Preferred Stock upon conversion of the
shares of Series B Preferred Stock as provided above. The provisions of this
paragraph 7(g) and any equivalent thereof in any such certificate similarly
shall apply to successive Transactions.
(h) In case at any time or from time to time:
(w) the Corporation shall declare a dividend (or any other
distribution) on its shares of Common Stock;
(x) the Corporation shall authorize the granting to the
holders of its Common Stock of rights or warrants to subscribe for or purchase
any shares of stock of any class or of any other rights or warrants;
(y) there shall be any reorganization or reclassification
of the Common Stock, or any Merger, or any Sale, or any Initial Public Offering
(which is provided for in paragraph 8 hereof); or
(z) there shall occur the voluntary or involuntary
liquidation, dissolution or winding up of the Corporation;
then the Corporation shall mail to each holder of shares of Series B Preferred
Stock at such holder's address as it appears on the transfer books of the
Corporation, as promptly as possible but in any event at least thirty (30) days
prior to the applicable date hereinafter specified, a notice stating (A) the
date on which a record is to be taken for the purpose of such dividend,
distribution or rights or warrants or, if a record is not to be taken, the date
as of which the holders of Common Stock of record to be entitled to such
dividend, distribution or rights are to be determined, or (B) the date on which
such reclassification, reorganization, Merger, Sale, Initial Public Offering,
liquidation, dissolution or winding up is expected to become effective, PROVIDED
that in the case of any Transaction to which paragraph 7(g) applies, the
Corporation shall give at least thirty (30) days prior written notice as
aforesaid. Such notice also shall specify the date as of which it is expected
that holders of Common Stock of record shall be entitled to exchange their
Common Stock for shares of stock or other securities or property or cash
deliverable upon such reclassification, reorganization, Merger, Sale,
liquidation, dissolution or winding up.
<PAGE>
(i) The Corporation shall at all times reserve and keep
available for issuance upon the conversion of the Series B Preferred Stock, such
number of its authorized but unissued shares of Common Stock as will from time
to time be sufficient to permit the conversion of all outstanding shares of
Series B Preferred Stock, and shall take all action required to increase the
authorized number of shares of Common Stock if at any time there shall be
insufficient authorized but unissued shares of Common Stock to permit such
reservation or to permit the conversion of all outstanding shares of Series B
Preferred Stock.
(j) The issuance or delivery of certificates for Common Stock
upon the conversion of shares of Series B Preferred Stock shall be made without
charge to the converting holder of shares of Series B Preferred Stock for such
certificates or for any tax in respect of the issuance or delivery of such
certificates or the securities represented thereby, and such certificates shall
be issued or delivered in the respective names of, or (subject to compliance
with the applicable provisions of federal and state securities laws) in such
names as may be directed by, the holders of the shares of Series B Preferred
Stock converted; PROVIDED, HOWEVER, that the Corporation shall not be required
to pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any such certificate in a name other than that of the
holder of the shares of Series B Preferred Stock converted, and the Corporation
shall not be required to issue or deliver such certificate unless or until the
Person or Persons requesting the issuance or delivery thereof shall have paid to
the Corporation the amount of such tax or shall have established to the
reasonable satisfaction of the Corporation that such tax has been paid.
8. INITIAL PUBLIC OFFERING. In the event of an Initial Public
Offering, at the election of the holders of a majority of the shares of Series B
Preferred Stock then outstanding, each share of Series B Preferred Stock shall
be converted into the number of shares of Common Stock into which such one (1)
share of Series B Preferred Stock could have been converted (subject to
adjustment) immediately prior to such Initial Public Offering.
9. CERTAIN REMEDIES. Any registered holder of Series B Preferred
Stock shall be entitled to an injunction or injunctions to prevent breaches of
the provisions of this Certificate of Designations and to enforce specifically
the terms and provisions of this Certificate of Designations in any court of the
United States or any state thereof having jurisdiction, this being in addition
to any other remedy to which such holder may be entitled at law or in equity.
10. REISSUANCE OF SERIES B PREFERRED STOCK. Shares of Series B
Preferred Stock that have been issued and reacquired in any manner, including
shares purchased or converted, shall (upon compliance with any applicable
provisions of the laws of Delaware) have the status of authorized and unissued
shares of preferred stock undesignated as to series and may be redesignated and
reissued as part of any series of preferred stock (other than Series B Preferred
Stock).
<PAGE>
11. BUSINESS DAY. If any payment shall be required by the terms
hereof to be made on a day that is not a Business Day, such payment shall be
made on the immediately succeeding Business Day.
12. DEFINITIONS. As used in this Certificate of Designations, the
following terms shall have the following meanings (with terms defined in the
singular having comparable meanings when used in the plural and VICE VERSA),
unless the context otherwise requires:
"Board of Directors" means the Board of Directors of the Corporation.
"Business Day" means any day except a Saturday, a Sunday, or other day
on which commercial banks in the State of New York are authorized or required by
law or executive order to close.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in, or other equivalents (however designated
and whether voting or non-voting) of, such Person's capital stock and any and
all rights, warrants or options exchangeable for or convertible into such
capital stock (but excluding any debt security that is exchangeable for or
convertible into such capital stock).
"Commission" means the Securities and Exchange Commission or any
similar agency then having jurisdiction to enforce the Securities Act.
"Common Stock" shall have the meaning ascribed to it in paragraph 2
hereof.
"Conversion Price" shall have the meaning ascribed to it in paragraph
7(a) hereof.
"Corporation" shall have the meaning ascribed to it in the first
paragraph of this Resolution.
"Current Market Price" per share shall mean, as of the date of
determination, (a) the average daily Market Price of the Common Stock for those
days during the period of thirty (30) Trading Days, ending on such date, and
(b) if the Common Stock is not then listed or admitted to trading on any
national securities exchange or quoted in the over-counter market, then the
Market Price on such date.
"Exchange Act" means the Securities Exchange Act of 1934, and the
rules and regulations of the Commission promulgated thereunder.
"GAP Coinvestment" means GAP Coinvestment Partners, L.P., a New York
limited partnership.
<PAGE>
"GAP LP" means General Atlantic Partners 41, L.P., a Delaware limited
partnership.
"Initial Public Offering" shall mean a firm commitment underwritten
initial public offering of the Corporation pursuant to an effective registration
statement under the Securities Act.
"Junior Stock" shall have the meaning ascribed to it in paragraph 2
hereof.
"Liquidation Amount" shall have the meaning ascribed to it in
paragraph 4(a) hereof.
"Liquidation Preference" shall have the meaning ascribed to it in
paragraph 4(a) hereof.
"Market Price" shall mean, per share of Common Stock, as of the date
of determination, (a) the closing price per share of Common Stock on such date
published in THE WALL STREET JOURNAL or, if no such closing price on such date
is published in THE WALL STREET JOURNAL, the average of the closing bid and
asked prices on such date, as officially reported on the principal national
securities exchange (including, without limitation, The Nasdaq Stock Market,
Inc.) on which the Common Stock is then listed or admitted to trading; or (b) if
the Common Stock is not then listed or admitted to trading on any national
securities exchange but is designated as a national market system security by
the NASD, the last trading price of the Common Stock on such date; or (c) if
there shall have been no trading on such date or if the Common Stock is not so
designated, the average of the reported closing bid and asked prices of the
common stock, on such date as shown by NASDAQ and reported by any member firm of
the New York Stock Exchange selected by the Corporation; or (d) if none of (a),
(b) or (c) is applicable, a market price per share determined at the
Corporation's expense by an appraiser chosen by the holders of a majority of the
shares of Series B Preferred Stock, or, if no such appraiser is so chosen more
than ten (10) Business Days after notice of the necessity of such calculation
shall have been delivered by the Corporation to the holders of Series B
Preferred Stock, then by an appraiser chosen by the Corporation and reasonably
satisfactory to a majority of the holders of Series B Preferred Stock. Any
determination of the Market Price by an appraiser shall be based on a valuation
of the Corporation as an entirety without regard to any discount for minority
interests or disparate voting rights among classes of Capital Stock.
"Merger" shall mean (x) the merger or consolidation of the Corporation
with one or more other Persons or (y) the merger or consolidation of one or more
Persons into or with the Corporation.
<PAGE>
"Person" means any individual, firm, corporation, partnership, limited
liability company, trust, incorporated or unincorporated association, joint
venture, joint stock company, governmental body or other entity of any kind.
"Sale" shall mean the sale, conveyance, exchange or transfer to
another Person of (i) the voting Capital Stock of the Corporation if after such
sale, conveyance, exchange or transfer the stockholders of the Corporation prior
to such sale, conveyance, exchange or transfer do not retain at least a majority
of the voting power of the Corporation, or (ii) all or substantially all of the
assets of the Corporation.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"Series A Preferred Stock" shall have the meaning ascribed to it in
paragraph 2 hereof.
"Series B Preferred Stock" shall have the meaning ascribed to it in
paragraph 1 hereof.
"Trading Day" means a day on which the national securities exchanges
are open for trading.
"Transaction" shall have the meaning ascribed to it in paragraph 7(g)
hereof.
<PAGE>
IN WITNESS WHEREOF, EXE Technologies, Inc. has caused this certificate
to be duly executed by its President this 15 day of September, 1997.
EXE TECHNOLOGIES, INC.
By: /s/ Lyle A. Baack
----------------------------------
Name: Lyle A. Baack
Title: President
<PAGE>
EXE TECHNOLOGIES, INC.
CERTIFICATE OF THE POWERS, DESIGNATIONS,
PREFERENCES AND RIGHTS OF THE
SERIES C CONVERTIBLE PREFERRED STOCK,
PAR VALUE $.01 PER SHARE
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
The following resolution was duly adopted by the Board of Directors of
EXE Technologies, Inc., a Delaware corporation (the "Corporation"), pursuant to
the provisions of Section 151 of the General Corporation Law of the State of
Delaware, on July 8, 1998, at a meeting of the Board of Directors:
WHEREAS, the Board of Directors is authorized, within the limitations
and restrictions stated in the Certificate of Incorporation of the Corporation,
to provide by resolution or resolutions for the issuance of shares of Preferred
Stock, par value $.01 per share, of the Corporation, in one or more series with
such voting powers, full or limited, or without voting powers, and such
designations, preferences and relative, participating, optional or other special
rights, and qualifications, limitations or restrictions as shall be stated and
expressed in the resolution or resolutions providing for the issuance thereof
adopted by the Board of Directors, and as are not stated and expressed in the
Certificate of Incorporation, or any amendment thereto, including (but without
limiting the generality of the foregoing) such provisions as may be desired
concerning voting, redemption, dividends, dissolution or the distribution of
assets and such other subjects or matters as may be fixed by resolution or
resolutions of the Board of Directors under the General Corporation Law of the
State of Delaware; and
WHEREAS, it is the desire of the Board of Directors, pursuant to its
authority as aforesaid, to authorize and fix the terms of a series of preferred
stock and the number of shares constituting such series.
Unless otherwise defined in this Certificate of Designations,
capitalized terms used in this Certificate of Designations shall have the
respective meanings ascribed to them in paragraph 12.
NOW, THEREFORE, BE IT RESOLVED:
<PAGE>
1. DESIGNATION AND NUMBER OF SHARES. There shall be hereby
established a series of Preferred Stock designated as "Series C Convertible
Preferred Stock" (the "Series C Preferred Stock"). The authorized number of
shares of Series C Preferred Stock shall be 2,000,000.
2. RANK. The Series C Preferred Stock shall, with respect to
distributions of assets and rights upon the liquidation, dissolution or winding
up of the Corporation (a "Liquidation"), rank (a) PARI PASSU with each of the
Series A Preferred Stock and the Series B Preferred Stock and (b) senior to (i)
all classes of the Common Stock and (ii) each other class or series of Capital
Stock of the Corporation hereafter created which does not expressly rank PARI
PASSU with or senior to the Series C Preferred Stock (the "Junior Stock").
3. DIVIDENDS. Beginning on the date of issuance of the Series C
Preferred Stock, if the Board of Directors shall declare a dividend or make any
other distribution (including, without limitation, in cash or other property or
assets), to holders of shares of Series A Preferred Stock, Series B Preferred
Stock or Common Stock, then the holders of each share of Series C Preferred
Stock shall be entitled to receive, out of funds legally available therefor, a
dividend or distribution in an amount equal to the amount of such dividend or
distribution received by a holder of the number of shares of Common Stock for
which such share of Series C Preferred Stock is convertible on the record date
for such dividend or distribution. Any such amount shall be paid to the holders
of shares of Series C Preferred Stock at the same time such dividend or
distribution is made to holders of Common Stock.
4. LIQUIDATION PREFERENCE.
(a) In the event of any voluntary or involuntary Liquidation,
the holders of shares of Series C Preferred Stock then outstanding shall be
entitled to be paid for each share of Series C Preferred Stock held thereby, out
of the assets of the Corporation available for distribution to its stockholders,
before any payment shall be made or any assets distributed to the holders of any
shares of Junior Stock, an amount in cash (the following (i) and (ii) together,
the "Liquidation Amount") equal to (i) $5.00 per share (subject to adjustment
under conditions, with respect to the Series C Preferred Stock, analogous to
those provided in paragraph 8(d) with respect to the Class A Common Stock) (the
"Liquidation Preference") plus (ii) all declared and unpaid dividends thereon to
the date fixed for the Liquidation. Except as provided in the preceding
sentence, holders of Series C Preferred Stock shall not be entitled to any
distribution in the event of any Liquidation. If, upon any Liquidation, the
assets of the Corporation available for distribution to its stockholders shall
be insufficient to pay each of the Series A Preferred Stock, the Series B
Preferred Stock and the Series C Preferred
-2-
<PAGE>
Stock the full amount as to which each of them shall be entitled by reason of
such Liquidation, then the Series A Preferred Stock, the Series B Preferred
Stock and the Series C Preferred Stock shall share ratably in such
distribution of assets in accordance with the respective amounts which would
be payable to them in respect of the shares held upon such distribution if
all amounts payable on or with respect to such shares were paid in full. For
purposes of calculating the amount of any payment to be paid upon any such
Liquidation, each share of Series A Preferred Stock, Series B Preferred Stock
and Series C Preferred Stock shall be deemed to be that number of shares
(including fractional shares) of Class A Common Stock into which such share
is then convertible, rounded to the nearest one-tenth of a share. If the
assets of the Corporation are not sufficient to pay in full the foregoing
Liquidation Amount to the holders of outstanding shares of the Series C
Preferred Stock, then the holders of all shares of Series C Preferred Stock
shall share ratably in such distribution of assets in accordance with the
amount that would be payable on such distribution if the amounts to which the
holders of outstanding shares of Series C Preferred Stock are entitled were
paid in full.
(b) After holders of all shares of Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock shall have been paid in
full the amounts to which they are entitled under the Corporation's Certificate
of Incorporation, as amended, the remaining net assets of the Corporation shall
be distributed to the holders of Junior Stock.
(c) Written notice of a Liquidation, stating a payment date and
the Liquidation Amount, as the case may be, and the place where such amount
shall be payable, shall be delivered in person, mailed by certified or
registered mail, return receipt requested, mailed by overnight mail or sent by
telecopier, not less than one (1) day prior to the payment date stated therein,
to the holders of record of the Series C Preferred Stock, such notice to be
addressed to each such holder at its address as shown by the records of the
Corporation.
5. TRIGGER EVENTS.
(a) Upon the occurrence of a Sale, a Merger, or an Initial
Public Offering in which the per share price equals or exceeds the Conversion
Price (each, a "Trigger Event"), the holders of Series C Preferred Stock shall
receive the following (the "Pro Rata Share"):
(i) In the event of a Sale in which the per share
consideration equals or exceeds the Conversion Price, each share of Series C
Preferred Stock shall be converted into the kind and amount of securities,
assets or cash receivable upon such Sale by a holder of the number of shares of
Common Stock into which such
-3-
<PAGE>
one (1) share of Series C Preferred Stock could have been converted (subject
to adjustment) immediately prior to such Sale.
(ii) In the event of a Merger in which the per share
consideration equals or exceeds the Conversion Price (whether or not the
stockholders of the Corporation prior to such Merger retain at least a majority
of the voting power of the surviving Person), each share of Series C Preferred
Stock shall be converted into the kind and amount of securities of the surviving
Person or other consideration receivable upon such Merger by a holder of the
number of shares of Common Stock into which such one (1) share of Series C
Preferred Stock could have been converted (subject to adjustment) immediately
prior to such Merger.
(iii) In the event of the Initial Public Offering in which
the per share price equals or exceeds the Conversion Price, each share of Series
C Preferred Stock shall be converted, effective immediately prior to the Initial
Public Offering, into the number of shares of Class A Common Stock into which
such one (1) share of Series C Preferred Stock could have been converted at such
time.
(b) On and after a Trigger Event, all rights in respect of the
shares of Series C Preferred Stock to be converted shall cease and terminate,
but the holder(s) thereof shall have the right to receive the Pro Rata Share, as
provided in this paragraph 5, and such shares of Series C Preferred Stock shall
no longer be deemed to be outstanding, whether or not the certificates
representing such shares of Series C Preferred Stock have been received by the
Corporation.
(c) Written notice of a Trigger Event, stating a payment date
and the Pro Rata Share and the place where such amount shall be payable, shall
be delivered in person, mailed by certified or registered mail, return receipt
requested, mailed by overnight mail or sent by telecopier, not less than one (1)
day prior to the payment date stated therein, to the holders of record of the
Series C Preferred Stock, such notice to be addressed to each such holder at its
address as shown by the records of the Corporation.
6. REDEMPTION. The shares of Series C Preferred Stock shall not be
redeemed or subject to redemption, whether at the option of the Corporation or
any holder thereof, or otherwise.
7. VOTING RIGHTS.
(a) The holders of Series C Preferred Stock, except as otherwise
required under Delaware law or as set forth in paragraph 7(b) below, shall not
-4-
<PAGE>
be entitled or permitted to vote on any matter required or permitted to be voted
upon by the stockholders of the Corporation.
(b) So long as the Series C Preferred Stock is outstanding, each
share of Series C Preferred Stock shall entitle the holder thereof to vote, in
person or by proxy, at a special or annual meeting of stockholders, on all
matters entitled to be voted on by holders of Common Stock voting together as a
single class with other shares entitled to vote thereon. With respect to any
such vote, each share of Series C Preferred Stock shall entitle the holder
thereof to cast that number of votes per share as is equal to the number of
votes that such holder would be entitled to cast had such holder converted its
shares of Series C Preferred Stock into shares of Class A Common Stock on the
record date for determining the stockholders of the Corporation eligible to vote
on any such matters.
8. CONVERSION.
(a) Any holder of Series C Preferred Stock shall have the right,
at its option, at any time and from time to time, to convert, subject to the
terms and provisions of this paragraph 8, any or all of such holder's shares of
Series C Preferred Stock into such number of fully paid and non-assessable
shares of Class A Common Stock as is equal to the product of the number of
shares of Series C Preferred Stock being so converted multiplied by the quotient
of (i) the Liquidation Preference divided by (ii) the conversion price of $5.00
per share, subject to adjustment as provided in paragraph 8(d) (the "Conversion
Price"), then in effect. Such conversion right shall be exercised by the
surrender of the shares of Series C Preferred Stock to be converted to the
Corporation at any time during usual business hours at its principal place of
business, accompanied by written notice that the holder elects to convert such
shares of Series C Preferred Stock and specifying the name or names (with
address) in which a certificate or certificates for shares of Class A Common
Stock are to be issued and (if so required by the Corporation) by a written
instrument or instruments of transfer in form reasonably satisfactory to the
Corporation duly executed by the holder or its duly authorized legal
representative and transfer tax stamps or funds therefor, if required pursuant
to paragraph 8(j). All shares of Series C Preferred Stock surrendered for
conversion shall be delivered to the Corporation for cancellation and canceled
by it.
(b) As promptly as practicable after the surrender, as herein
provided, of any shares of Series C Preferred Stock for conversion pursuant
to paragraph 8(a), the Corporation shall deliver to or upon the written order
of the holder of such shares of Series C Preferred Stock so surrendered a
certificate or certificates representing the number of fully paid and
non-assessable shares of Class A Common Stock into which such shares of
Series C Preferred Stock may be or have been converted in accordance
-5-
<PAGE>
with the provisions of this paragraph 8. Subject to the following provisions
of this paragraph and of paragraph 8(d), such conversion shall be deemed to
have been made immediately prior to the close of business on the date that
such shares of Series C Preferred Stock shall have been surrendered in
satisfactory form for conversion, and the Person or Persons entitled to
receive the shares of Class A Common Stock deliverable upon conversion of
such shares of Series C Preferred Stock shall be treated for all purposes as
having become the record holder or holders of such shares of Class A Common
Stock at such appropriate time, and such conversion shall be at the
Conversion Price in effect at such time; PROVIDED, HOWEVER, that no surrender
shall be effective to constitute the Person or Persons entitled to receive
the shares of Class A Common Stock deliverable upon such conversion as the
record holder or holders of such shares of Class A Common Stock while the
share transfer books of the Corporation shall be closed (but not for any
period in excess of five days), but such surrender shall be effective to
constitute the Person or Persons entitled to receive such shares of Class A
Common Stock as the record holder or holders thereof for all purposes
immediately prior to the close of business on the next succeeding day on
which such share transfer books are open, and such conversion shall be deemed
to have been made at, and shall be made at the Conversion Price in effect at,
such time on such next succeeding day.
(c) To the extent permitted by law, when shares of Series C
Preferred Stock are converted, all dividends declared and unpaid on the shares
of Series C Preferred Stock so converted to the date of conversion shall be
immediately due and payable and must accompany the shares of Class A Common
Stock issued upon such conversion.
(d) The Conversion Price shall be subject to adjustment as
follows:
(i) In the event that the Corporation shall at any time or
from time to time (A) pay a dividend or make a distribution (other than a
dividend or distribution paid or made to holders of shares of Series C Preferred
Stock in the manner provided in paragraph 3) on the outstanding shares of
Capital Stock in Class A Common Stock, (B) subdivide the outstanding shares of
Class A Common Stock into a larger number of shares, (C) combine the outstanding
shares of Class A Common Stock into a smaller number of shares or (D) issue any
shares of its Class A Common in a reclassification of the Corporation's Capital
Stock, then, and in each such case, the Conversion Price in effect immediately
prior to such event shall be adjusted (and any other appropriate actions shall
be taken by the Corporation) so that the holder of any share of Series C
Preferred Stock thereafter surrendered for conversion shall be entitled to
receive the number of shares of Class A Common Stock or other securities of the
Corporation that such holder would have owned or would have been entitled to
receive
-6-
<PAGE>
upon or by reason of any of the events described above, had such share of
Series C Preferred Stock been converted immediately prior to the occurrence
of such event. An adjustment made pursuant to this paragraph 8(d)(i) shall
become effective retroactively (x) in the case of any such dividend or
distribution, to a date immediately following the close of business on the
record date for the determination of holders of Capital Stock entitled to
receive such dividend or distribution or (y) in the case of any such
subdivision, combination or reclassification, to the close of business on the
day upon which such corporate action becomes effective.
(ii) In case the Corporation shall at any time or from time
to time distribute to all holders of shares of its Class A Common Stock
(including any such distribution made in connection with a merger or
consolidation in which the Corporation is the resulting or surviving Person and
the Common Stock is not changed or exchanged) cash, evidences of indebtedness of
the Corporation or another issuer, securities of the Corporation or another
issuer or other assets (excluding dividends or distributions paid or made to
holders of shares of Series C Preferred Stock in the manner provided in
paragraph 3, and dividends payable in shares of Class A Common Stock for which
adjustment is made under paragraph 8(d)(i)) or rights or warrants to subscribe
for or purchase securities of the Corporation (excluding those distributions in
respect of which an adjustment in the Conversion Price is made pursuant to
paragraph 8(d)(i)), then, and in each such case, the Conversion Price then in
effect shall be adjusted (and any other appropriate actions shall be taken by
the Corporation) by multiplying the Conversion Price in effect immediately prior
to the date of such distribution by a fraction (x) the numerator of which shall
be the Current Market Price of one share of Class A Common Stock on the record
date referred to below less the then fair market value (as determined by the
Board of Directors) of the portion of the cash, evidences of indebtedness,
securities or other assets so distributed or of such subscription rights or
warrants applicable to one share of Class A Common Stock and (y) the denominator
of which shall be such Current Market Price of one share of Class A Common Stock
(but such denominator shall not be less than one); PROVIDED, HOWEVER, that no
adjustment shall be made with respect to any distribution of rights to purchase
securities of the Corporation if the holder of shares of Series C Preferred
Stock would otherwise be entitled to receive such rights upon conversion at any
time of shares of Series C Preferred Stock into Class A Common Stock. Such
adjustment shall be made whenever any such distribution is made and shall become
effective retroactively to a date immediately following the close of business on
the record date for the determination of stockholders entitled to receive such
distribution.
(iii) In case the Corporation, at any time or from time to
time, shall take any action affecting its Class A Common Stock similar to or
having an effect similar to any of the actions described in any of
paragraph 8(d)(i) or paragraph 8(d)(ii), inclusive, or paragraph 8(g) (but not
including any action described in any such
-7-
<PAGE>
paragraph) and the Board of Directors in good faith determines that it would
be equitable in the circumstances to adjust the Conversion Price as a result
of such action, then, and in each such case, the Conversion Price shall be
adjusted in such manner and at such time as the Board of Directors of the
Corporation in good faith determines would be equitable in the circumstances
(such determination to be evidenced in a resolution, a certified copy of
which shall be mailed to the holders of the shares of Series C Preferred
Stock).
(iv) Notwithstanding anything herein to the contrary, no
adjustment under this paragraph 7(d) need be made to the Conversion Price unless
such adjustment would require an increase or decrease of at least 1% of the
Conversion Price then in effect. Any lesser adjustment shall be carried forward
and shall be made at the time of and together with the next subsequent
adjustment, which, together with any adjustment or adjustments so carried
forward, shall amount to an increase or decrease of at least 1% of such
Conversion Price. Any adjustment to the Conversion Price carried forward and
not theretofore made shall be made immediately prior to the conversion of any
shares of Series C Preferred Stock pursuant hereto.
(e) If the Corporation shall take a record of the holders of its
Capital Stock for the purpose of entitling them to receive a dividend or other
distribution in shares of Class A Common Stock, and shall thereafter and before
the distribution to stockholders thereof legally abandon its plan to pay or
deliver such dividend or distribution, then thereafter no adjustment in the
Conversion Price then in effect shall be required by reason of the taking of
such record.
(f) Upon any increase or decrease in the Conversion Price, then,
and in each such case, the Corporation promptly shall deliver to each registered
holder of Series C Preferred Stock at least ten (10) Business Days prior to
effecting any of the foregoing transactions a certificate, signed by the
President or a Vice President and by the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary of the Corporation, setting forth in
reasonable detail the event requiring the adjustment and the method by which
such adjustment was calculated and specifying the increased or decreased
Conversion Price then in effect following such adjustment.
(g) In case of any capital reorganization or reclassification or
other change of outstanding shares of Class A Common Stock (other than a change
in par value, or from par value to no par value, or from no par value to par
value), the Corporation shall execute and deliver to each holder of Series C
Preferred Stock at least ten (10) Business Days prior to effecting such
reorganization or reclassification a certificate that the holder of each share
of Series C Preferred Stock then outstanding shall have the right thereafter to
convert such share of Series C Preferred Stock into the kind and amount of
shares of stock or other securities, property or cash receivable upon such
-8-
<PAGE>
reorganization or reclassification by a holder of the number of shares of Class
A Common Stock into which such share of Series C Preferred Stock could have been
converted immediately prior to such reorganization or reclassification, and
provision shall be made therefor in any agreement relating to such
reorganization or reclassification. Such certificate shall provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this paragraph 8. The provisions of this
paragraph 8(g) and any equivalent thereof in any such certificate similarly
shall apply to successive transactions.
(h) In case at any time or from time to time:
(A) the Corporation shall declare a dividend (or any other
distribution) on, or payable in, its shares of Class A Common Stock;
(B) the Corporation shall authorize the granting to the
holders of its Class A Common Stock of rights or warrants to subscribe for or
purchase any shares of stock of any class or of any other rights or warrants;
(C) there shall be any reorganization or reclassification
of the Class A Common Stock, or any Merger, or any Sale, or any Initial Public
Offering; or
(D) there shall occur any voluntary or involuntary
Liquidation;
then the Corporation shall mail to each holder of shares of Series C Preferred
Stock at such holder's address as it appears on the transfer books of the
Corporation, as promptly as possible but in any event at least thirty (30) days
prior to the applicable date hereinafter specified, a notice stating (x) the
date on which a record is to be taken for the purpose of such dividend,
distribution or rights or warrants or, if a record is not to be taken, the date
as of which the holders of Capital Stock of record to be entitled to such
dividend, distribution or rights are to be determined, or (y) the date on which
such reclassification, reorganization, Merger, Sale, Initial Public Offering or
Liquidation is expected to become effective, PROVIDED that in the case of any
Merger, Sale or any event to which paragraph 8(g) applies, the Corporation shall
give at least thirty (30) days prior written notice as aforesaid. Such notice
also shall specify the date as of which it is expected that holders of Class A
Common Stock of record shall be entitled to exchange their Class A Common Stock
for shares of stock or other securities or property or cash deliverable upon
such reclassification, reorganization, Merger, Sale or Liquidation.
-9-
<PAGE>
(i) The Corporation shall at all times reserve and keep
available for issuance upon the conversion of the Series C Preferred Stock, such
number of its authorized but unissued shares of Class A Common Stock as will
from time to time be sufficient to permit the conversion of all outstanding
shares of Series C Preferred Stock, and shall take all action required to
increase the authorized number of shares of Class A Common Stock if at any time
there shall be insufficient authorized but unissued shares of Class A Common
Stock to permit such reservation or to permit the conversion of all outstanding
shares of Series C Preferred Stock.
(j) The issuance or delivery of certificates for Class A Common
Stock upon the conversion of shares of Series C Preferred Stock shall be made
without charge to the converting holder of shares of Series C Preferred Stock
for such certificates or for any tax in respect of the issuance or delivery of
such certificates or the securities represented thereby, and such certificates
shall be issued or delivered in the respective names of, or (subject to
compliance with the applicable provisions of federal and state securities laws)
in such names as may be directed by, the holders of the shares of Series C
Preferred Stock converted; PROVIDED, HOWEVER, that the Corporation shall not be
required to pay any tax which may be payable in respect of any transfer involved
in the issuance and delivery of any such certificate in a name other than that
of the holder of the shares of Series C Preferred Stock converted, and the
Corporation shall not be required to issue or deliver such certificate unless or
until the Person or Persons requesting the issuance or delivery thereof shall
have paid to the Corporation the amount of such tax or shall have established to
the reasonable satisfaction of the Corporation that such tax has been paid.
9. CERTAIN REMEDIES. Any registered holder of Series C Preferred
Stock shall be entitled to an injunction or injunctions to prevent breaches of
the provisions of this Certificate of Designations and to enforce specifically
the terms and provisions of this Certificate of Designations in any court of the
United States or any state thereof having jurisdiction, this being in addition
to any other remedy to which such holder may be entitled at law or in equity.
10. REISSUANCE OF SERIES C PREFERRED STOCK. Shares of Series C
Preferred Stock that have been issued and reacquired by the Corporation in any
manner, including shares purchased or converted, shall (upon compliance with any
applicable provisions of the laws of Delaware) have the status of authorized and
unissued shares of preferred stock undesignated as to series and may be
redesignated and reissued as part of any series of Preferred Stock (other than
Series C Preferred Stock).
-10-
<PAGE>
11. BUSINESS DAY. If any payment shall be required by the terms
hereof to be made on a day that is not a Business Day, then such payment shall
be made on the immediately succeeding Business Day.
12. DEFINITIONS. As used in this Certificate of Designations, the
following terms shall have the following meanings (with terms defined in the
singular having comparable meanings when used in the plural and VICE VERSA),
unless the context otherwise requires:
"Board of Directors" means the Board of Directors of the Corporation.
"Business Day" means any day except a Saturday, a Sunday, or other day
on which commercial banks in the State of New York are authorized or required by
law or executive order to close.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in, or other equivalents (however designated
and whether voting or non-voting) of, such Person's capital stock and any and
all rights, warrants or options exchangeable for or convertible into such
capital stock (but excluding any debt security that is exchangeable for or
convertible into such capital stock).
"Class A Common Stock" means the Corporation's Class A Common Stock,
par value $0.01 per share, or any other capital stock of the Corporation into
which such stock is reclassified or reconstituted.
"Class B Common Stock" means the Corporation's Class B Common Stock,
par value $0.01 per share, or any other capital stock of the Corporation into
which such stock is reclassified or reconstituted.
"Common Stock" means, collectively, the Class A Common Stock and the
Class B Common Stock.
"Conversion Price" shall have the meaning ascribed to it in paragraph
8(a) hereof.
"Corporation" shall have the meaning ascribed to it in the first
paragraph of this Resolution.
"Current Market Price" per share shall mean, as of the date of
determination, (a) the average daily Market Price of the Class A Common Stock
for those days during the period of thirty (30) Trading Days, ending on such
date, and (b) if the
-11-
<PAGE>
Class A Common Stock is not then listed or admitted to trading on any
national securities exchange or quoted in the over-counter market, then the
Market Price on such date.
"Initial Public Offering" shall mean a firm commitment underwritten
initial public offering of the Corporation pursuant to an effective registration
statement under the Securities Act.
"IPO Effectiveness Date" means the date upon which the Corporation
commences its Initial Public Offering.
"Junior Stock" shall have the meaning ascribed to it in paragraph 2
hereof.
"Liquidation" shall have the meaning ascribed to it in paragraph 2
hereof.
"Liquidation Amount" shall have the meaning ascribed to it in
paragraph 4(a) hereof.
"Liquidation Preference" shall have the meaning ascribed to it in
paragraph 4(a) hereof.
"Market Price" shall mean, per share of Class A Common Stock, as of
the date of determination: (a) the closing price per share of Class A Common
Stock on such date published in THE WALL STREET JOURNAL or, if no such closing
price on such date is published in THE WALL STREET JOURNAL, then the average of
the closing bid and asked prices on such date, as officially reported on the
principal national securities exchange (including, without limitation, The
Nasdaq Stock Market, Inc.) on which the Class A Common Stock is then listed or
admitted to trading; (b) if the Class A Common Stock is not then listed or
admitted to trading on any national securities exchange but is designated as a
national market system security by the NASD, then the last trading price of the
Class A Common Stock on such date; (c) if there shall have been no trading on
such date or if the Class A Common Stock is not so designated, then the average
of the reported closing bid and asked prices of the Class A Common Stock, on
such date as shown by NASDAQ and reported by any member firm of the New York
Stock Exchange selected by the Corporation; or (d) if none of (a), (b) or (c) is
applicable, a market price per share determined at the Corporation's expense by
an appraiser chosen by the holders of a majority of the shares of Series C
Preferred Stock, or, if no such appraiser is so chosen more than ten (10)
Business Days after notice of the necessity of such calculation shall have been
delivered by the Corporation to the holders of Series C Preferred Stock, then by
an appraiser chosen by the Corporation and reasonably satisfactory to a majority
of the holders of Series C Preferred Stock. Any determination of the Market
Price by an appraiser shall be based on a valuation of the Corporation as an
entirety without regard to
-12-
<PAGE>
any discount for minority interests or disparate voting rights among classes
of Capital Stock.
"Merger" shall mean (a) the merger or consolidation of the Corporation
with one or more other Persons or (b) the merger or consolidation of one or more
Persons into or with the Corporation, if, in the case of (a) or (b), the
stockholders of the Corporation prior to such merger or consolidation do not
retain at least a majority of the voting power of the surviving Person.
"Person" means any individual, firm, corporation, partnership, limited
liability company, trust, incorporated or unincorporated association, joint
venture, joint stock company, governmental body or other entity of any kind.
"Pro Rata Share" shall have the meaning ascribed to it in
paragraph 5(a) hereof.
"Sale" shall mean the sale, conveyance, exchange or transfer to
another Person of (a) the voting Capital Stock of the Corporation if after such
sale, conveyance, exchange or transfer the stockholders of the Corporation prior
to such sale, conveyance, exchange or transfer do not retain at least a majority
of the voting power of the Corporation, or (b) all or substantially all of the
assets of the Corporation.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"Series A Preferred Stock" means the Corporation's Series A
Convertible Participating Preferred Stock, par value $0.01 per share.
"Series B Preferred Stock" means the Corporation's Series B
Convertible Preferred Stock, par value $0.01 per share.
"Series C Preferred Stock" shall have the meaning set forth in
paragraph 1.
"Trading Day" means a day on which the national securities exchanges
are open for trading.
"Trigger Event" shall have the meaning ascribed in paragraph 5(a).
-13-
<PAGE>
IN WITNESS WHEREOF, EXE Technologies, Inc. has caused this certificate
to be duly executed by its President this 10th day of July, 1998
EXE TECHNOLOGIES, INC.
By: /s/ Adam C. Belsky
-----------------------------------
Print Name: Adam C. Belsky
---------------------------
Title: Chief Financial Officer
--------------------------------
<PAGE>
BY-LAWS
of
EXE TECHNOLOGIES, INC.
(A Delaware Corporation)
------------------------
ARTICLE 1
DEFINITIONS
As used in these By-laws, unless the context otherwise requires, the
term:
1.1 "Assistant Secretary" means an Assistant Secretary of the
Corporation.
1.2 "Assistant Treasurer" means an Assistant Treasurer of the
Corporation.
1.3 "Board" means the Board of Directors of the Corporation.
1.4 "By-laws" means the initial by-laws of the Corporation, as
amended from time to time.
1.5 "Certificate of Incorporation" means the initial certificate of
incorporation of the Corporation, as amended, supplemented or restated from time
to time.
1.6 "Chairman" means the Chairman of the Board of Directors of the
Corporation.
1.7 "Corporation" means EXE Technologies, Inc.
1.8 "Directors" means directors of the Corporation.
1.9 "Entire Board" means all directors of the Corporation in office,
whether or not present at a meeting of the Board, but disregarding vacancies.
<PAGE>
2
1.10 "General Corporation Law" means the General Corporation Law of
the State of Delaware, as amended from time to time.
1.11 "Office of the Corporation" means the executive office of the
Corporation, anything in Section 131 of the General Corporation Law to the
contrary notwithstanding.
1.12 "President" means the President of the Corporation.
1.13 "Secretary" means the Secretary of the Corporation.
1.14 "Stockholders" means stockholders of the Corporation.
1.15 "Treasurer" means the Treasurer of the Corporation.
1.16 "Vice President" means a Vice President of the Corporation.
ARTICLE 2
STOCKHOLDERS
2.1 PLACE OF MEETINGS. Every meeting of Stockholders shall be held
at the office of the Corporation or at such other place within or without the
State of Delaware as shall be specified or fixed in the notice of such meeting
or in the waiver of notice thereof.
2.2 ANNUAL MEETING. A meeting of Stockholders shall be held annually
for the election of Directors and the transaction of other business at such hour
and on such business day in October or November or as may be determined by the
Board and designated in the notice of meeting.
<PAGE>
3
2.3 DEFERRED MEETING FOR ELECTION OF DIRECTORS, ETC. If the annual
meeting of Stockholders for the election of Directors and the transaction of
other business is not held within the months specified in Section 2.2 hereof,
the Board shall call a meeting of Stockholders for the election of Directors and
the transaction of other business as soon thereafter as convenient.
2.4 OTHER SPECIAL MEETINGS. A special meeting of Stockholders (other
than a special meeting for the election of Directors), unless otherwise
prescribed by statute, may be called at any time by the Board or by the
President or by the Secretary. At any special meeting of Stockholders only such
business may be transacted as is related to the purpose or purposes of such
meeting set forth in the notice thereof given pursuant to Section 2.6 hereof or
in any waiver of notice thereof given pursuant to Section 2.7 hereof.
2.5 FIXING RECORD DATE. For the purpose of (a) determining the
Stockholders entitled (i) to notice of or to vote at any meeting of Stockholders
or any adjournment thereof, (ii) unless otherwise provided in the Certificate of
Incorporation, to express consent to corporate action in writing without a
meeting or (iii) 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 (b) any other lawful action, the
Board may fix a record date, which record date shall not precede the date upon
which the resolution fixing the record date was adopted by the Board and which
record date shall not be (x) in the case of clause (a)(i) above, more than sixty
nor less than ten days before the date of such meeting, (y) in the case of
clause (a)(ii) above, more than 10 days after the date upon which the resolution
fixing the record date was
<PAGE>
4
adopted by the Board and (z) in the case of clause (a)(iii) or (b) above,
more than sixty days prior to such action. If no such record date is fixed:
2.5.1 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;
2.5.2 the record date for determining stockholders entitled
to express consent to corporate action in writing without a meeting (unless
otherwise provided in the Certificate of Incorporation), when no prior
action by the Board is required under the General Corporation Law, shall be
the first day on which a signed written consent setting forth the action
taken or proposed to be taken is delivered to the Corporation by delivery
to its registered office in the State of Delaware, its principal place of
business, or an officer or agent of the Corporation having custody of the
book in which proceedings of meetings of stockholders are recorded; and
when prior action by the Board is required under the General Corporation
Law, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting shall be at the close of
business on the date on which the Board adopts the resolution taking such
prior action; and
<PAGE>
5
2.5.3 the record date for determining stockholders for any
purpose other than those specified in Sections 2.5.1 and 2.5.2 shall be at
the close of business on the day on which the Board adopts the resolution
relating thereto.
When a determination of Stockholders entitled to notice of or to vote at any
meeting of Stockholders has been made as provided in this Section 2.5, such
determination shall apply to any adjournment thereof unless the Board fixes a
new record date for the adjourned meeting. Delivery made to the Corporation's
registered office in accordance with Section 2.5.2 shall be by hand or by
certified or registered mail, return receipt requested.
2.6 NOTICE OF MEETINGS OF STOCKHOLDERS. Except as otherwise provided
in Sections 2.5 and 2.7 hereof, whenever under the provisions of any statute,
the Certificate of Incorporation or these By-laws, Stockholders are required or
permitted to take any action at a meeting, written notice shall be given stating
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. Unless otherwise
provided by any statute, the Certificate of Incorporation or these By-laws, a
copy of the notice of any meeting shall be given, personally or by mail, not
less than ten nor more than sixty days before the date of the meeting, to each
Stockholder of the Corporation entitled to such notice or to vote at such
meeting. If mailed, such notice shall be deemed to be given when deposited in
the United States mail, with postage prepaid, directed to the Stockholder at his
or her 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 required by this
<PAGE>
6
Section 2.6 has been given shall, in the absence of fraud, be prima facie
evidence of the facts stated therein. When a meeting is adjourned to another
time or place, 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, and at the adjourned meeting any business may be transacted that might
have been transacted at the meeting as originally called. If, however, the
adjournment is for more than thirty 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.
2.7 WAIVERS OF NOTICE. Whenever the giving of any notice is required
by statute, the Certificate of Incorporation or these By-laws, a waiver thereof,
in writing, signed by the Stockholder or Stockholders entitled to said notice,
whether before or after the event as to which such notice is required, shall be
deemed equivalent to notice. Attendance by a Stockholder at a meeting shall
constitute a waiver of notice of such meeting except when the Stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business on the ground that the meeting has
not been 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 statute, the
Certificate of Incorporation or these By-laws.
2.8 LIST OF STOCKHOLDERS. The Secretary shall prepare and make, or
cause to be prepared and made, at least ten days before every meeting of
Stockholders, a complete list of the Stockholders entitled to vote at the
meeting, arranged in alphabetical
<PAGE>
7
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, the Stockholder's agent, or attorney, at the
Stockholder's expense, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten 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. The
Corporation shall maintain the Stockholder list in written form or in another
form capable of conversion into written form within a reasonable time. Upon
the willful neglect or refusal of the Directors to produce such a list at any
meeting for the election of Directors, they shall be ineligible for election
to any office at such meeting. The stock ledger shall be the only evidence
as to who are the Stockholders entitled to examine the stock ledger, the list
of Stockholders or the books of the Corporation, or to vote in person or by
proxy at any meeting of Stockholders.
2.9 QUORUM OF STOCKHOLDERS; ADJOURNMENT. Except as otherwise
provided by any statute, the Certificate of Incorporation or these By-laws, the
holders of one-third of all outstanding shares of stock entitled to vote at any
meeting of Stockholders, present in person or represented by proxy, shall
constitute a quorum for the transaction of any business at such meeting. When a
quorum is once present to organize a meeting of Stockholders, it is not broken
by the subsequent withdrawal of any Stockholders. The holders of a majority of
the shares of stock present in person or repre-
<PAGE>
8
sented by proxy at any meeting of Stockholders, including an adjourned
meeting, whether or not a quorum is present, may adjourn such meeting to
another time and place. Shares of its own stock belonging to the Corporation
or to another corporation, if a majority of the shares entitled to vote in
the election of directors of such other corporation is held, directly or
indirectly, by the Corporation, shall neither be entitled to vote nor be
counted for quorum purposes; PROVIDED, HOWEVER, that the foregoing shall not
limit the right of the Corporation to vote stock, including but not limited
to its own stock, held by it in a fiduciary capacity.
2.10 VOTING; PROXIES. Unless otherwise provided in the Certificate of
Incorporation, every Stockholder of record shall be entitled at every meeting of
Stockholders to one vote for each share of capital stock standing in his or her
name on the record of Stockholders determined in accordance with Section 2.5
hereof. If the Certificate of Incorporation provides for more or less than one
vote for any share on any matter, each reference in the By-laws or the General
Corporation Law to a majority or other proportion of stock shall refer to such
majority or other proportion of the votes of such stock. The provisions of
Sections 212 and 217 of the General Corporation Law shall apply in determining
whether any shares of capital stock may be voted and the persons, if any,
entitled to vote such shares; but the Corporation shall be protected in assuming
that the persons in whose names shares of capital stock stand on the stock
ledger of the Corporation are entitled to vote such shares. Holders of
redeemable shares of stock are not entitled to vote after the notice of
redemption is mailed to such holders and a sum sufficient to redeem the stocks
has been deposited with a bank, trust company, or other
<PAGE>
9
financial institution under an irrevocable obligation to pay the holders the
redemption price on surrender of the shares of stock. At any meeting of
Stockholders (at which a quorum was present to organize the meeting), all
matters, except as otherwise provided by statute or by the Certificate of
Incorporation or by these By-laws, shall be decided by a majority of the
votes cast at such meeting by the holders of shares present in person or
represented by proxy and entitled to vote thereon, whether or not a quorum is
present when the vote is taken. All elections of Directors shall be by
written ballot unless otherwise provided in the Certificate of Incorporation.
In voting on any other question on which a vote by ballot is required by law
or is demanded by any Stockholder entitled to vote, the voting shall be by
ballot. Each ballot shall be signed by the Stockholder voting or the
Stockholder's proxy and shall state the number of shares voted. On all other
questions, the voting may be VIVA VOCE. Each Stockholder entitled to vote at
a meeting of Stockholders or to express consent or dissent to corporate
action in writing without a meeting may authorize another person or persons
to act for such Stockholder by proxy. The validity and enforceability of any
proxy shall be determined in accordance with Section 212 of the General
Corporation Law. A Stockholder may revoke any proxy that is not irrevocable
by attending the meeting and voting in person or by filing an instrument in
writing revoking the proxy or by delivering a proxy in accordance with
applicable law bearing a later date to the Secretary.
2.11 VOTING PROCEDURES AND INSPECTORS OF ELECTION AT MEETINGS OF
STOCKHOLDERS. The Board, in advance of any meeting of Stockholders, may appoint
one or more inspectors to act at the meeting and make a written report thereof.
The Board may
<PAGE>
10
designate one or more persons as alternate inspectors to replace any
inspector who fails to act. If no inspector or alternate has been appointed
or is able to act at a meeting, the person presiding at the meeting may
appoint, and on the request of any Stockholder entitled to vote thereat shall
appoint, one or more inspectors to act at the meeting. Each inspector,
before entering upon the discharge of his or her duties, shall take and sign
an oath faithfully to execute the duties of inspector with strict
impartiality and according to the best of his or her ability. The inspectors
shall (a) ascertain the number of shares outstanding and the voting power of
each, (b) determine the shares represented at the meeting and the validity of
proxies and ballots, (c) count all votes and ballots, (d) determine and
retain for a reasonable period a record of the disposition of any challenges
made to any determination by the inspectors, and (e) certify their
determination of the number of shares represented at the meeting and their
count of all votes and ballots. The inspectors may appoint or retain other
persons or entities to assist the inspectors in the performance of their
duties. Unless otherwise provided by the Board, the date and time of the
opening and the closing of the polls for each matter upon which the
Stockholders will vote at a meeting shall be determined by the person
presiding at the meeting and shall be announced at the meeting. No ballot,
proxies or votes, or any revocation thereof or change thereto, shall be
accepted by the inspectors after the closing of the polls unless the Court of
Chancery of the State of Delaware upon application by a Stockholder shall
determine otherwise.
2.12 ORGANIZATION. At each meeting of Stockholders, the President, or
in the absence of the President, the Chairman, or if there is no Chairman or if
there be one
<PAGE>
11
and the Chairman is absent, a Vice President, and in case more than one Vice
President shall be present, that Vice President designated by the Board (or
in the absence of any such designation, the most senior Vice President, based
on age, present), shall act as chairman of the meeting. The Secretary, or in
his or her absence, one of the Assistant Secretaries, shall act as secretary
of the meeting. In case none of the officers above designated to act as
chairman or secretary of the meeting, respectively, shall be present, a
chairman or a secretary of the meeting, as the case may be, shall be chosen
by a majority of the votes cast at such meeting by the holders of shares of
capital stock present in person or represented by proxy and entitled to vote
at the meeting.
2.13 ORDER OF BUSINESS. The order of business at all meetings of
Stockholders shall be as determined by the chairman of the meeting, but the
order of business to be followed at any meeting at which a quorum is present may
be changed by a majority of the votes cast at such meeting by the holders of
shares of capital stock present in person or represented by proxy and entitled
to vote at the meeting.
2.14 WRITTEN CONSENT OF STOCKHOLDERS WITHOUT A MEETING. Unless
otherwise provided in the Certificate of Incorporation, any action required by
the General Corporation Law to be taken at any annual or special meeting of
stockholders may be taken without a meeting, without prior notice and without a
vote, if a consent or consents in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
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
and shall be delivered (by hand or by certified or registered mail, return
<PAGE>
12
receipt requested) to the Corporation by delivery to its registered office in
the State of Delaware, its principal place of business, or an officer or agent
of the Corporation having custody of the book in which proceedings of meetings
of stockholders are recorded. Every written consent shall bear the date of
signature of each stockholder who signs the consent and no written consent shall
be effective to take the corporate action referred to therein unless, within
60 days of the earliest dated consent delivered in the manner required by this
Section 2.14, written consents signed by a sufficient number of holders to take
action are delivered to the Corporation as aforesaid. 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.
ARTICLE 3
DIRECTORS
3.1 GENERAL POWERS. Except as otherwise provided in the
Certificate of Incorporation, the business and affairs of the Corporation
shall be managed by or under the direction of the Board. The Board may adopt
such rules and regulations, not inconsistent with the Certificate of
Incorporation or these By-laws or applicable laws, as it may deem proper for
the conduct of its meetings and the management of the Corporation. In
addition to the powers expressly conferred by these By-laws, the Board may
exercise all powers and perform all acts that are not required, by these
By-laws or the Certificate of Incorporation or by statute, to be exercised
and performed by the Stockholders.
<PAGE>
13
3.2 NUMBER; QUALIFICATION; TERM OF OFFICE. The Board shall consist
of one or more members. The number of Directors shall be fixed initially by the
incorporator and may thereafter be changed from time to time by action of the
stockholders or by action of the Board. Directors need not be stockholders.
Each Director shall hold office until a successor is elected and qualified or
until the Director's death, resignation or removal.
3.3 ELECTION. Directors shall, except as otherwise required by
statute or by the Certificate of Incorporation, be elected by a plurality of the
votes cast at a meeting of stockholders by the holders of shares entitled to
vote in the election.
3.4 NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Unless otherwise
provided in the Certificate of Incorporation, newly created Directorships
resulting from an increase in the number of Directors and vacancies occurring in
the Board for any other reason, including the removal of Directors without
cause, may be filled by the affirmative votes of a majority of the entire Board,
although less than a quorum, or by a sole remaining Director, or may be elected
by a plurality of the votes cast by the holders of shares of capital stock
entitled to vote in the election at a special meeting of stockholders called for
that purpose. A Director elected to fill a vacancy shall be elected to hold
office until a successor is elected and qualified, or until the Director's
earlier death, resignation or removal.
3.5 RESIGNATION. Any Director may resign at any time by written
notice to the Corporation. Such resignation shall take effect at the time
therein specified,
<PAGE>
14
and, unless otherwise specified in such resignation, the acceptance of such
resignation shall not be necessary to make it effective.
3.6 REMOVAL. Subject to the provisions of Section 141(k) of the
General Corporation Law, any or all of the Directors may be removed with or
without cause by vote of the holders of a majority of the shares then entitled
to vote at an election of Directors.
3.7 COMPENSATION. Each Director, in consideration of his or her
service as such, shall be entitled to receive from the Corporation such amount
per annum or such fees for attendance at Directors' meetings, or both, as the
Board may from time to time determine, together with reimbursement for the
reasonable out-of-pocket expenses, if any, incurred by such Director in
connection with the performance of his or her duties. Each Director who shall
serve as a member of any committee of Directors in consideration of serving as
such shall be entitled to such additional amount per annum or such fees for
attendance at committee meetings, or both, as the Board may from time to time
determine, together with reimbursement for the reasonable out-of-pocket
expenses, if any, incurred by such Director in the performance of his or her
duties. Nothing contained in this Section 3.7 shall preclude any Director from
serving the Corporation or its subsidiaries in any other capacity and receiving
proper compensation therefor.
3.8 TIMES AND PLACES OF MEETINGS. The Board may hold meetings, both
regular and special, either within or without the State of Delaware. The times
and places for holding meetings of the Board may be fixed from time to time by
resolution of the Board or (unless contrary to a resolution of the Board) in the
notice of the meeting.
<PAGE>
15
3.9 ANNUAL MEETINGS. On the day when and at the place where the
annual meeting of stockholders for the election of Directors is held, and as
soon as practicable thereafter, the Board may hold its annual meeting, without
notice of such meeting, for the purposes of organization, the election of
officers and the transaction of other business. The annual meeting of the Board
may be held at any other time and place specified in a notice given as provided
in Section 3.11 hereof for special meetings of the Board or in a waiver of
notice thereof.
3.10 REGULAR MEETINGS. Regular meetings of the Board may be held
without notice at such times and at such places as shall from time to time be
determined by the Board.
3.11 SPECIAL MEETINGS. Special meetings of the Board may be called by
the Chairman, the President or the Secretary or by any two or more Directors
then serving on at least one day's notice to each Director given by one of the
means specified in Section 3.14 hereof other than by mail, or on at least three
days' notice if given by mail. Special meetings shall be called by the
Chairman, President or Secretary in like manner and on like notice on the
written request of any two or more of the Directors then serving.
3.12 TELEPHONE MEETINGS. Directors or members of any committee
designated by the Board may participate in a meeting of the Board or of such
committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this Section 3.12 shall constitute
presence in person at such meeting.
<PAGE>
16
3.13 ADJOURNED MEETINGS. A majority of the Directors present at any
meeting of the Board, including an adjourned meeting, whether or not a quorum is
present, may adjourn such meeting to another time and place. At least one day's
notice of any adjourned meeting of the Board shall be given to each Director
whether or not present at the time of the adjournment, if such notice shall be
given by one of the means specified in Section 3.14 hereof other than by mail,
or at least three days' notice if by mail. Any business may be transacted at an
adjourned meeting that might have been transacted at the meeting as originally
called.
3.14 NOTICE PROCEDURE. Subject to Sections 3.11 and 3.17 hereof,
whenever, under the provisions of any statute, the Certificate of Incorporation
or these By-laws, notice is required to be given to any Director, such notice
shall be deemed given effectively if given in person or by telephone, by mail
addressed to such Director at such Director's address as it appears on the
records of the Corporation, with postage thereon prepaid, or by telegram, telex,
telecopy or similar means addressed as aforesaid.
3.15 WAIVER OF NOTICE. Whenever the giving of any notice is required
by statute, the Certificate of Incorporation or these By-laws, a waiver thereof,
in writing, signed by the person or persons entitled to said notice, whether
before or after the event as to which such notice is required, shall be deemed
equivalent to notice. Attendance by 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 on the ground that the meeting has not been lawfully
called or convened. Neither the business to be transacted at, nor the purpose
of,
<PAGE>
17
any regular or special meeting of the Directors or a committee of Directors
need be specified in any written waiver of notice unless so required by
statute, the Certificate of Incorporation or these By-laws.
3.16 ORGANIZATION. At each meeting of the Board, the Chairman, or in
the absence of the Chairman, the President, or in the absence of the President,
a chairman chosen by a majority of the Directors present, shall preside. The
Secretary shall act as secretary at each meeting of the Board. In case the
Secretary shall be absent from any meeting of the Board, an Assistant Secretary
shall perform the duties of secretary at such meeting; and in the absence from
any such meeting of the Secretary and all Assistant Secretaries, the person
presiding at the meeting may appoint any person to act as secretary of the
meeting.
3.17 QUORUM OF DIRECTORS. The presence in person of a majority of the
entire Board shall be necessary and sufficient to constitute a quorum for the
transaction of business at any meeting of the Board, but a majority of a smaller
number may adjourn any such meeting to a later date.
3.18 ACTION BY MAJORITY VOTE. Except as otherwise expressly required
by statute, the Certificate of Incorporation or these By-laws, the act of a
majority of the Directors present at a meeting at which a quorum is present
shall be the act of the Board.
3.19 ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these By-laws, any action required or permitted
to be taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if all Directors or members of such committee, as the case may
be, consent thereto in
<PAGE>
18
writing, and the writing or writings are filed with the minutes of
proceedings of the Board or committee.
ARTICLE 4
COMMITTEES OF THE BOARD
The Board may, by resolution passed by a vote of a majority of the
entire Board, designate one or more committees, each committee to consist of one
or more of the Directors of the Corporation. The Board may designate one or
more Directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of such committee. If a member of a
committee shall be absent from any meeting, or disqualified from voting thereat,
the remaining member or members present and not disqualified from voting,
whether or not such member or members constitute a quorum, may, by a unanimous
vote, appoint another member of the Board 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 passed as aforesaid, shall have and may
exercise all the powers and authority of the Board in the management of the
business and affairs of the Corporation, and may authorize the seal of the
Corporation to be impressed on all papers that may require it, but no such
committee shall have the power or authority of the Board in reference to
amending the Certificate of Incorporation, adopting an agreement of merger or
consolidation under section 251 or section 252 of the General Corporation Law,
recommending to the stockholders (a) the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, or (b) a dissolution
of the
<PAGE>
19
Corporation or a revocation of a dissolution, or amending the By-laws of the
Corporation; and, unless the resolution designating it expressly so provides,
no such committee shall have the power and 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. Unless
otherwise specified in the resolution of the Board designating a committee,
at all meetings of such committee a majority of the total number of members
of the committee shall constitute a quorum for the transaction of business,
and the vote of a majority of the members of the committee present at any
meeting at which there is a quorum shall be the act of the committee. Each
committee shall keep regular minutes of its meetings. Unless the Board
otherwise provides, each committee designated by the Board may make, alter
and repeal rules for the conduct of its business. In the absence of such
rules each committee shall conduct its business in the same manner as the
Board conducts its business pursuant to Article 3 of these By-laws.
ARTICLE 5
OFFICERS
5.1 POSITIONS. The officers of the Corporation shall be a President,
a Secretary, a Treasurer and such other officers as the Board may appoint,
including a Chairman, one or more Vice Presidents and one or more Assistant
Secretaries and Assistant Treasurers, who shall exercise such powers and perform
such duties as shall be determined from time to time by the Board. The Board
may designate one or more Vice Presidents as Executive Vice Presidents and may
use descriptive words or phrases to
<PAGE>
20
designate the standing, seniority or areas of special competence of the Vice
Presidents elected or appointed by it. Any number of offices may be held by
the same person unless the Certificate of Incorporation or these By-laws
otherwise provide.
5.2 APPOINTMENT. The officers of the Corporation shall be chosen by
the Board at its annual meeting or at such other time or times as the Board
shall determine.
5.3 COMPENSATION. The compensation of all officers of the
Corporation shall be fixed by the Board. No officer shall be prevented from
receiving a salary or other compensation by reason of the fact that the officer
is also a Director.
5.4 TERM OF OFFICE. Each officer of the Corporation shall hold
office for the term for which he or she is elected and until such officer's
successor is chosen and qualifies or until such officer's earlier death,
resignation or removal. Any officer may resign at any time upon written notice
to the Corporation. Such resignation shall take effect at the date of receipt
of such notice or at such later time as is therein specified, and, unless
otherwise specified, the acceptance of such resignation shall not be necessary
to make it effective. The resignation of an officer shall be without prejudice
to the contract rights of the Corporation, if any. Any officer elected or
appointed by the Board may be removed at any time, with or without cause, by
vote of a majority of the entire Board. Any vacancy occurring in any office of
the Corporation shall be filled by the Board. The removal of an officer without
cause shall be without prejudice to the officer's contract rights, if any. The
election or appointment of an officer shall not of itself create contract
rights.
<PAGE>
21
5.5 FIDELITY BONDS. The Corporation may secure the fidelity of any
or all of its officers or agents by bond or otherwise.
5.6 CHAIRMAN. The Chairman, if one shall have been appointed, shall
preside at all meetings of the Board and shall exercise such powers and perform
such other duties as shall be determined from time to time by the Board.
5.7 PRESIDENT. The President shall be the Chief Executive Officer of
the Corporation and shall have general supervision over the business of the
Corporation, subject, however, to the control of the Board and of any duly
authorized committee of Directors. The President shall preside at all meetings
of the Stockholders and at all meetings of the Board at which the Chairman (if
there be one) is not present. The President may sign and execute in the name of
the Corporation deeds, mortgages, bonds, contracts and other instruments except
in cases in which the signing and execution thereof shall be expressly delegated
by the Board or by these By-laws to some other officer or agent of the
Corporation or shall be required by statute otherwise to be signed or executed
and, in general, the President shall perform all duties incident to the office
of President of a corporation and such other duties as may from time to time be
assigned to the President by the Board.
5.8 VICE PRESIDENTS. At the request of the President, or, in the
President's absence, at the request of the Board, the Vice Presidents shall (in
such order as may be designated by the Board, or, in the absence of any such
designation, in order of seniority based on age) perform all of the duties of
the President and, in so performing, shall have all the powers of, and be
subject to all restrictions upon, the President. Any
<PAGE>
22
Vice President may sign and execute in the name of the Corporation deeds,
mortgages, bonds, contracts or other instruments, except in cases in which
the signing and execution thereof shall be expressly delegated by the Board
or by these By-laws to some other officer or agent of the Corporation, or
shall be required by statute otherwise to be signed or executed, and each
Vice President shall perform such other duties as from time to time may be
assigned to such Vice President by the Board or by the President.
5.9 SECRETARY. The Secretary shall attend all meetings of the Board
and of the Stockholders and shall record all the proceedings of the meetings of
the Board and of the stockholders in a book to be kept for that purpose, and
shall perform like duties for committees of the Board, when required. The
Secretary shall give, or cause to be given, notice of all special meetings of
the Board and of the stockholders and shall perform such other duties as may be
prescribed by the Board or by the President, under whose supervision the
Secretary shall be. The Secretary shall have custody of the corporate seal of
the Corporation, and the Secretary, or an Assistant Secretary, shall have
authority to impress the same on any instrument requiring it, and when so
impressed the seal may be attested by the signature of the Secretary or by the
signature of such Assistant Secretary. The Board may give general authority to
any other officer to impress the seal of the Corporation and to attest the same
by such officer's signature. The Secretary or an Assistant Secretary may also
attest all instruments signed by the President or any Vice President. The
Secretary shall have charge of all the books, records and papers of the
Corporation relating to its organization and management, shall see that the
reports, statements and other documents required by statute are properly kept
and filed and, in
<PAGE>
23
general, shall perform all duties incident to the office of Secretary of a
corporation and such other duties as may from time to time be assigned to the
Secretary by the Board or by the President.
5.10 TREASURER. The Treasurer shall have charge and custody of, and
be responsible for, all funds, securities and notes of the Corporation; receive
and give receipts for moneys due and payable to the Corporation from any sources
whatsoever; deposit all such moneys and valuable effects in the name and to the
credit of the Corporation in such depositaries as may be designated by the
Board; against proper vouchers, cause such funds to be disbursed by checks or
drafts on the authorized depositaries of the Corporation signed in such manner
as shall be determined by the Board and be responsible for the accuracy of the
amounts of all moneys so disbursed; regularly enter or cause to be entered in
books or other records maintained for the purpose full and adequate account of
all moneys received or paid for the account of the Corporation; have the right
to require from time to time reports or statements giving such information as
the Treasurer may desire with respect to any and all financial transactions of
the Corporation from the officers or agents transacting the same; render to the
President or the Board, whenever the President or the Board shall require the
Treasurer so to do, an account of the financial condition of the Corporation and
of all financial transactions of the Corporation; exhibit at all reasonable
times the records and books of account to any of the Directors upon application
at the office of the Corporation where such records and books are kept; disburse
the funds of the Corporation as ordered by the Board; and, in general, perform
all duties incident to the office of Treasurer of a
<PAGE>
24
corporation and such other duties as may from time to time be assigned to the
Treasurer by the Board or the President.
5.11 ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. Assistant
Secretaries and Assistant Treasurers shall perform such duties as shall be
assigned to them by the Secretary or by the Treasurer, respectively, or by the
Board or by the President.
ARTICLE 6
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
6.1 EXECUTION OF CONTRACTS. The Board, except as otherwise provided
in these By-laws, may prospectively or retroactively authorize any officer or
officers, employee or employees or agent or agents, in the name and on behalf of
the Corporation, to enter into any contract or execute and deliver any
instrument, and any such authority may be general or confined to specific
instances, or otherwise limited.
6.2 LOANS. The Board may prospectively or retroactively authorize
the President or any other officer, employee or agent of the Corporation to
effect loans and advances at any time for the Corporation from any bank, trust
company or other institution, or from any firm, corporation or individual, and
for such loans and advances the person so authorized may make, execute and
deliver promissory notes, bonds or other certificates or evidences of
indebtedness of the Corporation, and, when authorized by the Board so to do, may
pledge and hypothecate or transfer any securities or other property of the
Corporation as security for any such loans or advances. Such authority
conferred by the Board may be general or confined to specific instances, or
otherwise limited.
<PAGE>
25
6.3 CHECKS, DRAFTS, ETC. All checks, drafts and other orders for the
payment of money out of the funds of the Corporation and all evidences of
indebtedness of the Corporation shall be signed on behalf of the Corporation in
such manner as shall from time to time be determined by resolution of the Board.
6.4 DEPOSITS. The funds of the Corporation not otherwise employed
shall be deposited from time to time to the order of the Corporation with such
banks, trust companies, investment banking firms, financial institutions or
other depositaries as the Board may select or as may be selected by an officer,
employee or agent of the Corporation to whom such power to select may from time
to time be delegated by the Board.
ARTICLE 7
STOCK AND DIVIDENDS
7.1 CERTIFICATES REPRESENTING SHARES. The shares of capital stock of
the Corporation shall be represented by certificates in such form (consistent
with the provisions of Section 158 of the General Corporation Law) as shall be
approved by the Board. Such certificates shall be signed by the Chairman, the
President or a Vice President and by the Secretary or an Assistant Secretary or
the Treasurer or an Assistant Treasurer, and may be impressed with the seal of
the Corporation or a facsimile thereof. The signatures of the officers upon a
certificate may be facsimiles, if the certificate is countersigned by a transfer
agent or registrar other than the Corporation itself or its employee. In case
any officer, transfer agent or registrar who has signed or whose
<PAGE>
facsimile signature has been placed upon any certificate shall have ceased to
be such officer, transfer agent or registrar before such certificate is
issued, such certificate may, unless otherwise ordered by the Board, 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.
7.2 TRANSFER OF SHARES. Transfers of shares of capital stock of the
Corporation shall be made only on the books of the Corporation by the holder
thereof or by the holder's duly authorized attorney appointed by a power of
attorney duly executed and filed with the Secretary or a transfer agent of the
Corporation, and on surrender of the certificate or certificates representing
such shares of capital stock properly endorsed for transfer and upon payment of
all necessary transfer taxes. Every certificate exchanged, returned or
surrendered to the Corporation shall be marked "Cancelled," with the date of
cancellation, by the Secretary or an Assistant Secretary or the transfer agent
of the Corporation. A person in whose name shares of capital stock shall stand
on the books of the Corporation shall be deemed the owner thereof to receive
dividends, to vote as such owner and for all other purposes as respects the
Corporation. No transfer of shares of capital stock shall be valid as against
the Corporation, its stockholders and creditors for any purpose, except to
render the transferee liable for the debts of the Corporation to the extent
provided by law, until such transfer shall have been entered on the books of the
Corporation by an entry showing from and to whom transferred.
7.3 TRANSFER AND REGISTRY AGENTS. The Corporation may from time to
time maintain one or more transfer offices or agents and registry offices or
agents at such place or places as may be determined from time to time by the
Board.
<PAGE>
7.4 LOST, DESTROYED, STOLEN AND MUTILATED CERTIFICATES. The holder
of any shares of capital stock of the Corporation shall immediately notify the
Corporation of any loss, destruction, theft or mutilation of the certificate
representing such shares, and the Corporation may issue a new certificate to
replace the certificate alleged to have been lost, destroyed, stolen or
mutilated. The Board may, in its discretion, as a condition to the issue of any
such new certificate, require the owner of the lost, destroyed, stolen or
mutilated certificate, or his or her legal representatives, to make proof
satisfactory to the Board of such loss, destruction, theft or mutilation and to
advertise such fact in such manner as the Board may require, and to give the
Corporation and its transfer agents and registrars, or such of them as the Board
may require, a bond in such form, in such sums and with such surety or sureties
as the Board may direct, to indemnify the Corporation and its transfer agents
and registrars against any claim that may be made against any of them on account
of the continued existence of any such certificate so alleged to have been lost,
destroyed, stolen or mutilated and against any expense in connection with such
claim.
7.5 RULES AND REGULATIONS. The Board may make such rules and
regulations as it may deem expedient, not inconsistent with these By-laws or
with the Certificate of Incorporation, concerning the issue, transfer and
registration of certificates representing shares of its capital stock.
7.6 RESTRICTION ON TRANSFER OF STOCK. A written restriction on the
transfer or registration of transfer of capital stock of the Corporation, if
permitted by Section 202 of the General Corporation Law and noted conspicuously
on the certificate
<PAGE>
representing such capital stock, may be enforced against the holder of the
restricted capital stock or any successor or transferee of the holder,
including an executor, administrator, trustee, guardian or other fiduciary
entrusted with like responsibility for the person or estate of the holder.
Unless noted conspicuously on the certificate representing such capital
stock, a restriction, even though permitted by Section 202 of the General
Corporation Law, shall be ineffective except against a person with actual
knowledge of the restriction. A restriction on the transfer or registration
of transfer of capital stock of the Corporation may be imposed either by the
Certificate of Incorporation or by an agreement among any number of
stockholders or among such stockholders and the Corporation. No restriction
so imposed shall be binding with respect to capital stock issued prior to the
adoption of the restriction unless the holders of such capital stock are
parties to an agreement or voted in favor of the restriction.
7.7 DIVIDENDS, SURPLUS, ETC. Subject to the provisions of the
Certificate of Incorporation and of law, the Board:
7.7.1 may declare and pay dividends or make other
distributions on the outstanding shares of capital stock in such amounts
and at such time or times as it, in its discretion, shall deem advisable
giving due consideration to the condition of the affairs of the
Corporation;
7.7.2 may use and apply, in its discretion, any of the
surplus of the Corporation in purchasing or acquiring any shares of capital
stock of the Corporation, or purchase warrants therefor, in accordance with
law, or any
<PAGE>
of its bonds, debentures, notes, scrip or other securities or evidences of
indebtedness; and
7.7.3 may set aside from time to time out of such surplus or
net profits such sum or sums as, in its discretion, it may think proper, as
a reserve fund to meet contingencies, or for equalizing dividends or for
the purpose of maintaining or increasing the property or business of the
Corporation, or for any purpose it may think conducive to the best
interests of the Corporation.
ARTICLE 8
INDEMNIFICATION
8.1 INDEMNITY UNDERTAKING. To the extent not prohibited by law, the
Corporation shall indemnify any person who is or was made, or threatened to be
made, a party to any threatened, pending or completed action, suit or proceeding
(a "Proceeding"), whether civil, criminal, administrative or investigative,
including, without limitation, an action by or in the right of the Corporation
to procure a judgment in its favor, by reason of the fact that such person, or a
person of whom such person is the legal representative, is or was a Director or
officer of the Corporation, or, at the request of the Corporation, is or was
serving as a director or officer of any other corporation or in a capacity with
comparable authority or responsibilities for any partnership, joint venture,
trust, employee benefit plan or other enterprise (an "Other Entity"), against
judgments, fines, penalties, excise taxes, amounts paid in settlement and costs,
charges and expenses (including attorneys' fees, disbursements and other
charges). Persons who are not directors or
<PAGE>
officers of the Corporation (or otherwise entitled to indemnification
pursuant to the preceding sentence) may be similarly indemnified in respect
of service to the Corporation or to an Other Entity at the request of the
Corporation to the extent the Board at any time specifies that such persons
are entitled to the benefits of this Article 8.
8.2 ADVANCEMENT OF EXPENSES. The Corporation shall, from time to
time, reimburse or advance to any Director or officer or other person entitled
to indemnification hereunder the funds necessary for payment of expenses,
including attorneys' fees and disbursements, incurred in connection with any
Proceeding, in advance of the final disposition of such Proceeding; PROVIDED,
HOWEVER, that, if required by the General Corporation Law, such expenses
incurred by or on behalf of any Director or officer or other person may be paid
in advance of the final disposition of a Proceeding only upon receipt by the
Corporation of an undertaking, by or on behalf of such Director or officer (or
other person indemnified hereunder), to repay any such amount so advanced if it
shall ultimately be determined by final judicial decision from which there is no
further right of appeal that such Director, officer or other person is not
entitled to be indemnified for such expenses.
8.3 RIGHTS NOT EXCLUSIVE. The rights to indemnification and
reimbursement or advancement of expenses provided by, or granted pursuant to,
this Article 8 shall not be deemed exclusive of any other rights to which a
person seeking indemnification or reimbursement or advancement of expenses may
have or hereafter be entitled under any statute, the Certificate of
Incorporation, these By-laws, any agreement,
<PAGE>
any vote of stockholders or disinterested Directors or otherwise, both as to
action in his or her official capacity and as to action in another capacity
while holding such office.
8.4 CONTINUATION OF BENEFITS. The rights to indemnification and
reimbursement or advancement of expenses provided by, or granted pursuant to,
this Article 8 shall continue as to a person who has ceased to be a Director or
officer (or other person indemnified hereunder) and shall inure to the benefit
of the executors, administrators, legatees and distributees of such person.
8.5 INSURANCE. The Corporation shall have power to 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 an Other Entity,
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 this Article 8, the Certificate of
Incorporation or under section 145 of the General Corporation Law or any other
provision of law.
8.6 BINDING EFFECT. The provisions of this Article 8 shall be a
contract between the Corporation, on the one hand, and each Director and officer
who serves in such capacity at any time while this Article 8 is in effect and
any other person entitled to indemnification hereunder, on the other hand,
pursuant to which the Corporation and each such Director, officer or other
person intend to be, and shall be legally bound. No repeal or modification of
this Article 8 shall affect any rights or obligations with respect to any
<PAGE>
32
state of facts then or theretofore existing or thereafter arising or any
proceeding theretofore or thereafter brought or threatened based in whole or
in part upon any such state of facts.
8.7 PROCEDURAL RIGHTS. The rights to indemnification and
reimbursement or advancement of expenses provided by, or granted pursuant to,
this Article 8 shall be enforceable by any person entitled to such
indemnification or reimbursement or advancement of expenses in any court of
competent jurisdiction. The burden of proving that such indemnification or
reimbursement or advancement of expenses is not appropriate shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors, its independent legal counsel and its stockholders) to have made a
determination prior to the commencement of such action that such indemnification
or reimbursement or advancement of expenses is proper in the circumstances nor
an actual determination by the Corporation (including its Board of Directors,
its independent legal counsel and its stockholders) that such person is not
entitled to such indemnification or reimbursement or advancement of expenses
shall constitute a defense to the action or create a presumption that such
person is not so entitled. Such a person shall also be indemnified for any
expenses incurred in connection with successfully establishing his or her right
to such indemnification or reimbursement or advancement of expenses, in whole or
in part, in any such proceeding.
8.8 SERVICE DEEMED AT CORPORATION'S REQUEST. Any Director or officer
of the Corporation serving in any capacity (a) another corporation of which a
majority of the shares entitled to vote in the election of its directors is
held, directly or indirectly, by
<PAGE>
33
the Corporation or (b) any employee benefit plan of the Corporation or any
corporation referred to in clause (a) shall be deemed to be doing so at the
request of the Corporation.
8.9 ELECTION OF APPLICABLE LAW. Any person entitled to be
indemnified or to reimbursement or advancement of expenses as a matter of right
pursuant to this Article 8 may elect to have the right to indemnification or
reimbursement or advancement of expenses interpreted on the basis of the
applicable law in effect at the time of the occurrence of the event or events
giving rise to the applicable Proceeding, to the extent permitted by law, or on
the basis of the applicable law in effect at the time such indemnification or
reimbursement or advancement of expenses is sought. Such election shall be
made, by a notice in writing to the Corporation, at the time indemnification or
reimbursement or advancement of expenses is sought; PROVIDED, HOWEVER, that if
no such notice is given, the right to indemnification or reimbursement or
advancement of expenses shall be determined by the law in effect at the time
indemnification or reimbursement or advancement of expenses is sought.
ARTICLE 9
BOOKS AND RECORDS
9.1 BOOKS AND RECORDS. There shall be kept at the principal office
of the Corporation correct and complete records and books of account recording
the financial transactions of the Corporation and minutes of the proceedings of
the stockholders, the Board and any committee of the Board. The Corporation
shall keep at its principal office, or at the office of the transfer agent or
registrar of the Corporation, a
<PAGE>
34
record containing the names and addresses of all stockholders, the number and
class of shares held by each and the dates when they respectively became the
owners of record thereof.
9.2 FORM OF RECORDS. Any records maintained by the Corporation in
the regular course of its business, including its stock ledger, books of
account, and minute books, may be kept on, or be in the form of, punch cards,
magnetic tape, photographs, microphotographs, or any other information storage
device, provided that the records so kept can be converted into clearly legible
written form within a reasonable time. The Corporation shall so convert any
records so kept upon the request of any person entitled to inspect the same.
9.3 INSPECTION OF BOOKS AND RECORDS. Except as otherwise provided by
law, the Board shall determine from time to time whether, and, if allowed, when
and under what conditions and regulations, the accounts, books, minutes and
other records of the Corporation, or any of them, shall be open to the
stockholders for inspection.
ARTICLE 10
SEAL
The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the words "Corporate Seal,
Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or otherwise reproduced.
<PAGE>
35
ARTICLE 11
FISCAL YEAR
The fiscal year of the Corporation shall be fixed, and may be changed,
by resolution of the Board.
ARTICLE 12
PROXIES AND CONSENTS
Unless otherwise directed by the Board, the Chairman, the President,
any Vice President, the Secretary or the Treasurer, or any one of them, may
execute and deliver on behalf of the Corporation proxies respecting any and all
shares or other ownership interests of any Other Entity owned by the Corporation
appointing such person or persons as the officer executing the same shall deem
proper to represent and vote the shares or other ownership interests so owned at
any and all meetings of holders of shares or other ownership interests, whether
general or special, and/or to execute and deliver consents respecting such
shares or other ownership interests; or any of the aforesaid officers may attend
any meeting of the holders of shares or other ownership interests of such Other
Entity and thereat vote or exercise any or all other powers of the Corporation
as the holder of such shares or other ownership interests.
<PAGE>
36
ARTICLE 13
EMERGENCY BY-LAWS
Unless the Certificate of Incorporation provides otherwise, the
following provisions of this Article 13 shall be effective during an emergency,
which is defined as when a quorum of the Corporation's Directors cannot be
readily assembled because of some catastrophic event. During such emergency:
13.1 NOTICE TO BOARD MEMBERS. Any one member of the Board or any one
of the following officers: Chairman, President, any Vice President, Secretary,
or Treasurer, may call a meeting of the Board. Notice of such meeting need be
given only to those Directors whom it is practicable to reach, and may be given
in any practical manner, including by publication and radio. Such notice shall
be given at least six hours prior to commencement of the meeting.
13.2 TEMPORARY DIRECTORS AND QUORUM. One or more officers of the
Corporation present at the emergency Board meeting, as is necessary to achieve a
quorum, shall be considered to be Directors for the meeting, and shall so serve
in order of rank, and within the same rank, in order of seniority. In the event
that less than a quorum of the Directors are present (including any officers who
are to serve as Directors for the meeting), those Directors present (including
the officers serving as Directors) shall constitute a quorum.
13.3 ACTIONS PERMITTED TO BE TAKEN. The Board as constituted in
Section 13.2, and after notice as set forth in Section 13.1 may:
<PAGE>
37
13.3.1 prescribe emergency powers to any officer of the
Corporation;
13.3.2 delegate to any officer or Director, any of the powers of
the Board;
13.3.3 designate lines of succession of officers and agents, in
the event that any of them are unable to discharge their duties;
13.3.4 relocate the principal place of business, or designate
successive or simultaneous principal places of business; and
13.3.5 take any other convenient, helpful or necessary action to
carry on the business of the Corporation.
ARTICLE 14
AMENDMENTS
These By-laws may be amended or repealed and new By-laws may be
adopted by a vote of the holders of shares entitled to vote in the election of
Directors or by the Board. Any By-laws adopted or amended by the Board may be
amended or repealed by the Stockholders entitled to vote thereon.
<PAGE>
EXHIBIT 10.1
EXE TECHNOLOGIES, INC.
1997 INCENTIVE AND NON-QUALIFIED
STOCK OPTION PLAN
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C> <C>
Section 1. NAME AND PURPOSES. . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Section 2. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Section 3. ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Section 4. ELIGIBILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Section 5. STOCK SUBJECT TO THE PLAN. . . . . . . . . . . . . . . . . . . . . . . .7
Section 6. TERMS AND CONDITIONS OF OPTIONS. . . . . . . . . . . . . . . . . . . . .7
Section 7. FAIR MARKET VALUE OF COMMON STOCK. . . . . . . . . . . . . . . . . . . 10
Section 8. ADJUSTMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 9. RIGHTS AS A STOCKHOLDER. . . . . . . . . . . . . . . . . . . . . . . . 11
Section 10. FORFEITURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 11. TIME OF GRANTING OPTIONS. . . . . . . . . . . . . . . . . . . . . . . 11
Section 12. MODIFICATION, EXTENSION, RENEWAL OF OPTION. . . . . . . . . . . . . . 12
Section 13. TRANSFERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 14. POWER OF BOARD IF CHANGE OF CONTROL . . . . . . . . . . . . . . . . . 12
Section 15. AMENDMENT OR TERMINATION OF THE PLAN. . . . . . . . . . . . . . . . . 12
Section 16. APPLICATION OF FUNDS. . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 17. NO OBLIGATION TO EXERCISE OPTION. . . . . . . . . . . . . . . . . . . 13
Section 18. APPROVAL OF STOCKHOLDERS. . . . . . . . . . . . . . . . . . . . . . . 13
Section 19. CONDITIONS UPON ISSUANCE OF SHARES. . . . . . . . . . . . . . . . . . 13
Section 20. RESERVATION OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 21. OTHER AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
-i-
<PAGE>
Section 22. TAXES, FEES, EXPENSES AND WITHHOLDING . . . . . . . . . . . . . . . . 14
Section 23. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 24. NO ENLARGEMENT OF EMPLOYEE RIGHTS . . . . . . . . . . . . . . . . . . 15
Section 25. INFORMATION TO OPTIONEES. . . . . . . . . . . . . . . . . . . . . . . 15
Section 26. AVAILABILITY OF PLAN. . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 27. INVALID PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 28. APPLICABLE LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 29. BOARD ACTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 30. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
INCENTIVE STOCK OPTION AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . .1
NON-QUALIFIED STOCK OPTION AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . .1
STOCK PURCHASE AND RESTRICTION AGREEMENT . . . . . . . . . . . . . . . . . . . . . .1
</TABLE>
-ii-
<PAGE>
EXE TECHNOLOGIES, INC.
1997 INCENTIVE AND NON-QUALIFIED
STOCK OPTION PLAN
Section 1. NAME AND PURPOSES OF THE PLAN.
(a) NAME. The Plan will be known as the EXE Technologies, Inc. 1997
Incentive and Non-Qualified Stock Option Plan.
(b) PURPOSES. The purpose of the Plan is to provide key Employees and
Consultants with an opportunity to share in the capital appreciation of the
Common Stock of the Company. The Options granted pursuant to the Plan are
intended to constitute either Incentive Stock Options or Non-Qualified Stock
Options, as determined by the Administrator of the Plan at the time of grant.
Section 2. DEFINITIONS. As used herein, the following definitions shall
apply:
(a) "Administrator" shall be the Board or a Committee appointed by the
Board pursuant to Section 3 of the Plan, which shall administer the Plan.
(b) "Affiliate" shall mean, whether now or hereafter existing, a person or
entity that directly, or indirectly controls or is controlled by, or is under
common control with, the Company, except that when used in connection with an
Incentive Stock Option, "Affiliate" shall mean a Subsidiary.
(c) "Board" shall mean the Board of Directors of the Company, as
constituted from time to time.
(d) "Change of Control" shall mean the happening of an event (excluding a
Public Offering) that shall be deemed to have occurred upon the earliest to
occur of the following events: (i) the date the stockholders of the Company (or
the Board, if stockholder action is not required) approve a plan or other
arrangement pursuant to which the Company will be dissolved or liquidated; (ii)
the date the stockholders of the Company (or the Board, if stockholder action is
not required) approve a definitive agreement to sell or otherwise dispose of all
or substantially all of the assets of the Company; (iii) the date the
stockholders of the Company (or the Board, if stockholder action is not
required) and the stockholders of the other constituent corporations (or their
respective boards of directors, if and to the extent that stockholder action is
not required) have approved a definitive agreement to merge or consolidate the
Company with or into another corporation, other than, in either case, a merger
or consolidation of the Company in which holders of shares of the Company's
voting capital stock immediately prior to the merger or consolidation will have
at least fifty percent (50%) of the ownership of voting capital stock of the
surviving corporation immediately after the merger or consolidation (on a fully
diluted basis),
<PAGE>
which voting capital stock is to be held by each such holder in the same or
substantially similar proportion (on a fully diluted basis) as such holder's
ownership of voting capital stock of the Company immediately before the
merger or consolidation; (iv) the date any entity, person or group (within
the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act),
other than (A) the Company, (B) any of its Subsidiaries, (C) any of the
holders of the capital stock of the Company, as determined on the date that
this Plan is adopted by the Board, (D) any employee benefit plan (or related
trust) sponsored or maintained by the Company or any of its Subsidiaries or
(E) any Affiliate of any of the foregoing, shall have acquired beneficial
ownership of, or shall have acquired voting control over more than fifty
percent (50%) of the outstanding shares of the Company's voting capital stock
(on a fully diluted basis), unless the transaction pursuant to which such
person, entity or group acquired such beneficial ownership or control
resulted from the original issuance by the Company of shares of its voting
capital stock and was approved by at least a majority of directors who shall
have been members of the Board for at least twelve (12) months prior to the
date of such approval; (v) the first day after the date of this Plan when
directors are elected such that there shall have been a change in the
composition of the Board such that a majority of the Board shall have been
members of the Board for less than twelve (12) months, unless the nomination
for election of each new director who was not a director at the beginning of
such twelve (12) month period was approved by a vote of at least sixty
percent (60%) of the directors then still in office who were directors at the
beginning of such period; or (vi) the date upon which the Board determines
(in its sole discretion) that based on then current available information,
the events described in clause (iv) are reasonably likely to occur.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and any successor thereto.
(f) "Committee" shall mean the Committee appointed by the Board in
accordance with Section 3(a) of the Plan, if one is appointed, in which event
the Committee shall possess the power and authority of the Board with respect to
the Plan as set forth in Section 3(b) of the Plan.
(g) "Common Stock" shall mean the Class B Common Stock, $.01 par value per
share, of the Company, or in the event of the conversion of the Class B Common
Stock, any shares of the Class A Common Stock $.01, par value per share, of the
Company issued or issuable upon conversion of the Class B Common Stock.
(h) "Company" shall mean EXE Technologies, Inc., a Delaware corporation,
and any successor in interest that agrees to assume and maintain the Plan.
(i) "Consultant" shall mean any person associated with the Company who is
engaged by the Company to render services and is compensated by the Company for
such services, including but not limited to, an advisor or independent
contractor, but excluding any director of the Company.
(j) "Disability" or "Disabled" with respect to an Optionee shall mean
(i) when the Optionee is determined to be disabled within the meaning of any
long-term disability policy or program sponsored by the Company covering the
Optionee, as in effect as of the date of such
2
<PAGE>
determination, or (ii) if no such policy or program shall be in effect, when
the Optionee is unable to engage in any substantial gainful activity by
reason of a physical or mental impairment that can be expected to result in
death or that has lasted or can be expected to last for a continuous period
of not less than twelve (12) months. The determination of whether an
Optionee is Disabled pursuant to subparagraph (ii) shall be determined by the
Board of Directors, whose determination shall be conclusive; provided that,
(A) if an Optionee is bound by the terms of an Executive Employment Agreement
between the Optionee and the Company, then whether the Optionee is "Disabled"
for purposes of the Plan shall be determined in accordance with the
procedures set forth in said Employment Agreement, if such procedures are
therein provided; and (B) an Optionee bound by such an Employment Agreement
shall not be determined to be Disabled under the Plan any earlier than he or
she would be determined to be disabled under his or her Employment Agreement.
(k) "Employee" shall mean any person employed by the Company or any
Subsidiary of the Company, provided, however, that such term shall not include
any director of the Company.
(l) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(m) "Fair Market Value" shall mean, as of any date, the fair market value
of a share of Common Stock as determined pursuant to Section 7 hereof.
(n) "Incentive Stock Option" shall mean any Option that is intended to be
and is designated as an incentive stock option within the meaning of Section 422
of the Code.
(o) "Non-Employee Director" shall have the meaning set forth in Rule
16b-3(b)(3)(i) promulgated by the Securities and Exchange Commission under
the Exchange Act, or any successor definition adopted by the Securities and
Exchange Commission; provided, however, that the Administrator may, to the
extent the Administrator deems it necessary or desirable to comply with
Section 162(m) of the Code and applicable regulations thereunder, ensure that
each Non-Employee Director also qualifies as an "outside director" as that
term is defined in the regulations under Section 162(m) of the Code.
(p) "Non-Qualified Stock Option" shall mean any Option that is not
intended to qualify as an Incentive Stock Option.
(q) "Option" shall mean an Incentive Stock Option or a Non-Qualified Stock
Option, as the case may be, granted pursuant to the Plan.
(r) "Option Agreement" shall mean the written agreement by and between the
Company and an Optionee under which Optionee may purchase the Shares pursuant to
the exercise of an Option.
(s) "Optionee" shall mean an Employee or Consultant to whom an Option is
granted.
3
<PAGE>
(t) "Plan" shall mean this EXE Technologies, Inc. 1997 Incentive and
Non-Qualified Stock Option Plan, as amended from time to time.
(u) "Public Offering" shall mean the consummation of a firm commitment
underwritten public offering of equity securities of the Company registered
under the Securities Act.
(v) "Sale of the Company" shall mean the earliest of: (i) the closing of a
sale, transfer or other disposition of all or substantially all of the shares of
the capital stock then outstanding of the Company (except if such transferee is
then an Affiliate); (ii) the closing of a sale, transfer or other disposition of
all or substantially all of the assets of the Company (except if such transferee
is then an Affiliate); or (iii) the merger or consolidation of the Company with
or into another corporation (except an Affiliate), other than a merger or
consolidation of the Company in which the holders of shares of the Company's
voting capital stock outstanding immediately before such merger or consolidation
hold greater than fifty percent (50%) of the surviving entity's voting capital
stock after such consolidation or merger.
(w) "Securities Act" shall mean the Securities Act of 1933, as amended.
(x) "Share" or "Shares" shall mean a share or shares of Common Stock, as
adjusted in accordance with Section 8 of the Plan, that is allocated to the
Plan.
(y) "Stock Purchase and Restriction Agreement" shall mean an agreement in
such form or forms as the Board (subject to the terms and conditions of this
Plan) may from time to time approve, which an Optionee shall be required to
execute as a condition of purchasing Shares upon the exercise of an Option.
(z) "Subsidiary" shall mean, whether now or hereafter existing, a
subsidiary or parent corporation of the Company as such term is defined in
Sections 424(e), (f) and (g) of the Code.
(aa) "Vested Amount" shall mean, with respect to each Option, a percentage
of the shares for which the Option has become exercisable (subject to the
further terms of the Plan) by application of the schedule set forth in Section
4(b).
Section 3. ADMINISTRATION.
(a) PROCEDURE. The Plan shall be administered by the Board or a Committee
consisting of not less than two (2) persons appointed by the Board, which shall
be the Administrator. In the event the Company has a class of equity securities
registered under the Exchange Act, the Board shall administer the Plan or shall
appoint a Committee in accordance with Section 3(b).
(b) COMMITTEE. If a Committee is appointed by the Board, then the
Committee shall possess the power and authority of the Board in administering
the Plan on behalf of the Board, subject to the terms and conditions as the
Board may prescribe. Members of the Committee shall
4
<PAGE>
be members of the Board and shall serve for such period of time as the Board
may determine. From time to time, the Board may increase the size of the
Committee and appoint additional members thereto, remove members (with or
without cause) and appoint new members in substitution therefor, fill
vacancies however caused, or remove all members of the Committee and
thereafter directly administer the Plan. Notwithstanding the foregoing, in
the event the Company has a class of equity securities registered under the
Exchange Act, the Committee shall be composed of two (2) or more Non-Employee
Directors.
(c) POWERS OF THE ADMINISTRATOR. Subject to the provisions of the Plan
(and, in the case of the Committee, the specific duties delegated by the Board
to such Committee), the Administrator shall have the authority, in its sole
discretion:
(1) to determine whether and to what extent Options are granted
hereunder;
(2) to determine the Fair Market Value of the Common Stock based upon
review of relevant information and in accordance with Section 7 of the Plan;
(3) to determine the exercise price of the Options in accordance with
Section 6(b) of the Plan;
(4) to select the Optionees to whom Options may from time to time be
granted;
(5) to determine the number of Shares to be subject to each Option
granted hereunder;
(6) to prescribe, amend and rescind rules and regulations relating to
the Plan;
(7) to determine the terms and provisions of each Option granted
under the Plan, each Option Agreement and each other agreement that in the sole
discretion of the Administrator may be required (all of which agreements need
not be identical with the terms of other Options, Option Agreements or other
agreements);
(8) to determine the circumstances under which the vesting or
exercise date of an Option will be accelerated;
(9) to interpret the Plan or any agreement entered into with respect
to the grant or exercise of Options;
(10) to authorize any person to execute on behalf of the Company any
instrument required to effectuate the grant of an Option previously granted by
the Board or to take such other actions as may be necessary or appropriate with
respect to the Company's rights pursuant to Options or agreements relating to
the granting or exercise thereof;
5
<PAGE>
(11) to determine whether and under what circumstances an Option may
be exercised without a payment of cash under Section 6(c) hereof;
(12) to terminate the Plan in the event of a Change of Control; and
(13) to make such other determinations and establish such other
procedures as it deems necessary or advisable for the administration of the
Plan.
(d) EFFECT OF THE ADMINISTRATOR'S DECISION. All decisions, determinations
and interpretations of the Administrator pursuant to the provisions of the Plan
shall be final and binding on all Optionees and any other holders of Options.
(e) LIMITATION OF LIABILITY. Notwithstanding anything herein to the
contrary, no member of the Board or the Committee shall be liable for any good
faith determination, act or failure to act in connection with the Plan or any
Option awarded hereunder.
Section 4. ELIGIBILITY.
(a) ELIGIBLE PERSONS. Options may be granted at any time and from time to
time to any Employee or Consultant who shall be selected by the Administrator.
Any grant of Options may include or exclude any Employee or Consultant as the
Administrator shall determine in its sole discretion. Consultants who are not
also Employees of the Company are eligible to be granted Non-Qualified Stock
Options under the Plan but are not eligible to be granted Incentive Stock
Options under the Plan.
(b) VESTING AND EXERCISABILITY OF OPTIONS. Subject to the provisions of
Section 6 hereof and except to the extent the Board provides otherwise, each
Option shall vest as follows: 25% of the Option shall vest on the first
anniversary of the date of grant, and an additional 25% shall vest on each of
the second, third, and fourth anniversaries of the date of grant.
The Administrator may, but need not, determine that the Vested Amount of
each Option shall be exercisable only upon the earlier to occur of: (i) the
consummation of a Public Offering; or (ii) the consummation of a Sale of the
Company. The unvested portion of each Option may not be exercised.
(c) EFFECT UPON ENGAGEMENT. The Plan will not confer upon any Optionee
any right with respect to the continuation of any employment, consulting or any
other relationship with the Company nor will it interfere in any way with such
Optionee's right or the Company's right to terminate that Optionee's employment,
consulting or other relationship with the Company at any time, whether with or
without cause.
6
<PAGE>
Section 5. STOCK SUBJECT TO THE PLAN.
(a) MAXIMUM NUMBER OF SHARES. Subject to the provisions of Section 8 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is Two Million One Hundred Seventeen Thousand Seven Hundred Fifty
Eight (2,117,758) Shares. The Shares may be authorized, but unissued or
reacquired, Common Stock.
(b) RETURN OF SHARES TO THE PLAN. If an Option expires, is terminated or
become unexercisable for any reason without having been exercised in full, then
the unpurchased Shares subject thereto shall, unless the Plan shall have been
terminated, return to the Plan and become available for future grant under the
Plan.
Section 6. TERMS AND CONDITIONS OF OPTIONS.
Each Option granted under the Plan shall be authorized by the Board and
shall be evidenced by an Option Agreement, which shall state or incorporate by
reference all other terms and conditions of the Plan including, without
limitation, the following terms and conditions:
(a) NUMBER OF SHARES. The Option Agreement shall state the number of
Shares subject to the Option.
(b) OPTION EXERCISE PRICE. The per Share exercise price for the Shares to
be issued pursuant to the exercise of an Incentive Stock Option shall be stated
in the Option Agreement and shall be no less than the Fair Market Value per
share of the Common Stock on the date such Option is granted, without regard to
any restriction other than a restriction that by its terms will never lapse;
provided, however, that any Incentive Stock Option granted under this Plan to an
Employee who, at the time such Option is granted, owns more than ten percent
(10%) of the current total combined voting power of all classes of the capital
stock of the Company, shall have an exercise price per Share of not less than
one hundred ten percent (110%) of the Fair Market Value of the Common Stock on
the date such Option is granted. The per Share exercise price for the Shares to
be issued pursuant to the exercise of a Non-Qualified Stock Option shall be
stated in the Option Agreement and shall be determined by the Administrator but
shall be at least $.01 per Share.
(c) CONSIDERATION. The consideration to be paid for the Shares to be
issued upon the exercise of an Option, including the method of payment, shall be
determined by the Administrator and may consist entirely of: (i) cash; (ii)
check; or (iii) such other consideration and method of payment as the
Administrator may from time to time determine. In making its determination as
to the type of consideration to accept, the Administrator shall consider if the
acceptance of such consideration may be reasonably expected to benefit the
Company.
(d) FORM OF OPTION. The Option Agreement shall state whether the
Option granted thereunder is intended to be an Incentive Stock Option or a
Non-Qualified Stock Option and shall, subject to the terms of the Option
Agreement, constitute a binding determination as to the form of Option
granted thereunder.
7
<PAGE>
(e) EXERCISE OF AN OPTION.
(1) Unless otherwise provided by the Board, the Vested Amount of any
Option granted hereunder shall be exercisable, in whole or in part, at such
times and under such further conditions as may be determined by the Board and as
set forth in the Option Agreement.
(2) An Option may not be exercised for a fraction of a Share.
(3) An Option may not be exercised after the date of expiration of
its term as shall be set forth in the Option Agreement.
(4) An Option shall be deemed to have been exercised when written
notice of such exercise has been received by the Company at its principal
executive office in accordance with the terms of the Option Agreement by the
person entitled to exercise the Option, and full payment for the Shares with
respect to which the Option is to be exercised has been received by the Company,
accompanied by an executed Stock Purchase and Restriction Agreement and any
other agreements required by the Administrator or the terms of the Plan and/or
Option Agreement. An Optionee shall have no right to vote or receive dividends
and shall have no other rights as a stockholder with respect to the Shares,
notwithstanding the exercise of the Option, 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 adjustment shall be made for a dividend or other right for which the record
date is prior to the date a stock Certificate with respect to the Shares is
issued.
(5) As soon as practicable after the proper exercise of an Option in
accordance with the provisions of the Plan, the Company shall, without transfer
or issue tax to the Optionee, deliver to the Optionee at the principal executive
office of the Company or such other place as shall be mutually agreed upon
between the Company and the Optionee, a Certificate or Certificates representing
the Shares for which the Option shall have been exercised. The time of issuance
and delivery of the Certificate(s) representing the Shares for which the Option
shall have been exercised may be postponed by the Company for such period as may
be required by the Company, with reasonable diligence, to comply with any
applicable listing requirements of any national or regional securities exchange
or any law or regulation applicable to the issuance or delivery of such Shares.
(6) The exercise of an Option in any manner shall result in a
decrease in the number of Shares that 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.
(f) TERMINATION OF OPTIONS.
(1) TERMINATION IN GENERAL. Unless sooner terminated as provided in
this Plan, each Option shall be exercisable for the period of time as shall be
determined by the Administrator and set forth in the Option Agreement and shall
be void and unexercisable thereafter.
8
<PAGE>
(2) TERMINATION OF RELATIONSHIP WITH THE COMPANY. Unless sooner
terminated as provided in this Plan, in the event of the termination of an
Optionee's employment or consulting relationship with the Company (as the case
may be) for any reason other than the death or Disability of the Optionee, such
Optionee may, within three (3) months (or such other period of time as is
determined by the Board) from 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 the Option up to the Vested Amount as of the date of
termination, but only to the extent that the Optionee was entitled to exercise
the Option on the date of such termination. To the extent the Optionee was not
entitled to exercise the Option on the date of such termination, or if the
Optionee does not exercise such Option to the extent so entitled within the time
specified herein, the Option will terminate.
(3) DEATH OR DISABILITY. Unless sooner terminated as provided in
this Plan, in the event of the death or Disability of an Optionee while employed
or engaged by the Company (as the case may be), Options held by such Optionee
that are exercisable on the date of Disability or death shall be exercisable up
to the Vested Amount as of the date of Disability or death for a period of
twelve (12) months commencing on the date of the Optionee's Disability or death.
Such Options may be exercisable by the Optionee or his or her legal guardian or
representative or, in the case of death, by his or her executor(s) or
administrator(s); provided, however, if such disabled Optionee shall commence
any employment or engagement during such twelve (12) month period with or by a
competitor of the Company (including, but not limited to, full or part-time
employment or independent consulting work), as determined solely in the judgment
of the Administrator, then all Options held by such Optionee that have not yet
been exercised shall terminate immediately upon the commencement thereof.
(4) AGREEMENT TO TERMINATE. Options may be terminated at any time by
agreement between the Company and the Optionee.
(g) OTHER PROVISIONS.
(1) Notwithstanding any provision in this Plan or an Option Agreement
to the contrary, no Option granted to any Optionee under this Plan shall be
treated as an Incentive Stock Option to the extent that such Option would cause
the aggregate Fair Market Value of all Shares with respect to which Incentive
Stock Options are exercisable by such Optionee for the first time during any
calendar year (determined as of the date of grant of each such Option) to exceed
$100,000. For purposes of determining whether an Incentive Stock Option granted
to an Optionee would cause the aggregate Fair Market Value to exceed the
$100,000 limitation, such Incentive Stock Options shall be taken into account in
the order granted. For purposes of this subsection, Incentive Stock Options
granted to an Optionee shall include all incentive stock options under all plans
of the Company that are incentive stock option plans within the meaning of
Section 422 of the Code. Options may be exercised in any order elected by the
Optionee, whether or not the Optionee holds any unexercised Options under this
Plan or any other plan of the Company.
9
<PAGE>
(2) Notwithstanding any other provision of this Plan or an Option
Agreement to the contrary, no Option shall be (A) granted under this Plan after
ten (10) years from the date on which this Plan is adopted by the Board, or (B)
exercisable more than ten (10) years from the date of grant; provided that if an
Incentive Stock Option shall be granted under this Plan to any Employee who, at
the time of the grant of such Option, owns stock possessing more than ten
percent (10%) of the total combined voting power for all classes of the
Company's capital stock, the foregoing clause (B) shall be deemed modified by
substituting the term "five (5) years" for the term "ten (10) years" that
appears therein.
Section 7. FAIR MARKET VALUE OF COMMON STOCK.
The Fair Market Value of a Share of Common Stock, as of any date, shall
be determined as follows:
(a) If the Shares of Common Stock are listed on a national or regional
securities exchange or traded through NASDAQ/NMS, then the Fair Market Value of
a share of Common Stock shall be the closing price for a share of Common Stock
on the exchange or on NASDAQ/NMS, as reported in THE WALL STREET JOURNAL or such
other source as the Administrator deems reliable on the relevant valuation date,
or if there is no trading on that date, on the next trading date.
(b) If the Shares of Common Stock are traded in the over-the-counter
market, then the Fair Market Value of a share of Common Stock shall be the mean
of the bid and asked prices for a share of Common Stock on the relevant
valuation date as reported in THE WALL STREET JOURNAL or other source the
Administrator deems reliable (or, if not so reported, as otherwise reported by
the National Association of Securities Dealers Automated Quotations ("NASDAQ")
System or the NASD OTC Bulletin Board), or if there is no trading on such date,
on the next trading date.
(c) In the absence of an established market for the Common Stock, the Fair
Market Value of a share of Common Stock shall be determined by the Board in its
sole discretion.
Section 8. ADJUSTMENTS.
(a) ADJUSTMENTS. Subject to any required action by the stockholders of
the Company, the number of Shares covered by each outstanding Option, the number
of Shares that have been authorized for issuance under the Plan but as to which
no Options have yet been granted or that have been returned to the Plan upon
cancellation or expiration of an Option, and the price per Share of the Common
Stock covered by an Option will each be proportionately adjusted for any
increase or decrease in the number of outstanding shares of Common Stock
resulting from stock splits, reverse stock splits, stock dividends,
reclassifications and recapitalizations or automatic conversion of shares of one
class of stock to those of another by operation of the terms of such stock.
Such adjustment shall be made by the Board whose determination in that respect
will be final, binding and conclusive. Except as provided herein, no issuance
by the Company of shares of stock of any class or securities convertible into
shares of stock of any class, will affect, and no
10
<PAGE>
adjustment by reason thereof will be made with respect to, the number or
price of shares of Common Stock subject to an Option.
(b) NO FRACTIONAL SHARES. No fractional Shares shall be issuable on
account of any action aforesaid, and the aggregate number of Shares into which
Shares then covered by the Option, when changed as the result of such action,
shall be reduced to the number of whole Shares resulting from such action,
unless the Board, in its sole discretion, shall determine to issue scrip
Certificates in respect to any fractional Shares, which scrip Certificates shall
be in a form and have such terms and conditions as the Board in its discretion
shall prescribe.
Section 9. RIGHTS AS A STOCKHOLDER.
An Optionee shall have no rights as a stockholder of the Company and shall
not have the right to vote nor receive dividends with respect to any Shares
subject to an Option until such Option has been exercised and a stock
Certificate with respect to the Shares purchased upon such exercise of the
Option has been issued to Optionee as set forth in Section 6(e)(4) and (5)
hereof.
Section 10. FORFEITURE.
Notwithstanding any other provision of this Plan, (a) if an Optionee's
employment with the Company is terminated by the Company pursuant to the cause
termination provisions of an applicable employment agreement, or (b) if the
Optionee's employment or consulting relationship with the Company (as the case
may be) is terminated and the Board makes a determination that the Optionee (1)
has engaged in any type of disloyalty to the Company, including without
limitation, fraud, embezzlement, theft, or dishonesty in the course of
Optionee's employment or consulting relationship, (2) has been convicted of a
felony or other crime involving a breach of trust or fiduciary duty owed to the
Company, (3) has made an unauthorized disclosure of trade secrets or
confidential information of the Company, or (4) has breached any confidentiality
agreement or non-competition agreement with the Company in any material respect,
then, at the election of the Board, all unexercised Options held by the Optionee
(whether or not then exercisable) shall terminate. In the event of such an
election by the Board, in addition to immediate termination of all unexercised
Options, the Optionee shall forfeit all Shares for which the Company has not yet
delivered stock Certificates to the Optionee and the Company shall refund to the
Optionee the exercise price paid to it upon exercise of the Option with respect
to such Shares. Notwithstanding anything herein to the contrary, the Company
may withhold delivery of stock Certificates pending the resolution of any
inquiry that could lead to a finding resulting in forfeiture.
Section 11. 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 to grant the Option or such
other date as is determined by the Administrator. Notice of the determination
shall be given to each Optionee to whom an Option is so granted within a
reasonable time after the date of such grant.
11
<PAGE>
Section 12. MODIFICATION, EXTENSION, RENEWAL OF OPTION.
Subject to the terms and conditions of the Plan, the Board may modify,
extend or renew an Option, or accept the surrender of an Option (to the extent
not theretofore exercised); provided that no Incentive Stock Option may be
modified, extended or renewed if such action would cause such Option to cease to
be an incentive stock option within the meaning of Section 422 of the Code.
Section 13. TRANSFERABILITY.
No Option may be sold, pledged, assigned, transferred or disposed of in any
manner other than by will or by the laws of descent and distribution. During
the lifetime of the Optionee, his or her Options shall be exercisable only by
the Optionee, or, in the event of his or her legal incapacity or Disability, by
the legal guardian or representative of the Optionee.
Section 14. POWER OF BOARD IF CHANGE OF CONTROL.
Notwithstanding anything to the contrary set forth in this Plan, in the
event of a Change of Control, the Board shall have the right, in its sole
discretion, to accelerate the vesting of all Options that have not vested as of
the date of the Change of Control and/or to establish an earlier date for the
expiration of the exercise of an Option (notwithstanding a later expiration of
exercisability set forth in an Option Agreement). In addition, in the event of
a Change of Control of the Company, the Board shall have the right, in its sole
discretion, subject to and conditioned upon a Sale of the Company: (a) to
arrange for the successor company (or other entity) to assume all of the rights
and obligations of the Company under this Plan; or (b) to terminate this Plan
and (i) to pay to all Optionees cash with respect to those Options that are
vested as of the date of the Sale of the Company in an amount equal to the
difference between the Option Price and the Fair Market Value of a Share of
Common Stock (determined as of the date the Plan is terminated) multiplied by
the number of Options that are vested as of the date of the Sale of the Company
which are held by the Optionee as of the date of the Sale of the Company, or
(ii) to arrange for the exchange of all Options for options to purchase common
stock in the successor corporation, or (iii) to distribute to each Optionee
other property in an amount equal to and in the same form as the Optionee would
have received from the successor corporation if the Optionee had owned the
Shares subject to Options that are vested as of the date of the Sale of the
Company rather than the Option at the time of the Sale of the Company. The form
of payment or distribution to the Optionee pursuant to this Section shall be
determined by the Board in its sole discretion.
Section 15. AMENDMENT OR TERMINATION OF THE PLAN.
Insofar as permitted by law and the Plan, the Board may at any time
suspend, terminate, discontinue, alter or amend the Plan in any respect
whatsoever; provided, however, that without prior approval of at least a
majority of the stockholders entitled to vote thereon, no such revision or
amendment may increase the aggregate number of Shares for which Options may be
granted hereunder, change the designation of the class of Optionees eligible to
receive Options or
12
<PAGE>
decrease the price at which Options may be granted. Any other provision of
this Section notwithstanding, the Board specifically is authorized to adopt
any amendment to this Plan deemed by the Board to be necessary or advisable
to assure that the Incentive Stock Options or the Non-Qualified Stock Options
available under the Plan continue to be treated as such, respectively, under
all applicable laws.
Section 16. APPLICATION OF FUNDS.
The proceeds received by the Company from the sale of Shares pursuant to
the exercise of Options shall be used for general corporate purposes.
Section 17. NO OBLIGATION TO EXERCISE OPTION.
The granting of an Option shall impose no obligation upon the Optionee to
exercise such Option.
Section 18. APPROVAL OF STOCKHOLDERS.
This Plan shall become effective on the date that it is adopted by the
Board; provided that it shall become limited to a non-qualified stock option
plan if it is not approved by the stockholders of a majority of the Company's
outstanding voting stock within one year (365 days) of its adoption by the
Board. The Board may grant Options hereunder prior to approval of the Plan, or
any material amendments thereto, by the holders of a majority of the Company's
outstanding voting stock; provided that any and all Options so granted shall be
converted into non-qualified stock options if the Plan, or a material amendment,
is not approved by such stockholders within 365 days of its adoption or material
amendment.
Section 19. CONDITIONS UPON ISSUANCE OF SHARES.
(a) Options granted under the Plan are conditioned upon the Company
obtaining any required permit or order from appropriate governmental agencies,
authorizing the Company to issue such Options and Shares issuable upon the
exercise thereof.
(b) 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, 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.
(c) As a condition to the exercise of an Option, the Board may require the
person exercising such Option to execute an agreement with, and/or may require
the person exercising such Option to make any representation and/or warranty to,
the Company as may be, in the judgment of counsel to the Company, required under
applicable law or regulation, including but not limited to, a representation and
warranty that the Shares are being purchased only for
13
<PAGE>
investment and without any present intention to sell or distribute such
Shares if, in the opinion of counsel for the Company, such a representation
and warranty is appropriate under any of the aforementioned relevant
provisions of law.
Section 20. RESERVATION OF SHARES.
(a) The Company, during the term of this Plan, shall at all times reserve
and keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.
(b) The Company, during the term of this Plan, shall use its best efforts
to seek to obtain from appropriate regulatory agencies any requisite
authorization in order to issue and sell such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. The inability of the
Company to obtain from any such regulatory agency having jurisdiction the
requisite authorization(s) deemed by the Company's counsel to be necessary for
the lawful issuance and sale of any Shares hereunder, or the inability of the
Company to confirm to its satisfaction that any issuance and sale of any Shares
hereunder will meet applicable legal requirements, shall relieve the Company of
any liability in respect to the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
Section 21. OTHER AGREEMENTS.
Options shall be evidenced by an Option Agreement in such form or forms as
the Board (subject to the terms and conditions of this Plan) may from time to
time approve, which Option Agreement shall evidence and reflect the terms and
conditions of an Option as set forth in Section 6 hereof. Upon exercise of an
Option, the Optionee shall execute and deliver to the Company a Stock Purchase
and Restriction Agreement in such form or forms as the Board shall approve from
time to time. The Administrator may, from time to time, require such other
agreements in connection with the Option as it, in its sole discretion, deems
advisable. The Option Agreement and the Stock Purchase and Restriction
Agreement and any other agreement required by the Plan or the Option Agreement,
as determined by the Board, may contain such other provisions as the Board in
its discretion deems advisable and that are not inconsistent with the provisions
of this Plan, including, without limitation, restrictions upon or conditions
precedent to the exercise of the Option.
Section 22. TAXES, FEES, EXPENSES AND WITHHOLDING.
(a) The Company shall pay all original issue and transfer taxes (but not
income taxes, if any) with respect to the grant of an Option and/or the issue
and transfer of Shares pursuant to the exercise thereof, and all other fees and
expenses necessarily incurred by the Company in connection therewith, and will,
from time to time, use its best efforts to comply with all laws and regulations
that, in the opinion of counsel for the Company, shall be applicable thereto.
(b) The granting of Options hereunder and the issuance of Shares pursuant
to the exercise thereof is conditioned upon the Company's reservation of the
right to withhold in accordance with any applicable law, from any compensation
or other amounts payable to the
14
<PAGE>
Optionee, any taxes required to be withheld under federal, state or local law
as a result of the grant or exercise of such Option or the sale of the Shares
issued upon exercise thereof. To the extent that compensation or other
amounts, if any, payable to the Optionee is insufficient to pay any taxes
required to be so withheld, the Company may, in its sole discretion, require
the Optionee (or such other person entitled herein to exercise the Option),
as a condition to the exercise of an Option, to pay in cash to the Company an
amount sufficient to cover such tax liability or otherwise to make adequate
provision for the Company's satisfaction of its withholding obligations under
federal, state and local law.
Section 23. NOTICES.
Any notice to be given to the Company pursuant to the provisions of this
Plan shall be addressed to the Company in care of its Secretary (or such other
person as the Company may designate from time to time) at its principal
executive office, and any notice to be given to an Optionee shall be delivered
personally or addressed to the Optionee at the address given beneath the
signature of the Optionee on his or her Option Agreement, or at such other
address as such Optionee or his or her permitted transferee (upon the transfer
of the Shares) may hereafter designate in writing to the Company. Any such
notice shall be deemed duly given when enclosed in a properly sealed envelope or
wrapper addressed as aforesaid, registered or certified, and deposited, postage
and registry or certification fee prepaid, in a post office or branch post
office regularly maintained by the United States Postal Service. It shall be
the obligation of each Optionee and each permitted transferee holding Shares
purchased upon exercise of an Option to provide the Secretary of the Company, by
letter mailed as provided herein, with written notice of his or her direct
mailing address.
Section 24. NO ENLARGEMENT OF EMPLOYEE RIGHTS.
This Plan is purely voluntary on the part of the Company, and the
continuance of the Plan shall not be deemed to constitute a contract between the
Company and any Employee or Consultant, or to be consideration for or a
condition of the employment or service of any Employee or Consultant as the case
may be. Nothing contained in this Plan shall be deemed to give any Employee or
Consultant the right to be retained in the employ or service of the Company, or
to interfere with the right of the Company to discharge or retire any Employee
or Consultant thereof at any time. No Employee or Consultant shall have any
right to or interest in Options authorized hereunder prior to the grant thereof
to such Employee or Consultant, and upon such grant such Employee shall have
only such rights and interests as are expressly provided herein, subject,
however, to all applicable provisions of the Company's Certificate of
Incorporation, as the same may be amended from time to time.
Section 25. INFORMATION TO OPTIONEES.
The Company, upon request, shall provide without charge to each Optionee
copies of such annual and periodic reports as are provided by the Company to its
stockholders generally.
15
<PAGE>
Section 26. AVAILABILITY OF PLAN.
A copy of this Plan shall be delivered to the Secretary of the Company and
shall be shown to any eligible person making reasonable inquiry concerning it.
Section 27. INVALID PROVISIONS.
In the event that any provision of this Plan is found to be invalid or
otherwise unenforceable under any applicable law, such invalidity or
unenforceability shall not be construed as rendering any other provisions
contained herein as invalid or unenforceable, and all such other provisions
shall be given full force and effect to the same extent as though the invalid or
unenforceable provision was not contained herein.
Section 28. APPLICABLE LAW.
This Plan shall be governed by and construed in accordance with the laws of
the State of Delaware.
Section 29. BOARD ACTION.
Notwithstanding anything to the contrary set forth in this Plan, any and
all actions of the Board or Committee, as the case may be, taken under or in
connection with this Plan and any agreements, instruments, documents,
Certificates or other writings entered into, executed, granted, issued and/or
delivered pursuant to the terms hereof, shall be subject to and limited by any
and all votes, consents, approvals, waivers or other actions of all or certain
stockholders of the Company or other persons required pursuant to (a) the
Company's Certificate of Incorporation (as the same may be amended and/or
restated from time to time), (b) the Company's Bylaws (as the same may be
amended and/or restated from time to time), and (c) any other agreement,
instrument, document or writing now or hereafter existing, between or among the
Company and its stockholders or other persons (as the same may be amended from
time to time).
Section 30. MISCELLANEOUS.
This Plan is intended to comply with the conditions and requirements for
employee benefit plans under Rule 16b-3, as promulgated under Section 16 of the
Exchange Act such that Options granted pursuant to the Plan will be exempted
from the provisions of Section 16(b) thereof. To the extent that any provision
of the Plan would cause a conflict with such requirements, such provision shall
be deemed null and void to the extent permitted by applicable law. This section
shall not be applicable if no class of the Company's equity securities is then
registered pursuant to Section 12 of the Exchange Act.
16
<PAGE>
PLAN HISTORY
ADOPTION AND APPROVAL OF PLAN AND ANY AMENDMENTS
Date Plan adopted by Board: September 15, 1997
Date Plan approved by Stockholders: September 15, 1997
Effective Date of Plan: September 15, 1997
17
<PAGE>
EXE TECHNOLOGIES, INC.
1997 INCENTIVE AND NON-QUALIFIED
STOCK OPTION PLAN
INCENTIVE STOCK OPTION AGREEMENT
EXE TECHNOLOGIES, INC. (the "Company") hereby grants to ___________
(the "Optionee") an option (the "Option") purchase a total of ______________
(___) shares of Class B Common Stock, $ .01 par value per share, of the
Company ("Common Stock"), at the price and on the terms set forth herein, and
in all respects subject to the terms and provisions of the EXE TECHNOLOGIES,
INC. 1997 INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN (the "Plan")
applicable to incentive stock options, which terms and provisions are
incorporated herein by reference. Capitalized terms used but not otherwise
defined herein shall have the meanings given to them in the Plan.
1. NATURE OF THE OPTION. The Option is intended by the Company and
the Optionee to be an incentive stock option within the meaning of Section 422
of the Code.
2. DATE OF GRANT; TERM OF OPTION. The Option is granted this ____
day of ____________, ____, and it may not be exercised later than 5:00 p.m. on
the ____ day of _____________, ____.
3. OPTION EXERCISE PRICE. The Option exercise price is $_____
per Share, which price is the Fair Market Value per share of the Common Stock
on the date hereof; or $________ per share if Optionee, at the time of grant,
owns stock possessing more than ten percent (10%) of the current total
combined voting power of all classes of the Company's capital stock, which
price represents a price per Share equal to no less than one hundred ten
percent (110%) of the Fair Market Value of the Common Stock on the date the
Option is granted.
4. EXERCISE OF OPTION. Except as otherwise provided herein, the
Option shall be exercisable during its term only in accordance with the terms
and provisions of the Plan and this Option Agreement as follows:
(a) VESTING. Twenty-Five percent of the Option shall vest on
the first anniversary of the date of grant, and an additional 25% shall vest on
each of the second, third, and fourth anniversaries of the date of grant.
<PAGE>
(b) RIGHT TO EXERCISE. The Vested Amount of each Option may be
exercised at such times and subject to such procedures as the Company may
further provide.
(c) METHOD OF EXERCISE. The Option shall be exercisable by
written notice that shall state the election to exercise the Option, the
number of Shares in respect to which the Option is being exercised and such
other representations and agreements as to the Optionee's investment intent
with respect to such Shares as may be required by the Company hereunder or
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 Company or such other person as may be designated by the
Company. The written notice shall be accompanied by payment of the purchase
price, an executed Stock Purchase and Restriction Agreement and any other
agreements required by the Administrator, the terms of the Plan and/or this
Option Agreement. The Option will be deemed to be exercised upon the receipt
by the Company of such written notice, payment of the purchase price, and
duly executed copies of the Stock Purchase and Restriction Agreement and any
other agreements required by the Administrator, the terms of the Plan and/or
this Option Agreement. The Optionee will have no right to vote or receive
dividends and will have not other rights as a stockholder with respect to
such Shares notwithstanding the exercise of the Option, 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 the Shares that are being issued upon exercise of the Option. The
Company will issue (or cause to be issued) such stock Certificates promptly
following the exercise of the Option. The Certificate or Certificates for
the Shares as to which the Option shall be exercised shall be registered in
the name of the Optionee and shall contain any legend as may be required
under the Plan, the Stock Purchase and Restriction Agreement, any other
agreements required by the Administrator and/or applicable law.
(d) METHOD OF PAYMENT. The method of payment of the purchase
price shall be determined by the Administrator and may consist entirely of
cash, check, or any combination of such methods of payment, or such other
consideration or method of payment as may be authorized by the Administrator
and permitted under the Plan.
(e) RESTRICTIONS ON EXERCISE. The Option may not be
exercised if the issuance of the Shares upon such exercise would constitute a
violation of any applicable federal or state securities laws or other laws or
regulations. As a condition to the exercise of the Option, the Company may
require the Optionee to make any representations and warranties to the
Company as may be required by any applicable law or regulation.
5. INVESTMENT REPRESENTATIONS. Unless the Shares have been
registered under the Securities Act, in connection with the grant of the
Option, the Optionee represents and warrants as follows:
2
<PAGE>
(a) The Optionee is acquiring the Option, and upon exercise
of the Option, the Optionee will be acquiring the Shares for investment for
his or her own account, not as a nominee or agent, and not with a view to, or
for resale in connection with, any distribution thereof.
(b) The 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
Shares. The Optionee has received all information as the Optionee deems
necessary and appropriate to enable him or her to evaluate the financial risk
inherent in making an investment in the Shares and has received satisfactory
and complete information concerning the business and financial condition of
the Company in response to all inquiries in respect thereof.
6. TERMINATION OF EMPLOYMENT WITH THE COMPANY. Subject to the
provisions of Section 8 hereof, upon termination of the Optionee's employment
with the Company for any reason other than death or Disability, the Optionee
shall have the right to exercise the Option at any time within the three (3)
month period after the date of such termination to the extent that the
Optionee was entitled to exercise the Option at the date of such termination.
7. DEATH OR DISABILITY OF OPTIONEE. Upon the death or Disability
of the Optionee while in the employ of the Company, the Option may be
exercised at any time within twelve (12) months after the date of death or
termination due to Disability, in the case of death, by the Optionee's estate
or by a person who acquired the right to exercise the Option by bequest or
inheritance, or, in the case of Disability, by the Optionee or his legal
guardian or representative, but in any case only to the extent the Optionee
was entitled to exercise the Option at such date; provided, however, that if
such disabled Optionee shall commence any employment or engagement during
such twelve (12) month period with or by a competitor of the Company
(including, but not limited to, full or part-time employment or independent
consulting work), as determined solely in the judgment of the Board, then the
Option shall terminate immediately upon the commencement thereof. To the
extent that the Optionee was not entitled to exercise the Option at the date
of termination, or to the extent the Option is not exercised within the time
specified herein, the Option shall terminate. Notwithstanding the foregoing,
the Option shall not be exercisable after the expiration of the term set
forth in Section 2 hereof.
8. FORFEITURE OF OPTION. Notwithstanding any other provision of
the Option Agreement, (a) if the Optionee's employment with the Company is
terminated by the Company pursuant to the cause termination provisions of an
applicable employment agreement, or (b) if the Optionee's employment with the
Company is terminated and the Board makes a determination that the Optionee
(i) has engaged in any type of disloyalty to the Company, including without
limitation, fraud, embezzlement, theft, or dishonesty in the course of his
employment, (ii) has
3
<PAGE>
been convicted of a felony or other crime involving a breach of trust or
other fiduciary duty owed to the Company, (iii) has disclosed trade secrets
or confidential information of the Company, or (iv) has breached any
agreement with the Company in respect of confidentiality, non-disclosure,
non-competition or otherwise, then, at the election of the Board, all
unexercised Options shall terminate. In the event of such an election by the
Board, in addition to immediate termination of all unexercised Options, the
Optionee shall forfeit all Shares for which the Company has not yet delivered
share Certificates to the Optionee and the Company shall refund to the
Optionee the Option price paid to the Company with respect to those Shares.
Notwithstanding anything herein to the contrary, the Company may withhold
delivery of share Certificates pending the resolution of any inquiry that
could lead to a determination resulting in forfeiture.
9. NON-TRANSFERABILITY OF OPTION. The Option may not be sold,
pledged, assigned, hypothecated, gifted, transferred or disposed of in any
manner either voluntarily or involuntarily by operation of law, other than by
will or by the laws of descent or distribution, and may be exercised during
the lifetime of the Optionee only by such Optionee. Subject to the foregoing
and the terms of the Plan, the terms of the Option Agreement shall be binding
upon the executors, administrators, heirs, successors and assigns of the
Optionee.
10. CONTINUATION OF EMPLOYMENT. Neither the Plan nor this Option
Agreement shall confer upon any Optionee any right to continue in the
employment of the Company or limit in any respect the right of the Company to
discharge or release the Optionee at any time, with or without cause and with
or without notice.
11. WITHHOLDING. The Company reserves the right to withhold, in
accordance with any applicable laws, from any consideration payable to
Optionee any taxes required to be withheld by federal, state or local law as
a result of the grant or exercise of the Option or the sale or other
disposition of the Shares issued upon exercise of the Option. If the amount
of any consideration payable to the Optionee is insufficient to pay such
taxes or if no consideration is payable to the Optionee, then upon the
request of the Company, the Optionee (or such other person entitled to
exercise the Option pursuant to Section 7 hereof) shall pay to the Company an
amount sufficient for the Company to satisfy any federal, state or local tax
withholding requirements the Company may incur, as a result of the grant or
exercise of the Option or the sale or other disposition of the Shares issued
upon the exercise of the Option.
12. THE PLAN. The Option is subject to, and the Company and the
Optionee agree to be bound by, all of the terms and conditions of the Plan as
such Plan may be amended from time to time in accordance with the terms
thereof. Pursuant to the Plan, the Board is authorized to adopt rules and
regulations not inconsistent with the Plan as it shall deem appropriate and
proper. A copy of the Plan in its present form is available for inspection
during business hours by the Optionee or the persons entitled to exercise the
Option at the Company's principal office.
4
<PAGE>
13. CONVERSION TO NON-QUALIFIED OPTION. Notwithstanding anything
to the contrary set forth herein, this Option is being granted subject to the
condition that in the event the Plan is not approved by the stockholders of
the Company within 365 days of the date that the Plan was adopted by the
Board, this Option shall automatically be converted into a non-qualified
stock option.
14. EARLY DISPOSITION OF STOCK. Subject to the fulfillment by the
Optionee of any conditions upon the disposition of Shares received under the
Option, the Optionee hereby agrees that if he or she disposes of any Shares
received under the Option within two (2) years from date of grant or one (1)
year after such Shares were transferred to him or her upon exercise of the
Option, he or she will notify the Company in writing within thirty (30) days
after the date of such disposition. The Optionee acknowledges that
disposition by him or her within two (2) years from the date of grant and one
(1) year from the date of exercise of the Option would disqualify him or her
from capital gain treatment for any gain realized upon such disposition.
15. ENTIRE AGREEMENT. The Option, together with the Plan and the
other exhibits attached thereto or hereto, represents the entire agreement
between the parties.
16. GOVERNING LAW. This Option shall be construed in accordance
with the laws of the State of Delaware.
17. AMENDMENT. Subject to the provisions of the Plan, this Option
Agreement may only be amended by a writing signed by each of the parties
hereto.
Date: EXE TECHNOLOGIES, INC.
--------------------
By:
------------------------------
Title:
---------------------------
5
<PAGE>
ACKNOWLEDGMENT
The Optionee acknowledges receipt of a copy of the Plan, a copy of
which is attached hereto, and represents that he or she has read and is familiar
with the terms and provisions thereof, and hereby accepts the Option subject to
all of the terms and provisions thereof. The Optionee hereby agrees to accept
as binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan.
Date:
------------------- -------------------------------
Signature of Optionee
-------------------------------
Name
-------------------------------
Address
-------------------------------
City, State, Zip
THE OPTION AND THE SECURITIES THAT MAY BE PURCHASED UPON EXERCISE OF
THE OPTION HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AN D HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE, TRANSFER OR DISTRIBUTION THEREOF. NO SUCH SALE,
TRANSFER OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATING THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED.
THE SHARES WHICH MAY BE PURCHASED UPON EXERCISE OF THE OPTION MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF A STOCK PURCHASE AND
RESTRICTION AGREEMENT TO BE ENTERED INTO BETWEEN THE HOLDER OF THE OPTION AND
THE COMPANY UPON EXERCISE OF THIS OPTION, A COPY OF WHICH AGREEMENT IS ON FILE
WITH THE SECRETARY OF THE COMPANY.
1
<PAGE>
EXE TECHNOLOGIES, INC.
1997 INCENTIVE AND NON-QUALIFIED
STOCK OPTION PLAN
NON-QUALIFIED STOCK OPTION AGREEMENT
EXE TECHNOLOGIES, INC. (the "Company") hereby grants to
____________________________ (the "Optionee") an option (the "Option") to
purchase a total of ______________ (___) shares of Class B Common Stock, $ .01
par value per share, of the Company ("Common Stock"), at the price and on the
terms set forth herein, and in all respects subject to the terms and provisions
of the EXE TECHNOLOGIES, INC. 1997 INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN
(the "Plan") applicable to non-qualified stock options, which terms and
provisions are incorporated by reference herein. Unless otherwise defined
herein, capitalized terms used but not defined herein shall have the meanings
given to them in the Plan.
1. NATURE OF THE OPTION. The Option is intended to be a
nonstatutory stock option and is NOT intended to be an incentive stock option
within the meaning of Section 422 of the Code, or to otherwise qualify for any
special tax benefits to the Optionee.
2. DATE OF GRANT; TERM OF OPTION. The Option is granted this ____
day of ____________, ____, and it may not be exercised later than 5:00 p.m. on
the ____ day of _____________ , ____.
3. OPTION EXERCISE PRICE. The Option exercise price is
_______________ ($_____) per Share.
4. EXERCISE OF OPTION. Except as otherwise provided herein, the
Option shall be exercisable during its term only in accordance with the terms
and provisions of the Plan and this Option Agreement as follows:
(a) VESTING. Twenty-Five percent of the Option shall vest on the
first anniversary of the date of grant, and an additional 25% shall vest on each
of the second, third, and fourth anniversaries of the date of grant.
(b) RIGHT TO EXERCISE. The Vested Amount of each Option may be
exercised at such times and subject to such procedures as the Company may
further provide.
(c) METHOD OF EXERCISE. The Option shall be exercisable by
written notice that shall state the election to exercise the Option, the number
of Shares in respect to which the Option is being exercised and such other
representations and agreements as to the Optionee's investment intent with
respect to such Shares as may be required by the Administrator or pursuant to
the provisions of the Plan. Such written notice shall be signed by the Optionee
<PAGE>
and shall be delivered in person or by certified mail to the Secretary of the
Company or such other person as may be designated by the Company. The written
notice shall be accompanied by payment of the purchase price, an executed Stock
Purchase and Restriction Agreement and any other agreements required by the
Administrator, the terms of the Plan and/or this Option Agreement. The Option
will be deemed to be exercised upon the receipt by the Company of such written
notice, payment of the purchase price, and duly executed copies of the Stock
Purchase and Restriction Agreement and any other agreements required by the
Administrator, the terms of the Plan and/or this Option Agreement. The Optionee
shall have no right to vote or receive dividends and shall have no other rights
as a stockholder with respect to such Shares, notwithstanding the exercise of
the Option, until the issuance by the Company (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 the Shares that are being issued
upon exercise of the Option. The Company will issue (or cause to be issued)
such stock Certificates promptly following the exercise of the Option. The
Certificate or Certificates for the Shares as to which the Option shall be
exercised shall be registered in the name of the Optionee and shall contain any
legend as may be required under the Plan, the Stock Purchase and Restriction
Agreement, any other agreements required by the Administrator and/or applicable
law.
(d) METHOD OF PAYMENT. The method of payment of the purchase
price shall be determined by the Administrator and may consist entirely of cash,
check, or any combination of such methods of payment, or such other
consideration or method of payment as may be authorized by the Administrator and
permitted under the Plan.
(e) RESTRICTIONS ON EXERCISE. The Option may not be exercised
if the issuance of the Shares upon such exercise would constitute a violation of
any applicable federal or state securities laws or other laws or regulations.
As a condition to the exercise of the Option, the Company may require the
Optionee to make any representations and warranties to the Company as may be
required by any applicable law or regulation.
5. INVESTMENT REPRESENTATIONS. Unless the Shares have been
registered under the Securities Act, in connection with the acquisition of the
Option, the Optionee represents and warrants as follows:
(a) The Optionee is acquiring the Option, and upon exercise of
the Option, Optionee will be acquiring the Shares for investment for his or her
own account, not as a nominee or agent, and not with a view to, or for resale in
connection with, any distribution thereof.
(b) The 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 Shares. The
Optionee has received all such information as the Optionee deems necessary and
appropriate to enable him or her to evaluate the financial risk inherent in
making an investment in the Shares and has received satisfactory and complete
information concerning the business and financial condition of the Company in
response to all inquiries in respect thereof.
2
<PAGE>
6. TERMINATION OF RELATIONSHIP WITH THE COMPANY. Subject to the
provisions of Section 8 hereof, upon termination of the Optionee's employment,
consulting or other relationship with the Company (as the case may be) for any
reason other than death or Disability, the Optionee shall have the right to
exercise this Option up to the Vested Amount as of the date of termination for a
period of three (3) months from the date of such termination, provided that the
Optionee may only exercise the Option to the extent that the Optionee was
entitled to exercise the Option at the date of such termination.
7. DEATH OR DISABILITY OF OPTIONEE. Upon the death or Disability of
the Optionee while in the employ of or engagement by the Company (as the case
may be), the Option may be exercised up to the Vested Amount at any time within
twelve (12) months after the date of death or termination due to Disability
provided the Optionee was entitled to exercise the Option at the date of his or
her death or termination due to Disability. In the case of death, the Option
may be exercised by the Optionee's estate or by a person who acquired the right
to exercise this Option by bequest or inheritance. In the case of Disability,
the Option may be exercised by the Optionee or his or her legal guardian or
representative, but in any case, the Option may be exercised only to the extent
that the Optionee was entitled to exercise the Option at such date; provided,
however, that if such disabled Optionee shall commence any employment or
engagement during such twelve (12) month period with or by a competitor of the
Company (including, but not limited to, full or part-time employment or
independent consulting work), as determined solely in the judgment of the Board,
then the Option shall terminate immediately upon the commencement thereof. To
the extent that the Optionee was not entitled to exercise the Option at the date
of termination, or to the extent the Option is not exercised within the time
specified herein, the Option shall terminate. Notwithstanding the foregoing,
the Option shall not be exercisable after the expiration of the term set forth
in Section 2 hereof.
8. FORFEITURE OF OPTION. Notwithstanding any other provision of
this Option Agreement, (a) if an Optionee's employment with the Company is
terminated by the Company pursuant to the cause termination provisions of an
applicable employment agreement, or (b) if the Optionee's employment or
consulting relationship with the Company (as the case may be) is terminated and
the Board makes a determination that the Optionee (i) has engaged in any type of
disloyalty to the Company, including without limitation, fraud, embezzlement,
theft, or dishonesty in the course of his employment or engagement, (ii) has
been convicted of a felony or other crime involving a breach of trust or other
fiduciary duty owed to the Company, (iii) has disclosed trade secrets or
confidential information of the Company, or (iv) has breached any agreement with
the Company in respect of confidentiality, non-disclosure, non-competition or
otherwise, then, at the election of the Board, all unexercised Options shall
terminate. In the event of such an election by the Board, in addition to
immediate termination of all unexercised Options, the Optionee shall forfeit all
Shares for which the Company has not yet delivered share Certificates to the
Optionee and the Company shall refund to the Optionee the Option price paid to
the Company with respect to those Shares. Notwithstanding anything herein to
the contrary, the Company may withhold delivery of share Certificates pending
the resolution of any inquiry that could lead to a determination resulting in
forfeiture.
3
<PAGE>
9. NON-TRANSFERABILITY OF OPTION. The Option may not be sold,
pledged, assigned, hypothecated, gifted, transferred or disposed of in any
manner either voluntarily or involuntarily by operation of law, other than by
will or by the laws of descent or distribution, and may be exercised during the
lifetime of the Optionee only by such Optionee. Subject to the foregoing and
the terms of the Plan, the terms of this Option Agreement shall be binding upon
the executors, administrators, heirs, successors and assigns of the Optionee.
10. CONTINUATION OF EMPLOYMENT OR ENGAGEMENT. Neither the Plan nor
this Option Agreement shall confer upon any Optionee any right to continue in
the service of the Company or limit, in any respect, the right of the Company to
discharge or release the Optionee at any time, with or without cause and with or
without notice.
11. WITHHOLDING. The Company reserves the right to withhold, in
accordance with any applicable laws, from any consideration payable to the
Optionee any taxes required to be withheld by federal, state or local law as a
result of the grant or exercise of the Option or the sale or other disposition
of the Shares issued upon exercise of the Option. If the amount of any
consideration payable to the Optionee is insufficient to pay such taxes or if no
consideration is payable to the Optionee, then upon the request of the Company,
the Optionee (or such other person entitled to exercise the Option pursuant to
Section 7 hereof) shall pay to the Company an amount sufficient for the Company
to satisfy any federal, state or local tax withholding requirements the Company
may incur as a result of the grant or exercise of the Option or the sale or
other disposition of the Shares issued upon the exercise of the Option.
12. THE PLAN. This Option Agreement is subject to, and the Company
and the Optionee agree to be bound by, all of the terms and conditions of the
Plan as such Plan may be amended from time to time in accordance with the terms
thereof. Pursuant to the Plan, the Board is authorized to adopt rules and
regulations not inconsistent with the Plan as it shall deem appropriate and
proper. A copy of the Plan in its present form is available for inspection
during business hours by the Optionee or the persons entitled to exercise the
Option at the Company's principal office.
13. ENTIRE AGREEMENT. This Option Agreement, together with the Plan,
and any other and the other exhibits attached thereto or hereto, represents the
entire agreement between the parties.
14. GOVERNING LAW. This Option Agreement shall be construed in
accordance with the laws of the State of Delaware.
4
<PAGE>
15. AMENDMENT. Subject to the provisions of the Plan, this Option
Agreement may only be amended by a writing signed by each of the parties hereto.
Date: EXE TECHNOLOGIES, INC.
--------------------
By:
------------------------------
Title:
---------------------------
5
<PAGE>
ACKNOWLEDGMENT
The Optionee acknowledges receipt of a copy of the Plan, a copy of
which is attached hereto, and represents that he or she has read and is familiar
with the terms and provisions thereof, and hereby accepts the Option subject to
all of the terms and provisions thereof. The Optionee hereby agrees to accept
as binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan.
Date:
-------------------- -----------------------------
Signature of Optionee
-----------------------------
Name
-----------------------------
Address
-----------------------------
City, State, Zip
THE OPTION AND THE SECURITIES THAT MAY BE PURCHASED UPON EXERCISE OF
THE OPTION HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE, TRANSFER OR DISTRIBUTION THEREOF. NO SUCH SALE,
TRANSFER OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATING THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED.
THE SHARES WHICH MAY BE PURCHASED UPON EXERCISE OF THE OPTION MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF A STOCK PURCHASE AND
RESTRICTION AGREEMENT TO BE ENTERED INTO BETWEEN THE HOLDER OF THE OPTION AND
THE COMPANY UPON EXERCISE OF THE OPTION, A COPY OF WHICH AGREEMENT IS ON FILE
WITH THE SECRETARY OF THE COMPANY.
<PAGE>
EXE TECHNOLOGIES, INC.
1997 INCENTIVE AND NON-QUALIFIED
STOCK OPTION PLAN
STOCK PURCHASE AND RESTRICTION AGREEMENT
This STOCK PURCHASE AND RESTRICTION AGREEMENT is made this _____
day of ____________, 19__, by and between EXE TECHNOLOGIES, INC. (the
"Company"), and ___________________________ ("Optionee"). For purposes of
this Agreement, the Optionee shall include the original grantee, as well as
any person or entity who acquired the right to exercise the Option pursuant
to the terms of the EXE TECHNOLOGIES, INC. 1997 INCENTIVE AND NON-QUALIFIED
STOCK OPTION PLAN (the "Plan").
R E C I T A L S:
1. Optionee was granted an Option (the "Option") on ____________,
19___ pursuant to the Plan, the terms and conditions of which are
incorporated herein by reference. In addition, capitalized terms used but
not otherwise defined herein shall have the meanings given to them in the
Plan.
2. Pursuant to the Option, Optionee was granted the right to
purchase _____________ (____) shares of the Company's Common Stock, as
adjusted in accordance with the Plan (the "Optioned Shares").
3. Optionee has elected to exercise the Option to purchase
________________ (_____) of such Optioned Shares (herein referred to as the
"Shares") under the Stock Option Agreement evidencing the Option (the "Option
Agreement").
4. As required by the Plan and the Option Agreement, as a
condition to Optionee's exercise of the Option, Optionee is required to
execute this Agreement which gives the Company certain rights, including, but
not limited to, transfer restrictions with respect to the Shares, rights of
repurchase and first refusal upon a proposed sale or transfer of the Shares
and other rights to repurchase the Shares being issued pursuant to the terms
hereof.
NOW, THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, and intending to be legally
bound hereby, the parties hereto hereby agree as follows:
1. EXERCISE OF OPTION. Subject to the terms and conditions
hereof, Optionee shall exercise his or her Option or a portion thereof to
purchase ___________________ Shares at an exercise price of $_________ per
Share, subject to and in accordance with the terms set forth
<PAGE>
in this Agreement, payable in accordance with the terms and provisions of the
Option Agreement.
2. TRANSFER RESTRICTIONS.
(a) The Optionee shall not sell, assign, transfer, pledge,
hypothecate, mortgage, encumber or otherwise dispose of all or any of his or her
Shares except as otherwise expressly provided in this Agreement.
(b) Notwithstanding anything to the contrary contained herein,
the Optionee may transfer all or any of his or her Shares (i) by way of gift to
his or her spouse, parents, siblings, or lineal descendants of the Optionee or
to any trust for the exclusive benefit of any such family member or the
Optionee, provided that any such transferee shall agree in writing with the
Company, prior to, and as a condition precedent to such transfer, to be bound by
all of the provisions of this Agreement to the same extent as if such transferee
were the Optionee, or (ii) by will or the laws of descent and distribution, in
which event each such transferee shall be bound by all of the provisions of this
Agreement to the same extent as if such transferee were the Optionee.
(c) Any purported transfer in violation of the provisions of
this Agreement shall be void AB INITIO.
3. TERMINATION OF EMPLOYMENT OR ENGAGEMENT.
(a) In the event of the termination of the employment or
engagement (or other relationship) of the Optionee with the Company for any
reason, the Company (which term, for purposes of this Section 3, shall include
the designees of the Company) shall have the right to purchase from, and if the
Company exercises its option pursuant to subparagraphs (d), (e) and (f) below,
the Optionee shall sell to the Company upon the exercise of such right at a
purchase price per Share equal to the Fair Market Value per share as at the date
of termination, all of the Shares owned by the Optionee.
(b) In the event the Optionee does not exercise the Option until
after the Optionee's termination of employment or engagement with the Company
(or if the Optionee is not the original grantee, then in the event the Option is
exercised after the original grantee's termination of employment or engagement
with the Company), the Company shall have the right to purchase from, and if the
Company exercises its option pursuant to subparagraphs (d), (e) and (f) below,
the Optionee shall sell to the Company upon the exercise of such right at a
purchase price per Share equal to the Fair Market Value per share as at the date
of exercise, all of the Shares owned by the Optionee.
(c) The number of Shares subject to repurchase pursuant to
Section 3(a) shall be adjusted to give effect to any stock dividend, or other
distribution of stock made on or in respect of such Shares, or any subdivision,
combination or reclassification of the outstanding capital stock of the Company
or received in exchange for the Shares.
-2-
<PAGE>
(d) In order to exercise the option to purchase Optionee's
Shares under this Section 3, the Company shall deliver a written notice to the
Stockholder indicating its election to purchase the Shares and specifying the
number of Shares which the Company elects to purchase and the purchase price
therefor.
(e) If the Company elects not to exercise its rights pursuant to
this Section 3 or if the Company is legally prohibited from or unable to
repurchase the Shares during the period referred to below, then the Company
shall notify the Optionee and each designee of the Company, if any, within the
60-day period following (i) with respect to a repurchase pursuant to Section
3(a), the termination of employment or engagement of the Optionee or (ii) with
respect to a repurchase pursuant to Section 3(b), the date of exercise of the
Option. In such event, the designees shall have the right, during the 30-day
period following the Company's notice, to purchase such number of Shares as the
Company shall designate, on the same terms and conditions as were applicable to
the Company, which right shall be exercised by giving written notice of
acceptance to the Company specifying the number of Shares which such designee
elects to purchase and the purchase price therefor.
(f) The repurchase of Shares hereunder shall be made on a date
selected by the Company, within ninety (90) days after (i) with respect to a
repurchase pursuant to Section 3(a), the termination of employment or engagement
or (ii) with respect to a repurchase pursuant to Section 3(b), the date of
exercise of the Option, by delivery of payment to the Optionee, by check or wire
transfer, against receipt of one or more Certificates, properly endorsed,
evidencing the Optionee's Shares to be so repurchased.
(g) Anything contained herein to the contrary notwithstanding,
at the option of the Company, any purchaser of Shares pursuant to Section 3
which is not the Company shall agree in writing, in advance, to be bound by and
comply with all applicable provisions of this Agreement.
4. RIGHT OF FIRST REFUSAL ON DISPOSITIONS.
(a) If at any time the Optionee desires to sell all or any part
of his or her Shares pursuant to a bona fide offer from a third party (the
"Proposed Transferee"), then the Optionee shall submit a written offer (the
"Offer") to sell such Shares (the "Offered Shares") to the Company or any entity
or person designated by the Company ("designee"), on terms and conditions,
including price, not less favorable to the Company or its designee than those on
which the Optionee proposes to sell such Offered Shares to the Proposed
Transferee. The Offer shall disclose the identity of the Proposed Transferee,
the number of Offered Shares proposed to be sold, the total number of Shares
owned by the Optionee, the terms and conditions, including price, of the
proposed sale, and any other material facts relating to the proposed sale. The
Offer shall further state that the Company or its designee may acquire, in
accordance with the provisions of this Agreement, all or any portion of the
Offered Shares for the price and upon the other terms and conditions set forth
therein.
-3-
<PAGE>
(b) If the Company (or its designee, if one exists) desires to
purchase all or any part of the Offered Shares, then the Company or its designee
shall communicate in writing its election to purchase (an "Acceptance") to the
Optionee, which Acceptance shall state the number of Offered Shares the Company
or its designee desires to purchase and shall be given to the Optionee within
thirty (30) days after the date the Offer was made to the Company. The
Acceptance shall, when taken in conjunction with the Offer, be deemed to
constitute a valid, legally binding and enforceable agreement for the sale and
purchase of such Offered Shares. Sales of the Offered Shares to be sold to the
Company or its designee pursuant to this Section 4 shall be made at the offices
of the Company on the 45th day following the date the Offer was made (or if such
45th day is not a business day, then on the next succeeding business day). Such
sales shall be effected by the Optionee's delivery to the Company a Certificate
or Certificates evidencing the Offered Shares to be purchased by the Company or
its designee, duly endorsed for transfer to the Company or its designee, as the
case may be, which Shares shall be delivered free and clear of all liens,
charges, claims, and encumbrances of any nature whatsoever, against payment to
the Optionee of the purchase price therefor by the Company or its designee, as
the case may be.
(c) If the Company or its designee does not purchase all of the
Offered Shares, then the Offered Shares not so purchased may be sold by the
Optionee at any time within ninety (90) days after the date the Offer was made
to the Company. Any such sale shall be to the Proposed Transferee, at not less
than the price and upon other terms and conditions, if any, not more favorable
to the Proposed Transferee than those specified in the Offer. Any Offered
Shares not sold within such 90-day period shall continue to be subject to the
requirements of a prior offer pursuant to this Section 4.
5. FAILURE TO DELIVER SHARES. If the Optionee becomes obligated to
sell any Shares to the Company or its designee under this Agreement and fails to
deliver such Shares in accordance with the terms of this Agreement, then the
Company or its designee may, at its option, in addition to all other remedies it
may have, send to the Optionee the purchase price for such Shares as is herein
specified. Thereupon, the Company upon written notice to the Optionee, (a)
shall cancel on its books the Certificate or Certificates representing the
Shares to be sold and (b) in the case of a designee, shall issue, in lieu
thereof, in the name of such designee, a new Certificate or Certificates
representing such Shares, and thereupon all of the Optionee's rights in and to
such Shares shall terminate.
6. FURTHER LIMITATION AS TO TRANSFERS BY THE STOCKHOLDER. In
addition to the other restrictions provided in this Agreement or otherwise, if
requested by the Company or its underwriters for a public offering of securities
of the Company, Optionee shall not sell or otherwise transfer or dispose of any
Shares or other securities of the Company held by such Optionee during the
period of fourteen (14) days before, and one hundred eighty (180) days
following, the effective date of a registration statement filed by the Company
with the Securities and Exchange Commission relating to such offering (other
than a registration statement on Form S-8 or Form S-4, or their successors, or
any other comparable form for similarly limited purposes promulgated after the
date hereof, or any registration statement covering only securities proposed to
be issued in exchange for securities or assets of another corporation).
-4-
<PAGE>
7. REMEDIES.
(a) The Optionee expressly agrees that the Company or its
designee, as the case may be, will be irreparably damaged if this Agreement is
not specifically enforced. In case any one or more of the covenants and/or
agreements set forth in this Agreement shall have been breached by the Optionee,
the Company or its designee (as the case may be) may proceed to protect and
enforce their rights either by suit in equity and/or by action at law,
including, but not limited to, an action for damages as a result of any such
breach; and/or an action for specific performance of any such covenant or
agreement contained in this Agreement and/or a temporary or permanent
injunction, in any case without showing any actual damage. The rights, powers
and remedies of the parties under this Agreement are cumulative and not
exclusive of any other right, power or remedy which such parties may have under
any other agreement or law. No single or partial assertion or exercise of any
right, power or remedy of a party hereunder shall preclude any other or further
assertion or exercise thereof.
(b) The Optionee agrees that, until a public market for the
Shares exists, the Shares cannot be readily purchased, sold, or evaluated in the
open market, that they have a unique and special value, and that the Company and
its stockholders would be irreparably damaged if the terms of this Agreement
were not capable of being specifically enforced, and for this reason, among
others, the Company shall be entitled to a decree of specific performance of the
terms hereof or an injunction restraining violation of this Agreement, said
right to be in addition to any other remedies of the Company.
8. ASSIGNMENT. The Company may assign its rights under this
Agreement to one or more persons or entities, who shall have the right to so
exercise such rights in his, her or its own name and for his, her or its own
account. If the exercise of any such right requires the consent of any state or
other regulatory authority, then the Optionee shall cooperate with the Company
in requesting such consent.
9. ADJUSTMENT. The number of Shares subject to the terms and
provisions of this Agreement during the term of this Agreement shall be adjusted
to give effect to any stock dividend or liquidating dividend of cash and/or
property, stock split, conversion or other change or reclassification of the
outstanding securities of the Company. In such event, any and all new,
substituted or additional securities or other property to which the Optionee is
entitled by reason of his or her ownership of Shares shall be immediately
subject to the terms of this Agreement, and be included in the term "Shares" for
all purposes with the same force and effect as the Shares presently subject to
such rights and restrictions.
10. LEGENDS. All Certificates representing any Shares of the Company
subject to the provisions of this Agreement shall have endorsed thereon the
following legend in substantially the following form unless in the opinion of
counsel such legend is no longer necessary:
-5-
<PAGE>
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR
ANY APPLICABLE STATE SECURITIES LAWS. THESE SHARES HAVE NOT
BEEN ACQUIRED WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY
NOT BE SOLD, ASSIGNED, EXCHANGED, MORTGAGED, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED OR DISPOSED OF, BY
GIFT OR OTHERWISE, OR IN ANY WAY ENCUMBERED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND ANY APPLICABLE STATE
SECURITIES LAWS, OR AN OPINION OF COUNSEL SATISFACTORY TO
EXE TECHNOLOGIES, INC. THAT REGISTRATION IS NOT REQUIRED
UNDER SUCH ACT AND UNDER APPLICABLE STATE SECURITIES LAWS.
MOREOVER, THE SHARES REPRESENTED BY THIS Certificate ARE
SUBJECT TO AND RESTRICTED BY THE PROVISIONS OF A CERTAIN
STOCK PURCHASE AND RESTRICTION AGREEMENT BETWEEN EXE
TECHNOLOGIES, INC. AND THE STOCKHOLDER, A COPY OF WHICH
AGREEMENT WILL BE FURNISHED BY EXE TECHNOLOGIES, INC. UPON
WRITTEN REQUEST AND WITHOUT CHARGE, AND ALL OF THE
PROVISIONS OF SUCH AGREEMENT ARE INCORPORATED BY REFERENCE
IN THIS CERTIFICATE.
11. INVESTMENT REPRESENTATIONS. Unless the Shares have been
registered under the Securities Act of 1933, as amended (the "Act"), in which
event the Company will so advise Optionee in writing, Optionee acknowledges,
agrees, represents and warrants, in connection with the proposed purchase of the
Shares, as follows:
(a) The Optionee is purchasing the Shares solely for his or her
own account for investment and not with a view to, or for resale in connection
with any distribution thereof within the meaning of the Act. The Optionee
further represents that he or she does not have any present intention of
selling, offering to sell or otherwise disposing of or distributing the Shares
or any portion thereof; and that the entire legal and beneficial interest of the
Shares he or she is purchasing is being purchased for, and will be held for the
account of, the Optionee only and neither in whole nor in part for any other
person.
(b) The 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 Shares. The
Optionee has a preexisting personal or business relationship with the officers
and directors of the Company and that the
-6-
<PAGE>
Optionee has such knowledge and experience in business and financial matters
to enable him or her to evaluate the risks of the prospective investment and
to make an informed investment decision with respect thereto and that the
Optionee has the capacity to protect his or her own interests in connection
with the purchase of the Shares. The Optionee has discussed the Company and
its plans, operations and financial condition with its officers, has received
all such information as the Optionee deems necessary and appropriate to
enable him or her to evaluate the financial risk inherent in making an
investment in the Shares and has received satisfactory and complete
information concerning the business and financial condition of the Company in
response to all inquiries in respect thereof.
(c) The Optionee realizes that his or her purchase of the Shares
will be a speculative investment and that Optionee is able, without impairing
his or her financial condition, to hold the Shares for an indefinite period of
time and to suffer a complete loss on the investment.
(d) The Company has disclosed in writing that: (i) the sale of
the Shares has not been registered under the Act, and the Shares must be held
indefinitely unless a transfer of them is subsequently registered under the Act
or an exemption from such registration is available, and the Company is under no
obligation to register the Shares; and (ii) the Company shall make a notation in
its records of the aforementioned restrictions on transfer and legends.
(e) The Optionee is aware of the provisions of Rule 144,
promulgated under the Act, which, in substance, permits limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof (or an affiliate of such issuer) in a non-public offering subject to the
satisfaction of certain conditions, including among other things: the resale
occurring not less than one (1) year from the date Optionee has purchased and
paid for the Shares; the availability of certain public information concerning
the Company; the sale being through a broker in an unsolicited "brokers'
transaction" or in a transaction directly with a market maker (as said term is
defined under the Securities Exchange Act of 1934, as amended); and that any
sale of the Shares may be made by Optionee, if Optionee is an affiliate of the
Company, only in limited amounts during any three-month period not exceeding
specified limitations. The Optionee understands that at the time Optionee
wishes to sell the Shares there may be no public market upon which to make such
a sale, and that, even if such public market then exists, the Company may not be
satisfying the current public information requirements of Rule 144, and that, in
such event, Optionee would be precluded from selling the Shares under Rule 144
even if the one-year minimum holding period had been satisfied. The Optionee
understands that in the event all of the requirements of Rule 144 are not
satisfied, registration under the Act, compliance with Regulation A, or some
other registration exemption will be required; and that, notwithstanding the
fact that Rule 144 is not exclusive, the Staff of the SEC has expressed its
opinion that persons proposing to sell private placement securities other than
in a registered offering and otherwise than pursuant to Rule 144 will have a
substantial burden of proof in establishing that an exemption from registration
is available for such offers or sales, and such persons and their respective
brokers who participate in such transactions do so at their own risk.
-7-
<PAGE>
(f) Without in any way limiting the Optionee's representations
and warranties set forth herein, the Optionee shall in no event make any
disposition of all or any portion of the Shares that he or she is purchasing
unless and until:
(i) there is then in effect a Registration Statement under
the Act covering such proposed disposition and such disposition is made in
accordance with said Registration Statement; or
(ii) the Optionee shall have (a) notified the Company of the
proposed disposition and furnished the Company with a detailed statement of the
circumstances surrounding the proposed disposition, and (b) furnished the
Company with an opinion of Optionee's own counsel (satisfactory to the Company)
to the effect that such disposition will not require registration of such shares
under the Act, and such opinion of the Optionee's counsel shall have been
concurred in by counsel for the Company and the Company shall have advised the
Optionee of such concurrence.
12. ESCROW. As security for the Optionee's faithful performance of
the terms of this Agreement and to insure the availability for delivery of the
Optionee's Shares upon exercise, under this Agreement, of the rights of the
Company and the rights of the other beneficiaries to this Agreement, the
Optionee shall, if requested in writing by the Company, deliver to and deposit
with the Secretary of the Company or his nominee (the "Escrow Agent"), as Escrow
Agent in this transaction, two Stock Assignments duly endorsed (with date and
number of shares blank) in the form attached hereto as ATTACHMENT A, together
with the Certificate or Certificates evidencing the Shares; such documents are
to be held by the Escrow Agent and delivered to said Escrow Agent pursuant to
the Joint Escrow Instructions of the Company and Optionee set forth in
ATTACHMENT B attached hereto and incorporated herein by this reference, which
instructions shall also be delivered to the Escrow Agent at the closing
hereunder.
13. RESTRICTION ON ALIENATION. The Optionee shall not sell,
transfer, gift, pledge, hypothecate, assign or otherwise dispose of any of the
Shares or any right or interest therein, whether voluntary, by operation of law
or otherwise, without the prior written consent of the Company, except a
transfer which meets the requirements of this Agreement. Any sale, transfer,
gift, pledge, hypothecation, assignment or disposition or purported sale,
transfer or other disposition of such Shares by Optionee shall be null and void
AB INITIO unless the terms, conditions and provisions of this Agreement are
strictly observed.
14. TERM. Except for Sections 3, 4 and 5 hereof, which shall
terminate upon the consummation of a Public Offering of shares of the Company's
equity capital, this Agreement shall continue in full force and effect until
such time as the Optionee has transferred all of the Shares (other than pursuant
to Section 2(b)) in accordance with the terms of this Agreement.
-8-
<PAGE>
15. MISCELLANEOUS.
(a) The Company shall not be required (i) to transfer on its
books any Shares that shall have been sold or transferred in violation of any of
the provisions set forth in this Agreement, or (ii) to treat as owner of such
Shares or to accord the right to vote as such owner or to pay dividends to any
transferee to whom such Shares shall have been so transferred.
(b) Subject to the provisions of this Agreement, Optionee shall,
during the term of this Agreement, exercise all rights and privileges of a
stockholder of the Company with respect to the Shares.
(c) The parties agree to execute such further instruments and to
take such further action as may reasonably be necessary to carry out the intent
of this Agreement.
(d) Any notice, consent or other communication required or
permitted hereunder shall be given in writing and shall be deemed effectively
given: (a) upon personal delivery; (b) two (2) business days after day of
deposit if sent by regular mail; (c) one (1) business day after the business day
of deposit with a carrier if sent by Federal Express, Express Mail or other
express service (receipt requested), in each case to the appropriate addresses,
telex numbers and telecopier numbers set forth below (or at such other address
or numbers as such party may designate by ten (10) days' advance written notice
to the other party hereto):
(i) To the Optionee:
-------------------
-------------------
-------------------
(ii) To the Company:
EXE Technologies, Inc.
-------------------
-------------------
Attn:
----------------
(e) This Agreement shall inure to the benefit of the successors
and assigns of the Company and, subject to all compliance with the restrictions
on transfer herein set forth, be binding upon Optionee, his heirs, executors,
administrators, and permitted successors and assigns.
(f) This Agreement shall be construed under the laws of the
State of Delaware and constitutes the entire Agreement of the parties with
respect to the subject matter
-9-
<PAGE>
hereof, superseding all prior written or oral agreements with respect
thereto, and no amendment or addition hereto shall be deemed effective unless
agreed to in writing by the parties hereto.
(g) If any provision of this Agreement is held by a court of
competent jurisdiction to be invalid, void or unenforceable, then the remaining
provisions shall nevertheless continue in full force and effect without being
impaired or invalidated in any way and shall be construed in accordance with the
purposes and tenor and effect of this Agreement.
(h) Nothing in this Agreement shall be deemed to create any term
of employment or engagement or affect in any manner whatsoever the right or
power of the Company to terminate Optionee's employment or engagement.
(i) Notwithstanding (i) the execution and delivery of this
Agreement by the parties hereto or (ii) anything to the contrary contained
herein, (A) if the Optionee's employment with the Company is terminated by the
Company pursuant to the cause termination provisions of an applicable employment
agreement, or (B) if the Optionee's employment or consulting relationship with
the Company (as the case may be) is terminated and the Board makes a
determination that the Optionee (1) has engaged in any type of disloyalty to the
Company, including without limitation, fraud, embezzlement, theft, or dishonesty
in the course of his or her employment or engagement, (2) has been convicted of
a felony, (3) has disclosed trade secrets or confidential information of the
Company, or (4) has breached any agreement with the Company in respect of
confidentiality, non-disclosure, non-competition or otherwise, then, at the
election of the Board, the Optionee shall forfeit all shares for which the
Company has not yet delivered share Certificates to the Optionee or Escrow
Agent, as the case may be, and the Company shall refund to the Optionee the
Option purchase price paid to the Company upon exercise of the Option with
respect to those Shares. In addition, the Company may withhold delivery of
share Certificates pending the resolution of any inquiry that could lead to a
determination resulting in forfeiture.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above-written.
EXE TECHNOLOGIES, INC.
By:
------------------------------
Title:
---------------------------
-10-
<PAGE>
OPTIONEE:
-----------------------------------
(Signature)
-----------------------------------
(Print Name)
Address:
--------------------------
--------------------------
-11-
<PAGE>
SPOUSAL CONSENT
The undersigned spouse of the Optionee agrees that his or her
interest, if any, in the Shares subject to the foregoing Stock Purchase and
Restriction Agreement shall be irrevocably bound by the terms of the Stock
Purchase and Restriction Agreement and further understands and agrees that any
community property interest, if any, shall be similarly bound by the terms of
the Stock Purchase and Restriction Agreement.
Date:
------------- ----------------------------------
Name of Spouse of Optionee
----------------------------------
Signature of Spouse of Optionee
-12-
<PAGE>
ATTACHMENT A
TO STOCK PURCHASE AND RESTRICTION AGREEMENT
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, _________________________ hereby sells, assigns
and transfers unto ___________________________, _____ shares of the Common Stock
(the "Shares") of EXE TECHNOLOGIES, INC. (the "Company"), standing in the
undersigned's name on the books of the Company represented by Certificate No.
_____ herewith, and does hereby irrevocably constitute and appoint
__________________ attorney to transfer the said Shares on the books of the
Company with full power of substitution in the premises.
Dated: Signature:
---------------- -----------------------------------
<PAGE>
ATTACHMENT B
TO STOCK PURCHASE AND RESTRICTION AGREEMENT
JOINT ESCROW INSTRUCTIONS
EXE TECHNOLOGIES, INC.
____________ __, 199
[ADDRESSEE]
Dear __________:
As Escrow Agent for both EXE TECHNOLOGIES, INC. (the "Company"), and
the undersigned grantee of an option to purchase stock of the Company
("Optionee"), you are hereby authorized and directed to hold the documents
delivered to you pursuant to the terms of that certain Stock Purchase and
Restriction Agreement dated ____________________, _____, to which a copy of
these Joint Escrow Instructions is attached as Attachment B (the "Agreement"),
in accordance with the following instructions:
1. In the event the Company and/or any designee or assignee of the
Company (referred to collectively for convenience herein as the "Company")
and/or any other signatory to the Stock Purchase and Restriction Agreement shall
elect to exercise any rights of first refusal, other rights of repurchase and/or
other rights set forth in the Agreement, the Company shall give to the Optionee
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 executive office of the Company. The Optionee 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 other
applicable purchaser against the simultaneous delivery to you of the purchase
price (by check, evidence of cancellation of indebtedness of Optionee to the
Company or a
<PAGE>
________________
__________,_____
Page __
promissory note, or some combination thereof) for the number of shares of
stock being purchased pursuant to the exercise of the rights.
3. Optionee 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 stock as defined in the Agreement. Optionee
does hereby irrevocably constitute and appoint you as his attorney-in-fact and
agent for the term of this escrow to execute with respect to such securities all
stock certificates, stock assignments, or other documents necessary or
appropriate to make such securities negotiable and complete any transaction
contemplated herein or in the Plan or Agreement.
4. This escrow shall terminate at such time as there are no longer
any shares of stock subject to the Rights.
5. If at the time of termination of this escrow you should have in
your possession any documents, securities, or other property belonging to
Optionee, then you shall deliver all of same to Optionee and you 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 Optionee while acting in
good faith and in the exercise of your own good judgment, 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 of
any court, 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
<PAGE>
________________
__________,_____
Page __
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 any
statute of limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. You shall be entitled to employ such legal counsel and other
experts as you may deem necessary or proper 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 Secretary 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 any officer of the Company as successor Escrow Agent.
13. If you reasonably require other or further instruments in
connection with these Joint Escrow Instructions or obligations in respect
hereto, then 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 to 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 dispute shall have been settled either by a 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
<PAGE>
________________
__________,_____
Page __
the other parties thereunto entitled at the following addresses, or at such
other address as a party may designate by ten (10) days' advance written
notice to each of the other parties hereto.
COMPANY: EXE Technologies, Inc.
-------------------------
-------------------------
OPTIONEE:
-------------------------
-------------------------
-------------------------
ESCROW AGENT:
-------------------------
-------------------------
-------------------------
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.
This instrument shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and permitted assigns.
Very truly yours,
-------------------------
By: EXE TECHNOLOGIES, INC.
Title:
-------------------------
<PAGE>
________________
__________,_____
Page __
OPTIONEE:
-------------------------
Address:
-----------------
-----------------
Agreed to and accepted as of the
date set forth above.
ESCROW AGENT
By:
---------------------
[Secretary of]
---------------------
Name:
-------------------
<PAGE>
EXHIBIT 10.3
EXECUTIVE EMPLOYMENT AGREEMENT - DAVID ALCALA
NEPTUNE SYSTEMS, INC.
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT is made as of the 18th day of
November, 1996 by and between David E. Alcala, a resident of Florida (the
"Employee"), and NEPTUNE SYSTEMS, INC., a corporation organized and existing
under the laws of the Commonwealth of Pennsylvania (the "Company").
WHEREAS, the Company is engaged in the business of providing supply
chain management software and related services to the warehouse, distribution
and logistics industries worldwide ("the Business")); and
WHEREAS, the Company desires to employ the Employee and the Employee
desires to be employed by the Company for a period of time in the future upon
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and obligations
contained herein, and intending to be legally bound, the parties, subject to
the terms and conditions set forth herein, agree as follows:
1. EMPLOYMENT AND TERM.
(a) The Company hereby employs the Employee and the Employee
hereby accepts employment with the Company, as Senior Vice President and
Chief Operating Officer (the "Position"), for a period commencing as of the
date of letter of agreement between Raymond R. Hood ("President/CEO of the
Company) and the Employee dated November 18, 1996 ("the Commencement Date")
and commencing active employment as of January 1, 1997 and continuing until
December 31, 1999, subject to the provisions of Section 8 hereof (the
"Initial Term"). During the Initial Term, the Employee shall also be a member
of the Executive Committee appointed by the Board of Directors.
(b) At the end of the Initial Term, this Agreement shall
automatically renew for successive additional periods of one (1) year, unless
terminated by either party upon no less than one hundred eighty (180) days
prior written notice to the other party prior to the expiration of the
Initial Term or any such renewal period. The Initial Term of employment and
any renewal periods hereunder, subject to the provisions of Section 8 hereof,
are hereinafter referred to as the "Term."
2. DUTIES. During the Term, the Employee shall serve the Company
faithfully and to the best of his ability and shall devote his full time,
attention, skill and efforts to the performance of the duties required by or
appropriate for the Position. The Employee shall assume such duties and
responsibilities as may be customarily incident to such a position, and such
additional and other duties as may be assigned to the Employee from time to
time by the President or the Executive Committee of the Company, including,
without limitation, the duties and responsibilities set forth in SCHEDULE A
attached hereto. The Employee shall report to the President of the Company.
3. OTHER BUSINESS ACTIVITIES. During the Term, the Employee shall
not, without the prior written consent of the Company in its sole discretion,
directly or indirectly engage in any other business activities or pursuits
whatsoever, except activities in connection with charitable or civic
activities, personal investments and serving as an executor, trustee or in
other similar fiduciary capacity; provided that such activities do not
interfere with his performance of his responsibilities and obligations
pursuant to this Agreement.
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT - DAVID ALCALA
4. COMPENSATION. The Company shall pay the Employee, and the Employee
hereby agrees to accept, as compensation for all services rendered hereunder
and for the Employee's intellectual property covenants and assignments and
covenant not to compete as provided for in Sections 6 and 7 hereof, the
compensation set forth in this Section 4.
4.1 SALARY. The Company shall pay the Employee an initial
base salary at the annual rate of One Hundred Sixty Thousand Dollars
($160,000) (as the same may hereafter be increased , the "Base Salary"). The
Base Salary shall be inclusive of all applicable income, social security and
other taxes and charges that are required by law to be withheld by the
Company, are requested to be withheld by the Employee, and shall be withheld
and paid in accordance with the Company's normal payroll practice for its
similarly situated employees from time to time in effect. The Base Salary may
be increased from time to time by the Board of Directors of the Company in
its discretion.
4.2 BONUS PROGRAM. During the term of this Agreement and
within thirty (30) calendar days of the end of each business quarter as
defined by the Company the Employee shall receive an amount equal to two
percent (2%) of the Gross Margin booked for all new business in the North
American operations of the company. In addition the Employee shall receive a
like amount for all new business booked outside the North American for which
the Employee was directly responsible and managed and directed the
activities. For the purposes of clarity the Employee and Company shall put in
place a margin booking form acceptable to the both parties to aid in this
calculation. For purposes of this Section 4.2 "Gross Margin" shall mean
GROSS MARGIN CALCULATION SIMILAR TO HIS SYSTEMS TO BE DEVELOPED AND ATTACHED
TO THIS AGREEMENT.
4.3 EQUITY PARTICIPATION.
(a) The Company shall grant to the Employee an incentive
stock option to purchase three percent (3%) of the total shares of the Class
B (restricted voting and transfer rights) common stock of the Company equal
to 300,000 shares of common stock at a par value $.01 per share. The
Company plans to offer an additional 2,345,679 shares in two offerings to
private investors in early 1997. This grant will be adjusted on a pro-rata
basis to maintain the 3% ratio on outstanding shares. If the offering is
fully subscribed this will result in an additional 70,370 options being issue
to the Employee. There will be no dilution protection after this supplemental
grant. The Option shall vest as follows: 1/3 of the shares shall vest on the
Commencement Date of this Agreement, 1/3 shares shall vest on the first
anniversary of the Commencement Date of this Agreement, and 1/3 shall vest on
the second anniversary of the Commencement Date of this Agreement. The
exercise price of the Option shall be fixed at .75 cents (.75) per share.
The Option shall be subject to and in accordance with the provisions of the
1996 Stock Option Plan of the Company (the "Plan") substantially in the form
attached hereto as SCHEDULE B however where this Agreement is different then
the language and provisions in this Agreement shall govern.
(b) Notwithstanding the foregoing, the Option shall
become fully vested upon the occurrence of one of the following events: (a)
the sale of the Company to an unrelated third party by way of merger, sale of
assets or sale of capital stock of the Company, (b) the sale by the Company
of more than seventeen percent (17%) of its outstanding Common Stock on a
fully-diluted basis to an unrelated third party (excluding any sales to
venture funds currently under consideration by the Company with whom
discussions began prior to the Commencement Date of this Agreement), or (c)
the filing by the Company of a registration statement on Form S-1 in
connection with an underwritten initial public offering.
(c) In addition to the foregoing Option, if the Company
completes an underwritten initial public offering of its Common Stock within
three (3) years from the date of this Agreement with an enjoys a market cap
of $200 million or more during it's first day of trading as a public company,
then the
-2-
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT - DAVID ALCALA
Employee shall be entitled to receive an additional option for 200,000
Qualified Contingent on Attorneys Opinion shares of the Class B Common Stock
of the Company calculated on a like basis with the Option granted above in
paragraph 4.3 (a) ("the IPO Option"). These options shall be granted on the
day after the Initial Public Offering and are fix priced at .75 cents (.75)
per share.
(d) All shares of Common Stock issued under the Option
or the IPO Option shall be subject to the terms and provisions of a Stock
Purchase and Restriction Agreement as required by the Plan.
4.4 FRINGE BENEFITS. The Employee shall be entitled to participate
in any health, dental programs, or other fringe benefits available to
employees of the Company as amended from time to time. During the Term, the
Employee shall receive term life insurance in the amount of $300,000 and
disability insurance in the amount of $12,000 per month, which premiums are
to be paid by the Company. The Employee shall be entitled to participate in
all vacation and other fringe benefit programs of the Company to the extent
and on the same terms and conditions as are accorded to other officers and
key employees of the Company. Not withstanding the above, the Employee is
entitled to ______ (3) weeks paid vacation per calendar year.
4.5 REIMBURSEMENT OF EXPENSES. The Employee shall be
reimbursed for all normal items of travel and entertainment and miscellaneous
expenses reasonably incurred by him on behalf of the Company, provided that
such expenses are documented and submitted to the Company all in accordance
with the reimbursement policies of the Company as in effect from time to
time. The Company shall pay to the Employee a car allowance of Seven Hundred
Fifty Dollars ($750) per month (the "Allowance") during the Term to help
defray the cost of acquiring, insuring and maintaining a vehicle. The Company
shall not be responsible for any cost or other obligation in connection with
such vehicle.
5. CONFIDENTIALITY. The Employee recognizes and acknowledges that
the Proprietary Information (as hereinafter defined) is a valuable, special
and unique asset of the Company. As a result, both during the Term and for a
period of three (3) years thereafter, the Employee shall not, without the
prior written consent of the Company, for any reason either directly or
indirectly divulge to any third-party or use for his own benefit, or for any
purpose other than the exclusive benefit of the Company, any confidential,
proprietary, business and technical information or trade secrets of the
Company or of any subsidiary or affiliate of the Company (the "Proprietary
Information") revealed, obtained or developed in the course of his employment
with the Company. Proprietary Information shall include, but shall not be
limited to: the intangible personal property described in Section 6(b)
hereof; any information relating to methods of production, manufacture and
research; hardware and software configurations, computer codes or
instructions (including source and object code listings, program logic
algorithms, subroutines, modules or other subparts of computer programs and
related documentation, including program notation), computer inputs and
outputs (regardless of the media on which stored or located) and computer
processing systems, techniques, designs, architecture, and interfaces; the
identities of, the Company's relationship with, the terms of contracts and
agreements with, the needs and requirements of, and the Company's course of
dealing with, the Company's actual and prospective customers, contractors and
suppliers; and any other materials prepared by the Employee in the course of
his employment by the Company, or prepared by any other employee or
contractor of the Company for the Company or its customers, (including
concepts, layouts, flow charts, specifications, know-bow, user or service
manuals, plans, sketches, blueprints, costs, business studies, business
procedures, finances, marketing data, methods, plans, personnel information,
customer and vendor credit information and any other materials that have not
been made available to the general public). Nothing contained herein shall
restrict the Employee's ability to make such disclosures during the course of
his employment as may be necessary or appropriate to the effective and
efficient discharge of the duties required by or appropriate for the Position
or as such disclosures may be required by law. Furthermore, nothing contained
herein shall restrict the Employee from divulging or using for his own
benefit or for any other purpose any Proprietary Information that is readily
available to the general public so long as such information did not become
available to the general public as a direct or indirect result of the
Employee's breach of this Section 5. Failure by the Company to mark any of
the Proprietary Information as confidential or proprietary shall not affect
its status as Proprietary Information under the
-3-
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT - DAVID ALCALA
terms of this Agreement.
6. PROPERTY.
(a) All right, title and interest in and to Proprietary
Information shall be and remain the sole and exclusive property of the
Company. During the Term, the Employee shall not remove from the Company's
offices or premises any documents, records, notebooks, files, correspondence,
reports, memoranda or similar materials of or containing Proprietary
Information, or other materials or property of any kind belonging to the
Company unless necessary or appropriate in accordance with the duties and
responsibilities required by or appropriate for the Position and, in the
event that such materials or property are removed, all of the foregoing shall
be returned to their proper files or places of safekeeping as promptly as
possible after the removal shall serve its specific purpose. The Employee
shall not make, retain, remove and/or distribute any copies of any of the
foregoing for any reason whatsoever, except as may be necessary in the
discharge of the assigned duties, and shall not divulge to any third person
the nature of and/or contents of any of the foregoing or of any other oral or
written information to which he may have access or with which for any reason
he may become familiar, except as disclosure shall be necessary in the
performance of the duties; and upon the termination of his employment with
the Company, he shall return to the Company all originals and copies of the
foregoing then in the possession, whether prepared by the Employee or by
others.
(b) (i) The Employee acknowledges that all right, title and
interest in and to any and all writings, documents, inventions, discoveries,
computer programs or instructions (whether in source code, object code, or
any other form), algorithms, formulae, plans, memoranda, tests, research,
designs, innovations, systems, analyses, specifications, models, data,
diagrams, flow charts, and/or techniques (whether reduced to written or
electronic form or otherwise) that the Employee creates, makes, conceives,
discovers or develops, either solely or jointly with any other person, at any
time during the Term, whether during working hours or at the Company's
facility or at any other time or location, and whether upon the request or
suggestion of the Company or otherwise, and that relate to or are useful in
any way in connection with the Business as it exists on the Commencement Date
of this Agreement or hereafter carried on by the Company (collectively,
"Intellectual Work Product") shall be the sole and exclusive property of the
Company. The Employee shall promptly disclose to the Company all Intellectual
Work Product, and the Employee shall have no claim for additional
compensation for the Intellectual Work Product.
(ii) From the Commencement Date of this Agreement until it's
termination the Employee acknowledges that all the Intellectual Work Product
that is copyrightable shall be considered a work made for hire under United
States Copyright Law. To the extent that any copyrightable Intellectual Work
Product may not be considered a work made for hire under the applicable
provisions of the United States Copyright Law, or to the extent that,
notwithstanding the foregoing provisions, the Employee may retain an interest
in any Intellectual Work Product that is not copyrightable, the Employee
hereby irrevocably assigns and transfers to the Company any and all right,
title, or interest that the Employee may have in the Intellectual Work
Product under copyright, patent, trade secret, trademark and other
intellectual property laws, in perpetuity or for the longest period otherwise
permitted by law, without the necessity of further consideration. The Company
shall be entitled to obtain and hold tn its own name all copyrights, patents,
trade secrets, and trademarks with respect thereto.
(iii) The Employee shall reveal promptly all information
relating to the Intellectual Work Product to an appropriate officer of the
Company, cooperate with the Company and execute such documents as may be
necessary or appropriate (A) in the event that the Company desires to seek
copyright, patent, trademark or other analogous protection thereafter
relating to the Intellectual Work Product, and when such protection is
obtained, renew and restore the same, or (B) to defend any opposition
proceedings in respect of obtaining and maintaining such copyright, patent,
trademark or other analogous protection.
(iv) In the event that the Company is unable after reasonable
effort to secure the Employee's signature on any of the documents referenced
in Section 7(b)(iii) hereof, whether because of the
-4-
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT - DAVID ALCALA
Employee's physical or mental incapacity or for any other reason whatsoever,
the Employee hereby irrevocably designates and appoints the Company and its
duly authorized officers and agents as the Employee's agent and
attorney-in-fact, to act for and in his behalf and stead to execute and file
any such documents and to do all other lawfully permitted acts to further the
prosecution and issuance of any such copyright, patent, trademark or other
analogous protection with the same legal force and effect as if executed by
the Employee.
(v) The Employee represents that the innovations,
designs, systems, analyses, ideas for marketing programs, and all copyrights,
patents, trademarks and trade names, or similar intangible personal property
identified on SCHEDULE C hereof comprises all of the innovations, designs,
systems, analyses, ideas for marketing programs, and all copyrights, patents,
trademarks and trade names, or similar intangible personal property that the
Employee has made or conceived of prior to the date hereof, and same are
excluded from the operation of the other provisions of this Section 6(b).
7. COVENANT NOT TO COMPETE.
(a) The Employee shall not, anywhere in the world, during the
Term and for a period of two (2) years thereafter (the "Restricted Period"),
do any of the following directly or indirectly without the prior written
consent of the Company in its sole discretion:
(i) engage or participate, directly or indirectly, in
any business activity competitive with the Business or the business of any of
the Company's subsidiaries or affiliates as conducted as of the Commencement
date of this Agreement ("the Neptune Business");
(ii) become interested (as owner, proprietor, promoter,
stockholder, lender, partner, co-venturer, director, officer, employee,
agent, consultant or otherwise) in any person, firm, corporation, association
or or other entity engaged in any business that is competitive with the
Neptune Business except as existed on the Commencement Date of this
Agreement, or become interested in (as owner, stockholder, lender, partner,
co-venturer, director, officer, employee, agent, consultant or otherwise) any
portion of the business of any person, firm, corporation, association or
other entity where such portion of such business is competitive with the
Neptune Business (notwithstanding the foregoing, the Employee may hold not
more than five percent (5%) of the outstanding securities of any class of any
publicly-traded securities of a company that is engaged in the Neptune
Business.
(iii) solicit or call on, either directly or
indirectly in a capacity competitive with the Neptune Business, any (A)
customer with whom the Company shall have dealt at any time during the three
(3) year period immediately preceding the termination of the Employee's
employment hereunder, or (B) supplier or distributor with whom the Company
shall have dealt at any time during the three (3) year period immediately
preceding the termination of the Employee's employment hereunder;
(iv) influence or attempt to influence any supplier,
distributor, customer or potential customer of the Company to terminate or
modify any written or oral agreement or course of dealing with the Company; or
(v) influence or attempt to influence any person either
(A) to terminate or modify the employment, consulting, agency,
distributorship or other arrangement with the Company, or (B) to employ or
retain, or arrange to have any other person or entity employ or retain, any
person who has been employed or retained by the Company as an employee of the
Company at any time during the twelve (12) month period immediately preceding
the termination of the Employee's employment hereunder.
(b) The Employee hereby acknowledges that the limitations as
to time, character or nature and geographic scope placed on his subsequent
employment by this Section 7 are reasonable and fair and will
-5-
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT - DAVID ALCALA
not prevent or materially impair his ability to earn a livelihood.
8. EARLY TERMINATION. The Employee's employment hereunder may be
terminated during the Term upon the occurrence of any one of the events
described in this Section 8. Upon termination, the Employee shall be entitled
only to such compensation and benefits as described in this Section 8.
8.1 TERMINATION FOR DISABILITY.
(a) In the event of the disability of the Employee such
that the Employee is unable to perform the duties and responsibilities
hereunder to the full extent required by this Agreement by reasons of
illness, injury or incapacity for a period of more than one hundred twenty
(120)) consecutive days ("Disability"), the Employee's employment hereunder
may be terminated by the Company provided that such disability is not the
direct result of the Employee performing his duties on behalf of the company
or occurring while performing duties and functions on behalf of the Company
("Work Related Activities"). Should such disability be the direct result of
Work Related Activities then the Employee shall be entitled to compensation
under this Agreement to the extent of continuing health and disability
benefits.
(b) In the event of a termination of the Employee's
employment hereunder pursuant to Section 8.1(a), the Employee will be
entitled to receive all accrued and unpaid (as of the date of such
termination) Base Salary and other forms of compensation and benefits payable
or provided in accordance with the terms of any then existing compensation or
benefit plan or arrangement, including payment prescribed under and
disability of life insurance plan or arrangement in which he is a participant
or to which he is a party as an employee of the Company; provided that the
Employee has complied with all of his obligations under this Agreement and
continues to comply with all of his surviving obligations hereunder listed in
Section 10. Except as specifically set forth in this Section 8.1(b), the
Company shall have no liability or obligation to the Employee for
compensation or benefits hereunder by reason of such termination.
8.2 TERMINATION BY DEATH. In the event that the Employee dies
during the Term, the Employee's employment hereunder shall be terminated
thereby and the Company shall pay to the Employee's executors, legal
representatives or administrators an amount equal to: the accrued and unpaid
portion of the Base Salary and other compensation for the month in which he
dies. Except as specifically set forth in this Section 8.2, the Company shall
have no liability or obligation hereunder to the Employee's executors, legal
representatives, administrators, heirs or assigns or any other person
claiming under or through him by reason of the Employee's death, except that
the Employee's executors, legal representatives or administrators will be
entitled to receive the payment prescribed under any death or disability
benefits plan in which he is a participant as an employee of the Company, and
to exercise any rights afforded under any compensation or benefit plan then
in effect.
8.3 TERMINATION FOR CAUSE.
(a) The Company may terminate the Employee's employment
hereunder at any time for "cause" upon ninety (90) days written notice to the
Employee. For purposes of this Agreement, "cause" shall mean:
(i) any material breach by the Employee of any of
his obligations under this Agreement;
(ii) willful failure by the Employee to perform
satisfactorily the duties required by or appropriate for the Position, as
determined by the President of the Company or the Board of Directors of the
Company in his or its sole reasonable discretion after 90 days written notice
to the employee of the deficiency in performance and development of a
mutually agreed plan to correct such performance shortfalls.
-6-
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT - DAVID ALCALA
(iii) conduct of the Employee involving any type of
disloyalty to the Company or willful misconduct with respect to the Company,
including without limitation fraud, embezzlement, theft or proven dishonesty
in the course of the employment;
(iv) conviction of a felony or other criminal act
punishable by more than one (l) year in prison;
(v) commission by the Employee of an intentional tort or
an act involving moral turpitude or constituting fraud; or
(vi) habitual alcohol or substance abuse or addiction.
(b) In the event of a termination of the Employee's
employment hereunder pursuant to Section 8.3(a), the Employee shall be
entitled to receive all accrued but unpaid (as of the effective date of such
termination) Base Salary, benefits and bonuses. All Base Salary, benefits and
bonuses shall cease at the time of such termination, subject to the terms of
any benefit or compensation plan then in force and applicable to the Employee
as well as a release by the Company of any non-compete covenants contained
anywhere in this Agreement except those restrictions contained in paragraphs
7 (a) (iii) and 7 (a) (iv) and 7 (a) (v). Except as specifically set forth in
this Section 8.3, the Company shall have no liability or obligation hereunder
by reason of such termination.
8.4 TERMINATION WITHOUT CAUSE.
(a) The Company may terminate the Employee's employment
hereunder at any time, for any reason, without cause, upon ninety (90) days
written notice to the Employee except that such termination may not be
performed under the condition of acquisition, merger, or sale of the company
without the full salary, benefits and stock options available under this
Agreement being given to the employee.
(b) In the event of a termination of the Employee's
employment hereunder pursuant to Section 8.4(a), the Employee shall be
entitled to receive all accrued but unpaid (as of the effective date of such
termination) Base Salary, benefits and bonuses, plus a liquidated termination
fee("the Termination Fee") equal to the Employee's normal monthly salary at
the time of the termination times the number of months remaining on this
Agreement or one hundred and sixty thousand dollars ($160,000) whichever is
greater. The payments of the Termination fee will be made on a monthly basis
until the full amount is paid to the Employee.) At the discretion of the
Employee he may waive the payment of Termination Fee for the right to
terminate any and all non-compete provisions of this Agreement in their
entirety no matter where they appear in this Agreement. All Base Salary,
benefits and bonuses shall cease at the time of such termination, subject to
the terms of any benefit or compensation plan then in force and applicable to
the Employee. Except as specifically set forth in this Section 8.4, the
Company shall have no liability or obligation hereunder by reason of such
termination.
8.5 OPTIONS; REPURCHASE OF SHARES.
Upon the termination of the Employee's employment pursuant to
this Section 8 for any reason, all further vesting on all stock options
and/or restricted stock in the Company held by the Employee shall immediately
cease as of such date and thereafter such stock options shall be exercisable
within two (2) calendar years and any restricted stock or other equity
securities held by the Employee shall be subject to repurchase by the Company
at an amount mutually agreed to and determined by an independent appraisal of
the worth of the company done by an outside party acceptable to both parties
to this Agreement. Should the Company file to have an Initial Public
Offerings within fifteen (15) calendar months of early termination of this
Agreement then the Company shall pay an additional amount to the Employee
equal to the difference between the amount already paid under this paragraph
and the share price in the Initial Public Offering.
-7-
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT - DAVID ALCALA
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE EMPLOYEE.
(a) The Employee represents and warrants to the Company that:
(i) There are no restrictions, agreements or
understandings whatsoever to which the Employee is a party which would
prevent or make unlawful the Employee's execution of this Agreement or the
Employee's employment hereunder, or which is or would be inconsistent or in
conflict with this Agreement or the Employee's employment hereunder, or would
prevent, limit or impair in any way the performance by the Employee of the
obligations hereunder; and
(ii) The Employee has disclosed to the Company all
restraints, confidentiality commitments or other employment restrictions that
he has with any other employer, person or entity.
(b) Upon and after his termination or cessation of employment
with the Company and until such time as no obligations of the Employee to the
Company hereunder exist, the Employee (i) shall provide a complete copy of
this Agreement to any prospective employer or other person, entity or
association in the Business, with whom or which the Employee proposes to be
employed, affiliated, engaged, associated or to establish any business or
remunerative relationship prior to the commencement thereof and (ii) shall
notify the Company of the name and address of any such person, entity or
association prior to his employment, affiliation, engagement, association or
the establishment of any business or remunerative relationship.
10. SURVIVAL OF PROVISIONS. The provisions of this Agreement set
forth in Sections 5, 6, 7 (a) (iii), 7 (a) (iv), 7 (a) (v), 8 and 9 through
20 hereof shall survive the termination of the Employee's employment
hereunder.
11. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the Company and the Employee and their
respective successors, executors, administrators, heirs and/or permitted
assigns; provided that neither the Employee nor the Company may make any
assignments of this Agreement or any interest herein, by operation of law or
otherwise, without the prior written consent of the other parties hereto,
except that, without such consent, the Company may assign this Agreement to
any successor to all or substantially all of its assets and business by means
of liquidation, dissolution, merger, consolidation, transfer of assets, or
otherwise, provided that such successor assumes in writing all of the
obligations of the Company under this Agreement.
12. NOTICE. Any notice hereunder by either party shall be given by
personal delivery or by sending such notice by certified mail, return-receipt
requested, or by overnight delivery with a reputable courier service, or
telecopied, addressed or telecopied, as the case may be, to the other party
at its address set forth below or at such other address designated by notice
in the manner provided in this section. Such notice shall be deemed to have
been received upon the date of actual delivery if personally delivered or, in
the case of mailing, two (2) days after deposit with the U.S. mail, or if by
overnight delivery, the date of delivery or, in the case of facsimile
transmission, when confirmed by the facsimile machine report.
If to the Employee:
David E. Alcala
841 Waterside Drive #203
Venice, Florida 34292
If to the Company:
-8-
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT - DAVID ALCALA
Neptune Systems, Inc.
640 Baldwin Tower Boulevard
Eddystone, PA 19022-1392
Attention: Raymond R. Hood
with a copy to:
Pepper, Hamilton & Scheetz
1235 Westlakes Drive
Suite 400
Berwyn,PA 19312
Attention: Christopher F. Wright, Esquire
13. ENTIRE AGREEMENT; AMENDMENTS. This Agreement contains the
entire agreement and understanding of the parties hereto relating to the
subject matter hereof, and merges and supersedes all prior and
contemporaneous discussions, agreements and understandings of every nature
between the parties hereto relating to the employment of the Employee with
the Company. This Agreement may not be changed or modified, except by an
agreement in writing signed by each of the parties hereto.
14. WAIVER. The waiver of the breach of any term or provision of
this Agreement shall not operate as or be construed to be a waiver of any
other or subsequent breach of this Agreement.
15. GOVERNING LAW. This Agreement shall be construed and enforced
in accordance with the laws of the Commonwealth of Pennsylvania, without
regard to the principles of conflicts of laws of any jurisdiction.
16. INVALIDITY. If any provision of this Agreement shall be
determined to be void, invalid, unenforceable or illegal for any reason, then
the validity and enforceability of all of the remaining provisions hereof
shall not be affected thereby. If any particular provision of this Agreement
shall be adjudicated to be invalid or unenforceable, then such provision
shall be deemed amended to delete therefrom the portion thus adjudicated to
be invalid or unenforceable, such amendment to apply only to the operation of
such provision in the particular jurisdiction in which such adjudication is
made; provided that, if any provision contained in this Agreement shall be
adjudicated to be invalid or unenforceable because such provision is held to
be excessively broad as to duration, geographic scope, activity or subject,
then such provision shall be deemed amended by limiting and reducing it so as
to be valid and enforceable to the maximum extent compatible with the
applicable laws of such jurisdiction, such amendment only to apply with
respect to the operation of such provision in the applicable jurisdiction in
which the adjudication is made.
17. SECTION HEADINGS. The section headings in this Agreement are
for convenience only; they form no part of this Agreement and shall not
affect its interpretation.
18. NUMBER OF DAYS. In computing the number of days for purposes
of this Agreement, all days shall be counted, including Saturdays, Sundays
and legal holidays; provided that, if the final day of any time period falls
on a Saturday, Sunday or day which is a legal holiday in Pennsylvania, then
such final day shall be deemed to be the next day which is not a Saturday,
Sunday or legal holiday.
19. SPECIFIC ENFORCEMENT; EXTENSION OF PERIOD.
(a) The Employee acknowledges that the restrictions contained
in Sections 5, 6, and 7 hereof are reasonable and necessary to protect the
legitimate interests of the Company and its affiliates and that the Company
would not have entered into this Agreement in the absence of such
restrictions. The Employee also acknowledges that any breach by him of
Sections 5, 6, or 7 hereof will cause continuing and irreparable injury to
the Company for which monetary damages would not be an adequate remedy. The
Employee shall not, in any
-9-
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT - DAVID ALCALA
action or proceeding to enforce any of the provisions of this Agreement,
assert the claim or defense that an adequate remedy at law exists. In the
event of such breach by the Employee, the Company shall have the right to
enforce the provisions of Sections 5, 6, and 7 of this Agreement by seeking
injunctive or other relief in any court, and this Agreement shall not in any
way limit remedies of law or in equity otherwise available to the Company.
(b) The periods of time set forth in Sections 5, 6 and 7
hereof shall not include, and shall be deemed extended by, any time required
for litigation to enforce the relevant covenant periods, provided that the
Company is successful on the merits in any such litigation. The "time
required for litigation" is herein defined to mean the period of time
commencing on the earlier of the Employee's first breach of such covenants or
the service of process upon the Employee ending on the expiration of all
appeals related to such litigation.
20. CONSENT TO SUIT. In the case of any dispute under or in
connection with this Agreement, the Employee may only bring suit against the
Company in the Courts of the Commonwealth of Pennsylvania in and for the
County of Philadelphia or in the Federal District Court for such geographic
location. The Employee hereby consents to the jurisdiction and venue of the
courts of the Commonwealth of Pennsylvania in and for the County of
Philadelphia or the Federal District Court for such geographic location,
provided that such Federal Court has subject matter jurisdiction over such
dispute, and the Employee hereby waives any claim he may have at any time as
to FORUM NON CONVENIENS with respect to such venue. The Company shall have
the right to institute any legal action arising out of or relating to this
Agreement in any appropriate court and in any jurisdiction. Any judgment
entered against either of the parties in any proceeding hereunder may be
entered and enforced by any court of competent jurisdiction. If an action at
law or in equity is necessary to enforce or interpret the terms of this
Agreement, the prevailing party shall be entitled to recover, in addition to
any other relief, reasonable attorneys' fees, costs and disbursements.
21. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which
together shall be deemed to be one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the day and year first written above.
NEPTUNE SYSTEMS, INC.
By: /s/ Raymond Hood
----------------------------------
Title: PRESIDENT & CEO
/s/ David E. Alcala
----------------------------------
DAVID E. ALCALA
-10-
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT - DAVID ALCALA
SCHEDULE A
DUTIES
The duties of the Employee shall include but not be limited to:
1. Directing the strategic sales and marketing operations of the Company;
2. Participating in the Executive Committee to formulate and execute
company policy
3. Providing direction to the Executive Committee on product direction.
4. Seeking out companies and products which are viable candidates for
acquisition or merger by the Company
5. Working with the President/CEO on day to day operation of the Company
6. Setting pricing policies for Company products and services
7. Reviewing, negotiating, and binding the Company in contracts and
agreement with customers
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT - DAVID ALCALA
SCHEDULE B
NEPTUNE SYSTEMS, INC.
1996 INCENTIVE AND QUALIFIED STOCK OPTION PLAN
[TO BE ATTACHED]
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT - DAVID ALCALA
SCHEDULE C
PRIOR INVENTIONS OF DAVID E. ALCALA
1. It is hereby disclosed that David E. Alcala and Kristine A. Alcala are
officers and owners of a corporate entity known as Manufacturing Technology
Associates, a State of Wisconsin Corporation, and that further that company
owns and has marketed a MRPII Manufacturing Requirements Planning
System/Financial System known under the trade name PACS/FACS (Planning and
Control System/Financial Accounting Control System), and further that under a
previous corporate entity know as Manufacturing Resource Management the PACS
product was sold to Arthur Andersen and Company who sold the product to the
general public under the operations of Andersen Consulting with the trade
name MACPAC, and further that PACS/FACS is a copyrighted work containing
substantial amounts of inventory control, stock location, and distribution
logic which can operate on the IBM AS/400, HP/9000 and IBM RS/6000 family of
computers David E. Alcala is a key designer and architect of the logic
contained in this system.
<PAGE>
NEPTUNE SYSTEMS, INC.
FIRST AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT
This First Amendment (this "Amendment") is dated September 11, 1997 by
and between David E. Alcala (the "Employee") and Neptune Systems, Inc. (the
"Company") and amends the Executive Employment Agreement dated as of November
18, 1996 between the Employee and the Company (the "Agreement").
WHEREAS, the Employee and the Company entered into the Agreement
pursuant to which the Employee was granted and was to be granted certain
incentive stock options in the Company;
WHEREAS, the Company is currently in negotiations with Dallas Systems
Corporation, General Atlantic Partners and EXE Technologies, Inc. with
respect to the merger of both the Company and Dallas with and into EXE
Technologies (the "Merger"); and
WHEREAS, the parties desire to amend the Agreement regarding the option
grants and to clarify the Agreement regarding the impact of the Merger.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein and intending to be legally bound hereby, the parties agree as follows:
1. DEFINITIONS. All capitalized terms used in this Amendment shall
have the same meaning as those contained in the Agreement unless otherwise
defined herein.
2. RECEIPT OF INITIAL OPTION. The Employee acknowledges that as stated
in Section 4.3.(a) of the Agreement the employee was granted an Incentive
Stock Option (the "Initial Option") dated November 18, 1996, to purchase
300,000 shares of the Class B Common Stock, $.001 par value per share, of the
Company at the fair market value of.75 cents per share.
3. ACCELERATION OF VESTING. The Company acknowledges that upon the
consummation of the Merger, the Initial Option will become fully vested
pursuant to Section 4.3(b) of the Agreement and that as of the date on which
the Merger is effective the Employee may upon demand execute any or all of
the options at anytime time the Employee desires.
4. THE SECOND OPTION GRANT. Promptly after the consummation of the
Merger, the successor in interest to the Company as a result of the Merger
(the "Surviving Corporation") shall grant to the Employee an incentive stock
option (the "Second Option") to purchase 39,583 total shares of the Class B
Common Stock, $.01 par value per share, of the Surviving Corporation. The
exercise price of the Second Option shall be fixed at a fare market price of
<PAGE>
Two Dollars ($2.00) per share. The Second Option shall be fully vested on the
date of issuance of the Second Option. The Second Option shall be subject to
and in accordance with provisions of the 1996 Stock Option Plan of the
Company or any successor Plan adopted by the Surviving Corporation (the
"Plan"), provided that if this Amendment or the Agreement conflicts with the
language and provisions in the Plan, then the Agreement as amended shall
govern. The Employee acknowledges that upon the issuance of the Second
Option, the Company has no further obligation to issue any additional options
to the Employee pursuant to Section 4.3(a) of the Agreement.
5. TERMINATION OF 4.3(c). The parties acknowledge that notwithstanding
anything to the contrary contained in the Agreement, Section 4.3(c) of the
Agreement is hereby terminated in its entirety.
6. THE THIRD OPTION GRANT. Promptly after the consummation of the
Merger, the Surviving Corporation shall grant to the Employee an incentive
stock option (the "Third Option") to purchase 200,000 shares of the Class B
Common Stock, $.01 par value per share, of the Surviving Corporation. The
exercise price of the Third Option shall be at the fair market value of Two
Dollars ($2.00) per share. The Third Option shall vest as follows: 10,417 of
the shares shall vest on [January 1], 1999; 66,667 of the shares shall vest
on [January 1], 2000; 66,667 of the shares shall vest on [January 1], 2001;
and 58,250 of the shares shall vest on [January 1], 2002. The Third Option
shall be subject to and in accordance with the provisions of the Plan,
provided that if this Amendment or the Agreement conflicts with the language
and provisions in the Plan, then the Agreement as amended shall govern.
7. EFFECT OF MERGER. The parties acknowledge that upon the
consummation of the Merger, the Agreement shall be binding upon each of the
Employee and the Surviving Corporation as a result of the Merger.
8. MISCELLANEOUS.
(a) The Agreement shall remain in full force and effect, subject
only to the changes herein specified.
(b) The Agreement, as modified by this Amendment, constitutes the
entire understanding between the parties with respect to the subject matter
hereof and supersedes any prior understandings and/or written or oral
agreements between them.
(c) All references to the Agreement in any other documents, shall
mean the Agreement as amended hereby and from time to time hereafter in
writing.
-2-
<PAGE>
(d) This Amendment shall be governed by the laws of the
Commonwealth of Pennsylvania, without regard to the principles of conflicts
of laws of any jurisdiction.
IN WITNESS WHEREOF, the parties have executed this Amendment on the date
first above written.
NEPTUNE SYSTEMS, INC.
/s/ David E. Alcala
- -------------------------- By: /s/ Raymond Hood
DAVID E. ALCALA ---------------------------------
Title: President
---------------------------------
-3-
<PAGE>
Triton SystemHouse Employment Agreement
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is hereby entered into between Triton
SystemHouse Pte. Ltd. ("Employer") and Mark R. Weaser ("Employee").
WHEREAS, the Employer is presently engaged in a business that requires the
assistance of individuals with Employee's executive qualifications, skills and
experience, and
WHEREAS, the Employer desires to procure the services of Employee and
Employee is willing to enter into the employ of the Employer upon the terms and
subject to the conditions set forth herein, and
WHEREAS, the parties believe it is in their mutual interest to address in
this Agreement certain of their rights and responsibilities arising out of such
employment relationship, including matters pertaining to compensation,
ownership and protection of valuable confidential and proprietary information
of Employer, certain restrictions on business practices of Employee reasonably
needed to protect the Employer's legitimate business interests and other
important considerations addressed herein.
NOW THEREFORE, for adequate consideration and intending to be legally
bound, the Employer hereby employs Employee, and the Employee hereby accepts
such employment with the Employer, upon the following terms and conditions:
1. EMPLOYMENT POSITION.
(a) INITIAL DUTIES. Employer hereby employs Employee to render services
to the Employer in the capacity of a General Manager and, in connection with
those services, Employee agrees to devote its full-time attention and efforts
to perform such duties and any incidental or further services as would normally
be expected of an employee working in Employee's capacity, as reasonably
determined by the Employer (see attached Job Description).
(b) CHANGES IN DUTIES. Employee hereby accepts employment with
Employer in the capacity described in the attached Job Description referenced
in 1(a). Employer may from time to time change Employee's duties or re-assign
Employee to another position or location, according to Employer's business
needs.
(c) OUTSIDE BUSINESS ACTIVITIES. As a full-time employee, the Employee
is expected to devote full-time attention and effort to the furtherance of
Employer's business interests and not to engage in any outside business
activities that would interfere with such work. Employee shall provide
Employer advance written notice and full disclosure of any outside business
activity that Employee desires to pursue ("Outside Business") to permit
Employer to determine whether the Outside Business relates to the Employer's
own business or to the actual or demonstrably anticipated research or
development of Employer's business. If approved by Employer, the Employee may
conduct such Outside Business, but entirely on Employee's own time and without
using any of Employer's equipment, supplies, facilities or Confidential or
Proprietary Information. Employer shall maintain in confidence any trade
secrets disclosed by Employee with respect to an Outside Business approved by
Employer. The Employee's pursuit of any Outside Business in no way waives or
otherwise relaxes the requirements of Section 4 ("Confidential & Proprietary
Information"), Section 5 ("Restrictions on Certain Business Practices") or
Section 8 ("No Conflicts").
2. TERM. The term of this Agreement ("Term") shall commence July 31, 1996
and shall continue in full force and effect until terminated in accordance with
Section 9 ("Termination").
3. COMPENSATION. Employee shall be compensated for its services as follows:
(a) BASE COMPENSATION. During the Term hereof, Employee shall receive a
salary in the amount of (see attached Compensation Schedule) per annum ("Base
Compensation"), payable monthly. The Base Compensation shall from time to time
be increased (i) automatically, by such cost of living adjustments as the
Employer may grant other employees in comparable positions and (ii) at the sole
discretion of the Employer in accordance with Subsection (c)("Compensation
Review").
(b) INCENTIVE COMPENSATION. Any incentive compensation payable to the
Employee beyond Base Compensation shall be determined from time to time by
Employer in its sole judgment.
1
<PAGE>
Triton SystemHouse Employment Agreement
(c) EMPLOYEE BENEFITS. During the Term hereof, Employee shall be covered
by such major medical, health benefit, pension and vacation plans or allowances
as are generally made available by Employer to other employees of similar status
and service and shall be eligible to participate in any stock option, stock
bonus or profit sharing or similar plans of the Employer under the terms of
any such plans.
(d) CERTAIN OUT-OF-POCKET COSTS. Employee shall be reimbursed for
pre-authorized costs of travel and other expenses incurred by Employee while
performing the services contemplated hereunder to the extent reimbursable under
Employer's travel policies from time to time in effect, Employee agrees to
comply with all reasonable authorization, recordkeeping and substantiation
requirements of Employer.
(e) COMPENSATION REVIEW. The Employee's job performance and
compensation shall be reviewed by the Employer after each anniversary date of
the Agreement.
4. CONFIDENTIAL & PROPRIETARY INFORMATION.
(a) "CONFIDENTIAL & PROPRIETARY INFORMATION" DEFINED. Employee hereby
acknowledges that during the period of employment and in rendering the services
contemplated herein, Employee may be exposed to confidential and proprietary
information belonging to the Employer or relating to its affairs. Such
information may include, without limitation, technical information (including
functional and technical specifications, designs, drawings, analysis,
research, processes, computer programs, algorithms, methods, ideas, "know how"
and the like), business information (sales and marketing research, materials,
plans, accounting and financial information, personnel records and the like),
Employee Work Product described in Subsection (b)("Employee Work Product") and
other information designated as confidential or proprietary expressly or by the
circumstances in which it is provided or created ("Confidential & Proprietary
Information"). Confidential & Proprietary Information does not include (i)
information already known or independently developed by the Employee after the
effective date hereof in compliance with Section 1(c)("Outside Business
Activities"); (ii) information in the public domain through no wrongful act of
the Employee or (iii) information received by the Employee outside the scope of
employment hereunder from a third party who was free to disclose it.
(b) "EMPLOYEE WORK PRODUCT" DEFINED. Employee hereby acknowledges that
during the period of employment, Employee may conceive, discover, reduce to
practice, create, author or develop certain works, inventions, ideas,
discoveries or improvements ("Work") that (i) result from services performed
by the Employee under or in anticipation of this Agreement or (ii) relate at
such time to the Employer's business or to the actual or demonstrably
anticipated research or development of the Employer's business (collectively,
"Employee Work Product"), Employee Work Product does not include any Work of
Employee authorized by Employer in accordance with Section 1(c)("Outside
Business Activities").
(c) OWNERSHIP ASSIGNMENT. Employee hereby acknowledges and agrees that
(i) Employer is the exclusive owner of all Confidential & Proprietary
Information and (ii) all Employee Work Product constitutes "work made for
hire" owned exclusively by Employer and, alternatively, Employee hereby
irrevocably assigns all patent, copyright, trade secret, ownership or other
rights it might have in Employee Work Product to the Employer. Employee
shall, during the Term hereof or at any time thereafter upon request, execute
any domestic or foreign applications assignments or other documents needed to
vest or confirm ownership of Employee Work Product exclusively in Employer.
(d) COVENANT NOT TO DISCLOSE. With respect to all Confidential &
Proprietary Information (including Employee Work Product), the Employee
hereby agrees that during the Term of this Agreement and at all times
thereafter it shall not use, commercialize or disclose such Confidential &
Proprietary Information to any person or entity unless specifically
authorized by Employer. Employee shall use at least the same degree of care
in safeguarding the Confidential & Proprietary Information as it uses in
safeguarding its own confidential information, but in no event shall Employee
exercise less that due diligence and care. Employee shall not alter or
remove from any Confidential & Proprietary Information any proprietary,
patent, copyright, trademark or trade secret legend, nor may it attempt to
decompile or reverse engineer such Confidential & Proprietary Information.
Upon termination of employment, or at any time upon the request of the
Employer, the Employee shall promptly return to the Employer or account for
all Confidential & Proprietary Information in its possession or control and
shall cease all further use thereof. The provisions of this Section 4
("Confidential & Proprietary Information") shall survive termination of this
Agreement.
5. RESTRICTION ON CERTAIN BUSINESS PRACTICES.
2
<PAGE>
Triton SystemHouse Employment Agreement
(a) NONSOLICITATION. During the Term hereof and for a period of six (6)
months thereafter, the Employee agrees (i) not to solicit the trade of, or
trade with, any customer or supplier of the Employer for any business purpose
other than for the benefit of the Employer, and (ii) not to hire, solicit,
nor attempt to solicit, the services of any employee or contractor of the
Employer without the prior written consent of the Employer.
(b) NONCOMPETITION. In addition to other restrictions imposed by this
Agreement, Employee covenants and agrees during the period of employment and
for six (6) months thereafter, not to engage, directly or indirectly, whether
as principal, agent, owner, employee, contractor or otherwise, individually or
in combination with any other individual, corporation or entity, in any
business which competes directly with, an actively operated business of
Employer selling the same or substantially similar products or services sold
by Employee on behalf of Employer within 6 months prior to termination
hereunder.
(c) SEVERANCE. If Employer terminates Employee without cause, Employer
will pay total compensations for six (6) months after the termination date.
6. REMEDIES. Employee acknowledges and agrees that the Employer would be
irreparably harmed and that remedies at law would be inadequate to redress
the actual or threatened violations of Section 4 ("Confidential & Proprietary
Information") or Section 5 ("Restrictions on Certain Business Practices") and
that, in addition to other relief, the foregoing restrictions may be enforced
by temporary and permanent injunctive relief. The time periods referenced in
the foregoing restrictions shall be extended by any period in which Employee
is in breach thereof. The Employer's breach of any provision of this
Agreement shall not constitute a defense for any violation by Employee of the
foregoing restrictions. Remedies referenced in this Agreement shall be
considered cumulative and not exclusive. Employee agrees to pay all costs
and expenses (including reasonable attorneys' fees) incurred by Employer in
enforcing the foregoing restrictions.
7. MINIMUM REQUIREMENTS OF LAW. The Employee acknowledges that the
provisions of Section 4 ("Confidential & Proprietary Information"), Section 5
("Restrictions on Certain Business Practices") and Section 6 ("Remedies") are
agreed to on the basis of adequate and substantial consideration, are
reasonably designed to protect legitimate and essential business interests
of Employer and that such provisions should be given full force and effect.
If, however, any such provision is found by a tribunal of competent
jurisdiction to be illegal or unenforceable in whole or in part then, to such
extent, the parties desire that the offending provision shall automatically
be deemed modified and conformed to the minimum requirements of law and
thereupon, together with all other provisions hereof (whether in their
original form or as modified hereunder), be given full force and effect.
8. NO CONFLICTS. Except to the extent made known to Employer by Employee
prior to the effective date hereof, Employee represents and warrants that (i)
it possesses the knowledge and skill reasonably required to render the
services contemplated hereunder in a professional and workmanlike manner,
(ii) it is not restricted by any other contract or other limitation of any
kind that would prevent or otherwise inhibit Employee from rendering the
services contemplated hereunder, (iii) in rendering the services hereunder,
Employee will not use any pre-existing work or divulge any information of any
previous employer or third party that would violate or infringe any patent,
copyright, trade secret or other proprietary rights of such employer or third
party and agrees at its own expense to defend, indemnify and hold Employer
harmless from any claim to the contrary, (iv) if the services contemplated
herein require Employee to obtain or maintain security or other background
clearance, then the employment contemplated herein is expressly conditioned
upon Employee's timely obtaining and maintaining such clearance during the
Term hereof, (v) Employee shall abide by Employer's generally applicable
rules and regulations from time to time in effect.
9. TERMINATION. Either party may terminate this Agreement if the other
party breaches any material provision hereof and fails within ten (10) days
after receipt of notice of default to correct such default or to commence
corrective action reasonably acceptable to the aggrieved party and proceed
with due diligence to completion. IN ADDITION, IT IS AGREED THAT THIS
RELATIONSHIP CONSTITUTES "EMPLOYMENT AT WILL" AND THAT EITHER PARTY MAY AT
ANY TIME TERMINATE THIS AGREEMENT WITH OR WITHOUT CAUSE UPON TWO (2) WEEKS'
ADVANCE WRITTEN NOTICE OR EQUIVALENT COMPENSATION IN LIEU OF SUCH NOTICE.
Termination of this Agreement, whether for cause, without cause, upon
expiration of the Term or otherwise, shall have no effect on the parties'
rights and obligations with respect to Section 4 ("Confidential & Proprietary
Information"), Section 5 ("Restrictions on Certain Business Practices") or
Section 8 ("No Conflicts").
10. DISPUTES, CHOICE OF LAW. Except for certain emergency judicial relief
authorized under Section 6 ("Remedies") which may be brought at any time, the
parties agree that all disputes between them shall first be subject to the
notice procedures in Section 9 ("Termination"), Employee shall initiate any
action to enforce this Agreement within one (1) year after the occurrence of
the alleged breach. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE REPUBLIC OF SINGAPORE AND ANY
ACTION OR OTHER PROCEEDING SHALL BE INITIATED AND MAINTAINED IN A FORUM OF
COMPETENT JURISDICTION IN SUCH COUNTRY.
3
<PAGE>
Triton SystemHouse Employment Agreement
11. MISCELLANEOUS. This document constitutes the entire agreement between
the parties with respect to the subject matter hereof, supersedes all other
communications, whether written or oral and is binding upon Employee and
Employee's successors, heirs, executors, legal representatives and
permitted assigns. This Agreement may be modified or amended only by a
writing signed by the party against whom enforcement is sought. Except as
specifically permitted herein, neither this Agreement nor any rights or
obligations hereunder may be transferred or assigned without the other
party's prior written consent and any attempt to the contrary shall be void;
provided, however, that Employer may assign this Agreement to any corporate
successor-in-interest or to any affiliate of Employer upon the reassignment
of Employee to such entity in accordance with Section 1(b) ("Changes in
Duties"). Any provision hereof found by a tribunal of competent jurisdiction
to be illegal or unenforceable shall be automatically conformed to the
minimum requirements of law and all other provisions shall remain in full
force and effect. Waiver of any provision hereof in one instance shall not
preclude enforcement thereof on future occasions. Headings are for reference
purposes only and have no substantive effect.
EMPLOYEE ACKNOWLEDGES THAT IT HAS READ THIS AGREEMENT IN ITS ENTIRETY AND
HEREBY AGREES TO BE BOUND BY ITS TERMS.
IN WITNESS WHEREOF, for consideration the adequacy of which is hereby
acknowledged and intending to be legally bound, the parties hereto have
caused this Agreement to be executed on the date last below written.
TRITON SYSTEMHOUSE PTE. LTD.
By: /s/ Raymond R. Hood
Name: Raymond R. Hood
Title: Managing Director
Dated: 12/7/96
EMPLOYEE:
By: /s/ Mark Weaser
Name: MARK WEASER
Date: 12/7/96
4
<PAGE>
COMPENSATION WORKSHEET-MARK WEASER
(FIGURES IN SINGAPORE DOLLARS)
<TABLE>
<S> <C> <C>
BASE:
Salary $ 181,399.70
Payable Monthly
Per month $ 13,449.98
BONUS:
Guarantee One Month Salary 13th month
Additional Discretion of Management
--
BENEFITS:
Medical Company standard medical policy
Car Allowance pick up current lease or sign new ones
Housing Allowance 7,000 month
COLA 4,550 month
Total Monthly Compensation 25,000
Total Annual Compensation 300,000
FIGURES BELOW IN U.S. DOLLARS
OTHER: 0.375%
Stock Option Program 37,500 Shares of Neptune stock (restricted common)
Current Value Per Share $ 2.66 Current Neptune VC Valuation
Current Value of Options $ 99,750
Projected Min per Share in 24 months $ 10.00 Minimum value to go public
Projected Min Options Value in 24 months $ 375,000
Projected Min per Share in 36 months $ 16.00 Minimum value to go public
Projected Min Options Value in 36 months $ 562,500
Vesting 36 Months, cliff vesting
Dilution Protection Piggyback deal protects you
Fuji SystemHouse to create equivalent option offer as above.
</TABLE>
AGREED:
TRITON SYSTEMHOUSE PTE. LTD
By: /s/ Raymond R. Hood
Name: Raymond R. Hood
Date: 12/7/96
EMPLOYEE:
By: /s/ Mark Weaser
Name: MARK WEASER
Date: 12/7/96
Page 1
<PAGE>
Triton SystemHouse
EXECUTIVE EMPLOYMENT AGREEMENT
AMENDMENT I
THIS AMENDMENT TO THE EMPLOYMENT AGREEMENT BETWEEN Triton SystemHouse
("Employer") and Mark R. Weaser ("Employee") dated December 7, 1996 is made
as of the 5th day of March, 1997.
WHEREAS, the Employer's corporate parent desires to grant stock options
("The Option") to its key employees and the key employees of its
subsidiaries; and
WHEREAS, the Employer desires to pay incentive compensation to the
Employee according to a performance based formula derived from the Employer's
financial results; and
WHEREAS, the Employee desires to hold such stock options and to receive
incentive compensation;
NOW, THEREFORE, in consideration of the mutual covenants and obligations
contained herein, and intending to be legally bound, the parties, subject to
the terms and conditions set forth herein, agree as follows:
1.0 EQUITY PARTICIPATION.
(a) The Company shall grant to the Employee an incentive stock
option to purchase THREE PERCENT (.0075%) OF THE TOTAL SHARES OF THE CLASS B
(RESTRICTED VOTING AND TRANSFER RIGHTS) COMMON STOCK OF THE COMPANY EQUAL TO
75,000 SHARES OF COMMON STOCK) at a par value $ .001 per share. The Company
plans to offer an additional 2,345,679 shares in two offerings to private
investors in early 1997. This grant will be adjusted on a pro-rata basis to
maintain the .0075% ratio on outstanding shares. If the offering is fully
subscribed this will result in an additional 17,593 options being issue to
the Employee. There will be no dilution protection after this supplemental
grant. The Option shall vest as follows: 1/3 of the shares shall vest on the
Commencement Date of this Agreement, AND ADDITIONAL 1/3 shares shall vest on
the first anniversary of the Commencement Date of this Agreement and AN
ADDITIONAL 1/3 shall vest on the second anniversary of the Commencement Date
of this Agreement. The exercise price of the Option shall be fixed at
seventy-five (75) cents per share. The Option shall be subject to and in
accordance with the provisions of the 1997 Stock Option Plan of the Company
(the "Plan") substantially in the form attached hereto as SCHEDULE B however
where this Agreement is different then the language and provisions in this
Agreement shall govern.
(b) Notwithstanding the foregoing, the Option shall become
fully vested upon the occurrence of one of the following events: (a) the sale
of the Company to
<PAGE>
an unrelated third party by way of merger, sale of assets or sale of capital
stock of the Company, (b) the sale by the Company of more than seventeen
percent (17%) of its outstanding Common Stock on a fully-diluted basis to an
unrelated third party (excluding any sales to venture funds currently under
consideration by the Company with whom discussions began prior to the
Commencement Date of this Agreement), or (c) the filing by the Company of a
registration statement on Form S-1 in connection with an underwritten initial
public offering.
(c) In addition to the foregoing Option, if the Company
completes an underwritten initial public offering of its Common Stock within
three (3) years from the date of this Agreement with an enjoys a market cap
of $200 million or more during it's first day of trading as a public company,
then the Employee shall be entitled to receive an additional option for
50,000 shares of the Class B Common Stock of the Company calculated on a like
basis with the Option granted above in paragraph 1.0 (a) ("the IPO Option").
These options shall be granted on the day after the Initial Public Offering
and are fix priced at seventy-five cents (75) per share.
(d) All shares of Common Stock issued under the Option or the
IPO Option shall be subject to the terms and provisions of
a Stock Purchase and Restriction Agreement as required by
the Plan.
2.0 INCENTIVE COMPENSATION
During the term of this Agreement and within thirty (30) calendar days of the
end of each business quarter as defined by the Company the Employee shall
receive an amount equal to two percent (2%) of the Gross Margin booked for
all new business in the ASEAN operations of the company. In addition the
Employee shall receive a like amount for all new business booked outside
ASEAN operations for which the Employee was directly responsible and managed
and directed the activities. For the purposes of clarity the Employee and
Company shall put in place a margin booking form acceptable to the both
parties to aid in this calculation. For purposes of this Section 2.0 "Gross
Margin" shall mean OPERATING REVENUE LESS DIRECT MARKETING COSTS (INCLUDING
ALL SALARIES, COMMISSIONS, AND OTHER COMPENSATION OF SALES PEOPLE),
ADVERTISING, TRADE SHOW EXPENSES AND OTHER EXPENSES DEEMED BY THE EXECUTIVE
COMMITTEE TO BE REASONABLY ATTRIBUTABLE TO ONGOING SALES EFFORT. (SEE
ATTACHED SCHEDULE FOR LIST OF ACCOUNTS).
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed as of the day and year first written above.
<PAGE>
Triton SystemHouse Pte. Ltd.
By:
-------------------------------------
Title: Director (date)
-------------------------------------
Mark R. Weaser (date)
<PAGE>
SCHEDULE A
NEPTUNE SYSTEMS, INC.
1996 INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN
[TO BE ATTACHED]
<PAGE>
TRITON SYSTEMHOUSE PTE. LTD.
RESTATED AMENDMENT TO EXECUTIVE EMPLOYMENT
AGREEMENT
This Restated Amendment (this "Restated Amendment") is dated September 12,
1997 by and between Mark R. Weaser (the "Employee") and Triton SystemHouse
Pte. Ltd. (the "Employer") and amends that certain Executive Employment
Agreement dated as of July 12, 1996 between the Employee and the Company (the
"Agreement").
WHEREAS, the Employee and the Employer entered into an Amendment I to the
Agreement dated September 14th 1997 ("Amendment I"), pursuant to which the
Employee was granted and was to be granted certain incentive stock options in
the Neptune Systems, Inc., the parent company of the Employer ("Neptune");
WHEREAS, the Employee and the Employer entered into an Addendum to the
Agreement dated July 25, 1997, pursuant to which the Employee was granted and
was to be granted certain additional incentive stock options in the Neptune
(the "Addendum");
WHEREAS, Neptune is currently in negotiations with Dallas Systems
Corporation, General Atlantic Partners and EXE Technologies, Inc. with
respect to the merger of both the Company and Dallas with and into EXE
Technologies (the "Merger"); and
WHEREAS, the parties desire to amend the Agreement regarding the option
grants and to clarify the Agreement regarding the impact of the Merger.
NOW, THEREFORE, in consideration of the mutual covenants set forth herein and
intending to be legally bound hereby, the parties agree as follows:
1. DEFINITIONS. All capitalized terms used in this Amendment shall
have the same meaning as those contained in the Agreement unless
otherwise defined herein.
2. RECEIPT OF INITIAL OPTION. The Employee acknowledges the receipt of
an Incentive Stock Option (the "Initial Option") dated March 1,
1997, to purchase 75,000 shares of the Class B Common Stock, $.001
par value per share, of the Company.
3. ACCELERATION OF VESTING. The Company acknowledges that upon the
consummation of the Merger, the Initial Option will become fully
vested.
4. TERMINATION OF AMENDMENT I AND THE ADDENDUM. The parties
acknowledge that notwithstanding anything to the contrary contained
in the Agreement, Amendment I or the Addendum, Amendment I and the
Addendum are hereby terminated in their entirety, provided that
paragraph 2.0 of amendment I shall survive such termination.
5. THE SECOND OPTION GRANT. Promptly after the consummation of the
Merger, the Employer shall cause the successor in interest to
Neptune as a result of the Merger (the "Surviving Corporation") to
grant to the Employee an incentive stock option (the "Second
Option") to purchase 9,896 total shares of the Class B Common
Stock, $.01 par value per share, of
<PAGE>
the Surviving Corporation. The exercise price of the Second Option
shall be fixed at Two Dollars ($2.00) per share. The Second Option
shall vest on the date of issuance of the Second Option. The Second
Option shall be subject to and in accordance with provisions of the
1996 Stock Option Plan of Neptune or any successor Plan adopted by
the Surviving Corporation (the "Plan"), provided that if this
Amendment conflicts with the language and provisions in the Plan,
then this Amendment shall govern.
6. THE THIRD OPTION GRANT. Promptly after the consummation of the
Merger, the Employer shall cause the Surviving Corporation to grant
to the Employee an incentive stock option (the "Third Option") to
purchase 50,000 shares of the Class B Common Stock, $.01 par value
per share, of the Surviving Corporation. The exercise price of the
Third Option shall be Two Dollars ($2.00) per share. The Third
Option shall vest as follows: 25,000 of the shares shall vest on
the date of issuance of the Third Option, 12,500 of the shares
shall vest on the first anniversary of this Restated Amendment, and
12,500 of the shares shall vest on the second anniversary of this
Restated Amendment. The Third Option shall be subject to and in
accordance with the provisions of the Plan, provided that if this
Amendment conflicts with the language and provisions of the Plan,
then this Amendment shall govern.
7. EFFECT OF MERGER. The parties acknowledge that upon the
consummation of the Merger, the Agreement shall be binding upon
each of the Employee and the Surviving Corporation as a result of
the Merger.
8. Miscellaneous.
(a) The Agreement shall remain in full force and effect, subject
only to the changes herein specified.
(b) The Agreement, as modified by this Amendment, constitutes
the entire understanding between the parties with respect to the
subject matter hereof and supersedes any prior understandings
and/or written or oral agreements between them.
(c) All references to the Agreement in any other documents,
shall mean the Agreement as amended hereby and from time to time
hereafter in writing.
(d) This Amendment shall be governed by the laws of the
Commonwealth of Pennsylvania, U.S.A. without regard to the
principles of conflicts of laws of any jurisdiction.
IN WITNESS WHEREOF, the parties have executed this Amendment on the date first
above written.
TRITON SYSTEMHOUSE PTE. LTD.
SEPT. 14, 1997
/s/ Mark R. Weaser By: /s/ Raymond Hood
- ------------------------ -----------------------------
MARK R. WEASER
Title:
----------------------------------
-2-
<PAGE>
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
EXE TECHNOLOGIES, INC.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made as of the 17th day of November,
1997 by and between C. Donald Scales, a resident of the state of Texas (the
"Employee"), and EXE Technologies, Inc., a corporation organized and existing
under the laws of the State of Delaware (the "Company").
WHEREAS, the Company is engaged in the business of providing supply
chain execution software and related services to the warehouse, distribution and
logistics industries worldwide (the "Business"); and
WHEREAS, the Company desires to employ the Employee and the Employee
desires to be employed by the Company for a period of time in the future upon
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations contained herein, and intending to be legally bound, the parties,
subject to the terms and conditions set forth herein, agree as follows:
1. EMPLOYMENT AND TERM.
(a) The Company hereby employs the Employee and the Employee
hereby accepts employment with the Company for the position detailed in Schedule
A attached hereto (the "Position"), for a period of one (1) year from the date
of this Agreement (the "Initial Term").
(b) At the end of the Initial Term, this Agreement shall
automatically renew for successive additional periods of one (1) year, unless
either party provides written notice to the other party at least ninety (90)
days prior to the expiration of the Initial Term or any such renewal period
indicating the notifying party's election not to renew this Agreement. The
Initial Term of employment and any renewal periods hereunder, subject to the
provisions of Section 8 hereof, are hereinafter referred to as the "Term."
2. DUTIES. During the Term, the Employee shall serve the Company
faithfully and to the best of his/her ability and shall devote his/her full
time, attention, skill and efforts to the performance of the duties required by
or appropriate for the Position. The Employee shall assume such duties and
responsibilities as may be customarily incident to such a position, and such
additional and other duties as may be assigned to the Employee from time to time
by his/her Reporting Manager, including, without limitation, the duties and
responsibilities set forth in Schedule A attached hereto. The Employee shall
report to the Reporting Manager designated in Schedule A.
3. OTHER BUSINESS ACTIVITIES. During the Term, the Employee shall
not, without the prior written consent of the Company in its sole discretion,
directly or indirectly engage in any other business activities or pursuits
whatsoever, except activities in connection with charitable or civic activities,
Page 1
<PAGE>
EMPLOYMENT AGREEMENT
personal investments and serving as an executor, trustee or in other similar
fiduciary capacity; provided that such activities do not interfere with his/her
performance of his/her responsibilities and obligations pursuant to this
Agreement.
4. COMPENSATION. The Company shall pay the Employee, and the
Employee hereby agrees to accept, as compensation for all services rendered
hereunder and for the Employee's intellectual property covenants and assignments
and covenant not to compete as provided for in Sections 6 and 7 hereof, the
compensation set forth in this Section 4.
4.1 SALARY. The Company shall pay the Employee an initial base
salary at the annual rate detailed in Schedule A attached hereto (the "Base
Salary"). The Base Salary shall be inclusive of all applicable income, social
security and other taxes and charges that are required by law to be withheld by
the Company or are requested to be withheld by the Employee. The Base Salary
shall be withheld and paid in accordance with the Company's normal payroll
practice for its similarly situated employees from time to time in effect. The
Base Salary may be increased from time to time by the Compensation Committee of
the Company in its sole discretion.
4.2 BONUS PROGRAM. The Employee shall be entitled to
participate in any bonus program that may be established by and at the
discretion of the Company, based upon the achievement of written individual and
corporate objectives as his/her Supervisor and the President of the Company
shall determine.
4.3 EQUITY PARTICIPATION.
(a) The Company shall grant to the Employee an incentive
stock option (the "Options") to purchase shares of Class B Common Stock of the
Company ("Common Stock"), the exercise price, par value and other details of
which are detailed in Schedule B attached hereto. The Options shall be subject
to and in accordance with the provisions of the 1997 Stock Option Plan of the
Company (the "Plan") substantially in the form attached hereto as Schedule B.
(b) All shares of Common Stock issued under the Options
shall be subject to the terms and provisions of a Stock Purchase and Restriction
Agreement as required by the Plan.
4.4 FRINGE BENEFITS. The Employee shall be entitled to
participate in any health or dental programs or other non-salary consideration
(disability, vacation, sick leave) as are Company standard. Such programs are
described in Schedule C attached hereto.
4.5 REIMBURSEMENT OF EXPENSES. The Employee shall be
reimbursed for all normal items of travel and entertainment and miscellaneous
expenses reasonably incurred by him/her on behalf of the Company, provided that
such expenses are documented and submitted to the Company all in accordance with
the reimbursement policies of the Company as in effect from time to time.
5. CONFIDENTIALITY. The Employee recognizes and acknowledges that
the Proprietary Information (as hereinafter defined) is a valuable, proprietary
and unique asset of the Company. As a result, both during the Term and for a
period of five (5) years thereafter, the Employee shall not, without the prior
written consent of the Company, for any reason either directly or indirectly
divulge to any third-party or use for his/her own benefit, or for any purpose
other than the exclusive benefit of the Company, any confidential, proprietary,
business and technical information or trade secrets of the
Page 2
<PAGE>
EMPLOYMENT AGREEMENT
Company or of any subsidiary or affiliate of the Company (the "Proprietary
Information") revealed, obtained or developed in the course of his/her
employment with the Company. Proprietary Information shall include, but shall
not be limited to: the intangible personal property described in Section 6(b)
hereof; any information relating to methods of production, manufacture and
research; hardware and software configurations, computer codes or
instructions (including source and object code listings, program logic
algorithms, subroutines, modules or other subparts of computer programs and
related documentation, including program notation), computer inputs and
outputs (regardless of the media on which stored or located) and computer
processing systems, techniques, designs, architecture, and interfaces; the
identities of, the Company's relationship with, the terms of contracts and
agreements with, the needs and requirements of, and the Company's course of
dealing with, the Company's actual and prospective customers, contractors and
suppliers; and any other materials prepared by the Employee in the course of
his/her employment by the Company, or prepared by any other employee or
contractor of the Company for the Company or its customers (including
concepts, layouts, flow charts, specifications, know-how, user or service
manuals, plans, sketches, blueprints, costs, business studies, business
procedures, finances, marketing data, methods, plans, personnel information,
customer and vendor credit information); and any other materials that have
not been made available to the general public. Nothing contained herein
shall restrict the Employee's ability to make such disclosures during the
course of his/her employment as may be necessary or appropriate to the
effective and efficient discharge of the duties required by or appropriate
for the Position or as such disclosures may be required by law. Furthermore,
nothing contained herein shall restrict the Employee from divulging or using
for his/her own benefit or for any other purpose any Proprietary Information
that is readily available to the general public so long as such information
did not become available to the general public as a direct or indirect result
of the Employee's breach of this Section 5. Failure by the Company to mark
any of the Proprietary Information as confidential or proprietary shall not
affect its status as Proprietary Information under the terms of this
Agreement.
6. PROPERTY.
(a) All right, title and interest in and to Proprietary
Information shall be and remain the sole and exclusive property of the Company.
During the Term, the Employee shall not remove from the Company's offices or
premises any documents, records, notebooks, files, correspondence, reports,
memoranda or similar materials of or containing Proprietary Information, or
other materials or property of any kind belonging to the Company unless
necessary or appropriate in accordance with the duties and responsibilities
required by or appropriate for the Position and, in the event that such
materials or property are removed, all of the foregoing shall be returned to
his/her proper files or places of safekeeping as promptly as possible after the
removal shall serve its specific purpose. The Employee shall not make, retain,
remove and/or distribute any copies of any of the foregoing for any reason
whatsoever, except as may be necessary in the discharge of the assigned duties,
and shall not divulge to any third person the nature of and/or contents of any
of the foregoing or of any other oral or written information to which he/she may
have access or with which for any reason he/she may become familiar, except as
disclosure shall be necessary in the performance of the duties. Upon the
termination of his/her employment with the Company, he/she shall return to the
Company all originals and copies of the foregoing then in the possession,
whether prepared by the Employee or by others.
(b) (i) The Employee acknowledges that all right, title and
interest in and to any and all writings, documents, inventions, discoveries,
computer programs or instructions (whether in source code, object code, or any
other form), algorithms, formulae, plans, memoranda, tests, research, designs,
innovations, systems, analyses, specifications, models, data, diagrams, flow
charts, and/or techniques (whether reduced to written or electronic form or
otherwise) that the Employee creates,
Page 3
<PAGE>
EMPLOYMENT AGREEMENT
makes, conceives, discovers or develops, either solely or jointly with any
other person, at any time during the Term, whether during working hours or at
the Company's facility or at any other time or location, and whether upon the
request or suggestion of the Company or otherwise, and that relate to or are
useful in any way in connection with the Business now or hereafter carried on
by the Company (collectively, "Intellectual Work Product") shall be the sole
and exclusive property of the Company. The Employee shall promptly disclose
to the Company all Intellectual Work Product, and the Employee shall have no
claim for additional compensation for the Intellectual Work Product.
(ii) The Employee acknowledges that all the Intellectual
Work Product that is copyrightable shall be considered a work made for hire
under United States Copyright Law. To the extent that any copyrightable
Intellectual Work Product may not be considered a work made for hire under the
applicable provisions of the United States Copyright Law, or to the extent that,
notwithstanding the foregoing provisions, the Employee may retain an interest in
any Intellectual Work Product that is not copyrightable, the Employee hereby
irrevocably assigns and transfers to the Company any and all right, title, or
interest that the Employee may have in the Intellectual Work Product under
copyright, patent, trade secret, trademark and other intellectual property laws,
in perpetuity or for the longest period otherwise permitted by law, without the
necessity of further consideration. The Company shall be entitled to obtain and
hold in its own name all copyrights, patents, trade secrets, and trademarks with
respect thereto.
(iii) The Employee shall reveal promptly all information
relating to the Intellectual Work Product to an appropriate officer of the
Company, cooperate with the Company and execute such documents as may be
necessary or appropriate (A) in the event that the Company desires to seek
copyright, patent, trademark or other analogous protection thereafter relating
to the Intellectual Work Product, and when such protection is obtained, to renew
and restore the same, or (B) to defend any opposition proceedings in respect of
obtaining and maintaining such copyright, patent, trademark or other analogous
protection.
(iv) In the event that the Company is unable after reasonable
effort to secure the Employee's signature on any of the documents referenced in
Section 6(b)(iii) hereof, whether because of the Employee's physical or mental
incapacity or for any other reason whatsoever, the Employee hereby irrevocably
designates and appoints the Company and its duly authorized officers and agents
as the Employee's agent and attorney-in-fact, to act for and in his/her behalf
and stead to execute and file any such documents and to do all other lawfully
permitted acts to further the prosecution and issuance of any such copyright,
patent, trademark or other analogous protection with the same legal force and
effect as if executed by the Employee.
(v) The Employee represents that the innovations, designs,
systems, analyses, ideas for marketing programs, and all copyrights, patents,
trademarks and trade names, or similar intangible personal property identified
on Schedule D hereof comprises all of the innovations, designs, systems,
analyses, ideas for marketing programs, and all copyrights, patents, trademarks
and trade names, or similar intangible personal property that the Employee has
made or conceived of prior to the date hereof, and same are excluded from the
operation of the other provisions of this Section 6(b).
7. COVENANT NOT TO COMPETE.
(a) The Employee shall not, anywhere in the world, during the
Term and for a period of two (2) years thereafter (the "Restricted Period"), do
any of the following directly or indirectly without the prior written consent of
the Company in its sole discretion:
Page 4
<PAGE>
EMPLOYMENT AGREEMENT
(i) engage or participate, directly or indirectly, in any
business activity competitive with the Business or the business of any of the
Company's subsidiaries or affiliates as conducted during the Term;
(ii) become interested (as owner, proprietor, promoter,
stockholder, lender, partner, co-venturer, director, officer, employee, agent,
consultant or otherwise) in any person, firm, corporation, association or
other entity engaged in any business that is competitive with the Business or
of the business of any subsidiary or affiliate of the Company as conducted
during the Term, or become interested in (as owner, stockholder, lender,
partner, co-venturer, director, officer, employee, agent, consultant or
otherwise) any portion of the business of any person, firm, corporation,
association or other entity where such portion of such business is
competitive with the Business of the Company or the business of any
subsidiary or affiliate of the Company as conducted during the Term
(notwithstanding the foregoing, the Employee may hold not more than one
percent (1%) of the outstanding securities of any class of any
publicly-traded securities of a company that is engaged in business activity
competitive with the Business or the business of any of the Company's
subsidiaries or affiliates as conducted during the Term);
(iii) solicit or call on for a purpose competitive with the
Business, either directly or indirectly, any (A) customer with whom the Company
shall have dealt at any time during the two (2) year period immediately
preceding the termination of the Employee's employment hereunder, or (B)
supplier or distributor with whom the Company shall have dealt at any time
during the two (2) year period immediately preceding the termination of the
Employee's employment hereunder;
(iv) influence or attempt to influence any supplier,
distributor, customer or potential customer of the Company to terminate or
modify any written or oral agreement or course of dealing with the Company; or
(v) influence or attempt to influence any person either
(A) to terminate or modify the employment, consulting, agency, distributorship
or other arrangement with the Company, or (B) to employ or retain, or arrange to
have any other person or entity employ or retain, any person who has been
employed or retained by the Company as an employee, consultant, agent or
distributor of the Company at any time during the twelve (12) month period
immediately preceding the termination of the Employee's employment hereunder.
(b) The Employee hereby acknowledges that the limitations as to
time, character or nature and geographic scope placed on his/her subsequent
employment by this Section 7 are reasonable and fair and will not prevent or
materially impair his/her ability to earn a livelihood.
8. TERMINATION OF EMPLOYMENT. The Employee's employment hereunder
may be terminated upon the occurrence of any one of the events described in this
Section 8 or pursuant to a non-renewal of the Agreement under Section 1(b)
hereof. Upon termination of the Employee's employment, the Employee shall be
entitled only to such compensation and benefits as described in this Section 8.
Page 5
<PAGE>
EMPLOYMENT AGREEMENT
8.1 TERMINATION FOR DISABILITY.
(a) In the event of the disability of the Employee such
that the Employee is unable to perform the duties and responsibilities hereunder
to the full extent required by this Agreement by reasons of illness, injury or
incapacity for a period of more than sixty (60) consecutive days or more than
forty-five (45) days, in the aggregate, during any ninety (90) day period
("Disability"), the Employee's employment hereunder may be terminated by the
Company.
(b) In the event of a termination of the Employee's
employment hereunder pursuant to Section 8.1(a), the Employee will be entitled
to receive all accrued and unpaid (as of the date of such termination) Base
Salary and other forms of compensation and benefits payable or provided in
accordance with the terms of any then existing compensation or benefit plan or
arrangement, including payment prescribed under and disability of life insurance
plan or arrangement in which he/she is a participant or to which he/she is a
party as an employee of the Company; provided that the Employee has complied
with all of his/her obligations under this Agreement and continues to comply
with all of his/her surviving obligations hereunder listed in Section 10.
Except as specifically set forth in this Section 8.1(b), the Company shall have
no liability or obligation to the Employee for compensation or benefits
hereunder by reason of such termination.
8.2 TERMINATION BY DEATH. In the event that the Employee dies
during the Term, the Employee's employment hereunder shall be terminated thereby
and the Company shall pay to the Employee's executors, legal representatives or
administrators an amount equal to: the accrued and unpaid portion of the Base
Salary and other compensation for the month in which he/she dies. Except as
specifically set forth in this Section 8.2, the Company shall have no liability
or obligation hereunder to the Employee's executors, legal representatives,
administrators, heirs or assigns or any other person claiming under or through
him/her by reason of the Employee's death, except that the Employee's executors,
legal representatives or administrators will be entitled to receive the payment
prescribed under any death or disability benefits plan in which he/she is a
participant as an employee of the Company, and to exercise any rights afforded
under any compensation or benefit plan then in effect.
8.3 TERMINATION FOR CAUSE.
(a) The Company may terminate the Employee's employment
hereunder at any time for "cause" upon written notice to the Employee. For
purposes of this Agreement, "cause" shall mean:
(i) any material breach by the Employee of any of
his/her obligations under this Agreement;
(ii) willful failure or inability by the Employee
to perform satisfactorily the duties required by or appropriate for the
Position, as determined by the President of the Company in his sole discretion;
(iii) conduct of the Employee involving any type of
disloyalty to the Company or willful misconduct with respect to the Company,
including without limitation fraud, embezzlement, theft or proven dishonesty in
the course of the employment, or any attempt by the Employee to secure any
personal profit related to the Business and the business opportunities of the
Company without the informed prior approval of the Board of Directors;
Page 6
<PAGE>
EMPLOYMENT AGREEMENT
(iv) conviction of a felony or other criminal act
punishable by more than one (1) year in prison;
(v) commission by the Employee of an intentional
tort or an act involving moral turpitude or constituting fraud; or
(vi) habitual alcohol or substance abuse or
addiction.
(b) In the event of a termination of the Employee's
employment hereunder pursuant to Section 8.3(a), the Employee shall be entitled
to receive all accrued but unpaid (as of the effective date of such termination)
Base Salary, benefits and bonuses. All Base Salary, benefits and bonuses shall
cease at the time of such termination, subject to the terms of any benefit or
compensation plan then in force and applicable to the Employee. Any options to
purchase the Company's common stock issued to Employee, including any vested or
unvested portion thereof, shall be canceled at the time of such termination, and
the Employee shall not be entitled to exercise any such options. Except as
specifically set forth in this Section 8.3, the Company shall have no liability
or obligation hereunder by reason of such termination.
8.4 TERMINATION WITHOUT CAUSE.
(a) The Company may terminate the Employee's employment
hereunder at any time during the Term, for any reason, without cause, effective
upon the date designated by the Company upon thirty (30) days written notice to
the Employee.
(b) In the event of a termination of the Employee's
employment hereunder pursuant to Section 8.4(a), the Employee shall be entitled
to receive an amount equal to the lesser of: (i) all unpaid Base Salary from the
effective date of the Employee's termination through the remainder of the Term;
or (ii) three (3) months Base Salary. Employee also shall be entitled to
receive all accrued (as of the effective date of the Employee's termination) but
unpaid benefits and bonuses. In addition, Employee will be eligible to receive
a liquidated termination fee equivalent to: (i) one (1) week's Base Salary for
every year of employment with EXE (or its predecessor companies Neptune Systems,
Inc. or Dallas Systems Corporation) up to five (5) years; and (ii) two (2)
week's Base Salary for every year of employment with EXE (or its predecessor
companies Neptune Systems, Inc. or Dallas Systems Corporation) over five (5)
years. The amounts to be paid to Employee hereunder shall be payable in twelve
(12) equal monthly installments in accordance with the Company's severance
payment plan then in effect, if any, at the time the Company terminates
Employee's employment pursuant to Section 8.4(a); provided that, if the Employee
obtains other employment during the twelve (12) month period following
termination, then the Company shall only be obligated to pay the Employee the
difference between the monthly installments provided for in this Section 8.4 and
the monthly salary the Employee shall receive from his/her new employer during
such period of employment. Employee acknowledges that, as a condition to
participation in such severance plan, Employee must complete in good faith such
employee exit forms then in use by the Company at the time Employee's employment
is terminated and acknowledge in writing on such forms then in use by the
Company, Employee's obligations to the Company including, but not limited to,
Employee's obligations with respect to confidentiality and Company property set
forth in Sections 5 and 6 hereof and Employee's obligations with respect to the
Covenant not to Compete set forth in Section 7 hereof. All Base Salary,
benefits and bonuses shall cease at the time of such termination, subject to the
terms of any benefit or compensation plan then in force and applicable to the
Employee. Except as specifically set forth in this Section 8.4, the Company
shall have no liability or obligation hereunder by reason of such termination.
Page 7
<PAGE>
EMPLOYMENT AGREEMENT
8.5. NON-RENEWAL BY EITHER PARTY.
In the event of a non-renewal of the Agreement by either party
pursuant to Section 1(b) hereof, the Employee shall be eligible to receive an
amount equal to: (i) one (1) week's Base Salary for every year of employment
with EXE (or its predecessor companies Neptune Systems, Inc. or Dallas
Systems Corporation) up to five (5) years; and (ii) two (2) week's Base
Salary for every year of employment with EXE (or its predecessor companies
Neptune Systems, Inc. or Dallas Systems Corporation) over five (5) years.
The amounts to be paid to Employee hereunder shall be payable in twelve (12)
equal monthly installments in accordance with the Company's severance payment
plan then in effect, if any, at the time the Employee's employment ceases;
provided that, if the Employee obtains other employment during the twelve
(12) month period following non-renewal, then the Company shall only be
obligated to pay the Employee the difference between the monthly installments
provided for in this Section 8.5 and the monthly salary the Employee shall
receive from his/her new employer during such period of employment. Employee
acknowledges that, as a condition to participation in such severance plan,
Employee must complete in good faith such employee exit forms then in use by
the Company at the time Employee's employment is terminated and acknowledge
in writing on such forms then in use by the Company, Employee's obligations
to the Company including, but not limited to, Employee's obligations with
respect to confidentiality and Company property set forth in Sections 5 and 6
hereof and Employee's obligations with respect to the Covenant not to Compete
set forth in Section 7 hereof. All Base Salary, benefits and bonuses shall
cease at the time of such termination, subject to the terms of any benefit or
compensation plan then in force and applicable to the Employee. Except as
specifically set forth in this Section 8.5, the Company shall have no
liability or obligation hereunder by reason of such termination.
8.6. OPTIONS; REPURCHASE OF SHARES.
Upon the termination of the Employee's employment pursuant to
Section 8 other than under Sections 8.3, all further vesting on all stock
options and/or restricted stock in the Company held by the Employee shall
immediately cease as of such date and thereafter any vested stock options shall
be exercisable and any restricted stock or other equity securities held by the
Employee shall be subject to repurchase by the Company in accordance with their
respective terms and the terms of any related agreements between the Company and
the Employee.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE EMPLOYEE.
(a) The Employee represents and warrants to the Company that:
(i) There are no restrictions, agreements or
understandings whatsoever to which the Employee is a party which would prevent
or make unlawful the Employee's execution of this Agreement or the Employee's
employment hereunder, or which is or would be inconsistent or in conflict with
this Agreement or the Employee's employment hereunder, or would prevent, limit
or impair in any way the performance by the Employee of the obligations
hereunder; and
(ii) The Employee has disclosed to the Company all
restraints, confidentiality commitments or other employment restrictions that
he/she has with any other employer, person or entity.
(b) Upon and after his/her termination or cessation of
employment with the Company and until such time as no obligations of the
Employee to the Company hereunder exist, the Employee (i) shall provide a
complete copy of this Agreement to any prospective employer or other
Page 8
<PAGE>
EMPLOYMENT AGREEMENT
person, entity or association in the Business, with whom or which the
Employee proposes to be employed, affiliated, engaged, associated or to
establish any business or remunerative relationship prior to the commencement
thereof and (ii) shall notify the Company of the name and address of any such
person, entity or association prior to his/her employment, affiliation,
engagement, association or the establishment of any business or remunerative
relationship.
10. SURVIVAL OF PROVISIONS. The provisions of this Agreement set
forth in Sections 5 through 20 hereof shall survive the termination of the
Employee's employment hereunder.
11. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the Company and the Employee and his/her
respective successors, executors, administrators, heirs and/or permitted
assigns; provided that neither the Employee nor the Company may make any
assignments of this Agreement or any interest herein, by operation of law or
otherwise, without the prior written consent of the other parties hereto, except
that, without such consent, the Company may assign this Agreement to any
successor to all or substantially all of its assets and business by means of
liquidation, dissolution, merger, consolidation, transfer of assets, or
otherwise, provided that such successor assumes in writing all of the
obligations of the Company under this Agreement.
12. NOTICE. Any notice hereunder by either party shall be given by
personal delivery or by sending such notice by certified mail, return-receipt
requested, or by overnight delivery with a reputable courier service, or
telecopied, addressed or telecopied, as the case may be, to the other party at
its address set forth below or at such other address designated by notice in the
manner provided in this section. Such notice shall be deemed to have been
received upon the date of actual delivery if personally delivered or, in the
case of mailing, two (2) days after deposit with the U.S. mail, or if by
overnight delivery, the date of delivery or, in the case of facsimile
transmission, when confirmed by the facsimile machine report.
If to the Employee:
C. Donald Scales
2700 Creek View Drive
Flower Mound, TX 75028
If to the Company:
EXE Technologies, Inc.
12740 Hillcrest Road
Dallas TX 75230
Attention: Raymond R. Hood
with a copy to:
Pepper, Hamilton & Scheetz LLP
1235 Westlakes Drive
Suite 400
Berwyn, PA 19312
Attention: Christopher F. Wright, Esquire
13. ENTIRE AGREEMENT; AMENDMENTS. This Agreement contains the
entire
Page 9
<PAGE>
EMPLOYMENT AGREEMENT
agreement and understanding of the parties hereto relating to the subject
matter hereof, and merges and supersedes all prior and contemporaneous
discussions, agreements and understandings of every nature between the
parties hereto relating to the employment of the Employee with the Company.
This Agreement may not be changed or modified, except by an agreement in
writing signed by each of the parties hereto.
14. WAIVER. The waiver of the breach of any term or provision of
this Agreement shall not operate as or be construed to be a waiver of any other
or subsequent breach of this Agreement.
15. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Texas, without regard to the principles
of conflicts of laws of any jurisdiction.
16. INVALIDITY. If any provision of this Agreement shall be
determined to be void, invalid, unenforceable or illegal for any reason, then
the validity and enforceability of all of the remaining provisions hereof shall
not be affected thereby. If any particular provision of this Agreement shall be
adjudicated to be invalid or unenforceable, then such provision shall be deemed
amended to delete therefrom the portion thus adjudicated to be invalid or
unenforceable, such amendment to apply only to the operation of such provision
in the particular jurisdiction in which such adjudication is made; provided
that, if any provision contained in this Agreement shall be adjudicated to be
invalid or unenforceable because such provision is held to be excessively broad
as to duration, geographic scope, activity or subject, then such provision shall
be deemed amended by limiting and reducing it so as to be valid and enforceable
to the maximum extent compatible with the applicable laws of such jurisdiction,
such amendment only to apply with respect to the operation of such provision in
the applicable jurisdiction in which the adjudication is made.
17. SECTION HEADINGS. The section headings in this Agreement are for
convenience only; they form no part of this Agreement and shall not affect its
interpretation.
18. NUMBER OF DAYS. In computing the number of days for purposes of
this Agreement, all days shall be counted, including Saturdays, Sundays and
legal holidays; provided that, if the final day of any time period falls on a
Saturday, Sunday or day which is a legal holiday in Pennsylvania, then such
final day shall be deemed to be the next day which is not a Saturday, Sunday or
legal holiday.
19. SPECIFIC ENFORCEMENT; EXTENSION OF PERIOD.
(a) The Employee acknowledges that the restrictions contained in
Sections 5, 6, and 7 hereof are reasonable and necessary to protect the
legitimate interests of the Company and its affiliates and that the Company
would not have entered into this Agreement in the absence of such restrictions.
The Employee also acknowledges that any breach by him/her of Sections 5, 6, or 7
hereof will cause continuing and irreparable injury to the Company for which
monetary damages would not be an adequate remedy. The Employee shall not, in
any action or proceeding to enforce any of the provisions of this Agreement,
assert the claim or defense that an adequate remedy at law exists. In the event
of such breach by the Employee, the Company shall have the right to enforce the
provisions of Sections 5, 6, and 7 of this Agreement by seeking injunctive or
other relief in any court, and this Agreement shall not in any way limit
remedies of law or in equity otherwise available to the Company.
(b) The periods of time set forth in Sections 5, 6 and 7 hereof
shall not
Page 10
<PAGE>
EMPLOYMENT AGREEMENT
include, and shall be deemed extended by, any time required for litigation to
enforce the relevant covenant periods, provided that the Company is
successful on the merits in any such litigation. The "time required for
litigation" is herein defined to mean the period of time commencing on the
earlier of the Employee's first breach of such covenants or the service of
process upon the Employee and ending on the expiration of all appeals related
to such litigation.
20. CONSENT TO SUIT. In the case of any dispute under or in
connection with this Agreement, the Employee may only bring suit against the
Company in the Courts of the State of Texas in and for the County of Dallas or
in the Federal District Court for such geographic location. The Employee hereby
consents to the jurisdiction and venue of the courts of the State of Texas in
and for the County of Dallas or the Federal District Court for such geographic
location, provided that such Federal Court has subject matter jurisdiction over
such dispute, and the Employee hereby waives any claim he may have at any time
as to FORUM NON CONVENIENS with respect to such venue. The Company shall have
the right to institute any legal action arising out of or relating to this
Agreement in any appropriate court and in any jurisdiction. Any judgment
entered against either of the parties in any proceeding hereunder may be entered
and enforced by any court of competent jurisdiction. If an action at law or in
equity is necessary to enforce or interpret the terms of this Agreement, then
the prevailing party shall be entitled to recover, in addition to any other
relief, reasonable attorneys' fees, costs and disbursements.
21. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which
together shall be deemed to be one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the day and year first written above.
EXE TECHNOLOGIES, INC.
By: /s/ Raymond Hood
-------------------------------
Title:
/s/ C. Donald Scales
-----------------------------
EMPLOYEE
Page 11
<PAGE>
EMPLOYMENT AGREEMENT
SCHEDULE A
EMPLOYMENT AND COMPENSATION
POSITION: SR. VICE PRESIDENT PROFESSIONAL SERVICES
REPORTING MANAGER: RAYMOND HOOD
BASE ANNUAL SALARY: $175,000.00
NON-REFUNDABLE DRAW
AGAINST INCENTIVE COMPENSATION PLAN: $100,000.00
Page 12
<PAGE>
EMPLOYMENT AGREEMENT
SCHEDULE B
INITIAL STOCK OPTION GRANT: 175,000 NORMAL VESTING
25,000 IMMEDIATE VESTING
EXE TECHNOLOGIES, INC.
1997 INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN
[ATTACHED]
Page 13
<PAGE>
EMPLOYMENT AGREEMENT
SCHEDULE C
NON SALARY CONSIDERATIONS
1. 7 paid holidays:
2. Vacation:
<TABLE>
<CAPTION>
Years of Continuous Service No. of Days Vacation
--------------------------- --------------------
<S> <C>
1 month but less than 3 years 1 day per month accrued
3 years but less than 10 17 days per year accrued
10 years and over 22 days per year accrued
</TABLE>
3. Medical Plan - Employer/Employee paid.
4. Dental Plan - Employer/Employee paid.
5. Life Insurance/AD&D - equal to $50,000 - Employer paid.
6. Voluntary Term Life Insurance
7. Vision plan - Employer paid - provides 20% to 60% discount on all vision
services.
8. Flexible Benefit Plan - enables employees to set aside pre-tax dollars for
the reimbursement of certain qualified expenses.
9. Short-term Disability - Employer paid - provides salary continuation to
regular, full-time employees who are unavoidably absent from work due to
personal illness injury or pregnancy.
10. Long-term Disability - Employer paid - provides income protection in the
event of a long-term disability, equal to 60% of basic monthly earnings.
11. 401(k) Plan - permits deferral of pre-tax dollars up to 15% of salary.
Company matches 100% of first 5% contribution.
12. Tuition Assistance - provides educational reimbursement benefits to
eligible employees.
EXE TECHNOLOGIES RESERVES THE RIGHT TO, AT ANY TIME, ADD TO, MODIFY, REVOKE,
SUSPEND, TERMINATE OR CHANGE ANY OR ALL BENEFIT PLANS WITHOUT NOTICE.
Page 14
<PAGE>
EMPLOYMENT AGREEMENT
SCHEDULE D
PRIOR INVENTIONS
1.
2.
3.
Page 15
<PAGE>
EXE TECHNOLOGIES, INC.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made as of the 16th day of February, 1998
by and between Thomas Cooper, a resident of the state of Texas (the
"Employee"), and EXE Technologies, Inc., a corporation organized and existing
under the laws of the State of Delaware (the "Company").
WHEREAS, the Company is engaged in the business of providing supply
chain execution software and related services to the warehouse, distribution
and logistics industries worldwide (the "Business"); and
WHEREAS, the Company desires to employ the Employee and the Employee
desire.a to be employed by the Company for a period of time in the future
upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and obligations
contained herein, and intending to be legally bound, the parties, subject to
the terms and conditions set forth herein, agree as follows:
1. EMPLOYMENT AND TERM.
(a) The Company hereby employs the Employee and the Employee
hereby accepts employment with the Company for the position detailed in
Schedule A attached hereto (the "Position"), for a period of one (1) year
from the date of this Agreement (the "Initial Term"). During the Initial
Term, the Employee shall also be a member of the Executive Committee
appointed by the Board of Directors.
(b) At the end of the Initial Term, this Agreement shall
automatically renew for successive additional periods of one (1) year, unless
either party provides written notice to the other party at least ninety (90)
days prior to the expiration of the Initial Term or any such renewal period
indicating the notifying party's election not to renew this Agreement. The
Initial Term of employment and any renewal periods hereunder, subject to the
provisions of Section 8 hereof, are hereinafter referred to as the "Term."
<PAGE>
2. DUTIES. During the Term, the Employee shall serve the Company
faithfully and to the best of his ability and shall devote his full time,
attention, skill and efforts to the performance of the duties required by or
appropriate for the Position. The Employee shall assume such duties and
responsibilities as may be customarily incident to such a position, and such
additional and other duties as may be assigned to the Employee from time to
time by the Chief Executive Officer or the Board of Directors of the Company
(the "Board"), including, without limitation, the duties and responsibilities
set forth in SCHEDULE A attached hereto. The Employee shall report to the
Reporting Manager designated in SCHEDULE A attached hereto.
3. OTHER BUSINESS ACTIVITIES. During the Term, the Employee shall not,
without the prior written consent of the Company in its sole discretion,
directly or indirectly engage in any other business activities or pursuits
whatsoever, except activities in connection with charitable or civic
activities, personal investments and serving as an executor, trustee or in
other similar fiduciary capacity; provided that such activities do not
interfere with his performance of his responsibilities and obligations
pursuant to this Agreement.
4. COMPENSATION. The Company shall pay the Employee, and the Employee
hereby agrees to accept, as compensation for all services rendered hereunder
and for the Employee's intellectual property covenants and assignments and
covenant not to compete as provided for in Sections 6 and 7 hereof, the
compensation set forth in this Section 4.
4.1 SALARY. The Company shall pay the Employee an initial base
salary at the annual rate detailed in Schedule A attached hereto (the "Base
Salary"). The Base Salary shall be inclusive of all applicable income, social
security and other taxes and charges that are required by law to be withheld
by the Company, or are requested to be withheld by the Employee. The Base
Salary shall be withheld and paid in accordance with the Company's normal
payroll practice for its similarly situated employees from time to time in
effect. The Base Salary may be increased from time to time by the
Compensation Committee of the Company in its sole discretion.
4.2 INCENTIVE COMPENSATION PROGRAM.
(a) The Employee shall be entitled to participate in the
incentive compensation program that will be established by the Company (the
"Incentive Program") pursuant to which the Board may award bonuses to
executive employees, based upon the achievement of written individual and
corporate objectives determined by the Board annually. The Employee shall be
eligible to receive under the
-2-
<PAGE>
Incentive Compensation Program up to Two Hundred Fifty Thousand Dollars
($250,000) or more annually as determined by the Board.
(b) During the Initial Term, the Employee shall receive in
addition to-the Base Salary, a non-refundable draw against any amounts due to
the Employee under Section 4.2(a). Such draw shall be in the amount of Two
Hundred Fifty Thousand Dollars ($250,000) and shall be payable in
installments similar to the payment of the Base Salary.
4.3 EQUITY PARTICIPATION.
(a) The Company shall grant to the Employee an initial stock
option to purchase Three Hundred Thousand (300,000) shares of the Class B
Common Stock, par value $.01 per share, of the Company ("Class B Common
Stock") (the "Initial Option"). The Initial Option shall vest in accordance
with the schedule set for on SCHEDULE B, and shall be an incentive stock
option to the extent allowed by the vesting schedule. The exercise price of
the Initial Option shall be Two Dollars ($2.00) per share, which is the fair
market value of the Class B Common Stock on the date of this Agreement as
determined by the Board. The Initial Option shall be subject to and in
accordance with the provisions of the 1997 Stock Option Plan of the Company,
as amended (the "Plan"), substantially in the form attached hereto as part of
SCHEDULE B.
(b) The Company shall grant to the Employee an additional
non-qualified stock option under the Plan to purchase up to Three Hundred
Thousand (300,000) shares of Class B Common Stock (the "Incentive-Based
Option"). The Incentive-Based Option shall vest in full on the fifth
anniversary of this Agreement, unless such option vests earlier pursuant to
the terms set forth on SCHEDULE B. The exercise price of the Incentive-Based
Option shall be Two Dollars ($2.00) per share.
(c) Notwithstanding the foregoing, one hundred percent (100%)
of the Employee's then remaining unvested options shall become vested upon
the occurrence of the acquisition of a majority of the capital stock of the
Company by an unrelated third party by way of merger, sale of assets, or sale
of capital stock of the Company that results in a change of the Company's
Chief Executive Officer within a period of 18 months following the
transaction.
(d) All shares of Class B Common Stock issued under the
either the Initial Option or the Incentive-Based Option shall be subject to
the terms and provisions of a Stock Purchase and Restriction Agreement as
required by the Plan.
-3-
<PAGE>
(e) During the sixty (60) day period following the effective
date of this Agreement, the Employee shall have the right to purchase up to
One Hundred Thousand (100,000) shares of the Company's Class A Common Stock,
par value $.01 per share, at a purchase price of Three Dollars ($3.00) per
share. The Employee may exercise such right by delivering a letter to the
Chief Financial Officer of the Company specifying the number of shares to be
purchased, accompanied by a check payable to the Company for the full
purchase price for the shares to be purchased.
4.4 FRINGE BENEFITS. The Employee shall be entitled to
participate in any health or dental programs or other non-salary
consideration (disability, vacation, sick leave) as are Company standard.
Such programs are described in SCHEDULE C attached hereto.
4.5 REIMBURSEMENT OF EXPENSES. The Employee shall be reimbursed
for all normal items of travel and entertainment and miscellaneous expenses
reasonably incurred by the Employee on behalf of the Company, provided that
such expenses are documented and submitted to the Company all in accordance
with the reimbursement policies of the Company as in effect from time to time.
4.6 REIMBURSEMENT OF CERTAIN RELOCATION EXPENSES. In the event
that the Employee's prior employer demands repayment by the Employee of the
prior employer's relocation payment, the Company will reimburse to the
Employee the amount of such repayment. If the Employee terminates his
employment with the Company prior to the first anniversary of the
Commencement Date, then such advance shall reduce the amount of the incentive
compensation payable pursuant to Section 4.2(a) and the draw payable pursuant
to Section 4.2(b).
5. CONFIDENTIALITY. The Employee recognizes and acknowledges that the
Proprietary Information (as hereinafter defined) is a valuable, proprietary
and unique asset of the Company. As a result, both during the Term and for a
period of five (5) years thereafter, the Employee shall not, without the
prior written consent of the Company, for any reason either directly or
indirectly divulge to any third-party or use for the Employee's own benefit,
or for any purpose other than the exclusive benefit of the Company, any
confidential, proprietary, business and technical information or trade
secrets of the Company or of any subsidiary or affiliate of the Company (the
"Proprietary Information") revealed, obtained or developed in the course of
the Employee's employment with the Company. Proprietary Information shall
include, but shall not be limited to: the intangible personal property
described in Section 6(b) hereof; any information relating to methods of
production, manufacture and research; hardware
-4-
<PAGE>
and software configurations, computer codes or instructions (including source
and object code listings, program logic algorithms, subroutines, modules or
other subparts of computer programs and related documentation, including
program notation), computer inputs and outputs (regardless of the media on
which stored or located) and computer.processing systems, techniques,
designs, architecture, and interfaces; the identities of, the Company's
relationship with, the terms of contracts and agreements with, the needs and
requirements of, and the Company's course of dealing with, the Company's
actual and prospective customers, contractors and suppliers; and any other
materials prepared by the Employee in the course of the Employee's employment
by the Company, or prepared by any other employee or contractor of the
Company for the Company or its customers, (including concepts, layouts, flow
charts, specifications, know-how, user or service manuals, plans, sketches,
blueprints, costs, business studies, business procedures, finances, marketing
data, methods, plans, personnel information, customer and vendor credit
information and any other materials that have not been made available to the
general public). Nothing contained herein shall restrict the Employee's
ability to make such disclosures during the course of the Employee's
employment as may be necessary or appropriate to the effective and efficient
discharge of the duties required by or appropriate for the Position or as
such disclosures may be required by law. Furthermore, nothing contained
herein shall restrict the Employee from divulging or using for the Employee's
own benefit or for any other purpose any Proprietary Information that is
readily available to the general public so long as such information did not
become available to the general public as a direct or indirect result of the
Employee's breach of this Section 5. Failure by the Company to mark any of
the Proprietary Information as confidential or proprietary shall not affect
its status as Proprietary Information under the terms of this Agreement.
6. PROPERTY.
(a) All right, title and interest in and to Proprietary
Information shall be and remain the sole and exclusive property of the
Company. During the Term, the Employee shall not remove from the Company's
offices or premises any documents, records, notebooks, files, correspondence,
reports, memoranda or similar materials of or containing Proprietary
Information, or other materials or property of any kind belonging to the
Company unless necessary or appropriate in accordance with the duties and
responsibilities required by or appropriate for the Position and, in the
event that such materials or property are removed, all of the foregoing shall
be returned to their proper files or places of safekeeping as promptly as
possible after the removal shall serve its specific purpose. The Employee
shall not make, retain, remove and/or distribute any copies of any of the
foregoing for any reason whatsoever, except as may be necessary in the
discharge of the assigned duties, and shall not divulge to any third
-5-
<PAGE>
person the nature of and/or contents of any of the foregoing or of any other
oral or written information to which the Employee may have access or with
which for any reason the Employee may become familiar, except as disclosure
shall be necessary in the performance of the duties; and upon the termination
of the Employee's employment with the Company, the Employee shall return to
the Company all originals and copies of the foregoing then in the possession,
whether prepared by the Employee or by others.
(b) (i) The Employee acknowledges that all right, title and
interest in and to any and all writings, documents, inventions, discoveries,
computer programs or instructions (whether in source code, object code, or
any other form), algorithms, formulae, plans, memoranda, tests, research,
designs, innovations, systems, analyses, specifications, models, data,
diagrams, flow charts, and/or techniques (whether reduced to written or
electronic form or otherwise) that the Employee creates, makes, conceives,
discovers or develops, either solely or jointly with any other person, at any
time during the Term, whether during working hours or at the Company's
facility or at any other time or location, and whether upon the request or
suggestion of the Company or otherwise, and that relate to or are useful in
any way in connection with the Business now or hereafter carried on by the
Company (collectively, "Intellectual Work Product") shall be the sole and
exclusive property of the Company. The Employee shall promptly disclose to
the Company all Intellectual Work Product, and the Employee shall have no
claim for additional compensation for the Intellectual Work Product.
(ii) The Employee acknowledges that all the Intellectual Work
Product that is copyrightable shall be considered a work made for hire under
United States Copyright Law. To the extent that any copyrightable
Intellectual Work Product may not be considered a work made for hire under
the applicable provisions of the United States Copyright Law, or to the
extent that, notwithstanding the foregoing provisions, the Employee may
retain an interest in any Intellectual Work Product that is not
copyrightable, the Employee hereby irrevocably assigns and transfers to the
Company any and all right, title, or interest that the Employee may have in
the Intellectual Work Product under copyright, patent, trade secret,
trademark and other intellectual property laws, in perpetuity or for the
longest period otherwise permitted by law, without' the necessity of further
consideration. The Company shall be entitled to obtain and hold in its own
name all copyrights, patents, trade secrets, and trademarks with respect
thereto.
(iii) The Employee shall reveal promptly all information relating
to the Intellectual Work Product to an appropriate officer of the Company,
cooperate with the Company and execute such documents as may be necessary or
appropriate (A) in the event that the Company desires to seek copyright,
patent, trademark or other
-6-
<PAGE>
analogous protection thereafter relating to the Intellectual Work Product,
and when such protection is obtained, to renew and restore the same, or (B)
to defend any opposition proceedings in respect of obtaining and maintaining
such copyright, patent, trademark or other analogous protection.
(iv) ln the event that the Company is unable after reasonable
effort to secure the Employee's signature on any of the documents referenced
in Section 6(b)(iii) hereof, whether because of the Employee's physical or
mental incapacity or for any other reason whatsoever, the Employee hereby
irrevocably designates and appoints the Company and its duly authorized
officers and agents as the Employee's agent and attorney-in-fact, to act for
and in the Employee's behalf and stead to execute and file any such documents
and to do all other lawfully permitted acts to further the prosecution and
issuance of any such copyright, patent, trademark or other analogous
protection with the same legal force and effect as if executed by the
Employee.
(v) The Employee represents that the innovations, designs, systems,
analyses, ideas for marketing programs, and all copyrights, patents,
trademarks and trade names, or similar intangible personal property
identified on SCHEDULE D hereof comprises all of the innovations, designs,
systems, analyses, ideas for marketing programs, and all copyrights, patents,
trademarks and trade names, or similar intangible personal property that the
Employee has made or conceived of prior to the date hereof, and same are
excluded from the operation of the other provisions of this Section 6(b).
7. COVENANT NOT TO COMPETE.
(a) The Employee shall not, anywhere in the world, during the Term
and for a period of two (2) years thereafter (the "Restricted Period"), do
any of the following directly or indirectly without the prior written consent
of the Company in its sole discretion:
(i) engage or participate in business of developing and/or
selling supply chain execution software, other than with the Company;
(ii) become interested (as owner, proprietor, promoter,
stockholder, lender, partner, co-venturer, director, officer, employee,
agent, consultant or otherwise) in any person, firm, corporation, association
or other entity engaged in any business that is competitive with the Business
or of the business of any subsidiary or affiliate of the Company as conducted
during the Term, or become interested in (as
-7-
<PAGE>
owner, stockholder, lender, partner, co-venturer, director, officer,
employee, agent, consultant or otherwise) any portion of the business of any
person, firm, corporation, association or other entity where such portion of
such business is competitive with the Business of the Company or the business
of any subsidiary or affiliate of the Company as conducted during the Term
(notwithstanding the foregoing, the Employee may hold not more than one
percent (1%) of the outstanding securities of any class of any
publicly-traded securities of a company that is engaged in business activity
competitive with the Business or the business of any of the Company's
subsidiaries or affiliates as conducted during the Term);
(iii) solicit or call on for a purpose competitive with the
Business, either directly or indirectly, any (A) customer with whom the
Company shall have dealt at any time during the two (2) year period
immediately preceding the termination of the Employee's employment hereunder,
or (B) supplier or distributor with whom the Company shall have dealt at any
time during the two (2) year period immediately preceding the termination of
the Employee's employment hereunder;
(iv) influence or attempt to influence any supplier,
distributor, customer or potential customer of the Company to terminate or
modify any written or oral agreement or course of dealing with the Company; or
(v) influence or attempt to influence any person either (A)
to terminate or modify the employment, consulting, agency, distributorship or
other arrangement with the Company, or (B) to employ or retain, or arrange to
have any other person or entity employ or retain, any person who has been
employed or retained by the Company as an employee, consultant, agent or
distributor of the Company at any time during the twelve (12) month period
immediately preceding the termination of the Employee's employment hereunder.
(b) The Employee hereby acknowledges that the limitations as to time,
character or nature and geographic scope placed on the Employee's subsequent
employment by this Section 7 are reasonable and fair and will not prevent or
materially impair the Employee's ability to earn a livelihood.
8. TERMINATION OF EMPLOYMENT. The Employee's employment hereunder may
be terminated upon the occurrence of any one of the events described in this
Section 8 or pursuant to a non-renewal of the Agreement under Section 1(b)
hereof. Upon termination of the Employee's employment, the Employee shall be
entitled only to such compensation and benefits as described in this Section
8.
-8-
<PAGE>
8.1 TERMINATION FOR DISABILITY.
(a) In the event of the disability of the Employee such that the
Employee is unable to perform the duties and responsibilities hereunder to
the full extent required by this Agreement by reasons of illness, injury or
incapacity for a period of more than sixty (60) consecutive days or more than
forty-five (45) days, in the aggregate, during any ninety (90) day period
("Disability"), the Employee's employment hereunder may be terminated by the
Company.
(b) In the event of a termination of the Employee's employment
hereunder pursuant to Section 8.1(a), the Employee will be entitled to
receive all accrued and unpaid (as of the date of such termination) Base
Salary and other forms of compensation and benefits payable or provided in
accordance with the terms of any then existing compensation or benefit plan
or arrangement, including payment prescribed under and disability of life
insurance plan or arrangement in which he is a participant or to which he is
a party as an employee of the Company; provided that the Employee has
complied with all of his obligations under this Agreement and continues to
comply with all of his surviving obligations hereunder listed in Section 10.
Except as specifically set forth in this Section 8.1(b), the Company shall
have no liability or obligation to the Employee for compensation or benefits
hereunder by reason of such termination.
8.2 TERMINATION BY DEATH. In the event that the Employee dies
during the Term, the Employee's employment hereunder shall be terminated
thereby and the Company shall pay to the Employee's executors, legal
representatives or administrators an amount equal to: the accrued and unpaid
portion of the Base Salary and other compensation for the month in which he
dies. Except as specifically set forth in this Section 8.2, the Company shall
have no liability or obligation hereunder to the Employee's executors, legal
representatives, administrators, heirs or assigns or any other person
claiming under or through him by reason of the Employee's death, except that
the Employee's executors, legal representatives or administrators will be
entitled to receive the payment prescribed under any death or disability
benefits plan in which he is a participant as an employee of the Company, and
to exercise any rights afforded under any compensation or benefit plan then
in effect.
8.3 TERMINATION FOR CAUSE.
(a) The Company may terminate the Employee's employment
hereunder at any time for "cause" upon written notice to the Employee. For
purposes of this Agreement, "cause" shall mean:
-9-
<PAGE>
(i) any material breach by the Employee of any of his
obligations under this Agreement;
(ii) failure by the Employee to perform satisfactorily the
duties required by or appropriate for the Position, as determined by the
President of the Company or the Board in his or its sole and reasonable
discretion;
(iii) conduct of the Employee involving any type of disloyalty
to the Company or willful misconduct with respect to the Company, including
without limitation fraud, embezzlement, theft or proven dishonesty in the
course of the employment, or any attempt by the Employee to secure any
personal profit related to the Business and the business opportunities of the
Company without the informed prior approval of the Board of Directors;
(iv) conviction of a felony;
(v) commission by the Employee of an intentional tort (i.e.,
assault, battery, false imprisonment, intentional infliction of emotional
distress, trespass to real or personal property or conversion) or an act
involving moral turpitude or constituting fraud; or
(vi) habitual alcohol or substance abuse or addiction.
(b) In the event of a termination of the Employee's employment
hereunder pursuant to Section 8.3(a), the Employee shall be entitled to
receive all accrued but unpaid (as of the effective date of such termination)
Base Salary, benefits and bonuses. All Base Salary, benefits and bonuses
shall cease at the time of such termination, subject to the terms of any
benefit or compensation plan then in force and applicable to the Employee. In
the event of a termination of the Employee's employment hereunder pursuant to
Sections 8.3(a) (iii), (iv), (v) or (vi), any options to purchase the
Company's common stock issued to Employee, including any vested or unvested
portion thereof, shall be canceled at the time of such termination, and the
Employee shall not be entitled to exercise any such options. Except as
specifically set forth in this Section 8.3, the Company shall have no
liability or obligation hereunder by reason of such termination.
8.4 TERMINATION WITHOUT CAUSE.
-10-
<PAGE>
(a) The Company may terminate the Employee's employment hereunder
at any time during the Term, for any reason, without cause, effective upon
the date designated by the Company upon thirty (30) days written notice to
the Employee.
(b) ln the event of a termination of the Employee's employment
hereunder pursuant to Section 8.4(a), the Employee shall be entitled to
receive an amount equal to any unpaid Base Salary plus any unpaid
Non-recoverable Draw against the Incentive Compensation pursuant to Schedule
A. The amounts to be paid to Employee hereunder shall be paid in accordance
with the Company's normal payroll and incentive compensation distribution
cycle then in effect. Employee acknowledges that, as a condition to receiving
any severance payments hereunder, Employee must complete in good faith such
employee exit forms then in use by the Company at the time Employee's
employment is terminated and acknowledge in writing on such forms then in use
by the Company, Employee's obligations to the Company including, but not
limited to, Employee's obligations with respect to confidentiality and
Company property set forth in Sections 5 and 6 hereof and Employee's
obligations with respect to the Covenant not to Compete set forth in Section
7 hereof. All benefits and unguaranteed incentive compensation shall cease at
the time of such termination, subject to the terms of any benefit or
compensation plan then in force and applicable to the Employee. Except as
specifically set forth in this Section 8.4, the Company shall have no
liability or obligation hereunder by reason of such termination.
8.5 NON-RENEWAL BY EITHER PARTY.
In the event of a non-renewal of the Agreement by either party pursuant
to Section 1(b) hereof, the Employee shall be eligible to receive an amount
equal to: (i) one (1) week's Base Salary for every year of employment with
EXE up to five (5) years; and (ii) two (2) week's Base Salary for every year
of employment with EXE over five (5) years. The amounts to be paid to
Employee hereunder shall be payable in twelve (12) equal monthly installments
in accordance with the Company's severance payment plan then in effect, if
any, at the time the Employee's employment ceases; provided that, if the
Employee obtains other employment during the twelve (12) month period
following non-renewal, then the Company shall only be obligated to pay the
Employee the difference between the monthly installments provided for in this
Section 8.5 and the monthly salary the Employee shall receive from his new
employer during such period of employment. Employee acknowledges that, as a
condition to participation in such severance plan, Employee must complete in
good faith such employee exit forms then in use by the Company at the time
Employee's employment is terminated and acknowledge in writing on such forms
then in use by the Company,
-11-
<PAGE>
Employee's obligations to the Company including, but not limited to,
Employee's obligations with respect to confidentiality and Company property
set forth in Sections 5 and 6 hereof and Employee's obligations with respect
to the Covenant not to Compete set forth in Section 7 hereof. All Base
Salary, benefits and bonuses shall cease at the time of such termination,
subject to the terms of any benefit or compensation plan then in force and
applicable to the Employee. Except as specifically set forth in this Section
8.5, the Company shall have no liability or obligation hereunder by reason of
such termination.
8.6 OPTIONS; REPURCHASE OF SHARES.
Upon the termination of the Employee's employment pursuant to Section 8
other than under Section 8.3, all further vesting on all stock options and/or
restricted stock in the Company held by the Employee shall immediately cease
as of such date and thereafter any vested stock options shall be exercisable
and any restricted stock or other equity securities held by the Employee
shall be subject to repurchase by the Company in accordance with their
respective terms and the terms of any related agreements between the Company
and the Employee.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE EMPLOYEE.
(a) The Employee represents and warrants to the Company that:
(i) There are no restrictions, agreements or understandings
whatsoever to which the Employee is a party which would prevent or make
unlawful the Employee's execution of this Agreement or the Employee's
employment hereunder, or which is or would be inconsistent or in conflict
with this Agreement or the Employee's employment hereunder, or would prevent,
limit or impair in any way the performance by the Employee of the obligations
hereunder; and
(ii) The Employee has disclosed to the Company all restraints,
confidentiality commitments or other employment restrictions that the
Employee has with any other employer, person or entity.
(b) Upon and after the Employee's termination or cessation of
employment with the Company and until such time as no obligations of the
Employee to the Company hereunder exist, the Employee (i) shall provide a
complete copy of this Agreement to any prospective employer or other person,
entity or association in the Business, with whom or which the Employee
proposes to be employed, affiliated,
-12-
<PAGE>
engaged, associated or to establish any business or remunerative relationship
prior to the commencement thereof and (ii) shall notify the Company of the
name and address of any such person, entity or association prior to the
Employee's employment, affiliation, engagement, association or the
establishment of any business or remunerative relationship.
10. SURVIVAL OF PROVISIONS. The provisions of this Agreement set forth
in Sections 5 through 20 hereof shall survive the termination of the
Employee's employment hereunder in accordance with their respective terms.
11. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the Company and the Employee and their respective
successors, executors, administrators, heirs and/or permitted assigns;
provided that neither the Employee nor the Company may make any assignments
of this Agreement or any interest herein, by operation of law or otherwise,
without the prior written consent of the other parties hereto, except that,
without such consent, the Company may assign this Agreement to any successor
to all or substantially all of its assets and business by means of
liquidation, dissolution, merger, consolidation, transfer of assets, or
otherwise, provided that such successor assumes in writing all of the
obligations of the Company under this Agreement.
12. NOTICE. Any notice hereunder by either party shall be given by
personal delivery or by sending such notice by certified mail, return-receipt
requested, or by overnight delivery with a reputable courier service, or
telecopied, addressed or telecopied, as the case may be, to the other party
at its address set forth below or at such other address designated by notice
in the manner provided in this section. Such notice shall be deemed to have
been received upon the date of actual delivery if personally delivered or, in
the case of mailing, two (2) days after deposit with the U.S. mail, or if by
overnight delivery, the date of delivery or, in the case of facsimile
transmission, when confirmed by the facsimile machine report.
If to the Employee:
Thomas Cooper
702 Thomas Court
Southlake, TX 76092
-13-
<PAGE>
If to the Company:
EXE Technologies, Inc.
12740 Hillcrest Road
Dallas, TX 75230
Attention: President
with a copy to:
Pepper Hamilton LLP
1235 Westlakes Drive
Suite 400
Berwyn, PA 19312
Attention: Christopher F. Wright, Esquire
13. ENTIRE AGREEMENT; AMENDMENTS. This Agreement contains the entire
agreement and understanding of the parties hereto relating to the subject
matter hereof, and merges and supersedes all prior and contemporaneous
discussions, agreements and understandings of every nature between the
parties hereto relating to the employment of the Employee with the Company.
This Agreement may not be changed or modified, except by an agreement in
writing signed by each of the parties hereto.
14. WAIVER. The waiver of the breach of any term or provision of this
Agreement shall not operate as or be construed to be a waiver of any other or
subsequent breach of this Agreement.
15. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Texas, without regard to the
principles of conflicts of laws of any jurisdiction.
16. INVALIDITY. If any provision of this Agreement shall be determined
to be void, invalid, unenforceable or illegal for any reason, then the
validity and enforceability of all of the remaining provisions hereof shall
not be affected thereby. If any particular provision of this Agreement shall
be adjudicated to be invalid or unenforceable, then such provision shall be
deemed amended to delete therefrom the portion thus adjudicated to be
invalid or unenforceable, such amendment to apply only to the operation of
such provision in the particular jurisdiction in which such adjudication is
made; provided that, if any provision contained in this Agreement shall be
adjudicated to be invalid or unenforceable because such provision is held to
be
-14-
<PAGE>
excessively broad as to duration, geographic scope, activity or subject, then
such provision shall be deemed amended by limiting and reducing it so as to
be valid and enforceable to the maximum extent compatible with the applicable
laws of such jurisdiction, such amendment only to apply with respect to the
operation of such provision in the applicable jurisdiction in which the
adjudication is made.
17. SECTION HEADINGS. The section headings in this Agreement are for
convenience only; they form no part of this Agreement and shall not affect
its interpretation.
18. NUMBER OF DAYS. In computing the number of days for purposes of
this Agreement, all days shall be counted, including Saturdays, Sundays and
legal holidays; provided that, if the final day of any time period falls on a
Saturday, Sunday or day which is a legal holiday in Texas, then such final
day shall be deemed to be the next day which is not a Saturday, Sunday or
legal holiday.
19. SPECIFIC ENFORCEMENT; EXTENSION OF PERIOD.
(a) The Employee acknowledges that the restrictions contained in
Sections 5, 6, and 7 hereof are reasonable and necessary to protect the
legitimate interests of the Company and its affiliates and that the Company
would not have entered into this Agreement in the absence of such
restrictions. The Employee also acknowledges that any breach by the Employee
of Sections 5, 6, or 7 hereof will cause continuing and irreparable injury to
the Company for which monetary damages would not be an adequate remedy. The
Employee shall not, in any action or proceeding to enforce any of the
provisions of this Agreement, assert the claim or defense that an adequate
remedy at law exists. In the event of such breach by the Employee, the
Company shall have the right to enforce the provisions of Sections 5, 6, and
7 of this Agreement by seeking injunctive or other relief in any court, and
this Agreement shall not in any way limit remedies of law or in equity
otherwise available to the Company.
(b) The periods of time set forth in Sections 5, 6 and 7 hereof
shall not include, and shall be deemed extended by, any time required for
litigation to enforce the relevant covenant periods, provided that the
Company is successful on the merits in any such litigation. The "time
required for litigation" is herein defined to mean the period of time
commencing on the earlier of the Employee's first breach of such covenants or
the service of process upon the Employee and ending on the expiration of all
appeals related to such litigation.
-15-
<PAGE>
20. CONSENT TO SUIT. In the case of any dispute under or in connection
with this Agreement, the Employee may only bring suit against the Company in
the Courts of the State of Texas in and for the County of Dallas or in the
Federal District Court for such geographic location. The Employee hereby
consents to the jurisdiction and venue of the courts of the State of Texas in
and for the County of Dallas or the Federal District Court for such
geographic location, provided that such Federal Court has subject matter
jurisdiction over such dispute, and the Employee hereby waives any claim the
Employee may have at any time as to FORUM NON CONVENIENS with respect to such
venue. The Company shall have the right to institute any legal action arising
out of or relating to this Agreement in any appropriate court and in any
jurisdiction. Any judgment entered against either of the parties in any
proceeding hereunder may be entered and enforced by any court of competent
jurisdiction. If an action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, then the prevailing party shall be
entitled to recover, in addition to any other relief, reasonable attorneys'
fees, costs and disbursements.
21. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which
together shall be deemed to be one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on the day and year first written above.
EXE TECHNOLOGIES, INC.
By: /s/ Raymond Hood
--------------------------------
Title: President
------------------------------
/s/ Thomas R. Cooper
------------------------------------
Thomas Cooper
-16-
<PAGE>
SCHEDULE A
EMPLOYMENT AND COMPENSATION
POSITION: SENIOR VICE PRESIDENT WORLDWIDE SALES AND MARKETING
DUTIES: PER JOB DESCRIPTION
REPORTING MANAGER: CHIEF EXECUTIVE OFFICER
BASE SALARY: $250,000
NON-RECOVERABLE DRAW AGAINST
INCENTIVE COMPENSATION (INITIAL TERM ONLY): $250,000
<PAGE>
SCHEDULE B
OPTION VESTING SCHEDULES
INITIAL OPTION:
(a) 100,000 shares on the date of this Agreement
(b) 100,000 shares on the first anniversary of this Agreement
(c) 50,000 shares on the second anniversary of this Agreement
(d) 50,000 shares on the third anniversary of this Agreement
INCENTIVE-BASED OPTION: The Incentive-Based Option shall vest as follows if
the revenue targets set forth below are achieved:
(a) 100,000 shares on January 31, 1999, if the prior calendar year Software
License Revenue equals or exceeds $34 million.
(b) 100,000 shares on January 31, 2000, if the prior calendar year Software
License Revenue equals or exceeds $68 million.
(c) 75,000 shares on January 31, 2001, if the prior calendar year Software
License Revenue equals or exceeds $136 million.
(d) 25,000 shares on January 31, 2002, if the prior calendar year Software
License Revenue equals or exceeds $272 million.
If the Company does not achieve the target Software License Revenue in any
year as set forth in (a) - (d) above, then the portion of the Incentive-Based
Option for such year shall not vest at that time. If the Company exceeds the
target Software License Revenue in any year by the cumulative amount of all
shortfalls in any previous years, the portion of the Incentive-Based Option
that had not vested previously shall then vest on the date indicated. If the
Incentive-Based Option has not vested fully by January 31, 2002, the Company,
in its sole discretion, may set certain revenue goals for the accelerated
vesting of any unvested portion of the Incentive-Based Option.
<PAGE>
The foregoing Incentive-Based Option Grant Vesting targets will be adjusted
if during the term of the agreement the Company completes a merger or
acquisition of another entity with Software License Revenue greater than $10
million.
EXE TECHNOLOGIES, INC.
1997 INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN
(ATTACHED)
<PAGE>
SCHEDULE C
NON SALARY CONSIDERATION
(COMPANY HUMAN RESOURCE POLICIES ATTACHED)
<PAGE>
NON-SALARY CONSIDERATIONS
1. 7 paid holidays:
2. Vacation:
<TABLE>
<CAPTION>
Years of continuous service No. of Days Vacation
--------------------------- --------------------
<S> <C>
1 month but less than 3 years.... 1 day per month
3 years but less than 10......... 17 days per year
10 years and over................ 22 days per year
</TABLE>
3. Medical Plan - Employer/Employee paid.
4. Dental Plan - Employer/Employee paid.
5. Life Insurance/AD&D - equal to $50,000 - Employer paid.
6. Vision plan - Employer paid - provides 20% to 60% discount on all vision
services.
7. Flexible Benefit Plan - enables employees to set aside pre-tax dollars for
the reimbursement of certain qualified expenses.
8. Short-term Disability - Employer paid - provides potential salary
continuation to regular, full-time employees who are unavoidably absent
from work due to personal illness injury or pregnancy.
9. Long-term Disability - Employer paid - provides income protection in the
event of a long-term disability, equal to 60% of basic monthly earnings.
10. 401(k) Plan - permits deferral of pre-tax dollars up to 15% of salary.
Company matches 100% of first 5% contribution.
11. Employee Assistance Plan - provides counseling or referral benefits to
eligible employees and their families.
12. Tuition Assistance - provides educational reimbursement benefits to
eligible employees.
<PAGE>
SCHEDULE D
PRIOR INVENTIONS
1.
2.
3.
<PAGE>
EMPLOYMENT AGREEMENT
EXE TECHNOLOGIES, INC.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made as of the 16th day of March, 1998
by and between George Van Ness, a resident of the State of Texas (the
"Employee"), and EXE Technologies, Inc., a corporation organized and existing
under the laws of the State of Delaware (the "Company").
WHEREAS, the Company is engaged in the business of providing supply
chain execution software and related services to the warehouse, distribution and
logistics industries worldwide (the "Business"); and
WHEREAS, the Company desires to employ the Employee and the Employee
desires to be employed by the Company for a period of time in the future upon
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations contained herein, and intending to be legally bound, the parties,
subject to the terms and conditions set forth herein, agree as follows:
1. EMPLOYMENT AND TERM.
(a) The Company hereby employs the Employee and the Employee
hereby accepts employment with the Company for the position detailed in Schedule
A attached hereto (the "Position"), for a period of one (1) year from the date
of this Agreement (the "Initial Term").
(b) At the end of the Initial Term, this Agreement shall
automatically renew for successive additional periods of one (1) year, unless
either party provides written notice to the other party at least ninety (90)
days prior to the expiration of the Initial Term or any such renewal period
indicating the notifying party's election not to renew this Agreement. The
Initial Term of employment and any renewal periods hereunder, subject to the
provisions of Section 8 hereof, are hereinafter referred to as the "Term."
2. DUTIES. During the Term, the Employee shall serve the Company
faithfully and to the best of his/her ability and shall devote his/her full
time, attention, skill and efforts to the performance of the duties required by
or appropriate for the Position. The Employee shall assume such duties and
responsibilities as may be customarily incident to such a position, and such
additional and other duties as may be assigned to the Employee from time to time
by his/her Reporting Manager, including, without limitation, the duties and
responsibilities set forth in Schedule A attached hereto. The Employee shall
report to the Reporting Manager designated in Schedule A.
3. OTHER BUSINESS ACTIVITIES. During the Term, the Employee shall
not, without the prior written consent of the Company in its sole discretion,
directly or indirectly engage in any other business activities or pursuits
whatsoever, except activities in connection with charitable or civic activities,
personal investments and serving as an executor, trustee or in other similar
fiduciary capacity; provided that such activities do not interfere with his/her
performance of his/her responsibilities and obligations pursuant to this
Agreement.
Page 1
<PAGE>
EMPLOYMENT AGREEMENT
4. COMPENSATION. The Company shall pay the Employee, and the
Employee hereby agrees to accept, as compensation for all services rendered
hereunder and for the Employee's intellectual property covenants and assignments
and covenant not to compete as provided for in Sections 6 and 7 hereof, the
compensation set forth in this Section 4.
4.1 SALARY. The Company shall pay the Employee an initial base
salary at the annual rate detailed in Schedule A attached hereto (the "Base
Salary"). The Base Salary shall be inclusive of all applicable income, social
security and other taxes and charges that are required by law to be withheld by
the Company or are requested to be withheld by the Employee. The Base Salary
shall be withheld and paid in accordance with the Company's normal payroll
practice for its similarly situated employees from time to time in effect. The
Base Salary may be increased from time to time by the Compensation Committee of
the Company in its sole discretion.
4.2 BONUS PROGRAM. The Employee shall be entitled to
participate in any bonus program that may be established by and at the
discretion of the Company, based upon the achievement of written individual and
corporate objectives as his/her Supervisor and the President of the Company
shall determine.
4.3 EQUITY PARTICIPATION.
(a) The Company shall grant to the Employee an incentive
stock option (the "Options") to purchase shares of Class B Common Stock of the
Company ("Common Stock"), the exercise price, par value and other details of
which are detailed in Schedule B attached hereto. The Options shall be subject
to and in accordance with the provisions of the 1997 Stock Option Plan of the
Company (the "Plan") substantially in the form attached hereto as Schedule B.
(b) All shares of Common Stock issued under the Options
shall be subject to the terms and provisions of a Stock Purchase and Restriction
Agreement as required by the Plan.
4.4 FRINGE BENEFITS. The Employee shall be entitled to
participate in any health or dental programs or other non-salary consideration
(disability, vacation, sick leave) as are Company standard. Such programs are
described in Schedule C attached hereto.
4.5 REIMBURSEMENT OF EXPENSES. The Employee shall be reimbursed
for all normal items of travel and entertainment and miscellaneous expenses
reasonably incurred by him/her on behalf of the Company, provided that such
expenses are documented and submitted to the Company all in accordance with the
reimbursement policies of the Company as in effect from time to time.
5. CONFIDENTIALITY. The Employee recognizes and acknowledges that
the Proprietary Information (as hereinafter defined) is a valuable, proprietary
and unique asset of the Company. As a result, both during the Term and for a
period of five (5) years thereafter, the Employee shall not, without the prior
written consent of the Company, for any reason either directly or indirectly
divulge to any third-party or use for his/her own benefit, or for any purpose
other than the exclusive benefit of the Company, any confidential, proprietary,
business and technical information or trade secrets of the Company or of any
subsidiary or affiliate of the Company (the "Proprietary Information") revealed,
obtained or developed in the course of his/her employment with the Company.
Proprietary Information shall include, but shall not be limited to: the
intangible personal property described in Section 6(b) hereof; any information
relating to methods of production, manufacture and research; hardware and
software configurations, computer codes or instructions (including source and
object code listings, program logic algorithms, subroutines, modules or other
subparts of computer programs and related documentation, including program
notation), computer inputs and outputs (regardless of the media on which stored
or
Page 2
<PAGE>
EMPLOYMENT AGREEMENT
located) and computer processing systems, techniques, designs, architecture,
and interfaces; the identities of, the Company's relationship with, the terms of
contracts and agreements with, the needs and requirements of, and the Company's
course of dealing with, the Company's actual and prospective customers,
contractors and suppliers; and any other materials prepared by the Employee in
the course of his/her employment by the Company, or prepared by any other
employee or contractor of the Company for the Company or its customers
(including concepts, layouts, flow charts, specifications, know-how, user or
service manuals, plans, sketches, blueprints, costs, business studies, business
procedures, finances, marketing data, methods, plans, personnel information,
customer and vendor credit information); and any other materials that have not
been made available to the general public. Nothing contained herein shall
restrict the Employee's ability to make such disclosures during the course of
his/her employment as may be necessary or appropriate to the effective and
efficient discharge of the duties required by or appropriate for the Position or
as such disclosures may be required by law. Furthermore, nothing contained
herein shall restrict the Employee from divulging or using for his/her own
benefit or for any other purpose any Proprietary Information that is readily
available to the general public so long as such information did not become
available to the general public as a direct or indirect result of the Employee's
breach of this Section 5. Failure by the Company to mark any of the Proprietary
Information as confidential or proprietary shall not affect its status as
Proprietary Information under the terms of this Agreement.
6. PROPERTY.
(a) All right, title and interest in and to Proprietary
Information shall be and remain the sole and exclusive property of the Company.
During the Term, the Employee shall not remove from the Company's offices or
premises any documents, records, notebooks, files, correspondence, reports,
memoranda or similar materials of or containing Proprietary Information, or
other materials or property of any kind belonging to the Company unless
necessary or appropriate in accordance with the duties and responsibilities
required by or appropriate for the Position and, in the event that such
materials or property are removed, all of the foregoing shall be returned to
his/her proper files or places of safekeeping as promptly as possible after the
removal shall serve its specific purpose. The Employee shall not make, retain,
remove and/or distribute any copies of any of the foregoing for any reason
whatsoever, except as may be necessary in the discharge of the assigned duties,
and shall not divulge to any third person the nature of and/or contents of any
of the foregoing or of any other oral or written information to which he/she may
have access or with which for any reason he/she may become familiar, except as
disclosure shall be necessary in the performance of the duties. Upon the
termination of his/her employment with the Company, he/she shall return to the
Company all originals and copies of the foregoing then in the possession,
whether prepared by the Employee or by others.
(b) (i) The Employee acknowledges that all right, title and
interest in and to any and all writings, documents, inventions, discoveries,
computer programs or instructions (whether in source code, object code, or any
other form), algorithms, formulae, plans, memoranda, tests, research, designs,
innovations, systems, analyses, specifications, models, data, diagrams, flow
charts, and/or techniques (whether reduced to written or electronic form or
otherwise) that the Employee creates, makes, conceives, discovers or develops,
either solely or jointly with any other person, at any time during the Term,
whether during working hours or at the Company's facility or at any other time
or location, and whether upon the request or suggestion of the Company or
otherwise, and that relate to or are useful in any way in connection with the
Business now or hereafter carried on by the Company (collectively, "Intellectual
Work Product") shall be the sole and exclusive property of the Company. The
Employee shall promptly disclose to the Company all Intellectual Work Product,
and the Employee shall have no claim for additional compensation for the
Intellectual Work Product.
(ii) The Employee acknowledges that all the Intellectual
Work Product that is copyrightable shall be considered a work made for hire
under United States Copyright Law. To the extent
Page 3
<PAGE>
EMPLOYMENT AGREEMENT
that any copyrightable Intellectual Work Product may not be considered a work
made for hire under the applicable provisions of the United States Copyright
Law, or to the extent that, notwithstanding the foregoing provisions, the
Employee may retain an interest in any Intellectual Work Product that is not
copyrightable, the Employee hereby irrevocably assigns and transfers to the
Company any and all right, title, or interest that the Employee may have in
the Intellectual Work Product under copyright, patent, trade secret,
trademark and other intellectual property laws, in perpetuity or for the
longest period otherwise permitted by law, without the necessity of further
consideration. The Company shall be entitled to obtain and hold in its own
name all copyrights, patents, trade secrets, and trademarks with respect
thereto.
(iii) The Employee shall reveal promptly all information
relating to the Intellectual Work Product to an appropriate officer of the
Company, cooperate with the Company and execute such documents as may be
necessary or appropriate (A) in the event that the Company desires to seek
copyright, patent, trademark or other analogous protection thereafter relating
to the Intellectual Work Product, and when such protection is obtained, to renew
and restore the same, or (B) to defend any opposition proceedings in respect of
obtaining and maintaining such copyright, patent, trademark or other analogous
protection.
(iv) In the event that the Company is unable after reasonable
effort to secure the Employee's signature on any of the documents referenced in
Section 6(b)(iii) hereof, whether because of the Employee's physical or mental
incapacity or for any other reason whatsoever, the Employee hereby irrevocably
designates and appoints the Company and its duly authorized officers and agents
as the Employee's agent and attorney-in-fact, to act for and in his/her behalf
and stead to execute and file any such documents and to do all other lawfully
permitted acts to further the prosecution and issuance of any such copyright,
patent, trademark or other analogous protection with the same legal force and
effect as if executed by the Employee.
(v) The Employee represents that the innovations, designs,
systems, analyses, ideas for marketing programs, and all copyrights, patents,
trademarks and trade names, or similar intangible personal property identified
on Schedule D hereof comprises all of the innovations, designs, systems,
analyses, ideas for marketing programs, and all copyrights, patents, trademarks
and trade names, or similar intangible personal property that the Employee has
made or conceived of prior to the date hereof, and same are excluded from the
operation of the other provisions of this Section 6(b).
7. COVENANT NOT TO COMPETE.
(a) The Employee shall not, anywhere in the world, during the
Term and for a period of two (2) years thereafter (the "Restricted Period"), do
any of the following directly or indirectly without the prior written consent of
the Company in its sole discretion:
(i) engage or participate, directly or indirectly, in any
business activity competitive with the Business or the business of any of the
Company's subsidiaries or affiliates as conducted during the Term;
(ii) become interested (as owner, proprietor, promoter,
stockholder, lender, partner, co-venturer, director, officer, employee,
agent, consultant or otherwise) in any person, firm, corporation, association
or other entity engaged in any business that is competitive with the Business
or of the business of any subsidiary or affiliate of the Company as conducted
during the Term, or become interested in (as owner, stockholder, lender,
partner, co-venturer, director, officer, employee, agent, consultant or
otherwise) any portion of the business of any person, firm, corporation,
association or other entity where such portion of such business is
competitive with the Business of the Company or the business of any
subsidiary or affiliate of the Company as conducted during the Term
(notwithstanding the
Page 4
<PAGE>
EMPLOYMENT AGREEMENT
foregoing, the Employee may hold not more than one percent (1%) of the
outstanding securities of any class of any publicly-traded securities of a
company that is engaged in business activity competitive with the Business or
the business of any of the Company's subsidiaries or affiliates as conducted
during the Term);
(iii) solicit or call on for a purpose competitive with the
Business, either directly or indirectly, any (A) customer with whom the Company
shall have dealt at any time during the two (2) year period immediately
preceding the termination of the Employee's employment hereunder, or (B)
supplier or distributor with whom the Company shall have dealt at any time
during the two (2) year period immediately preceding the termination of the
Employee's employment hereunder;
(iv) influence or attempt to influence any supplier,
distributor, customer or potential customer of the Company to terminate or
modify any written or oral agreement or course of dealing with the Company; or
(v) influence or attempt to influence any person either
(A) to terminate or modify the employment, consulting, agency, distributorship
or other arrangement with the Company, or (B) to employ or retain, or arrange to
have any other person or entity employ or retain, any person who has been
employed or retained by the Company as an employee, consultant, agent or
distributor of the Company at any time during the twelve (12) month period
immediately preceding the termination of the Employee's employment hereunder.
(b) The Employee hereby acknowledges that the limitations as to
time, character or nature and geographic scope placed on his/her subsequent
employment by this Section 7 are reasonable and fair and will not prevent or
materially impair his/her ability to earn a livelihood.
8. TERMINATION OF EMPLOYMENT. The Employee's employment hereunder
may be terminated upon the occurrence of any one of the events described in this
Section 8 or pursuant to a non-renewal of the Agreement under Section 1(b)
hereof. Upon termination of the Employee's employment, the Employee shall be
entitled only to such compensation and benefits as described in this Section 8.
8.1 TERMINATION FOR DISABILITY.
(a) In the event of the disability of the Employee such
that the Employee is unable to perform the duties and responsibilities hereunder
to the full extent required by this Agreement by reasons of illness, injury or
incapacity for a period of more than sixty (60) consecutive days or more than
forty-five (45) days, in the aggregate, during any ninety (90) day period
("Disability"), the Employee's employment hereunder may be terminated by the
Company.
(b) In the event of a termination of the Employee's
employment hereunder pursuant to Section 8.1(a), the Employee will be entitled
to receive all accrued and unpaid (as of the date of such termination) Base
Salary and other forms of compensation and benefits payable or provided in
accordance with the terms of any then existing compensation or benefit plan or
arrangement, including payment prescribed under and disability of life insurance
plan or arrangement in which he/she is a participant or to which he/she is a
party as an employee of the Company; provided that the Employee has complied
with all of his/her obligations under this Agreement and continues to comply
with all of his/her surviving obligations hereunder listed in Section 10.
Except as specifically set forth in this Section 8.1(b), the Company shall have
no liability or obligation to the Employee for compensation or benefits
hereunder by reason of such termination.
8.2 TERMINATION BY DEATH. In the event that the Employee dies
during the Term, the Employee's employment hereunder shall be terminated thereby
and the Company shall pay to
Page 5
<PAGE>
EMPLOYMENT AGREEMENT
the Employee's executors, legal representatives or administrators an amount
equal to: the accrued and unpaid portion of the Base Salary and other
compensation for the month in which he/she dies. Except as specifically set
forth in this Section 8.2, the Company shall have no liability or obligation
hereunder to the Employee's executors, legal representatives, administrators,
heirs or assigns or any other person claiming under or through him/her by
reason of the Employee's death, except that the Employee's executors, legal
representatives or administrators will be entitled to receive the payment
prescribed under any death or disability benefits plan in which he/she is a
participant as an employee of the Company, and to exercise any rights
afforded under any compensation or benefit plan then in effect.
8.3 TERMINATION FOR CAUSE.
(a) The Company may terminate the Employee's employment
hereunder at any time for "cause" upon written notice to the Employee. For
purposes of this Agreement, "cause" shall mean:
(i) any material breach by the Employee of any of
his/her obligations under this Agreement;
(ii) willful failure or inability by the Employee
to perform satisfactorily the duties required by or appropriate for the
Position, as determined by the President of the Company in his sole discretion;
(iii) conduct of the Employee involving any type of
disloyalty to the Company or willful misconduct with respect to the Company,
including without limitation fraud, embezzlement, theft or proven dishonesty in
the course of the employment, or any attempt by the Employee to secure any
personal profit related to the Business and the business opportunities of the
Company without the informed prior approval of the Board of Directors;
(iv) conviction of a felony or other criminal act
punishable by more than one (1) year in prison;
(v) commission by the Employee of an intentional
tort or an act involving moral turpitude or constituting fraud; or
(vi) habitual alcohol or substance abuse or
addiction.
(b) In the event of a termination of the Employee's
employment hereunder pursuant to Section 8.3(a), the Employee shall be entitled
to receive all accrued but unpaid (as of the effective date of such termination)
Base Salary, benefits and bonuses. All Base Salary, benefits and bonuses shall
cease at the time of such termination, subject to the terms of any benefit or
compensation plan then in force and applicable to the Employee. Any options to
purchase the Company's common stock issued to Employee, including any vested or
unvested portion thereof, shall be canceled at the time of such termination, and
the Employee shall not be entitled to exercise any such options. Except as
specifically set forth in this Section 8.3, the Company shall have no liability
or obligation hereunder by reason of such termination.
8.4 TERMINATION WITHOUT CAUSE.
(a) The Company may terminate the Employee's employment
hereunder at any time during the Term, for any reason, without cause, effective
upon the date designated by the Company upon thirty (30) days written notice to
the Employee.
Page 6
<PAGE>
EMPLOYMENT AGREEMENT
(b) In the event of a termination of the Employee's
employment hereunder pursuant to Section 8.4(a), the Employee shall be entitled
to receive an amount equal to the lesser of: (i) all unpaid Base Salary from the
effective date of the Employee's termination through the remainder of the Term;
or (ii) three (3) months Base Salary. Employee also shall be entitled to
receive all accrued (as of the effective date of the Employee's termination) but
unpaid benefits and bonuses. In addition, Employee will be eligible to receive
a liquidated termination fee equivalent to: (i) one (1) week's Base Salary for
every year of employment with EXE up to five (5) years; and (ii) two (2) week's
Base Salary for every year of employment with EXE over five (5) years. The
amounts to be paid to Employee hereunder shall be payable in twelve (12) equal
monthly installments in accordance with the Company's severance payment plan
then in effect, if any, at the time the Company terminates Employee's employment
pursuant to Section 8.4(a); provided that, if the Employee obtains other
employment during the twelve (12) month period following termination, then the
Company shall only be obligated to pay the Employee the difference between the
monthly installments provided for in this Section 8.4 and the monthly salary the
Employee shall receive from his/her new employer during such period of
employment. Employee acknowledges that, as a condition to participation in such
severance plan, Employee must complete in good faith such employee exit forms
then in use by the Company at the time Employee's employment is terminated and
acknowledge in writing on such forms then in use by the Company, Employee's
obligations to the Company including, but not limited to, Employee's obligations
with respect to confidentiality and Company property set forth in Sections 5 and
6 hereof and Employee's obligations with respect to the Covenant not to Compete
set forth in Section 7 hereof. All Base Salary, benefits and bonuses shall
cease at the time of such termination, subject to the terms of any benefit or
compensation plan then in force and applicable to the Employee. Except as
specifically set forth in this Section 8.4, the Company shall have no liability
or obligation hereunder by reason of such termination.
8.5. NON-RENEWAL BY EITHER PARTY.
In the event of a non-renewal of the Agreement by either party
pursuant to Section 1(b) hereof, the Employee shall be eligible to receive an
amount equal to: (i) one (1) week's Base Salary for every year of employment
with EXE (or its predecessor companies Neptune Systems, Inc. or Dallas
Systems Corporation) up to five (5) years; and (ii) two (2) week's Base
Salary for every year of employment with EXE over five (5) years. The
amounts to be paid to Employee hereunder shall be payable in twelve (12)
equal monthly installments in accordance with the Company's severance payment
plan then in effect, if any, at the time the Employee's employment ceases;
provided that, if the Employee obtains other employment during the twelve
(12) month period following non-renewal, then the Company shall only be
obligated to pay the Employee the difference between the monthly installments
provided for in this Section 8.5 and the monthly salary the Employee shall
receive from his/her new employer during such period of employment. Employee
acknowledges that, as a condition to participation in such severance plan,
Employee must complete in good faith such employee exit forms then in use by
the Company at the time Employee's employment is terminated and acknowledge
in writing on such forms then in use by the Company, Employee's obligations
to the Company including, but not limited to, Employee's obligations with
respect to confidentiality and Company property set forth in Sections 5 and 6
hereof and Employee's obligations with respect to the Covenant not to Compete
set forth in Section 7 hereof. All Base Salary, benefits and bonuses shall
cease at the time of such termination, subject to the terms of any benefit or
compensation plan then in force and applicable to the Employee. Except as
specifically set forth in this Section 8.5, the Company shall have no
liability or obligation hereunder by reason of such termination.
Page 7
<PAGE>
EMPLOYMENT AGREEMENT
8.6. OPTIONS; REPURCHASE OF SHARES.
Upon the termination of the Employee's employment pursuant to
Section 8 other than under Sections 8.3, all further vesting on all stock
options and/or restricted stock in the Company held by the Employee shall
immediately cease as of such date and thereafter any vested stock options shall
be exercisable and any restricted stock or other equity securities held by the
Employee shall be subject to repurchase by the Company in accordance with their
respective terms and the terms of any related agreements between the Company and
the Employee.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE EMPLOYEE.
(a) The Employee represents and warrants to the Company that:
(i) There are no restrictions, agreements or
understandings whatsoever to which the Employee is a party which would prevent
or make unlawful the Employee's execution of this Agreement or the Employee's
employment hereunder, or which is or would be inconsistent or in conflict with
this Agreement or the Employee's employment hereunder, or would prevent, limit
or impair in any way the performance by the Employee of the obligations
hereunder; and
(ii) The Employee has disclosed to the Company all
restraints, confidentiality commitments or other employment restrictions that
he/she has with any other employer, person or entity.
(b) Upon and after his/her termination or cessation of
employment with the Company and until such time as no obligations of the
Employee to the Company hereunder exist, the Employee (i) shall provide a
complete copy of this Agreement to any prospective employer or other person,
entity or association in the Business, with whom or which the Employee proposes
to be employed, affiliated, engaged, associated or to establish any business or
remunerative relationship prior to the commencement thereof and (ii) shall
notify the Company of the name and address of any such person, entity or
association prior to his/her employment, affiliation, engagement, association or
the establishment of any business or remunerative relationship.
10. SURVIVAL OF PROVISIONS. The provisions of this Agreement set
forth in Sections 5 through 20 hereof shall survive the termination of the
Employee's employment hereunder.
11. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the Company and the Employee and his/her
respective successors, executors, administrators, heirs and/or permitted
assigns; provided that neither the Employee nor the Company may make any
assignments of this Agreement or any interest herein, by operation of law or
otherwise, without the prior written consent of the other parties hereto, except
that, without such consent, the Company may assign this Agreement to any
successor to all or substantially all of its assets and business by means of
liquidation, dissolution, merger, consolidation, transfer of assets, or
otherwise, provided that such successor assumes in writing all of the
obligations of the Company under this Agreement.
12. NOTICE. Any notice hereunder by either party shall be given by
personal delivery or by sending such notice by certified mail, return-receipt
requested, or by overnight delivery with a reputable courier service, or
telecopied, addressed or telecopied, as the case may be, to the other party at
its address set forth below or at such other address designated by notice in the
manner provided in this section. Such notice shall be deemed to have been
received upon the date of actual delivery if personally delivered or, in the
case of mailing, two (2) days after deposit with the U.S. mail, or if by
overnight delivery, the date of delivery or, in the case of facsimile
transmission, when confirmed by the facsimile machine report.
Page 8
<PAGE>
EMPLOYMENT AGREEMENT
If to the Employee:
George Van Ness
1485 Bent Trail Circle
Southlake, TX 76092
If to the Company:
EXE Technologies, Inc.
12740 Hillcrest Road
Dallas TX 75230
Attention: Raymond R. Hood
with a copy to:
Pepper, Hamilton & Scheetz LLP
1235 Westlakes Drive
Suite 400
Berwyn, PA 19312
Attention: Christopher F. Wright, Esquire
13. ENTIRE AGREEMENT; AMENDMENTS. This Agreement contains the
entire agreement and understanding of the parties hereto relating to the subject
matter hereof, and merges and supersedes all prior and contemporaneous
discussions, agreements and understandings of every nature between the parties
hereto relating to the employment of the Employee with the Company. This
Agreement may not be changed or modified, except by an agreement in writing
signed by each of the parties hereto.
14. WAIVER. The waiver of the breach of any term or provision of
this Agreement shall not operate as or be construed to be a waiver of any other
or subsequent breach of this Agreement.
15. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Texas, without regard to the principles
of conflicts of laws of any jurisdiction.
16. INVALIDITY. If any provision of this Agreement shall be
determined to be void, invalid, unenforceable or illegal for any reason, then
the validity and enforceability of all of the remaining provisions hereof shall
not be affected thereby. If any particular provision of this Agreement shall be
adjudicated to be invalid or unenforceable, then such provision shall be deemed
amended to delete therefrom the portion thus adjudicated to be invalid or
unenforceable, such amendment to apply only to the operation of such provision
in the particular jurisdiction in which such adjudication is made; provided
that, if any provision contained in this Agreement shall be adjudicated to be
invalid or unenforceable because such provision is held to be excessively broad
as to duration, geographic scope, activity or subject, then such provision shall
be deemed amended by limiting and reducing it so as to be valid and enforceable
to the maximum extent compatible with the applicable laws of such jurisdiction,
such amendment only to apply with respect to the operation of such provision in
the applicable jurisdiction in which the adjudication is made.
17. SECTION HEADINGS. The section headings in this Agreement are for
convenience only; they form no part of this Agreement and shall not affect its
interpretation.
Page 9
<PAGE>
EMPLOYMENT AGREEMENT
18. NUMBER OF DAYS. In computing the number of days for purposes of
this Agreement, all days shall be counted, including Saturdays, Sundays and
legal holidays; provided that, if the final day of any time period falls on a
Saturday, Sunday or day which is a legal holiday in Pennsylvania, then such
final day shall be deemed to be the next day which is not a Saturday, Sunday or
legal holiday.
19. SPECIFIC ENFORCEMENT; EXTENSION OF PERIOD.
(a) The Employee acknowledges that the restrictions contained in
Sections 5, 6, and 7 hereof are reasonable and necessary to protect the
legitimate interests of the Company and its affiliates and that the Company
would not have entered into this Agreement in the absence of such restrictions.
The Employee also acknowledges that any breach by him/her of Sections 5, 6, or 7
hereof will cause continuing and irreparable injury to the Company for which
monetary damages would not be an adequate remedy. The Employee shall not, in
any action or proceeding to enforce any of the provisions of this Agreement,
assert the claim or defense that an adequate remedy at law exists. In the event
of such breach by the Employee, the Company shall have the right to enforce the
provisions of Sections 5, 6, and 7 of this Agreement by seeking injunctive or
other relief in any court, and this Agreement shall not in any way limit
remedies of law or in equity otherwise available to the Company.
(b) The periods of time set forth in Sections 5, 6 and 7 hereof
shall not include, and shall be deemed extended by, any time required for
litigation to enforce the relevant covenant periods, provided that the Company
is successful on the merits in any such litigation. The "time required for
litigation" is herein defined to mean the period of time commencing on the
earlier of the Employee's first breach of such covenants or the service of
process upon the Employee and ending on the expiration of all appeals related to
such litigation.
20. CONSENT TO SUIT. In the case of any dispute under or in
connection with this Agreement, the Employee may only bring suit against the
Company in the Courts of the State of Texas in and for the County of Dallas or
in the Federal District Court for such geographic location. The Employee hereby
consents to the jurisdiction and venue of the courts of the State of Texas in
and for the County of Dallas or the Federal District Court for such geographic
location, provided that such Federal Court has subject matter jurisdiction over
such dispute, and the Employee hereby waives any claim he may have at any time
as to FORUM NON CONVENIENS with respect to such venue. The Company shall have
the right to institute any legal action arising out of or relating to this
Agreement in any appropriate court and in any jurisdiction. Any judgment
entered against either of the parties in any proceeding hereunder may be entered
and enforced by any court of competent jurisdiction. If an action at law or in
equity is necessary to enforce or interpret the terms of this Agreement, then
the prevailing party shall be entitled to recover, in addition to any other
relief, reasonable attorneys' fees, costs and disbursements.
21. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which
together shall be deemed to be one and the same instrument.
Page 10
<PAGE>
EMPLOYMENT AGREEMENT
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the day and year first written above.
EXE TECHNOLOGIES, INC.
By: /s/ Raymond Hood
---------------------------------
Title:
EMPLOYEE
/s/ George Van Ness
-------------------------------
Page 11
<PAGE>
EMPLOYMENT AGREEMENT
SCHEDULE A
EMPLOYMENT AND COMPENSATION
POSITION: SENIOR VICE PRESIDENT PRODUCT DEVELOPMENT
REPORTING MANAGER: RAYMOND HOOD
BASE ANNUAL SALARY: $175,000.00
ANNUAL NON-REFUNDABLE
DRAW: $100,000 (TO BE APPLIED AGAINST ICP)
Page 12
<PAGE>
EMPLOYMENT AGREEMENT
SCHEDULE B
INITIAL STOCK OPTION GRANT: 200,000
STRIKE PRICE: $2.00 PER SHARE
VESTING: 25,000 UPON DATE OF HIRE
175,000 OVER A 3-YEAR PERIOD; ONE-THIRD PER
YEAR
EXE TECHNOLOGIES, INC.
1997 INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN
[TO BE PROVIDED]
Page 13
<PAGE>
EMPLOYMENT AGREEMENT
SCHEDULE C
NON SALARY CONSIDERATIONS
1. 7 paid holidays:
Vacation:
<TABLE>
<CAPTION>
Years of continuous service No. of Days Vacation
--------------------------- --------------------
<S> <C>
1 month but less than 3 years 1 day per month
3 years but less than 10 17 days per year
10 years and over 22 days per year
</TABLE>
1. Medical Plan - Employer/Employee paid.
1. Dental Plan - Employer/Employee paid.
1. Life Insurance/AD&D - equal to $50,000 - Employer paid.
6. Voluntary Term Life Insurance......................
7. Vision plan - Employer paid - provides 20% to 60% discount on all vision
services.
8. Flexible Benefit Plan - enables employees to set aside pre-tax dollars for
the reimbursement of certain qualified expenses.
9. Short-term Disability - Employer paid - provides salary continuation to
regular, full-time employees who are unavoidably absent from work due to
personal illness injury or pregnancy.
10. Long-term Disability - Employer paid - provides income protection in the
event of a long-term disability, equal to 60% of basic monthly earnings.
11. 401(k) Plan - permits deferral of pre-tax dollars up to 15% of salary.
Company matches 100% of first 5% contribution.
12. Tuition Assistance - provides educational reimbursement benefits to
eligible employees.
EXE Technologies reserves the right to, at any time, add to, modify, revoke,
suspend, terminate or change any or all benefit plans without notice.
Page 14
<PAGE>
EMPLOYMENT AGREEMENT
SCHEDULE D
PRIOR INVENTIONS
1.
2.
Page 15
<PAGE>
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
EXE TECHNOLOGIES, INC.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made as of the 16th day of March, 1998 by
and between Kenichi Tsumura, a resident of Tokyo, Japan (the "Employee"), and
EXE Technologies, Inc., a corporation organized and existing under the laws of
the State of Delaware (the "Company").
WHEREAS, the Company is engaged in the business of providing supply
chain execution software and related services to the warehouse, distribution and
logistics industries worldwide (the "Business"); and
WHEREAS, the Company desires to employ the Employee and the Employee
desires to be employed by the Company for a period of time in the future upon
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations contained herein, and intending to be legally bound, the parties,
subject to the terms and conditions set forth herein, agree as follows:
1. EMPLOYMENT AND TERM.
(a) The Company hereby employs the Employee and the Employee
hereby accepts employment with the Company for the position detailed in Schedule
A attached hereto (the "Position"), for a period of one (1) year from the date
of this Agreement (the "Initial Term").
(b) At the end of the Initial Term, this Agreement shall
automatically renew for successive additional periods of one (1) year, unless
either party provides written notice to the other party at least ninety (90)
days prior to the expiration of the Initial Term or any such renewal period
indicating the notifying party's election not to renew this Agreement. The
Initial Term of employment and any renewal periods hereunder, subject to the
provisions of Section 8 hereof, are hereinafter referred to as the "Term."
1. DUTIES. During the Term, the Employee shall serve the
Company faithfully and to the best of his/her ability and shall devote
his/her full time, attention, skill and efforts to the performance of the
duties required by or appropriate for the Position. The Employee shall
assume such duties and responsibilities as may be customarily incident to
such a position, and such additional and other duties as may be assigned to
the Employee from time to time by his/her Reporting Manager, including,
without limitation, the duties and responsibilities set forth in Schedule A
attached hereto. The Employee shall report to the Reporting Manager
designated in Schedule A.
3. OTHER BUSINESS ACTIVITIES. During the Term, the Employee shall
not, without the prior written consent of the Company in its sole discretion,
directly or indirectly engage in any other business activities or pursuits
whatsoever, except activities in connection with charitable or civic activities,
personal investments and serving as an executor, trustee or in other similar
fiduciary capacity; provided that such activities do not interfere with his/her
performance of his/her responsibilities and obligations pursuant to this
Agreement.
4. COMPENSATION. The Company shall pay the Employee, and the
Employee hereby agrees to accept, as compensation for all services rendered
hereunder and for the Employee's
Confidential Page 1 of 16 (rev. 11-Nov-97)
<PAGE>
EMPLOYMENT AGREEMENT
intellectual property covenants and assignments and covenant not to compete
as provided for in Sections 6 and 7 hereof, the compensation set forth in
this Section 4.
4.1 SALARY. The Company shall pay the Employee an initial base
salary at the annual rate detailed in Schedule A attached hereto (the "Base
Salary"). The Base Salary shall be inclusive of all applicable income, and other
taxes and charges that are required by law to be withheld by the Company or are
requested to be withheld by the Employee. The Base Salary shall be withheld and
paid in accordance with the Company's normal payroll practice for its similarly
situated employees from time to time in effect. The Base Salary may be
increased from time to time by the Compensation Committee of the Company in its
sole discretion.
4.2 BONUS PROGRAM. The Employee shall be entitled to
participate in any bonus program that may be established by and at the
discretion of the Company, based upon the achievement of written individual and
corporate objectives as his/her Supervisor and the President of the Company
shall determine.
4.3 EQUITY PARTICIPATION.
(a) The Company shall grant to the Employee an incentive
stock option (the "Options") to purchase shares of Class B Common Stock of the
Company ("Common Stock"), the exercise price, par value and other details of
which are detailed in Schedule B attached hereto. The Options shall be subject
to and in accordance with the provisions of the 1997 Stock Option Plan of the
Company (the "Plan") substantially in the form attached hereto as Schedule B.
(b) All shares of Common Stock issued under the Options
shall be subject to the terms and provisions of a Stock Purchase and Restriction
Agreement as required by the Plan.
4.4 FRINGE BENEFITS. The Employee shall be entitled to
participate in any benefit or other non-salary consideration as are typical for
the country. These are described in Schedule C attached hereto.
4.5 REIMBURSEMENT OF EXPENSES. The Employee shall be reimbursed
for all normal items of travel and entertainment and miscellaneous expenses
reasonably incurred by him/her on behalf of the Company, provided that such
expenses are documented and submitted to the Company all in accordance with the
reimbursement policies of the Company as in effect from time to time.
5. CONFIDENTIALITY. The Employee recognizes and acknowledges that
the Proprietary Information (as hereinafter defined) is a valuable, proprietary
and unique asset of the Company. As a result, both during the Term and for a
period of five (5) years thereafter, the Employee shall not, without the prior
written consent of the Company, for any reason either directly or indirectly
divulge to any third-party or use for his/her own benefit, or for any purpose
other than the exclusive benefit of the Company, any confidential, proprietary,
business and technical information or trade secrets of the Company or of any
subsidiary or affiliate of the Company (the "Proprietary Information") revealed,
obtained or developed in the course of his/her employment with the Company.
Proprietary Information shall include, but shall not be limited to: the
intangible personal property described in Section 6(b) hereof; any information
relating to methods of production, manufacture and research; hardware and
software configurations, computer codes or instructions (including source and
object code listings, program logic algorithms, subroutines, modules or other
subparts of computer programs and related documentation, including program
notation), computer inputs and outputs (regardless of the media on which stored
or located) and computer processing systems, techniques, designs, architecture,
and interfaces; the identities of, the Company's relationship with, the terms of
contracts and agreements with, the needs and
Confidential Page 2 of 16 (rev. 11-Nov-97)
<PAGE>
EMPLOYMENT AGREEMENT
requirements of, and the Company's course of dealing with, the Company's
actual and prospective customers, contractors and suppliers; and any other
materials prepared by the Employee in the course of his/her employment by the
Company, or prepared by any other employee or contractor of the Company for
the Company or its customers (including concepts, layouts, flow charts,
specifications, know-how, user or service manuals, plans, sketches,
blueprints, costs, business studies, business procedures, finances, marketing
data, methods, plans, personnel information, customer and vendor credit
information); and any other materials that have not been made available to
the general public. Nothing contained herein shall restrict the Employee's
ability to make such disclosures during the course of his/her employment as
may be necessary or appropriate to the effective and efficient discharge of
the duties required by or appropriate for the Position or as such disclosures
may be required by law. Furthermore, nothing contained herein shall restrict
the Employee from divulging or using for his/her own benefit or for any other
purpose any Proprietary Information that is readily available to the general
public so long as such information did not become available to the general
public as a direct or indirect result of the Employee's breach of this
Section 5. Failure by the Company to mark any of the Proprietary Information
as confidential or proprietary shall not affect its status as Proprietary
Information under the terms of this Agreement.
6. PROPERTY.
(a) All right, title and interest in and to Proprietary
Information shall be and remain the sole and exclusive property of the Company.
During the Term, the Employee shall not remove from the Company's offices or
premises any documents, records, notebooks, files, correspondence, reports,
memoranda or similar materials of or containing Proprietary Information, or
other materials or property of any kind belonging to the Company unless
necessary or appropriate in accordance with the duties and responsibilities
required by or appropriate for the Position and, in the event that such
materials or property are removed, all of the foregoing shall be returned to
his/her proper files or places of safekeeping as promptly as possible after the
removal shall serve its specific purpose. The Employee shall not make, retain,
remove and/or distribute any copies of any of the foregoing for any reason
whatsoever, except as may be necessary in the discharge of the assigned duties,
and shall not divulge to any third person the nature of and/or contents of any
of the foregoing or of any other oral or written information to which he/she may
have access or with which for any reason he/she may become familiar, except as
disclosure shall be necessary in the performance of the duties. Upon the
termination of his/her employment with the Company, he/she shall return to the
Company all originals and copies of the foregoing then in the possession,
whether prepared by the Employee or by others.
(b) (i) The Employee acknowledges that all right, title and
interest in and to any and all writings, documents, inventions, discoveries,
computer programs or instructions (whether in source code, object code, or any
other form), algorithms, formulae, plans, memoranda, tests, research, designs,
innovations, systems, analyses, specifications, models, data, diagrams, flow
charts, and/or techniques (whether reduced to written or electronic form or
otherwise) that the Employee creates, makes, conceives, discovers or develops,
either solely or jointly with any other person, at any time during the Term,
whether during working hours or at the Company's facility or at any other time
or location, and whether upon the request or suggestion of the Company or
otherwise, and that relate to or are useful in any way in connection with the
Business now or hereafter carried on by the Company (collectively, "Intellectual
Work Product") shall be the sole and exclusive property of the Company. The
Employee shall promptly disclose to the Company all Intellectual Work Product,
and the Employee shall have no claim for additional compensation for the
Intellectual Work Product.
(ii) The Employee acknowledges that all the Intellectual
Work Product that is copyrightable shall be considered a work made for hire
under United States Copyright Law. To the extent that any copyrightable
Intellectual Work Product may not be considered a work made for hire under the
applicable provisions of the United States Copyright Law, or to the extent that,
notwithstanding the
Confidential Page 3 of 16 (rev. 11-Nov-97)
<PAGE>
EMPLOYMENT AGREEMENT
foregoing provisions, the Employee may retain an interest in any Intellectual
Work Product that is not copyrightable, the Employee hereby irrevocably
assigns and transfers to the Company any and all right, title, or interest
that the Employee may have in the Intellectual Work Product under copyright,
patent, trade secret, trademark and other intellectual property laws, in
perpetuity or for the longest period otherwise permitted by law, without the
necessity of further consideration. The Company shall be entitled to obtain
and hold in its own name all copyrights, patents, trade secrets, and
trademarks with respect thereto.
(iii) The Employee shall reveal promptly all information
relating to the Intellectual Work Product to an appropriate officer of the
Company, cooperate with the Company and execute such documents as may be
necessary or appropriate (A) in the event that the Company desires to seek
copyright, patent, trademark or other analogous protection thereafter relating
to the Intellectual Work Product, and when such protection is obtained, to renew
and restore the same, or (B) to defend any opposition proceedings in respect of
obtaining and maintaining such copyright, patent, trademark or other analogous
protection.
(iv) In the event that the Company is unable after
reasonable effort to secure the Employee's signature on any of the documents
referenced in Section 6(b)(iii) hereof, whether because of the Employee's
physical or mental incapacity or for any other reason whatsoever, the
Employee hereby irrevocably designates and appoints the Company and its duly
authorized officers and agents as the Employee's agent and attorney-in-fact,
to act for and in his/her behalf and stead to execute and file any such
documents and to do all other lawfully permitted acts to further the
prosecution and issuance of any such copyright, patent, trademark or other
analogous protection with the same legal force and effect as if executed by
the Employee.
(v) The Employee represents that the innovations, designs,
systems, analyses, ideas for marketing programs, and all copyrights, patents,
trademarks and trade names, or similar intangible personal property identified
on Schedule D hereof comprises all of the innovations, designs, systems,
analyses, ideas for marketing programs, and all copyrights, patents, trademarks
and trade names, or similar intangible personal property that the Employee has
made or conceived of prior to the date hereof, and same are excluded from the
operation of the other provisions of this Section 6(b).
7. COVENANT NOT TO COMPETE.
(a) The Employee shall not, anywhere in the world, during the
Term and for a period of two (2) years thereafter (the "Restricted Period"), do
any of the following directly or indirectly without the prior written consent of
the Company in its sole discretion:
(i) engage or participate, directly or indirectly, in any
business activity competitive with the Business or the business of any of the
Company's subsidiaries or affiliates as conducted during the Term;
(ii) become interested (as owner, proprietor, promoter,
stockholder, lender, partner, co-venturer, director, officer, employee,
agent, consultant or otherwise) in any person, firm, corporation, association
or other entity engaged in any business that is competitive with the Business
or of the business of any subsidiary or affiliate of the Company as conducted
during the Term, or become interested in (as owner, stockholder, lender,
partner, co-venturer, director, officer, employee, agent, consultant or
otherwise) any portion of the business of any person, firm, corporation,
association or other entity where such portion of such business is
competitive with the Business of the Company or the business of any
subsidiary or affiliate of the Company as conducted during the Term
(notwithstanding the foregoing, the Employee may hold not more than one
percent (1%) of the outstanding securities of any class of any
publicly-traded securities of a company that is engaged in business activity
competitive with
Confidential Page 4 of 16 (rev. 11-Nov-97)
<PAGE>
EMPLOYMENT AGREEMENT
the Business or the business of any of the Company's subsidiaries or
affiliates as conducted during the Term);
(iii) solicit or call on for a purpose competitive with the
Business, either directly or indirectly, any (A) customer with whom the Company
shall have dealt at any time during the two (2) year period immediately
preceding the termination of the Employee's employment hereunder, or (B)
supplier or distributor with whom the Company shall have dealt at any time
during the two (2) year period immediately preceding the termination of the
Employee's employment hereunder;
(iv) influence or attempt to influence any supplier,
distributor, customer or potential customer of the Company to terminate or
modify any written or oral agreement or course of dealing with the Company; or
(v) influence or attempt to influence any person either
(A) to terminate or modify the employment, consulting, agency, distributorship
or other arrangement with the Company, or (B) to employ or retain, or arrange to
have any other person or entity employ or retain, any person who has been
employed or retained by the Company as an employee, consultant, agent or
distributor of the Company at any time during the twelve (12) month period
immediately preceding the termination of the Employee's employment hereunder.
(b) The Employee hereby acknowledges that the limitations as to
time, character or nature and geographic scope placed on his/her subsequent
employment by this Section 7 are reasonable and fair and will not prevent or
materially impair his/her ability to earn a livelihood.
8. TERMINATION OF EMPLOYMENT. The Employee's employment hereunder
may be terminated upon the occurrence of any one of the events described in this
Section 8 or pursuant to a non-renewal of the Agreement under Section 1(b)
hereof. Upon termination of the Employee's employment, the Employee shall be
entitled only to such compensation and benefits as described in this Section 8.
8.1 TERMINATION FOR DISABILITY.
(a) In the event of the disability of the Employee such
that the Employee is unable to perform the duties and responsibilities hereunder
to the full extent required by this Agreement by reasons of illness, injury or
incapacity for a period of more than sixty (60) consecutive days or more than
forty-five (45) days, in the aggregate, during any ninety (90) day period
("Disability"), the Employee's employment hereunder may be terminated by the
Company.
(b) In the event of a termination of the Employee's
employment hereunder pursuant to Section 8.1(a), the Employee will be entitled
to receive all accrued and unpaid (as of the date of such termination) Base
Salary and other forms of compensation and benefits payable or provided in
accordance with the terms of any then existing compensation or benefit plan or
arrangement, including payment prescribed under and disability of life insurance
plan or arrangement in which he/she is a participant or to which he/she is a
party as an employee of the Company; provided that the Employee has complied
with all of his/her obligations under this Agreement and continues to comply
with all of his/her surviving obligations hereunder listed in Section 10.
Except as specifically set forth in this Section 8.1(b), the Company shall have
no liability or obligation to the Employee for compensation or benefits
hereunder by reason of such termination.
8.2 TERMINATION BY DEATH. In the event that the Employee dies
during the Term, the Employee's employment hereunder shall be terminated thereby
and the Company shall pay to the Employee's executors, legal representatives or
administrators an amount equal to: the accrued and unpaid portion of the Base
Salary and other compensation for the month in which he/she dies. Except as
Confidential Page 5 of 16 (rev. 11-Nov-97)
<PAGE>
EMPLOYMENT AGREEMENT
specifically set forth in this Section 8.2, the Company shall have no liability
or obligation hereunder to the Employee's executors, legal representatives,
administrators, heirs or assigns or any other person claiming under or through
him/her by reason of the Employee's death, except that the Employee's executors,
legal representatives or administrators will be entitled to receive the payment
prescribed under any death or disability benefits plan in which he/she is a
participant as an employee of the Company, and to exercise any rights afforded
under any compensation or benefit plan then in effect.
8.3 TERMINATION FOR CAUSE.
(a) The Company may terminate the Employee's employment
hereunder at any time for "cause" upon written notice to the Employee. For
purposes of this Agreement, "cause" shall mean:
(i) any material breach by the Employee of any of
his/her obligations under this Agreement;
(ii) willful failure or inability by the Employee
to perform satisfactorily the duties required by or appropriate for the
Position, as determined by the President of the Company in his sole discretion;
(iii) conduct of the Employee involving any type of
disloyalty to the Company or willful misconduct with respect to the Company,
including without limitation fraud, embezzlement, theft or proven dishonesty in
the course of the employment, or any attempt by the Employee to secure any
personal profit related to the Business and the business opportunities of the
Company without the informed prior approval of the Board of Directors;
(iv) conviction of a felony or other criminal act
punishable by more than one (1) year in prison;
(v) commission by the Employee of an intentional
tort or an act involving moral turpitude or constituting fraud; or
(vi) habitual alcohol or substance abuse or
addiction.
(b) In the event of a termination of the Employee's
employment hereunder pursuant to Section 8.3(a), the Employee shall be entitled
to receive all accrued but unpaid (as of the effective date of such termination)
Base Salary, benefits and bonuses. All Base Salary, benefits and bonuses shall
cease at the time of such termination, subject to the terms of any benefit or
compensation plan then in force and applicable to the Employee. Any options to
purchase the Company's common stock issued to Employee, including any vested or
unvested portion thereof, shall be canceled at the time of such termination, and
the Employee shall not be entitled to exercise any such options. Except as
specifically set forth in this Section 8.3, the Company shall have no liability
or obligation hereunder by reason of such termination.
8.4 TERMINATION WITHOUT CAUSE.
(a) The Company may terminate the Employee's employment
hereunder at any time during the Term, for any reason, without cause, effective
upon the date designated by the Company upon thirty (30) days written notice to
the Employee.
(b) In the event of a termination of the Employee's
employment hereunder pursuant to Section 8.4(a), the Employee shall be entitled
to receive an amount equal to the
Confidential Page 6 of 16 (rev. 11-Nov-97)
<PAGE>
EMPLOYMENT AGREEMENT
lesser of: (i) all unpaid Base Salary from the effective date of the
Employee's termination through the remainder of the Term; or (ii) three (3)
months Base Salary. Employee also shall be entitled to receive all accrued
(as of the effective date of the Employee's termination) but unpaid benefits
and bonuses. In addition, Employee will be eligible to receive a liquidated
termination fee equivalent to: (i) one (1) week's Base Salary for every year
of employment with EXE up to five (5) years; and (ii) two (2) week's Base
Salary for every year of employment with EXE over five (5) years. The
amounts to be paid to Employee hereunder shall be payable in twelve (12)
equal monthly installments in accordance with the Company's severance payment
plan then in effect, if any, at the time the Company terminates Employee's
employment pursuant to Section 8.4(a); provided that, if the Employee obtains
other employment during the twelve (12) month period following termination,
then the Company shall only be obligated to pay the Employee the difference
between the monthly installments provided for in this Section 8.4 and the
monthly salary the Employee shall receive from his/her new employer during
such period of employment. Employee acknowledges that, as a condition to
participation in such severance plan, Employee must complete in good faith
such employee exit forms then in use by the Company at the time Employee's
employment is terminated and acknowledge in writing on such forms then in use
by the Company, Employee's obligations to the Company including, but not
limited to, Employee's obligations with respect to confidentiality and
Company property set forth in Sections 5 and 6 hereof and Employee's
obligations with respect to the Covenant not to Compete set forth in Section
7 hereof. All Base Salary, benefits and bonuses shall cease at the time of
such termination, subject to the terms of any benefit or compensation plan
then in force and applicable to the Employee. Except as specifically set
forth in this Section 8.4, the Company shall have no liability or obligation
hereunder by reason of such termination.
8.5. NON-RENEWAL BY EITHER PARTY.
In the event of a non-renewal of the Agreement by either party
pursuant to Section 1(b) hereof, the Employee shall be eligible to receive an
amount equal to: (i) one (1) week's Base Salary for every year of employment
with EXE (or its predecessor companies Neptune Systems, Inc. or Dallas
Systems Corporation) up to five (5) years; and (ii) two (2) week's Base
Salary for every year of employment with EXE (or its predecessor companies
Neptune Systems, Inc. or Dallas Systems Corporation) over five (5) years.
The amounts to be paid to Employee hereunder shall be payable in twelve (12)
equal monthly installments in accordance with the Company's severance payment
plan then in effect, if any, at the time the Employee's employment ceases;
provided that, if the Employee obtains other employment during the twelve
(12) month period following non-renewal, then the Company shall only be
obligated to pay the Employee the difference between the monthly installments
provided for in this Section 8.5 and the monthly salary the Employee shall
receive from his/her new employer during such period of employment. Employee
acknowledges that, as a condition to participation in such severance plan,
Employee must complete in good faith such employee exit forms then in use by
the Company at the time Employee's employment is terminated and acknowledge
in writing on such forms then in use by the Company, Employee's obligations
to the Company including, but not limited to, Employee's obligations with
respect to confidentiality and Company property set forth in Sections 5 and 6
hereof and Employee's obligations with respect to the Covenant not to Compete
set forth in Section 7 hereof. All Base Salary, benefits and bonuses shall
cease at the time of such termination, subject to the terms of any benefit or
compensation plan then in force and applicable to the Employee. Except as
specifically set forth in this Section 8.5, the Company shall have no
liability or obligation hereunder by reason of such termination.
Confidential Page 7 of 16 (rev. 11-Nov-97)
<PAGE>
EMPLOYMENT AGREEMENT
8.6. OPTIONS; REPURCHASE OF SHARES.
Upon the termination of the Employee's employment pursuant to
Section 8 other than under Sections 8.3, all further vesting on all stock
options and/or restricted stock in the Company held by the Employee shall
immediately cease as of such date and thereafter any vested stock options shall
be exercisable and any restricted stock or other equity securities held by the
Employee shall be subject to repurchase by the Company in accordance with their
respective terms and the terms of any related agreements between the Company and
the Employee.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE EMPLOYEE.
(a) The Employee represents and warrants to the Company that:
(i) There are no restrictions, agreements or
understandings whatsoever to which the Employee is a party which would prevent
or make unlawful the Employee's execution of this Agreement or the Employee's
employment hereunder, or which is or would be inconsistent or in conflict with
this Agreement or the Employee's employment hereunder, or would prevent, limit
or impair in any way the performance by the Employee of the obligations
hereunder; and
(ii) The Employee has disclosed to the Company all
restraints, confidentiality commitments or other employment restrictions that
he/she has with any other employer, person or entity.
(b) Upon and after his/her termination or cessation of
employment with the Company and until such time as no obligations of the
Employee to the Company hereunder exist, the Employee (i) shall provide a
complete copy of this Agreement to any prospective employer or other person,
entity or association in the Business, with whom or which the Employee proposes
to be employed, affiliated, engaged, associated or to establish any business or
remunerative relationship prior to the commencement thereof and (ii) shall
notify the Company of the name and address of any such person, entity or
association prior to his/her employment, affiliation, engagement, association or
the establishment of any business or remunerative relationship.
10. SURVIVAL OF PROVISIONS. The provisions of this Agreement set
forth in Sections 5 through 20 hereof shall survive the termination of the
Employee's employment hereunder.
11. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the Company and the Employee and his/her
respective successors, executors, administrators, heirs and/or permitted
assigns; provided that neither the Employee nor the Company may make any
assignments of this Agreement or any interest herein, by operation of law or
otherwise, without the prior written consent of the other parties hereto, except
that, without such consent, the Company may assign this Agreement to any
successor to all or substantially all of its assets and business by means of
liquidation, dissolution, merger, consolidation, transfer of assets, or
otherwise, provided that such successor assumes in writing all of the
obligations of the Company under this Agreement.
12. NOTICE. Any notice hereunder by either party shall be given by
personal delivery or by sending such notice by certified mail, return-receipt
requested, or by overnight delivery with a reputable courier service, or
telecopied, addressed or telecopied, as the case may be, to the other party at
its address set forth below or at such other address designated by notice in the
manner provided in this section. Such notice shall be deemed to have been
received upon the date of actual delivery if personally delivered or, in the
case of mailing, two (2) days after deposit with the U.S. mail, or if by
overnight delivery, the date of delivery or, in the case of facsimile
transmission, when confirmed by the facsimile machine report.
Confidential Page 8 of 16 (rev. 11-Nov-97)
<PAGE>
EMPLOYMENT AGREEMENT
If to the Employee:
Kenichi Tsumura
Tokyo, Japan
If to the Company:
EXE Technologies, Inc.
12740 Hillcrest Road
Dallas TX 75230
Attention: President
with a copy to:
Pepper, Hamilton & Scheetz LLP
1235 Westlakes Drive
Suite 400
Berwyn, PA 19312
Attention: Christopher F. Wright, Esquire
13. ENTIRE AGREEMENT; AMENDMENTS. This Agreement contains the
entire agreement and understanding of the parties hereto relating to the subject
matter hereof, and merges and supersedes all prior and contemporaneous
discussions, agreements and understandings of every nature between the parties
hereto relating to the employment of the Employee with the Company. This
Agreement may not be changed or modified, except by an agreement in writing
signed by each of the parties hereto.
14. WAIVER. The waiver of the breach of any term or provision of
this Agreement shall not operate as or be construed to be a waiver of any other
or subsequent breach of this Agreement.
15. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Texas, without regard to the principles
of conflicts of laws of any jurisdiction.
16. INVALIDITY. If any provision of this Agreement shall be
determined to be void, invalid, unenforceable or illegal for any reason, then
the validity and enforceability of all of the remaining provisions hereof shall
not be affected thereby. If any particular provision of this Agreement shall be
adjudicated to be invalid or unenforceable, then such provision shall be deemed
amended to delete therefrom the portion thus adjudicated to be invalid or
unenforceable, such amendment to apply only to the operation of such provision
in the particular jurisdiction in which such adjudication is made; provided
that, if any provision contained in this Agreement shall be adjudicated to be
invalid or unenforceable because such provision is held to be excessively broad
as to duration, geographic scope, activity or subject, then such provision shall
be deemed amended by limiting and reducing it so as to be valid and enforceable
to the maximum extent compatible with the applicable laws of such jurisdiction,
such amendment only to apply with respect to the operation of such provision in
the applicable jurisdiction in which the adjudication is made.
17. SECTION HEADINGS. The section headings in this Agreement are for
convenience only; they form no part of this Agreement and shall not affect its
interpretation.
18. NUMBER OF DAYS. In computing the number of days for purposes of
this Agreement, all days shall be counted, including Saturdays, Sundays and
legal holidays; provided that, if
Confidential Page 9 of 16 (rev. 11-Nov-97)
<PAGE>
EMPLOYMENT AGREEMENT
the final day of any time period falls on a Saturday, Sunday or day which is
a legal holiday in Pennsylvania, then such final day shall be deemed to be
the next day which is not a Saturday, Sunday or legal holiday.
19. SPECIFIC ENFORCEMENT; EXTENSION OF PERIOD.
(a) The Employee acknowledges that the restrictions contained in
Sections 5, 6, and 7 hereof are reasonable and necessary to protect the
legitimate interests of the Company and its affiliates and that the Company
would not have entered into this Agreement in the absence of such restrictions.
The Employee also acknowledges that any breach by him/her of Sections 5, 6, or 7
hereof will cause continuing and irreparable injury to the Company for which
monetary damages would not be an adequate remedy. The Employee shall not, in
any action or proceeding to enforce any of the provisions of this Agreement,
assert the claim or defense that an adequate remedy at law exists. In the event
of such breach by the Employee, the Company shall have the right to enforce the
provisions of Sections 5, 6, and 7 of this Agreement by seeking injunctive or
other relief in any court, and this Agreement shall not in any way limit
remedies of law or in equity otherwise available to the Company.
(b) The periods of time set forth in Sections 5, 6 and 7 hereof
shall not include, and shall be deemed extended by, any time required for
litigation to enforce the relevant covenant periods, provided that the Company
is successful on the merits in any such litigation. The "time required for
litigation" is herein defined to mean the period of time commencing on the
earlier of the Employee's first breach of such covenants or the service of
process upon the Employee and ending on the expiration of all appeals related to
such litigation.
20. CONSENT TO SUIT. In the case of any dispute under or in
connection with this Agreement, the Employee may only bring suit against the
Company in the Courts of the State of Texas in and for the County of Dallas or
in the Federal District Court for such geographic location. The Employee hereby
consents to the jurisdiction and venue of the courts of the State of Texas in
and for the County of Dallas or the Federal District Court for such geographic
location, provided that such Federal Court has subject matter jurisdiction over
such dispute, and the Employee hereby waives any claim he may have at any time
as to FORUM NON CONVENIENS with respect to such venue. The Company shall have
the right to institute any legal action arising out of or relating to this
Agreement in any appropriate court and in any jurisdiction. Any judgment
entered against either of the parties in any proceeding hereunder may be entered
and enforced by any court of competent jurisdiction. If an action at law or in
equity is necessary to enforce or interpret the terms of this Agreement, then
the prevailing party shall be entitled to recover, in addition to any other
relief, reasonable attorneys' fees, costs and disbursements.
21. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which
together shall be deemed to be one and the same instrument.
Confidential Page 10 of 16 (rev. 11-Nov-97)
<PAGE>
EMPLOYMENT AGREEMENT
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the day and year first written above.
EXE TECHNOLOGIES, INC.
By: /s/ Raymond R. Hood
----------------------------
Raymond R. Hood
Title: President
-------------------------
EMPLOYEE
/s/ Kenichi Tsumura
-------------------------------
Confidential Page 11 of 16 (rev. 11-Nov-97)
<PAGE>
EMPLOYMENT AGREEMENT
SCHEDULE A
EMPLOYMENT AND COMPENSATION
POSITION: PRESIDENT AND CEO - EXE TECHNOLOGIES - JAPAN
REPORTING MANAGER: TOM COOPER FOR SALES & MARKETING
DON SCALES FOR PROFESSIONAL SERVICES AND CUSTOMER SUPPORT
BASE ANNUAL SALARY: 30,000,000 JAPANESE YEN
(APPROX. US$238,000 AT 126 YEN PER DOLLAR)
Confidential Page 12 of 16 (rev. 11-Nov-97)
<PAGE>
EMPLOYMENT AGREEMENT
SCHEDULE B
INITIAL STOCK OPTION GRANT: 25,000
VESTING: 5,000 EFFECTIVE WITH DATE OF AGREEMENT. THE
BALANCE TO VEST OVER A 4-YEAR PERIOD,
SPECIFICALLY, 5,000 ON THE FIRST, SECOND,
THIRD AND FOURTH ANNIVERSARY OF THE DATE OF
AGREEMENT.
Confidential Page 13 of 16 (rev. 11-Nov-97)
<PAGE>
EMPLOYMENT AGREEMENT
EXE TECHNOLOGIES, INC.
1997 INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN
[ATTACHED]
Confidential Page 14 of 16 (rev. 11-Nov-97)
<PAGE>
EMPLOYMENT AGREEMENT
SCHEDULE C
NON SALARY CONSIDERATIONS
1. Annual Vacation Leave: In accordance with the country standard.
2. Medical & Insurance Benefits: Competitive medical and insurance
benefits in accordance with the
company's policy and country standard.
Confidential Page 15 of 16 (rev. 11-Nov-97)
<PAGE>
EMPLOYMENT AGREEMENT
SCHEDULE D
PRIOR INVENTIONS
1.
2.
3.
Confidential Page 16 of 16 (rev. 11-Nov-97)
<PAGE>
Exhibit 10.9
REVOLVING LINE OF CREDIT NOTE
$12,500,000.00 Dallas, Texas
December 1, 1997
FOR VALUE RECEIVED, the undersigned EXE TECHNOLOGIES, INC. ("Borrower")
promises to pay to the order of WELLS FARGO BANK (TEXAS), NATIONAL
ASSOCIATION ("Bank") at its office at North Texas RCBO, 1445 Ross, Suite 300,
Dallas, Texas, or at such other place as the holder hereof may designate, in
lawful money of the United States of America and in immediately available
funds, the principal sum of Twelve Million Five Hundred Thousand Dollars
($12,500,000.00), or so much thereof as may be advanced and be outstanding,
with interest thereon, to be computed on each advance from the date of its
disbursement as set forth herein.
DEFINITIONS:
As used herein, the following terms shall have the meanings set forth
after each, and any other term defined in this Note shall have the meaning
set forth at the place defined:
(a) "Business Day" means any day except a Saturday, Sunday or any other
day on which commercial banks in Texas are authorized or required by law to
close.
(b) "Fixed Rate Term" means a period commencing on a Business Day and
continuing for one (1), two (2), three (3), six (6) months or twelve months
(12), as designated by Borrower, during which all or a portion of the
outstanding principal balance of this Note bears interest determined in
relation to LIBOR; provided however, that no Fixed Rate Term may be selected
for a principal amount less than One Hundred Thousand Dollars ($100,000.00);
and provided further, that no Fixed Rate Term shall extend beyond the
scheduled maturity date hereof. If any Fixed Rate Term would end on a day
which is not a Business Day, then such Fixed Rate Term shall be extended to
the next succeeding Business Day.
(c) "LIBOR" means the rate per annum (rounded upward, if necessary, to
the nearest whole 1/8 of 1%) and determined pursuant to the following formula:
Base LIBOR
LIBOR = -------------------------------
100% - LIBOR Reserve Percentage
(i) "Base LIBOR" means the rate per annum for United States dollar
deposits quoted by Bank as the Inter-Bank Market Offered Rate, with the
understanding that such rate is quoted by Bank for the purpose of calculating
effective rates of interest for loans
<PAGE>
making reference thereto, on the first day of a Fixed Rate Term for delivery
of funds on said date for a period of time approximately equal to the number
of days in such Fixed Rate Term and in an amount approximately equal to the
principal amount to which such Fixed Rate Term applies. Borrower understands
and agrees that Bank may base its quotation of the Inter-Bank Market Offered
Rate upon such offers or other market indicators of the Inter-Bank Market as
Bank in its discretion deems appropriate including, but not limited to, the
rate offered for U.S. dollar deposits on the London Inter-Bank Market.
(ii) "LIBOR Reserve Percentage" means the reserve percentage prescribed
by the Board of Governors of the Federal Reserve System (or any successor)
for "Eurocurrency Liabilities" (as defined in Regulation D of the Federal
Reserve Board, as amended), adjusted by Bank for expected changes in such
reserve percentage during the applicable Fixed Rate Term.
(d) "Prime Rate" means at any time the rate of interest most recently
announced within Bank at its principal office as its Prime Rate, with the
understanding that the Prime Rate is one of Bank's base rates and serves as
the basis upon which effective rates of interest are calculated for those
loans making reference thereto, and is evidenced by the recording thereof
after its announcement in such internal publication or publications as Bank
may designate.
INTEREST:
(a) INTEREST. The outstanding principal balance of this Note shall
bear interest (computed on the basis of a 360-day year, actual days elapsed,
unless such calculation would result in a usurious rate, in which case
interest shall be computed on the basis of a 365/366-day year, as the case
may be, actual days elapsed]) at the lesser of (i) either (A) a fluctuating
rate per annum one-half of one percent (1/2%) below the Prime Rate in effect
from time to time, or (B) a fixed rate per annum determined by Bank to be
equal to the LIBOR Margin above LIBOR in effect on the first day of the
applicable Fixed Rate Term, or (ii) the Maximum Rate. When interest is
determined in relation to the Prime Rate, each change in the rate of interest
hereunder shall become effective on the date each Prime Rate change is
announced within Bank. With respect to each LIBOR selection hereunder, Bank
is hereby authorized to note the date, principal amount, interest rate and
Fixed Rate Term applicable thereto and any payments made thereon on Bank's
books and records (either manually or by electronic entry) and/or on any
schedule attached to this Note, which notations shall be prima facie evidence
of the accuracy of the information noted.
-2-
<PAGE>
(b) SELECTION OF INTEREST RATE OPTIONS. At any time any portion of
this Note bears interest determined in relation to LIBOR, it may be
continued by Borrower at the end of the Fixed Rate Term applicable thereto so
that all or a portion thereof bears interest determined in relation to the
Prime Rate or to LIBOR for a new Fixed Rate Term designated by Borrower. At
any time any portion of this Note bears interest determined in relation to
the Prime Rate, Borrower may convert all or a portion thereof so that it
bears interest determined in relation to LIBOR for a Fixed Rate Term
designated by Borrower. At such time as Borrower requests an advance
hereunder or wishes to select a LIBOR option for all or a portion of the
outstanding principal balance hereof, and at the end of each Fixed Rate Term,
Borrower shall give Bank notice specifying: (i) the interest rate option
selected by Borrower; (ii) the principal amount subject thereto; and (iii)
for each LIBOR selection, the length of the applicable Fixed Rate Term. Any
such notice may be given by telephone so long as, with respect to each LIBOR
selection, (A) Bank receives written confirmation from Borrower not later
than three (3) Business Days after such telephone notice is given, and (B)
such notice is given to Bank prior to 10:00 a.m., California time, on the
first day of the Fixed Rate Term. For each LIBOR option requested hereunder,
Bank will quote the applicable fixed rate to Borrower at approximately 10:00
a.m., California time, on the first day of the Fixed Rate Term. If Borrower
does not immediately accept the rate quoted by Bank, any subsequent
acceptance by Borrower shall be subject to a redetermination by Bank of the
applicable fixed rate; provided however, that if Borrower fails to accept any
such rate by 11:00 a.m., California time, on the Business Day such quotation
is given, then the quoted rate shall expire and Bank shall have no obligation
to permit a LIBOR option to be selected on such day. If no specific
designation of interest is made at the time any advance is requested
hereunder or at the end of any Fixed Rate Term, Borrower shall be deemed to
have made a Prime Rate interest selection for such advance or the principal
amount to which such Fixed Rate Term applied.
(c) ADDITIONAL LIBOR PROVISIONS.
(i) If Bank at any time shall determine that for any reason adequate
and reasonable means do not exist for ascertaining LIBOR, then Bank shall
promptly give notice thereof to Borrower. If such notice is given and until
such notice has been withdrawn by Bank, then (A) no new LIBOR option may be
selected by Borrower, and (B) any portion of the outstanding principal
balance hereof which bears interest determined in relation to LIBOR,
subsequent to the end of the Fixed Rate Term applicable thereto, shall bear
interest determined in relation to the Prime Rate.
-3-
<PAGE>
(ii) If any law, treaty, rule, regulation or determination of a court
or governmental authority or any change therein or in the interpretation or
application thereof (each, a "Change in Law") shall make it unlawful for Bank
(A) to make LIBOR options available hereunder, or (B) to maintain interest
rates based on LIBOR, then in the former event, any obligation of Bank to
make available such unlawful LIBOR options shall immediately be cancelled,
and in the latter event, any such unlawful LIBOR-based interest rates then
outstanding shall be converted, at Bank's option, so that interest on the
portion of the outstanding principal balance subject thereto is determined in
relation to the Prime Rate; provided however, that if any such Change in Law
shall permit any LIBOR-based interest rates to remain in effect until the
expiration of the Fixed Rate Term applicable thereto, then such permitted
LIBOR-based interest rates shall continue in effect until the expiration of
such Fixed Rate Term. Upon the occurrence of any of the foregoing events,
Borrower shall pay to Bank immediately upon demand such amounts as may be
necessary to compensate Bank for any fines, fees, charges, penalties or other
costs incurred or payable by Bank as a result thereof and which are
attributable to any LIBOR options made available to Borrower hereunder, and
any reasonable allocation made by Bank among its operations shall be
conclusive and binding upon Borrower.
(iii) If any Change in Law or compliance by Bank with any request or
directive (whether or not having the force of law) from any central bank or
other governmental authority shall:
(A) subject Bank to any tax, duty or other charge with respect to
any LIBOR options, or change the basis of taxation of payments
to Bank of principal, interest, fees or any other amount
payable hereunder (except for changes in the rate of tax on the
overall net income of Bank); or
(B) impose, modify or hold applicable any reserve, special deposit,
compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances
or loans by, or any other acquisition of funds by any office of
Bank; or
(C) impose on Bank any other condition;
and the result of any of the foregoing is to increase the cost to Bank of
making, renewing or maintaining any LIBOR options hereunder and/or to reduce
any amount receivable by Bank in connection therewith, then in any such case,
Borrower shall pay to Bank immediately upon demand such amounts as may be
necessary to compensate Bank for any additional costs incurred by Bank and/or
reductions in amounts received by Bank which are attributable to such LIBOR
options. In determining which costs
-4-
<PAGE>
incurred by Bank and/or reductions in amounts received by Bank are
attributable to any LIBOR options made available to Borrower hereunder, any
reasonable allocation made by Bank among its operations shall be conclusive
and binding upon Borrower.
(d) PAYMENT OF INTEREST. Interest accrued on this Note shall be
payable on the 15th day of each month, commencing December 15, 1997.
(e) DEFAULT INTEREST. From and after the maturity date of this Note,
or such earlier date as all principal owing hereunder becomes due and payable
by acceleration or otherwise, the outstanding principal balance of this Note
shall bear interest until paid in full at an increased rate per annum
(computed on the basis of a 360-day year, actual days elapsed, unless such
calculation would result in a usurious rate, in which case interest shall be
computed on the basis of a 365/366-day year, as the case may be, actual days
elapsed) equal to four percent (4%) above the rate of interest from time to
time applicable to this Note, but in no event at a rate greater than the
Maximum Rate.
(f) DETERMINATION OF LIBOR MARGIN. The "LIBOR Margin" shall be
determined as of the first day of each quarter according to the following
grid:
<TABLE>
<CAPTION>
SENIOR FUNDED DEBT TO LIBOR
CASH FLOW RATIO MARGIN
--------------------- ------
<S> <C>
LESS THAN 1.50 to 1.00 1.50%
GREATER THAN OR EQUAL TO 1.50 to 1.00 and LESS THAN OR EQUAL TO 2.00 to 1.00 1.75%
GREATER THAN 2.00 to 1.00 2.00%
</TABLE>
The Bank shall make such determination based on the financial
information submitted by the Borrower to the Bank for the calendar quarter
preceding each quarter. Each change in the rate of interest under this Note
based on a change in the Applicable Prime Rate Margin or LIBOR Margin shall
be effective on the first day of the next calendar quarter.
From the date hereof until December 31, 1997, the LIBOR Margin shall be
two percent (2.00%)
As used herein, "Senior Funded Debt to Cash Flow Ratio" shall mean the
ratio of "Senior Funded Debt" to "Cash Flow", with "Senior Funded Debt"
defined as the total outstanding unsubordinated indebtedness, according to
generally accepted
-5-
<PAGE>
accounting principles, including capital leases or other
equipment financing, and "Cash Flow" defined as net profit plus interest,
depreciation expense, amortization expense and non-cash expenses.
BORROWING AND REPAYMENT:
(a) BORROWING AND REPAYMENT. Borrower may from time to time during the
term of this Note borrow, partially or wholly repay its outstanding
borrowings, and reborrow, subject to all of the limitations, terms and
conditions of this Note and of any document executed in connection with or
governing this Note; provided however, that the total outstanding borrowings
under this Note shall not at any time exceed the principal amount stated
above. The unpaid principal balance of this obligation at any time shall be
the total amounts advanced hereunder by the holder hereof less the amount of
principal payments made hereon by or for any Borrower, which balance may be
endorsed hereon from time to time by the holder. The outstanding principal
balance of this Note shall be due and payable in full on December 31, 2000.
(b) ADVANCES. Advances hereunder, to the total amount of the principal
sum stated above, may be made by the holder at the oral or written request of
(i) Ray Hood or Adam Belsky or Ken Alesawski, or Ed Holcomb, any one acting
alone, who are authorized to request advances and direct the disposition of
any advances until written notice of the revocation of such authority is
received by the holder at the office designated above, or (ii) any person,
with respect to advances deposited to the credit of any account of any
Borrower with the holder, which advances, when so deposited, shall be
conclusively presumed to have been made to or for the benefit of each
Borrower regardless of the fact that persons other than those authorized to
request advances may have authority to draw against such account. The holder
shall have no obligation to determine whether any person requesting an
advance is or has been authorized by any Borrower.
(c) APPLICATION OF PAYMENTS. Each payment made on this Note shall be
credited first, to any interest then due and second, to the outstanding
principal balance hereof. All payments credited to principal shall be
applied first, to the outstanding principal balance of this Note which bears
interest determined in relation to the Prime Rate, if any, and second, to the
outstanding principal balance of this Note which bears interest determined in
relation to LIBOR, with such payments applied to the oldest Fixed Rate Term
first.
-6-
<PAGE>
PREPAYMENT:
(a) PRIME RATE. Borrower may prepay principal on any portion of this
Note which bears interest determined in relation to the Prime Rate at any
time, in any amount and without penalty.
(b) LIBOR. Borrower may prepay principal on any portion of this Note
which bears interest determined in relation to LIBOR at any time and in the
minimum amount of One Hundred Thousand Dollars ($100,000.00); provided
however, that if the outstanding principal balance of such portion of this
Note is less than said amount, the minimum prepayment amount shall be the
entire outstanding principal balance thereof. In consideration of Bank
providing this prepayment option to Borrower, or if any such portion of this
Note shall become due and payable at any time prior to the last day of the
Fixed Rate Term applicable thereto, Borrower shall pay to Bank immediately
upon demand a fee which is the sum of the discounted monthly differences for
each month from the month of prepayment through the month in which such Fixed
Rate Term matures, calculated as follows for each such month:
(i) DETERMINE the amount of interest which would have accrued each
month on the amount prepaid at the interest rate applicable to
such amount had it remained outstanding until the last day of
the Fixed Rate Term applicable thereto.
(ii) SUBTRACT from the amount determined in (i) above the amount of
interest which would have accrued for the same month on the
amount prepaid for the remaining term of such Fixed Rate Term
at LIBOR in effect on the date of prepayment for new loans made
for such term and in a principal amount equal to the amount
prepaid.
(iii) If the result obtained in (ii) for any month is greater than
zero, discount that difference by LIBOR used in (ii) above.
Each Borrower acknowledges that prepayment of such amount may result in Bank
incurring additional costs, expenses and/or liabilities, and that it is
difficult to ascertain the full extent of such costs, expenses and/or
liabilities. Each Borrower, therefore, agrees to pay the above-described
prepayment fee and agrees that said amount represents a reasonable estimate
of the prepayment costs, expenses and/or liabilities of Bank.
EVENTS OF DEFAULT:
This Note is made pursuant to and is subject to the terms and conditions
of that certain Credit Agreement between Borrower and Bank dated as of
December 1, 1997, as amended from time to
-7-
<PAGE>
time (the "Credit Agreement") . Any default in the payment or performance of
any obligation under this Note, or any defined-event of default under the
Credit Agreement, shall constitute an "Event of Default" under this Note.
MISCELLANEOUS:
(a) REMEDIES. Upon the occurrence of any Event of Default, the holder
of this Note, at the holder's option, may declare all sums of principal and
accrued and unpaid interest outstanding hereunder to be immediately due and
payable without presentment, demand, or any notices of any kind, including
without limitation notice of nonperformance, notice of protest, protest,
notice of dishonor, notice of intention to accelerate or notice of
acceleration, all of which are expressly waived by each Borrower, and the
obligation, if any, of the holder to extend any further credit hereunder
shall immediately cease and terminate. Each Borrower shall pay to the holder
immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and all allocated costs of the holder's in-house counsel to the
extent permissible), expended or incurred by the holder in connection with
the enforcement of the holder's rights and/or the collection of any amounts
which become due to the holder under this Note, and the prosecution or
defense of any action in any way related to this Note, including without
limitation, any action for declaratory relief, whether incurred at the trial
or appellate level, in an arbitration proceeding or otherwise, and including
any of the foregoing incurred in connection with any bankruptcy proceeding
(including without limitation, any adversary proceeding, contested matter or
motion brought by Bank or any other person) relating to any Borrower or any
other person or entity.
(b) OBLIGATIONS JOINT AND SEVERAL. Should more than one person or
entity sign this Note as a Borrower, the obligations of each such Borrower
shall be joint and several.
(c) GOVERNING LAW. This Note shall be governed by and construed in
accordance with the laws of the State of Texas.
(d) SAVINGS CLAUSE. It is the intention of the parties to comply
strictly with applicable usury laws. Accordingly, notwithstanding any
provision to the contrary in this Note, or in any contract, instrument or
document evidencing or securing the payment hereof or otherwise relating
hereto (each, a "Related Document"), in no event shall this Note or any
Related Document require the payment or permit the payment, taking,
reserving, receiving, collection or charging of any sums constituting
interest under applicable laws that exceed the maximum amount permitted by
such laws, as the same may be amended or modified
-8-
<PAGE>
from time to time (the "Maximum Rate"). If any such excess interest is
called for, contracted for, charged, taken, reserved or received in
connection with this Note or any Related Document, or in any communication by
Bank or any other person to Borrower or any other person, or in the event
that all or part of the principal or interest hereof or thereof shall be
prepaid or accelerated, so that under any of such circumstances or under any
other circumstance whatsoever the amount of interest contracted for, charged,
taken, reserved or received on the amount of principal actually outstanding
from time to time under this Note shall exceed the Maximum Rate, then in such
event it is agreed that: (i) the provisions of this paragraph shall govern
and control; (ii) neither Borrower nor any other person or entity now or
hereafter liable for the payment of this Note or any Related Document shall
be obligated to pay the amount of such interest to the extent it is in excess
of the Maximum Rate; (iii) any such excess interest which is or has been
received by Bank, notwithstanding this paragraph, shall be credited against
the then unpaid principal balance hereof or thereof, or if this Note or any
Related Document has been or would be paid in full by such credit, refunded
to Borrower; and (iv) the provisions of this Note and each Related Document,
and any other communication to Borrower, shall immediately be deemed reformed
and such excess interest reduced, without the necessity of executing any
other document, to the Maximum Rate. The right to accelerate the maturity of
this Note or any Related Document does not include the right to accelerate,
collect or charge unearned interest, but only such interest that has
otherwise accrued as of the date of acceleration. Without limiting the
foregoing, all calculations of the rate of interest contracted for, charged,
taken, reserved or received in connection with this Note and any Related
Document which are made for the purpose of determining whether such rate
exceeds the Maximum Rate shall be made to the extent permitted by applicable
laws by amortizing, prorating, allocating and spreading during the period of
the full term of this Note or such Related Document, including all prior and
subsequent renewals and extensions hereof or thereof, all interest at any
time contracted for, charged, taken, reserved or received by Bank. The terms
of this paragraph shall be deemed to be incorporated into each Related
Document.
To the extent that Article 5069-1.04 of the Texas Revised Civil Statutes
is relevant to Bank for the purpose of determining the Maximum Rate, Bank
hereby elects to determine the applicable rate ceiling under such Article by
the indicated (weekly) rate ceiling from time to time in effect, subject to
Bank's right subsequently to change such method in accordance with applicable
law, as the same may be amended or modified from time to time.
(e) RIGHT OF SETOFF; DEPOSIT ACCOUNTS. Upon and after the occurrence
of an Event of Default, (i) Borrower hereby authorizes
-9-
<PAGE>
Bank, at any time and from time to time, without notice, which is hereby
expressly waived by Borrower, and whether or not Bank shall have declared
this Note to be due and payable in accordance with the terms hereof, to set
off against, and to appropriate and apply to the payment of, Borrower's
obligations and liabilities under this Note (whether matured or unmatured,
fixed or contingent, liquidated or unliquidated), any and all amounts owing
by Bank to Borrower (whether payable in U.S. dollars or any other currency,
whether matured or unmatured, and in the case of deposits, whether general or
special (except trust and escrow accounts), time or demand and however
evidenced), and (ii) pending any such action, to the extent necessary, to
hold such amounts as collateral to secure such obligations and liabilities
and to return as unpaid for insufficient funds any and all checks and other
items drawn against any deposits so held as Bank, in its sole discretion, may
elect. Borrower hereby grants to Bank a security interest in all deposits
and accounts maintained with Bank and with any other financial institution to
secure the payment of all obligations and liabilities of Borrower to Bank
under this Note.
(f) BUSINESS PURPOSE. Borrower represents and warrants that all loans
evidenced by this Note are for a business, commercial, investment,
agricultural or other similar purpose and not primarily for a personal,
family or household use.
(g) CERTAIN TRI-PARTY ACCOUNTS. Borrower and Bank agree that Tex. Rev.
Civ. Stat. Ann. Art. 5056, ch. 15 (which regulates certain revolving credit
loan accounts and revolving triparty accounts) shall not apply to any
revolving loan accounts created under this Note or maintained in connection
herewith.
NOTICE: THIS NOTE AND ALL OTHER DOCUMENTS RELATING TO THE INDEBTEDNESS
EVIDENCED HEREBY CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES RELATING TO THIS
NOTE AND THE INDEBTEDNESS EVIDENCED HEREBY.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the
date first written above.
EXE TECHNOLOGIES,
By: /s/ Adam Belsky
---------------------------------
Adam Belsky
Chief Financial Officer
-10-
<PAGE>
Exhibit 10.10
CREDIT AGREEMENT
THIS AGREEMENT is entered into as of December 1, 1997, by and between
EXE TECHNOLOGIES, INC., a Delaware corporation ("Borrower"), and WELLS FARGO
BANK (TEXAS), NATIONAL ASSOCIATION ("Bank").
RECITAL
Borrower has requested from Bank the credit accommodations described
below (each, a "Credit" and collectively, the "Credits"), and Bank has agreed
to provide the Credits to Borrower on the terms and conditions contained
herein.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Bank and Borrower hereby agree as follows:
ARTICLE I
THE CREDITS
SECTION 1.1. LINE OF CREDIT.
(a) LINE OF CREDIT. Subject to the terms and conditions of this
Agreement, Bank hereby agrees to make advances to Borrower from time to time
up to and including December 31, 2000, not to exceed at any time the
aggregate principal amount of Twelve Million Five Hundred Thousand Dollars
($12,500,000.00) ("Line of Credit"), the proceeds of which shall be used to
assist with working capital. Borrower's obligation to repay advances under
the Line of Credit shall be evidenced by a promissory note substantially in
the form of Exhibit A attached hereto ("Line of Credit Note"), all terms of
which are incorporated herein by this reference.
(b) LIMITATION ON BORROWINGS. Outstanding borrowings under the Line of
Credit, to a maximum of the principal amount set forth above, shall not at
any time exceed two hundred fifty percent (250%) of an aggregate of (i)
Borrower's Cash Flow for the preceding four consecutive calendar quarters,
PLUS (ii) at Borrower's option, an amount up to (A) $2,000,000 from the date
hereof to December 31, 1998, (B) $1,000,000 from the date hereof to December
31, 1999, and (C) $500,000 from the date hereof to December 31, 2000.
As used above, "Cash Flow" means an aggregate of net income PLUS
depreciation expense, amortization expense and non-cash expenses.
<PAGE>
(c) BORROWING AND REPAYMENT. Borrower may from time to time during the
term of the Line of Credit borrow, partially or wholly repay its outstanding
borrowings, and reborrow, subject to all of the limitations, terms and
conditions contained herein or in the Line of Credit Note; provided however,
that the total outstanding borrowings under the Line of Credit shall not at
any time exceed the maximum principal amount available thereunder, as set
forth above.
SECTION 1.2. FOREIGN EXCHANGE FACILITY.
(a) FOREIGN EXCHANGE FACILITY. Subject to the terms and conditions of
this Agreement, Bank hereby agrees to make available to Borrower a facility
(the "Foreign Exchange Facility") under which Bank, from time to time up to
and including December 31, 2000, will enter into foreign exchange contracts
for the account of Borrower for the purchase and/or sale by Borrower in
United States dollars of foreign currencies designated by Borrower; provided
however, that the maximum amount of all outstanding foreign exchange
contracts shall not at any time exceed an aggregate of Five Million United
States Dollars (US$5,000,000.00). No foreign exchange contract shall be
executed for a term in excess of three (3) months or for a term which
extends beyond December 31, 2000. Borrower shall have a "Delivery Limit"
under the Foreign Exchange Facility not to exceed at any time the aggregate
principal amount of One Million United States Dollars (US$1,000,000.00),
which Delivery Limit reflects the maximum principal amount of Borrower's
foreign exchange contracts which may mature during any two (2) day period.
All foreign exchange transactions shall be subject to the additional terms of
a Foreign Exchange Agreement, substantially in the form of Exhibit B attached
hereto ("Foreign Exchange Agreement"), all terms of which are incorporated
herein by this reference.
(b) SETTLEMENT. Each foreign exchange contract under the Foreign
Exchange Facility shall be settled on its maturity date by Bank's debit to
any demand deposit account maintained by Borrower with Bank.
SECTION 1.1. INTEREST/FEES.
(a) INTEREST. The outstanding principal balance of the Line of Credit
shall bear interest at the rate of interest set forth in the Line of Credit
Note.
(b) COMPUTATION AND PAYMENT. Interest shall be computed on the basis
of a 360-day year, actual days elapsed, unless such calculation would result
in a usurious rate, in which case interest shall be computed on the basis of
a 365/366-day year, as the case may be, actual days elapsed. Interest shall
be payable
-2-
<PAGE>
at the times and place set forth in the Line of Credit Note (collectively,
the "Notes").
SECTION 1.2. COLLECTION OF PAYMENTS. Borrower authorizes Bank to
collect all interest and fees due under each Credit by charging Borrower's
demand deposit account number 4091-220202 with Bank, or any other demand
deposit account maintained by Borrower with Bank, for the full amount
thereof. Should there be insufficient funds in any such demand deposit
account to pay all such sums when due, the full amount of such deficiency
shall be immediately due and payable by Borrower.
SECTION 1.3. COLLATERAL.
As security for all indebtedness of Borrower to Bank subject hereto,
Borrower hereby grants to Bank security interests of first priority in all
Borrower's accounts receivable and other rights to payment, general
intangible, inventory and equipment.
All of the foregoing shall be evidenced by and subject to the terms of
such security agreements, financing statements, deeds of trust and other
documents as Bank shall reasonably require, all in form and substance
satisfactory to Bank. Borrower shall reimburse Bank immediately upon demand
for all costs and expenses incurred by Bank in connection with any of the
foregoing security, including without limitation, filing and recording fees
and costs of appraisals, audits and title insurance.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Borrower makes the following representations and warranties to Bank,
which representations and warranties shall survive the execution of this
Agreement and shall continue in full force and effect until the full and
final payment, and satisfaction and discharge, of all obligations of Borrower
to Bank subject to this Agreement.
SECTION 2.1. LEGAL STATUS. Borrower is a corporation, duly organized
and existing and in good standing under the laws of the state of Delaware,
and is qualified or licensed to do business (and is in good standing as a
foreign corporation, if applicable) in all jurisdictions in which such
qualification or licensing is required or in which the failure to so qualify
or to be so licensed could have a material adverse effect on Borrower.
SECTION 2.2. AUTHORIZATION AND VALIDITY. This Agreement, the Notes,
and each other document, contract and instrument required hereby or at any
time hereafter delivered to Bank in connection herewith (collectively, the
"Loan Documents") have
-3-
<PAGE>
been duly authorized, and upon their execution and delivery in accordance
with the provisions hereof will constitute legal, valid and binding
agreements and obligations of Borrower or the party which executes the same,
enforceable in accordance with their respective terms.
SECTION 2.3. NO VIOLATION. The execution, delivery and performance by
Borrower of each of the Loan Documents do not violate any provision of any
law or regulation, or contravene any provision of the Articles of
Incorporation or By-Laws of Borrower, or result in any breach of or default
under any contract, obligation, indenture or other instrument to which
Borrower is a party or by which Borrower may be bound.
SECTION 2.4. LITIGATION. There are no pending, or to the best of
Borrower's knowledge threatened, actions, claims, investigations, suits or
proceedings by or before any governmental authority, arbitrator, court or
administrative agency which could have a material adverse effect on the
financial condition or operation of Borrower other than those disclosed by
Borrower to Bank in writing prior to the date hereof and attached hereto as
Exhibit C.
SECTION 2.5. CORRECTNESS OF FINANCIAL STATEMENT. The financial
statement of Borrower dated August 31, 1997, a true copy of which has been
delivered by Borrower to Bank prior to the date hereof, (a) is complete and
correct and presents fairly the financial condition of Borrower, (b)
discloses all liabilities of Borrower that are required to be reflected or
reserved against under generally accepted accounting principles, whether
liquidated or unliquidated, fixed or contingent, and (c) has been prepared in
accordance with generally accepted accounting principles consistently
applied. Since the date of such financial statement there has been no
material adverse change in the financial condition of Borrower, nor has
Borrower mortgaged, pledged, granted a security interest in or otherwise
encumbered any of its assets or properties except in favor of Bank or as
otherwise permitted by Bank in writing.
SECTION 2.6. INCOME TAX RETURNS. Borrower has no knowledge of any
pending assessments or adjustments of its income tax payable with respect to
any year.
SECTION 2.7. NO SUBORDINATION. There is no agreement, indenture,
contract or instrument to which Borrower is a party or by which Borrower may
be bound that requires the subordination in right of payment of any of
Borrower's obligations subject to this Agreement to any other obligation of
Borrower.
SECTION 2.8. PERMITS, FRANCHISES. Borrower possesses, and will
hereafter possess, all permits, consents, approvals, franchises and licenses
required and rights to all trademarks,
-4-
<PAGE>
trade names, patents, and fictitious names, if any, necessary to enable it to
conduct the business in which it is now engaged in compliance with applicable
law.
SECTION 2.9. ERISA. Borrower is in compliance in all material respects
with all applicable provisions of the Employee Retirement Income Security Act
of 1974, as amended or recodified from time to time ("ERISA"); Borrower has
not violated any provision of any defined employee pension benefit plan (as
defined in ERISA) maintained or contributed to by Borrower (each, a "Plan");
no Reportable Event as defined in ERISA has occurred and is continuing with
respect to any Plan initiated by Borrower; Borrower has met its minimum
funding requirements under ERISA with respect to each Plan; and each Plan
will be able to fulfill its benefit obligations as they come due in
accordance with the Plan documents and under generally accepted accounting
principles.
SECTION 2.10. OTHER OBLIGATIONS. Borrower is not in default on any
obligation for borrowed money, any purchase money obligation or any other
material lease, commitment, contract, instrument or obligation.
SECTION 2.11. ENVIRONMENTAL MATTERS. Except as disclosed by Borrower
to Bank in writing prior to the date hereof, Borrower is in compliance in all
material respects with all applicable federal or state environmental,
hazardous waste, health and safety statutes, and any rules or regulations
adopted pursuant thereto, which govern or affect any of Borrower's operations
and/or properties, including without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Superfund
Amendments and Reauthorization Act of 1986, the Federal Resource Conservation
and Recovery Act of 1976, and the Federal Toxic Substances Control Act, as
any of the same may be amended, modified or supplemented from time to time.
None of the operations of Borrower is the subject of any federal or state
investigation evaluating whether any remedial action involving a material
expenditure is needed to respond to a release of any toxic or hazardous waste
or substance into the environment. Borrower has no material contingent
liability in connection with any release of any toxic or hazardous waste or
substance into the environment.
ARTICLE III
CONDITIONS
SECTION 3.1. CONDITIONS OF INITIAL EXTENSION OF CREDIT. The obligation
of Bank to grant any of the Credits is subject to the fulfillment to Bank's
satisfaction of all of the following conditions:
-5-
<PAGE>
(a) APPROVAL OF BANK COUNSEL. All legal matters incidental to the
granting of each of the Credits shall be satisfactory to Bank's counsel.
(b) DOCUMENTATION. Bank shall have received, in form and substance
satisfactory to Bank, each of the following, duly executed:
(i) This Agreement and the Notes.
(ii) Corporate Borrowing Resolution.
(iii) Certificate of Incumbency.
(iv) Continuing Security Agreement Rights to Payment and Inventory.
(v) Security Agreement Equipment.
(vi) UCC 1 Financing Statements.
(vii) Foreign Exchange Agreement.
(viii) Such other documents as Bank may require under any other
Section of this Agreement.
(b) FINANCIAL CONDITION. There shall have been no material adverse
change, as determined by Bank, in the financial condition or business of
Borrower, nor any material decline, as determined by Bank, in the market
value of any collateral required hereunder or a substantial or material
portion of the assets of Borrower.
(c) INSURANCE. Borrower shall have delivered to Bank evidence of
insurance coverage on all Borrower's property, in form, substance, amounts,
covering risks and issued by companies satisfactory to Bank, and where
required by Bank, with loss payable endorsements in favor of Bank.
SECTION 3.2. CONDITIONS OF EACH EXTENSION OF CREDIT. The obligation of
Bank to make each extension of credit requested by Borrower hereunder shall
be subject to the fulfillment to Bank's satisfaction of each of the following
conditions:
(a) COMPLIANCE. The representations and warranties contained herein
and in each of the other Loan Documents shall be true on and as of the date
of the signing of this Agreement and on the date of each extension of credit
by Bank pursuant hereto, with the same effect as though such representations
and warranties had been made on and as of each such date, and on each such
date, no Event of Default as defined herein, and no condition, event or act
which with the giving of notice or the passage of time or both would
constitute such an Event of Default, shall have occurred and be continuing or
shall exist.
(b) DOCUMENTATION. Bank shall have received all additional documents
which may be required in connection with such extension of credit.
-6-
<PAGE>
ARTICLE IV
AFFIRMATIVE COVENANTS
Borrower covenants that so long as Bank remains committed to extend
credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Bank under any of the
Loan Documents remain outstanding, and until payment in full of all
obligations of Borrower subject hereto, Borrower shall, unless Bank otherwise
consents in writing:
SECTION 4.1. PUNCTUAL PAYMENTS. Punctually pay all principal,
interest, fees or other liabilities due under any of the Loan Documents at
the times and place and in the manner specified therein, and immediately upon
demand by Bank, the amount by which the outstanding principal balance of any
of the Credits at any time exceeds any limitation on borrowings applicable
thereto.
SECTION 4.2. ACCOUNTING RECORDS. Maintain adequate books and records
in accordance with generally accepted accounting principles consistently
applied, and permit any representative of Bank, at any reasonable time, to
inspect, audit and examine such books and records, to make copies of the
same, and to inspect the properties of Borrower.
SECTION 4.3. FINANCIAL STATEMENTS. Provide to Bank all of the
following, in form and detail satisfactory to Bank:
(a) not later than 120 days after and as of the end of each fiscal
year, an audited consolidated financial statement of Borrower, prepared by a
certified public accountant acceptable to Bank, to include balance sheet,
income statement, statement of cash flow, and source and application of funds
statement;
(b) not later than 45 days after and as of the end of each fiscal
quarter, an unaudited consolidating financial statement of Borrower, prepared
by a certified public accountant acceptable to Bank, to include balance
sheet, income statement, statement of cash flow, and source and application
of funds statement;
(c) not later than 45 days after and as of the end of each fiscal
quarter, a borrowing certificate showing availability calculation and
certificate of non-default showing covenant calculations and compliance;
(d) from time to time such other information as Bank may reasonably
request.
SECTION 4.4. COMPLIANCE. Preserve and maintain all licenses, permits,
governmental approvals, rights, privileges and franchises necessary for the
conduct of its business; and comply
-7-
<PAGE>
with the provisions of all documents pursuant to which Borrower is
organized and/or which govern Borrower's continued existence and with the
requirements of all laws, rules, regulations and orders of any governmental
authority applicable to Borrower and/or its business.
SECTION 4.5. INSURANCE. Maintain and keep in force insurance of the
types and in amounts customarily carried in lines of business similar to that
of Borrower, including but not limited to fire, extended coverage, public
liability, flood, property damage and workers' compensation, with all such
insurance carried with companies and in amounts satisfactory to Bank, and
deliver to Bank from time to time at Bank's request schedules setting forth
all insurance then in effect.
SECTION 4.6. FACILITIES. Keep all properties useful or necessary to
Borrower's business in good repair and condition, and from time to time make
necessary repairs, renewals and replacements thereto so that such properties
shall be fully and efficiently preserved and maintained.
SECTION 4.7. TAXES AND OTHER LIABILITIES. Pay and discharge when due
any and all indebtedness, obligations, assessments and taxes, both real or
personal, including without limitation federal and state income taxes and
state and local property taxes and assessments, except such (a) as Borrower
may in good faith contest or as to which a bona fide dispute may arise, and
(b) for which Borrower has made provision, to Bank's satisfaction, for
eventual payment thereof in the event Borrower is obligated to make such
payment.
SECTION 4.8. LITIGATION. Promptly give notice in writing to Bank of
any litigation pending or threatened against Borrower.
SECTION 4.9. FINANCIAL CONDITION. Maintain Borrower's financial
condition as follows using generally accepted accounting principles
consistently applied and used consistently with prior practices (except to
the extent modified by the definitions herein):
(a) Total Liabilities divided by Tangible Net Worth measured for the
most recent four consecutive calendar quarters not greater than 1.0 to 1.0,
with "Total Liabilities" defined as the aggregate of current liabilities and
non-current liabilities less subordinated debt, and with "Tangible Net Worth"
defined as the aggregate of total stockholders' equity plus subordinated debt
less any intangible assets.
(b) Quick Ratio measured for the most recent four consecutive calendar
quarters not less than 1.25 to 1.0, with "Quick Ratio" defined as the
aggregate of unrestricted cash, unrestricted marketable securities and
non-affiliate receivables
-8-
<PAGE>
convertible into cash (less any allowances for bad debts) divided by the
aggregate of total current liabilities plus total senior indebtedness.
(c) EBITDA Coverage Ratio not less than 2.0 to 1.0 measured for the
most recent four consecutive calendar quarters, with "EBITDA" defined as the
aggregate of net profit before tax plus interest expense (net of capitalized
interest expense), depreciation expense, amortization expense and
extraordinary non-cash charges, and with "EBITDA Coverage Ratio" defined as
EBITDA divided by the aggregate of total interest expense plus the prior
period current maturity of long-term debt and the prior period current
maturity of subordinated debt.
SECTION 4.10. NOTICE TO BANK. Promptly (but in no event more than
fifteen (15) days after the occurrence of each such event or matter) give
written notice to Bank in reasonable detail of: (a) the occurrence of any
Event of Default, or any condition, event or act which with the giving of
notice or the passage of time or both would constitute an Event of Default;
(b) any change in the name or the organizational structure of Borrower; (c)
the occurrence and nature of any Reportable Event or Prohibited Transaction,
each as defined in ERISA, or any funding deficiency with respect to any Plan;
or (d) any termination or cancellation of any insurance policy which Borrower
is required to maintain, or any uninsured or partially uninsured loss through
liability or property damage, or through fire, theft or any other cause
affecting Borrower's property.
ARTICLE V
NEGATIVE COVENANTS
Borrower further covenants that so long as Bank remains committed to
extend credit to Borrower pursuant hereto, or any liabilities (whether direct
or contingent, liquidated or unliquidated) of Borrower to Bank under any of
the Loan Documents remain outstanding, and until payment in full of all
obligations of Borrower subject hereto, Borrower will not without Bank's
prior written consent:
SECTION 5.1. USE OF FUNDS. Use any of the proceeds of any of the
Credits except for the purposes stated in Article I hereof.
SECTION 5.2. OTHER INDEBTEDNESS. Create, incur, assume or permit to
exist any indebtedness or liabilities resulting from borrowings, loans or
advances, whether secured or unsecured, matured or unmatured, liquidated or
unliquidated, joint or several, except (a) the liabilities of Borrower to
Bank, and (b) any other liabilities of Borrower existing as of, and disclosed
to Bank prior to, the date hereof.
-9-
<PAGE>
SECTION 5.3. MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Merge into or
consolidate with any other entity; make any substantial change in the nature
of Borrower's business as conducted as of the date hereof; acquire all or
substantially all of the assets of any other entity; nor sell, lease,
transfer or otherwise dispose of all or a substantial or material portion of
Borrower's assets except in the ordinary course of its business.
SECTION 5.4. GUARANTIES. Guarantee or become liable in any way as
surety, endorser (other than as endorser of negotiable instruments for
deposit or collection in the ordinary course of business), accommodation
endorser or otherwise for, nor pledge or hypothecate any assets of Borrower
as security for, any liabilities or obligations of any other person or
entity, except any of the foregoing in favor of Bank.
SECTION 5.5. LOANS, ADVANCES, INVESTMENTS. Make any loans or advances
to or investments in any person or entity, except any of the foregoing
existing as of, and disclosed to Bank prior to, the date hereof.
SECTION 5.6. DIVIDENDS, DISTRIBUTIONS. Declare or pay any dividend or
distribution either in cash, stock or any other property on Borrower's stock
now or hereafter outstanding, nor redeem, retire, repurchase or otherwise
acquire any shares of any class of Borrower's stock now or hereafter
outstanding.
SECTION 5.7. PLEDGE OF ASSETS. Mortgage, pledge, grant or permit to
exist a security interest in, or lien upon, all or any portion of Borrower's
assets now owned or hereafter acquired, except any of the foregoing in favor
of Bank or which is existing as of, and disclosed to Bank in writing prior
to, the date hereof.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.1. The occurrence of any of the following shall constitute
an "Event of Default" under this Agreement:
(a) Borrower shall fail to pay when due any principal, interest, fees
or other amounts payable under any of the Loan Documents.
(b) Any financial statement or certificate furnished to Bank in
connection with, or any representation or warranty made by Borrower or any
other party under this Agreement or any other Loan Document shall prove to be
incorrect, false or misleading in any material respect when furnished or made.
(c) Any default in the performance of or compliance with any
obligation, agreement or other provision contained herein or
-10-
<PAGE>
in any other Loan Document (other than those referred to in subsections (a)
and (b) above), and with respect to any such default which by its nature can
be cured, such default shall continue for a period of twenty (20) days from
its occurrence.
(d) Any default in the payment or performance of any obligation, or any
defined event of default, under the terms of any contract or instrument
(other than any of the Loan Documents) pursuant to which Borrower has
incurred any debt or other liability to any person or entity, including Bank.
(e) The filing of a notice of judgment lien against Borrower; or the
recording of any abstract of judgment against Borrower in any county in which
Borrower has an interest in real property; or the service of a notice of levy
and/or of a writ of attachment or execution, or other like process, against
the assets of Borrower; or the entry of a judgment against Borrower.
(f) Borrower shall become insolvent, or shall suffer or consent to or
apply for the appointment of a receiver, trustee, custodian or liquidator of
itself or any of its property, or shall generally fail to pay its debts as
they become due, or shall make a general assignment for the benefit of
creditors; Borrower shall file a voluntary petition in bankruptcy, or seeking
reorganization, in order to effect a plan or other arrangement with creditors
or any other relief under the Bankruptcy Reform Act, Title 11 of the United
States Code, as amended or recodified from time to time ("Bankruptcy Code"),
or under any state or federal law granting relief to debtors, whether now or
hereafter in effect; or any involuntary petition or proceeding pursuant to
the Bankruptcy Code or any other applicable state or federal law relating to
bankruptcy, reorganization or other relief for debtors is filed or commenced
against Borrower, or Borrower shall file an answer admitting the jurisdiction
of the court and the material allegations of any involuntary petition; or
Borrower shall be adjudicated a bankrupt, or an order for relief shall be
entered against Borrower by any court of competent jurisdiction under the
Bankruptcy Code or any other applicable state or federal law relating to
bankruptcy, reorganization or other relief for debtors.
(g) There shall exist or occur any event or condition which Bank in
good faith believes impairs, or is substantially likely to impair, the
prospect of payment or performance by Borrower of its obligations under any
of the Loan Documents.
(h) The dissolution or liquidation of Borrower; or Borrower, or any of
its directors, stockholders or members, shall take action seeking to effect
the dissolution or liquidation of Borrower.
-11-
<PAGE>
SECTION 6.2. REMEDIES. Upon the occurrence of any Event of Default:
(a) all principal and accrued and unpaid interest outstanding under each of
the Loan Documents, any term thereof to the contrary notwithstanding, shall
at Bank's option and without notice become immediately due and payable
without presentment, demand, or any notices of any kind, including without
limitation notice of nonperformance, notice of protest, protest, notice of
dishonor, notice of intention to accelerate or notice of acceleration, all of
which are hereby expressly waived by each Borrower; (b) the obligation, if
any, of Bank to extend any further credit under any of the Loan Documents
shall immediately cease and terminate; and (c) Bank shall have all rights,
powers and remedies available under each of the Loan Documents, or accorded
by law, including without limitation the right to resort to any or all
security for any of the Credits and to exercise any or all of the rights of a
beneficiary or secured party pursuant to applicable law. All rights, powers
and remedies of Bank may be exercised at any time by Bank and from time to
time after the occurrence of an Event of Default, are cumulative and not
exclusive, and shall be in addition to any other rights, powers or remedies
provided by law or equity.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. NO WAIVER. No delay, failure or discontinuance of Bank in
exercising any right, power or remedy under any of the Loan Documents shall
affect or operate as a waiver of such right, power or remedy; nor shall any
single or partial exercise of any such right, power or remedy preclude, waive
or otherwise affect any other or further exercise thereof or the exercise of
any other right, power or remedy. Any waiver, permit, consent or approval of
any kind by Bank of any breach of or default under any of the Loan Documents
must be in writing and shall be effective only to the extent set forth in
such writing.
SECTION 7.2. NOTICES. All notices, requests and demands which any
party is required or may desire to give to any other party under any
provision of this Agreement must be in writing delivered to each party at the
following address:
BORROWER: EXE TECHNOLOGIES, INC.
12740 Hillcrest Road
Dallas, TX 75230
BANK: WELLS FARGO BANK (TEXAS),
NATIONAL ASSOCIATION
North Texas RCBO
1455 Ross, Suite 300
Dallas, TX 75202
-12-
<PAGE>
or to such other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or
made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by
mail, upon the earlier of the date of receipt or three (3) days after deposit
in the U.S. mail, first class and postage prepaid; and (c) if sent by
telecopy, upon receipt.
SECTION 7.3. COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to
Bank immediately upon demand the full amount of all payments, advances,
charges, costs and expenses, including reasonable attorneys' fees (to include
outside counsel fees and all allocated costs of Bank's in-house counsel to
the extent permissible), expended or incurred by Bank in connection with (a)
the negotiation and preparation of this Agreement and the other Loan
Documents up to an amount of $2,500, (b) Bank's continued administration
hereof and thereof, and the preparation of any amendments and waivers hereto
and thereto, (c) the enforcement of Bank's rights and/or the collection of
any amounts which become due to Bank under any of the Loan Documents, and (d)
the prosecution or defense of any action in any way related to any of the
Loan Documents, including without limitation, any action for declaratory
relief, whether incurred at the trial or appellate level, in an arbitration
proceeding or otherwise, and including any of the foregoing incurred in
connection with any bankruptcy proceeding (including without limitation, any
adversary proceeding, contested matter or motion brought by Bank or any other
person) relating to any Borrower or any other person or entity.
SECTION 7.4. SUCCESSORS, ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties; provided however,
that Borrower may not assign or transfer its interest hereunder without
Bank's prior written consent. Bank reserves the right to sell, assign,
transfer, negotiate or grant participations in all or any part of, or any
interest in, Bank's rights and benefits under each of the Loan Documents. In
connection therewith, Bank may disclose all documents and information which
Bank now has or may hereafter acquire relating to any of the Credits,
Borrower or its business, or any collateral required hereunder.
SECTION 7.5. AMENDMENT. This Agreement may be amended or modified
only in writing signed by each party hereto.
-13-
<PAGE>
SECTION 7.6. NO THIRD PARTY BENEFICIARIES. This Agreement is made and
entered into for the sole protection and benefit of the parties hereto and
their respective permitted successors and assigns, and no other person or
entity shall be a third party beneficiary of, or have any direct or indirect
cause of action or claim in connection with, this Agreement or any other of
the Loan Documents to which it is not a party.
SECTION 7.7. TIME. Time is of the essence of each and every provision
of this Agreement and each other of the Loan Documents.
SECTION 7.8. SEVERABILITY OF PROVISIONS. If any provision of this
Agreement shall be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity without invalidating the remainder of such provision or any
remaining provisions of this Agreement.
SECTION 7.9. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which when executed and delivered shall be
deemed to be an original, and all of which when taken together shall
constitute one and the same Agreement.
SECTION 7.10. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas.
SECTION 7.11. SAVINGS CLAUSE. It is the intention of the parties to
comply strictly with applicable usury laws. Accordingly, notwithstanding any
provision to the contrary in the Loan Documents, in no event shall any Loan
Documents require the payment or permit the payment, taking, reserving,
receiving, collection or charging of any sums constituting interest under
applicable laws that exceed the maximum amount permitted by such laws, as the
same may be amended or modified from time to time (the "Maximum Rate") . If
any such excess interest is called for, contracted for, charged, taken,
reserved or received in connection with any Loan Documents, or in any
communication by or any other person to Borrower or any other person, or in
the event that all or part of the principal or interest hereof or thereof
shall be prepaid or accelerated, so that under any of such circumstances or
under any other circumstance whatsoever the amount of interest contracted
for, charged, taken, reserved or received on the amount of principal actually
outstanding from time to time under the Loan Documents shall exceed the
Maximum Rate, then in such event it is agreed that: (i) the provisions of
this paragraph shall govern and control; (ii) neither Borrower nor any other
person or entity now or hereafter liable for the payment of any Loan
Documents shall be obligated to pay the amount of such interest to the extent
it is in excess of the Maximum Rate; (iii) any such excess interest which is
or has been
-14-
<PAGE>
received by Bank, notwithstanding this paragraph, shall be credited against
the then unpaid principal balance hereof or thereof, or if any of the Loan
Documents has been or would be paid in full by such credit, refunded to
Borrower; and (iv) the provisions of each of the Loan Documents, and any
other communication to Borrower, shall immediately be deemed reformed and
such excess interest reduced, without the necessity of executing any other
document, to the Maximum Rate. The right to accelerate the maturity of the
Loan Documents does not include the right to accelerate, collect or charge
unearned interest, but only such interest that has otherwise accrued as of
the date of acceleration. Without limiting the foregoing, all calculations
of the rate of interest contracted for, charged, taken, reserved or received
in connection with any of the Loan Documents which are made for the purpose
of determining whether such rate exceeds the Maximum Rate shall be made to
the extent permitted by applicable laws by amortizing, prorating, allocating
and spreading during the period of the full term of such Loan Documents,
including all prior and subsequent renewals and extensions hereof or thereof,
all interest at any time contracted for, charged, taken, reserved or received
by Bank. The terms of this paragraph shall be deemed to be incorporated into
each of the other Loan Documents.
To the extent that Article 5069-1.04 of the Texas Revised Civil Statutes
is relevant to Bank for the purpose of determining the Maximum Rate, Bank
hereby elects to determine the applicable rate ceiling under such Article by
the indicated (weekly) rate ceiling from time to time in effect, subject to
Bank's right subsequently to change such method in accordance with
applicable law, as the same may be amended or modified from time to time.
SECTION 7.12. RIGHT OF SETOFF; DEPOSIT ACCOUNTS. Upon and after the
occurrence of an Event of Default, (a) Borrower hereby authorizes Bank, at
any time and from time to time, without notice, which is hereby expressly
waived by each Borrower, and whether or not Bank shall have declared the
Credits to be due and payable in accordance with the terms hereof, to set off
against, and to appropriate and apply to the payment of, Borrower's
obligations and liabilities under the Loan Documents (whether matured or
unmatured, fixed or contingent, liquidated or unliquidated), any and all
amounts owing by Bank to Borrower (whether payable in U.S. dollars or any
other currency, whether matured or unmatured, and in the case of deposits,
whether general or special (except trust and escrow accounts), time or demand
and however evidenced), and (b) pending any such action, to the extent
necessary, to hold such amounts as collateral to secure such obligations and
liabilities and to return as unpaid for insufficient funds any and all checks
and other items drawn against any deposits so held as Bank, in its sole
discretion, may elect. Borrower hereby grants to Bank a security interest in
all deposits and accounts maintained with Bank and with any other
-15-
<PAGE>
financial institution to secure the payment of all obligations and
liabilities of Borrower to Bank under the Loan Documents.
SECTION 7.13. BUSINESS PURPOSE. Borrower represents and warrants that
the Credits are for a business, commercial, investment, agricultural or other
similar purpose and not primarily for a personal, family or household use.
SECTION 7.14. ARBITRATION.
(a) ARBITRATION. Upon the demand of any party, any Dispute shall be
resolved by binding arbitration (except as set forth in (e) below) in
accordance with the terms of this Agreement. A "Dispute" shall mean any
action, dispute, claim or controversy of any kind, whether in contract or
tort, statutory or common law, legal or equitable, now existing or hereafter
arising under or in connection with, or in any way pertaining to, any of the
Loan Documents, or any past, present or future extensions of credit and other
activities, transactions or obligations of any kind related directly or
indirectly to any of the Loan Documents, including without limitation, any of
the foregoing arising in connection with the exercise of any self-help,
ancillary or other remedies pursuant to any of the Loan Documents. Any party
may by summary proceedings bring an action in court to compel arbitration of
a Dispute. Any party who fails or refuses to submit to arbitration following
a lawful demand by any other party shall bear all costs and expenses incurred
by such other party in compelling arbitration of any Dispute.
(b) GOVERNING RULES. Arbitration proceedings shall be administered by
the American Arbitration Association ("AAA") or such other administrator as
the parties shall mutually agree upon in accordance with the AAA Commercial
Arbitration Rules. All Disputes submitted to arbitration shall be resolved in
accordance with the Federal Arbitration Act (Title 9 of the United States
Code), notwithstanding any conflicting choice of law provision in any of the
Loan Documents. The arbitration shall be conducted at a location in Texas
selected by the AAA or other administrator. If there is any inconsistency
between the terms hereof and any such rules, the terms and procedures set
forth herein shall control. All statutes of limitation applicable to any
Dispute shall apply to any arbitration proceeding. All discovery activities
shall be expressly limited to matters directly relevant to the Dispute being
arbitrated. Judgment upon any award rendered in an arbitration may be
entered in any court having jurisdiction; provided however, that nothing
contained herein shall be deemed to be a waiver by any party that is a bank
of the protections afforded to it under 12 U.S.C. Section 91 or any similar
applicable state law.
(c) NO WAIVER; PROVISIONAL REMEDIES, SELF-HELP AND FORECLOSURE. No
provision hereof shall limit the right of any
-16-
<PAGE>
party to exercise self-help remedies such as setoff, foreclosure against or
sale of any real or personal property collateral or security, or to obtain
provisional or ancillary remedies, including without limitation injunctive
relief, sequestration, attachment, garnishment or the appointment of a
receiver, from a court of competent jurisdiction before, after or during the
pendency of any arbitration or other proceeding. The exercise of any such
remedy shall not waive the right of any party to compel arbitration hereunder.
(d) ARBITRATOR QUALIFICATIONS AND POWERS; AWARDS. Arbitrators must be
active members of the Texas State Bar with expertise in the substantive laws
applicable to the subject matter of the Dispute. Arbitrators are empowered
to resolve Disputes by summary rulings in response to motions filed prior to
the final arbitration hearing. Arbitrators (i) shall resolve all Disputes in
accordance with the substantive law of the state of Texas, (ii) may grant any
remedy or relief that a court of the state of Texas could order or grant
within the scope hereof and such ancillary relief as is necessary to make
effective any award, and (iii) shall have the power to award recovery of all
costs and fees, to impose sanctions and to take such other actions as they
deem necessary to the same extent a judge could pursuant to the Federal Rules
of Civil Procedure, the Texas Rules of Civil Procedure or other applicable
law. Any Dispute in which the amount in controversy is $5,000,000 or less
shall be decided by a single arbitrator who shall not render an award of
greater than $5,000,000 (including damages, costs, fees and expenses). By
submission to a single arbitrator, each party expressly waives any right or
claim to recover more than $5,000,000. Any Dispute in which the amount in
controversy exceeds $5,000,000 shall be decided by majority vote of a panel
of three arbitrators; provided however, that all three arbitrators must
actively participate in all hearings and deliberations.
(e) JUDICIAL REVIEW. Notwithstanding anything herein to the contrary,
in any arbitration in which the amount in controversy exceeds $25,000,000,
the arbitrators shall be required to make specific, written findings of fact
and conclusions of law. In such arbitrations (i) the arbitrators shall not
have the power to make any award which is not supported by substantial
evidence or which is based on legal error, (ii) an award shall not be binding
upon the parties unless the findings of fact are supported by substantial
evidence and the conclusions of law are not erroneous under the substantive
law of the state of Texas, and (iii) the parties shall have in addition to
the grounds referred to in the Federal Arbitration Act for vacating,
modifying or correcting an award the right to judicial review of (A) whether
the findings of fact rendered by the arbitrators are supported by substantial
evidence, and (B) whether the conclusions of law are erroneous under the
substantive law of the state of Texas. Judgment confirming an award in such a
-17-
<PAGE>
proceeding may be entered only if a court determines the award is supported
by substantial evidence and not based on legal error under the substantive
law of the state of Texas.
(f) MISCELLANEOUS. To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the Dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose
the existence, content or results thereof, except for disclosures of
information by a party required in the ordinary course of its business, by
applicable law or regulation, or to the extent necessary to exercise any
judicial review rights set forth herein. If more than one agreement for
arbitration by or between the parties potentially applies to a Dispute, the
arbitration provision most directly related to the Loan Documents or the
subject matter of the Dispute shall control. This arbitration provision
shall survive termination, amendment or expiration of any of the Loan
Documents or any relationship between the parties.
NOTICE: THIS DOCUMENT AND ALL OTHER DOCUMENTS RELATING TO THE INDEBTEDNESS
CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES RELATING TO THE INDEBTEDNESS.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
WELLS FARGO BANK (TEXAS),
EXE TECHNOLOGIES, INC. NATIONAL ASSOCIATION
By: /s/ A C Belsky By: /s/ Brent Bertino
---------------------------- ------------------------------
Adam Belsky Brent Bertino
Chief Financial Officer Assistant Vice President
-18-
<PAGE>
OFFICE LEASE
THIS LEASE, dated this 21st day of May , 1998, by and between BLI-8787,
LTD., a Texas limited partnership ("Lessor"), and EXE TECHNOLOGIES, INC., a
Delaware corporation ("Lessee").
WITNESSETH:
That Lessor, in consideration of the rents and covenants hereinafter set
forth, does hereby lease and let unto Lessee, and Lessee does hereby hire and
take from Lessor, that certain space designated as Floors 1-8 of Tower I of
the office tower ("Office Tower I") known and described as Regal Stemmons
Corporate Center, located at 8787 Stemmons Freeway, Dallas, Texas, which
Office Tower I is located next to the adjacent office tower ("Office Tower
II") located at 8777 Stemmons Freeway, Dallas, Texas. The aforesaid space
leased and let unto Lessee is hereinafter referred to as the "Premises"; the
land (including all easement areas appurtenant thereto) upon which the
building or buildings of which the Premises are a part is hereinafter
referred to as the "Property"; and the Property and all buildings and
improvements (including Office Tower I and Office Tower Il) and personal
property of Lessor used in connection with the operation or maintenance
thereof located therein and thereon and the appurtenant parking facilities,
if any, are hereinafter called the "Office Complex." Lessor represents and
warrants to Lessee, to Lessor's actual knowledge, that the Premises contains
approximately 98,957 square feet of rentable area and the Office Complex
contains approximately 195,770 square feet of rentable area. On or prior to
the date sixty (60) days after the date hereof, Lessor and Lessee shall be
entitled to remeasure the rentable area of the Premises in accordance with
BOMA standards and if the measurements reflect any discrepancy from the
amounts stated herein, Lessor and Lessee shall execute an amendment to this
Lease for the purpose of adjusting, either upward or downward, the Base Rent,
Lessee's Proportionate Share of Real Estate Taxes, Lessee's Proportionate
Share of Operating Expenses and other sums payable by Lessee hereunder. In
the event that neither party obtains a remeasurement of the rentable area of
the Premises within such sixty (60) day period as described above, then such
right shall be waived and Base Rent, Lessee's Proportionate Share of Real
Estate Taxes, Lessee's Proportionate Share of Operating Expenses and other
sums payable by Lessee hereunder shall be based upon the measurements as
provided hereinabove.
Lessee hereby accepts this Lease and the Premises upon the covenants and
conditions set forth herein and subject to any covenants, conditions,
restrictions and other matters (other than liens) of record and all
applicable zoning, municipal, county, state and federal laws, ordinances and
regulations governing and regulating the use of the Premises (collectively,
the "Applicable Requirements"). Lessor represents and warrants to Lessee that
use of the Premises for office purposes is permitted, or will be permitted on
or prior to the Commencement Date (hereinafter defined), under all Applicable
Requirements, subject to Lessee Finish (defined in Section 16.27 hereof) and
obtaining a certificate of occupancy.
TO HAVE AND TO HOLD THE SAME, without any liability or obligation on the
part of Lessor to make any alterations, improvements or repairs of any kind
on or about the Premises, except as expressly provided herein, for a term of
ten (10) years and six (6) months, commencing on the date one hundred twenty
(120) days after the date hereof unless sooner terminated in the manner
provided hereinafter, to be occupied and used by Lessee for office purposes
and for any other lawful purpose consistent with a first class office
complex, subject to the covenants and agreements hereinafter contained.
ARTICLE 1
BASE RENT
SECTION 1.1 BASE RENT. In consideration of the leasing aforesaid, Lessee
agrees to pay to Lessor, at 8235 Douglas Avenue, Suite 200, Dallas, Texas 75225,
or at such other place as Lessor from time to time may designate in writing,
rent in an amount equal to $19.67 per square foot of rentable area contained
within the Premises per year for months 7 through 66 and $21.18 per square foot
of rentable area contained within the Premises per year for months 67 through
126, sometimes hereinafter referred to as the "Base Rent," payable monthly, in
advance, in equal installments of $162,207.02 per month for months 7 through 66
and $174,659.11 per month for months 67 through 126, commencing on the first day
of the seventh month of the term and continuing on the first day of each and
every month thereafter for the next succeeding months during the balance of the
term. If the term commences on a date other than the first day of a calendar
month or ends on a date other
-1-
<PAGE>
than the last day of a calendar month, monthly rent for the first month of
the term or the last month of the term, as the case may be, shall be prorated
based upon the ratio that the number of days in the term within such month
bears to the total number of days in such month. Base Rent and Additional
Rent for the Premises for the first six (6) months of the Lease term shall be
abated. Upon execution of this Lease, Lessee shall deliver to Lessor a check
in the amount of $162,207.02 for Base Rent for the seventh (7th) month of the
Lease term.
ARTICLE 2
ADDITIONAL RENT
SECTION 2.1 ADDITIONAL RENT. In addition to the Base Rent payable by Lessee
under the provisions of Article 1 hereof, Lessee shall pay to Lessor "Additional
Rent" as hereinafter provided for in this Article 2. All sums under this Article
and all other sums and charges required to be paid by Lessee under the Lease
(except Base Rent), however denoted, shall be deemed to be "Additional Rent." If
any such amounts or charges are not paid at the time provided in the Lease, they
shall nevertheless be collectible as Additional Rent with the next installment
of Base Rent falling due.
SECTION 2.2 DEFINITIONS. For the purposes of this Article 2, the parties
hereto agree upon the following definitions:
(a) "Lease Year" shall mean each of those calendar years commencing with
and including the year during which the term of this Lease commences,
and ending with the calendar year during which the term of this Lease
(including any extensions or renewals) terminates.
(b) "Real Estate Taxes" shall mean and include all personal property taxes
of Lessor relating to Lessor's personal property located in Office
Tower I and used or useful in connection with the operation and
maintenance thereof, real estate taxes and installments of special
assessments, including interest thereon, relating to Office Tower I,
and all other governmental charges, general and special, ordinary and
extraordinary, foreseen as well as unforeseen, of any kind and nature
whatsoever, or other tax, however described, which is levied or
assessed by the United States of America or the state in which Office
Tower I is located or any political subdivision thereof, against
Lessor or all or any part of Office Tower I as a result of Lessor's
ownership of Office Tower I, and payable during the respective Lease
Year. It shall not include any gross or net income tax, estate tax, or
inheritance tax, franchise taxes or taxes imposed as a result of any
transfer by Lessor of its interest in this Lease, Office Tower I or
any portion thereof.
(c) "Excess Real Estate Taxes" for an applicable Lease Year shall mean the
amount of Real Estate Taxes incurred for such applicable Lease Year in
excess of the sum of Real Estate Taxes incurred for 1998.
(d) "Operating Expenses" shall mean and include all expenses incurred with
respect to the maintenance and operation of the Property and Office
Complex as determined by Lessor's accountant in accordance with
generally accepted accounting principles consistently followed,
including, but not limited to, insurance premiums, maintenance and
repair costs, steam, electricity, water, sewer, gas and other utility
charges, fuel, lighting, window washing, janitorial services, trash
and rubbish removal, wages payable to employees of Lessor whose duties
are connected with the operation and maintenance of the Property and
Office Complex (but only for the portion of their time allocable to
work related to the Office Complex), amounts paid to contractors or
subcontractors for work or services performed in connection with the
operation and maintenance of the Property and Office Complex, all
costs of uniforms, supplies and materials used in connection with the
operation and maintenance of the Property and Office Complex, all
payroll taxes, unemployment insurance costs, vacation allowances, and
the cost of providing disability insurance or benefits, pensions,
profit sharing benefits, hospitalization, retirement or other
so-called fringe benefits, and any other expense imposed on Lessor,
its contractors or subcontractors, pursuant to law or pursuant to any
collective bargaining agreement covering such employees (pro-rated
according to the portion of their time allocated to work related to
the Office Complex), all services, supplies, repairs, replacements or
other expenses for maintaining and operating the Office Complex,
reasonable attorneys' fees and costs in connection with appeal or
contest of real estate or other taxes or levies, and such other
expenses as may be ordinarily incurred in the operation and
maintenance of an office complex and not specifically set forth
herein, including reasonable management
-2-
<PAGE>
fees and the costs of a building office at the Office Complex,
including the compensation of an on-site building manager. The term
"Operating Expenses" shall not include any capital improvement to
the Office Complex other than replacements required for normal
maintenance and repair, nor shall it include repairs, restoration
or other work occasioned by fire, windstorm or other insured
casualty, expenses incurred in leasing or procuring tenants,
leasing commissions, advertising expenses, expenses for renovating
space for new tenants, legal expenses incident to enforcement by
Lessor of the terms of any lease, interest or principal payments on
any mortgage or other indebtedness of Lessor, compensation paid to
any employee of Lessor above the grade of the on-site building
manager or building superintendent, depreciation allowance or
expense; costs occasioned by the exercise of eminent domain;
overhead and profit increment paid to subsidiaries or other
affiliates of Lessor for services on or to the Office Complex
and/or Premises to the extent that the costs of such services
exceed the competitive cost for such services rendered by persons
or entities of similar skill, competence and experience; fines,
penalties, legal fees or costs of litigation incurred due to the
late payment of taxes, utility bills and other costs; any penalties
or liquidated damages that Lessor pays to Lessee under this Lease
or to any other tenants under their respective leases; costs
associated with correcting any violation of any law existing as of
the date hereof; rental or lease charges on any equipment or
property the acquisition of which would normally be capitalized
under generally accepted accounting principals; and all items
(including repairs) and services for which Lessee or other tenants
pay directly to third parties or for which Lessee or other tenants
reimburse Lessor (other than as a reimbursement of Operating
Expenses). Notwithstanding the foregoing, in the event Lessor
installs equipment in or makes improvements or alterations to the
Office Complex which are for the purpose of reducing energy costs,
maintenance costs or other Operating Expenses or which are required
under any governmental laws, regulations, or ordinances which were
not required at the date of commencement of the term of this Lease,
Lessor may include in Operating Expenses reasonable charges for
interest on such investment and reasonable charges for depreciation
on the same so as to amortize such investment over the reasonable
life of such equipment, improvement or alteration on a straight
line basis but only to the extent of the savings resulting
therefrom. Operating Expenses shall also be deemed to include
expenses incurred by Lessor in connection with city sidewalks
adjacent to the Property and any pedestrian walkway system (either
above or below ground) or other public facility to which Lessor of
the Office Complex is from time to time subject in connection with
operations of the Property and Office Complex. Notwithstanding any
provision contained herein to the contrary, commencing January 1,
1999, in no event shall the amount of Operating Expenses used for
purposes of calculating Lessee's Proportionate Share of Operating
Expenses exceed in any year the amount of Operating Expenses used
for purposes of making such calculation for the prior year by more
than six percent (6%).
(e) "Excess Operating Expenses" shall mean the amount of Operating
Expenses incurred for any applicable Lease Year in excess of the sum
of Operating Expenses incurred during the first twelve (12) months
after the Commencement Date, adjusted to reflect an occupancy rate for
the Office Complex of the greater of: (1) ninety-five percent (95%),
or (ii) the actual occupancy rate.
(f) "Lessee's Pro Rata Share of Excess Real Estate Taxes" shall mean a
fraction, the numerator of which is the number of rentable square feet
contained within the Premises and the denominator of which is the
number of rentable square feet contained within Office Tower l, and,
represented as a percentage, is hereby stipulated to be One Hundred
percent (100%) of the Excess Real Estate Taxes for the applicable
Lease Year. Said percentage has been agreed upon by the parties hereto
after due consideration of the rentable area of the Premises compared
to the rentable area of Office Tower l; provided, however, the
percentage for Lessee's Pro Rata Share of Excess Real Estate Taxes
shall be amended each year to the greater of the following: (i) if the
total rentable area leased in Office Tower I (pursuant to leases under
which the term has commenced) is 95% or less than the total rentable
area of Office Tower I, the percentage shall be that which the
rentable area of the Premises bears to 95% of the total rentable area
of Office Tower I for such Lease Year; or (ii) if the total rentable
area leased in Office Tower l (pursuant to leases under which the term
has commenced) is greater than 95%, the percentage shall be that which
the rentable area of the Premises bears to the actual rentable area of
Office Tower I for the Lease Year. Rentable area shall in no event
include basement storage space or garage space.
-3-
<PAGE>
(g) "Lessee's Pro Rata Share of Excess Operating Expenses" shall mean a
fraction, the numerator of which is the number of rentable square feet
contained within the Premises and the denominator of which is the
number of rentable square feet contained within the Office Complex,
and, represented as a percentage, is hereby stipulated to be Fifty-One
percent (51%) of the Excess Operating Expenses for the applicable
Lease Year. Said percentage has been agreed upon by the parties hereto
after due consideration of the rentable area of the Premises compared
to the rentable area of the Office Complex; provided, however, the
percentage for Lessee's Pro Rata Share of Excess Operating Expenses
shall be amended each year to the greater of the following: (i) if the
total rentable area leased in the Office Complex (pursuant to leases
under which the term has commenced) is 95% or less than the total
rentable area of the Office Complex, the percentage shall be that
which the rentable area of the Premises bears to 95% of the total
rentable area of the Office Complex for such Lease Year; or (ii) if
the total rentable area leased in the Office Complex (pursuant to
leases under which the term has commenced) is greater than 95%, the
percentage shall be that which the rentable area of the Premises bears
to the actual rentable area of the Office Complex for the Lease Year.
Rentable area shall in no event include basement storage space or
garage space.
SECTION 2.3 ADJUSTMENT OF OPERATING EXPENSES. Notwithstanding anything to
the contrary set forth above, it is agreed that in the event the Office Complex
is not fully occupied during any Lease Year, Operating Expenses for such year
shall be adjusted to the amount that would have been incurred had the Office
Complex been ninety-five percent (95%) occupied during such year; provided, that
a corresponding adjustment is made with respect to Operating Expenses for 1998.
SECTION 2.4 NOT APPLICABLE.
SECTION 2.5 ESTIMATED EXCESS TAXES AND EXPENSES. As to each Lease Year
commencing January 1,1999, Lessor shall estimate for each such Lease Year (a)
the total amount of Excess Real Estate Taxes; (b) the total amount of Excess
Operating Expenses; (c) Lessee's Pro Rata Share of Excess Real Estate Taxes; (d)
Lessee's Pro Rata Share of Excess Operating Expenses; (e) the computation of the
annual and monthly rental payable during such Lease Year as a result of
increases or decreases in Lessee's Pro Rata Share of Excess Real Estate Taxes
and Lessee's Pro Rata Share of Excess Operating Expenses. Said estimate shall be
in writing and shall be delivered or mailed to Lessee at the Premises.
SECTION 2.6 PAYMENT OF ADDITIONAL RENT. Lessee shall pay, as Additional
Rent, the amount of Lessee's Pro Rata Share of Excess Real Estate Taxes for each
Lease Year and Lessee's Pro Rata Share of Excess Operating Expenses for each
Lease Year, so estimated, in equal monthly installments, in advance, on the
first day of each month during each applicable Lease Year. In the event that
said estimate is delivered to Lessee after the first day of January of the
applicable Lease Year, said amount, so estimated shall be payable as Additional
Rent, in equal monthly installments, in advance, on the first day of each month
over the balance of such Lease Year, with the number of installments being equal
to the number of full calendar months remaining in such Lease Year.
SECTION 2.7 RE-ESTIMATES OF EXCESS TAXES AND EXPENSE. From time to time
during any applicable Lease Year, Lessor may re-estimate the amount of Excess
Real Estate Taxes and Excess Operating Expenses and Lessee's Pro Rata Share
thereof, and in such event Lessor shall notify Lessee, in writing, of such
re-estimate in the manner above set forth and fix monthly installments for
the then remaining balance of such Lease Year in an amount sufficient to pay
the re-estimated amount over the balance of such Lease Year after giving
credit for payments made by Lessee on the previous estimate.
SECTION 2.8 ADJUSTMENT OF ACTUAL TAXES AND EXPENSE. Upon completion of each
Lease Year, Lessor shall cause its accountants to determine the actual amount of
Excess Real Estate Taxes and Excess Operating Expenses for such Lease Year and
Lessee's Pro Rata Share thereof and deliver a written certification of the
amounts thereof to Lessee within ninety (90) days after the end of each Lease
Year. If Lessee has paid less than its Pro Rata Share of Excess Real Estate
Taxes or its Pro Rata Share of Excess Operating Expenses for any Lease Year,
Lessee shall pay the balance of its Pro Rata Share of the same within thirty
(30) days after receipt of such statement. If Lessee has paid more than its Pro
Rata Share of Excess Real Estate Taxes or its Pro Rata Share of Excess Operating
Expenses for any Lease Year, Lessor shall, at Lessee's option, either (a) refund
such excess, or (b) credit such excess against the most current monthly
installment or installments due Lessor for its estimate of Lessee's Pro Rata
Share of Excess Real Estate Taxes and Lessee's Pro Rata Share of
-4-
<PAGE>
Excess Operating Expenses for the next following Lease Year. A pro rata
adjustment shall be made for a fractional Lease Year occurring during the
term of this Lease or any renewal or extension thereof based upon the number
of days of the term of this Lease during said Lease Year as compared to three
hundred sixty-five (365) days and all additional sums payable by Lessee or
credits due Lessee as a result of the provisions of this Article 2 shall be
adjusted accordingly. Notwithstanding anything contained herein to the
contrary, Lessee shall be entitled to inspect Lessor's books and records
relating to Operating Expenses at any time during the term of this Lease by
delivering fifteen (15) days prior written notice thereof to Lessor. In the
event Lessee's inspection reflects that Lessor's determination of Operating
Expenses is in error, Lessor and Lessee shall promptly make any necessary
adjustments, and if Lessor's determination is in error by more than five
percent (5%), Lessor shall reimburse Lessee for the reasonable cost of such
inspection.
SECTION 2.9 OTHER ADDITIONAL RENT. Further, Lessee shall pay, also as
Additional Rent, all other sums and charges required to be paid by Lessee under
this lease, and any tax or excise on rents, gross receipts tax, or other tax,
however described, which is levied or assessed by the United States of America
or the state in which the Office Complex is located or any political subdivision
thereof, against Lessor in respect to the Base Rent, Additional Rent, or other
charges reserved under this Lease or as a result of Lessor's receipt of such
rents or other charges accruing under this Lease; provided, however, Lessee
shall have no obligation to pay gross or net income or franchise taxes of
Lessor.
ARTICLE 3
BASE AND ADDITIONAL RENT
SECTION 3.1 INTEREST ON PAST DUE OBLIGATIONS. Any installment of Base Rent,
Additional Rent, or other charges to be paid by Lessee accruing under the
provisions of this Lease which shall not be paid when due shall bear interest at
the rate of fifteen percent (15%) per annum from the date which is ten (10) days
after written notice from Lessor that same is due until the same shall be paid,
but if such rate exceeds the maximum interest rate permitted by law, such rate
shall be reduced to the highest rate allowed by law under the circumstances.
SECTION 3.2 RENT INDEPENDENT. Lessee's covenants to pay the Base Rent and
the Additional Rent are independent of any other covenant, condition, provision
or agreement herein contained, except as otherwise provided herein. Nothing
herein contained shall be deemed to suspend or delay the payment of any amount
of money or charge at the time the same becomes due and payable hereunder, or
limit any other remedy of Lessor, except as otherwise provided herein. Base Rent
and Additional Rent are sometimes collectively referred to as "Rent." Rent shall
be payable without deduction, offset, prior notice or demand, in lawful money of
the United States, except as otherwise provided herein.
SECTION 3.3 LETTER OF CREDIT. As security for its obligations under this
Lease and its lease of space in the adjacent office tower, Lessee shall deliver
to Landlord an irrevocable standby letter of credit (the "Letter of Credit")
issued by a bank with at least One Billion Dollars in assets by June 30, 1998.
The Letter of Credit shall be in such amount and shall be released as provided
in EXHIBIT "C" attached hereto and made a part hereof for all purposes. Lessor
shall be permitted to draw the full amount of the Letter of Credit in the event
of a monetary default by Lessee hereunder which is not cured within thirty (30)
days after written notice from Lessor or if the Letter of Credit is not renewed
at least thirty (30) days prior to its expiration date for so long as it is
required to be maintained hereunder. Any amount drawn by Lessor shall be held by
Lessor in a separate account or certificate of deposit with a federally insured
financial institution and shall serve as security for the obligations of Lessee,
and may be applied by Lessor to any damages incurred by Lessor as a result of
the breach of Lessee's obligations.
-5-
<PAGE>
ARTICLE 4
POSSESSION OF PREMISES
SECTION 4.1 DELAYED OR EARLIER POSSESSION. The parties hereto agree that
Lessee shall be entitled to occupy the Premises on the date of execution of this
Lease for purposes of installing and constructing Lessee's Finish. Such early
occupancy shall be subject to all of the terms and conditions hereof except the
obligation to pay Rent; provided, Lessee will be responsible for all costs and
expenses incurred because of Lessee's occupancy of the Premises prior to the
Commencement Date, including, without limitation, the additional costs of
electricity, utilities and security. The Premises shall be delivered to Lessee
on the date of full execution of this Lease.
SECTION 4.2 EFFECT OF POSSESSION. Lessee acknowledges that neither Lessor
nor any agent of Lessor has made any representation or warranty with respect to
the Premises or the Office Complex or with respect to the suitability or fitness
of either for the conduct of Lessee's business or for any other purpose other
than that the Premises may be used lawfully for office purposes and that, to
Lessor's actual knowledge, the Premises, the Property and the Office Complex are
in substantial compliance with all applicable laws, including environmental
laws, building and fire codes, and the Americans with Disabilities Act. Nothing
contained in this Article shall affect the commencement of the lease term or the
obligation of Lessee to pay any Rent due under this Lease except as otherwise
provided herein.
SECTION 4.3 PERMITTED USE. Lessee shall use and occupy the Premises for the
purpose described on page 1 of this Lease and shall not use or permit the
Premises to be used for any other purpose without the prior written consent of
Lessor, which consent Lessee agrees may be withheld by Lessor in its sole and
absolute discretion.
SECTION 4.4 COMPLIANCE WITH ENVIRONMENTAL LAWS. Lessee shall not (either
with or without negligence) cause or permit the escape, disposal or release of
any biologically or chemically active or other hazardous substances or materials
in violation of any applicable law, including any environmental law. Lessee
shall not allow the storage or use of such substances or materials in any manner
not permitted by all applicable laws, including environmental laws and by the
standards prevailing in the industry for the storage and use of such substances
or materials, nor allow to be brought into the Office Complex any such materials
or substances except to use in the ordinary course of Lessee's business, and
then only after written notice is given to Lessor of the identity of such
substances or materials. Without limitation, hazardous substances and material
shall include those described in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et
seq.,the Resource Conservation and Recovery Act, as amended, 42 U.S.C. Section
6901 et seq., any applicable state or local laws and the regulations adopted
under these acts. If any lender or governmental agency shall ever require
testing to ascertain whether or not there has been any release of hazardous
materials by Lessee, then the reasonable costs thereof shall be reimbursed by
Lessee to Lessor upon demand as additional charges if such requirement applies
to the Premises. In addition, Lessee shall execute affidavits, representations
and the like from time to time at Lessor's request concerning Lessee's best
knowledge and belief regarding the presence of hazardous substances or materials
on the Premises. In all events, Lessee shall indemnify Lessor in the manner
elsewhere provided in this Lease from any release of hazardous materials on the
Premises occurring while Lessee is in possession, or elsewhere if caused by
Lessee or persons acting under Lessee. The within covenants shall survive the
expiration or earlier termination of the term of this Lease. Lessor represents
and warrants to Lessee that, to Lessor's actual knowledge, the Premises and the
Office Complex are in compliance with all environmental laws and that, to
Lessor's actual knowledge, except as otherwise disclosed in an environmental
report dated December 8, 1997, from Spectrum Assessment and Engineering, Inc.,
no hazardous materials have been stored, used or released on the Office Complex
as of the date of execution of this Lease. Lessor shall indemnify Lessee from
any release of hazardous materials on the Premises occurring prior to Lessee's
possession of the Premises.
ARTICLE 5
SERVICES
SECTION 5.1 SERVICES PROVIDED BY LESSOR. Subject to the provisions of
Article 2 hereof, Lessor shall provide the following services on all days
excepting Saturdays, Sundays, holidays, and as otherwise stated:
-6-
<PAGE>
(a) JANITORIAL SERVICE. Nightly janitorial services Monday through Friday
in and about the Premises. The janitorial services furnished to the
Premises shall include normal cleaning and upkeep services, normal
removal of trash and rubbish, vacuuming and spot cleaning of
carpeting, maintenance of towels, tissue and other restroom supplies
and such other work as is customarily performed in connection with
such nightly janitorial services in an office complex similar in
construction, general location, use and occupancy to the Office
Complex. Lessor shall also provide periodic interior and exterior
window washing and cleaning and waxing of uncarpeted floors in
accordance with Lessor's reasonable schedule.
(b) ELECTRICAL ENERGY. Electrical energy will be provided for lighting and
operation of office machines, air conditioning, and heating as
required for normal office usage during the normal working hours set
forth in subparagraph (c) of this Article. The cost for such
electrical energy shall be directly metered and be payable by Lessee.
Office machines will include computers, printers, copy machines,
scanners, fax machines, electronic and electric typewriters and other
office equipment. Lessee shall pay the cost of all equipment and of
the installation of all facilities provided and installed by Lessor to
provide such electrical capacity in excess of the above normal office
standards. Lessee shall not make any installation requiring excess
electrical energy without first receiving Lessor's written consent
thereto, which shall not be unreasonably withheld; and provided
further that Lessee shall pay all costs of installation of facilities
necessary to furnish such excess capacity and for such increased
electrical usage. All electric lighting bulbs and tubes and all
ballasts and starters within the Premises shall be replaced by Lessor
at the expense of Lessor. The electrical service required of Lessor
by this subparagraph (b), and electricity for other uses consented to
by Lessor, shall be available at all times subject to the requirement
that Lessee pay for usage in excess of the electrical service to be
provided pursuant to the terms of this subparagraph (b).
(c) HEATING AND AIR CONDITIONING. Heat and air conditioning for normal
comfort from 8:00 a.m. to 5:30 p.m., and on Saturdays which are not
holidays, from 8:00 a.m. to 1:00 p.m. The cost for such heat and air
conditioning shall be directly metered and be payable by Lessee. Air
conditioning to the Premises is to be provided based on standard
lighting and normal incidental office use only. During other hours,
Lessor shall provide such amounts of heating and air conditioning upon
a reasonable advance notice from Lessee to Lessor, which advance
notice shall not be less than twenty-four (24) hours.
(d) WATER. Hot and cold water from the regular building outlets and/or as
installed by Lessee at Lessee's cost, for lavatory and restrooms and
for drinking purposes.
(e) PASSENGER ELEVATOR SERVICE. Passenger elevator service in common with
other tenants to be provided by automatic elevators twenty-four (24)
hours per day. Lessor shall have the right to restrict the use of
elevators for freight purposes to the freight elevator and to hours to
be determined by Lessor. Lessor shall have the right to limit the
number of elevators to be in operation on Saturdays, Sundays and
holidays.
(f) PARKING FACILITIES, LANDSCAPED AREAS AND COMMON AREAS. Maintenance in
good order, condition and repair of the parking facilities and all
driveways leading thereto and keeping the same free from any
unreasonable accumulation of snow. Lessor shall keep and maintain the
Office Complex and landscaped area and parking facilities and all
common areas in a neat and orderly condition, and in first class
condition and repair. Lessor shall promptly remove or cause to be
removed any unauthorized vehicles from the parking facilities. Lessor
reserves the right to designate areas of the appurtenant parking
facilities where Lessee, its agents, employees and invitees shall park
and may exclude Lessee, its agents, employees and invitees from
parking in other areas as designated by Lessor, provided, however,
Lessor shall not be liable to Lessee for the failure of any tenant,
its invitees, employees, agents, and customers to abide by Lessor's
designations or restrictions. Notwithstanding anything to the contrary
contained herein, in no event may Lessee utilize, at any time, more
than Lessee's proportionate share of the number of garage parking
spaces, uncovered parking spaces and handicapped spaces, respectively,
located at the Office Complex. Lessee's proportionate share of such
parking spaces shall be calculated by dividing the number of rentable
square feet contained within the Premises by the number of rentable
square feet contained within the Office Complex, and is hereby
-7-
<PAGE>
stipulated to be 253 garage parking spaces, 123 uncovered spaces
and 5 handicapped parking spaces.
(g) SECURITY. Security service for the Office Complex 24 hours per day,
which shall include, without limitation, at least one (1) uniformed
security guard on patrol and existing lighting of the common areas,
parking facilities and all other portions of the Office Complex.
Lessor shall restrict access to the Office Complex to tenants and
other authorized individuals after normal business hours and on
weekends and holidays. Notwithstanding the foregoing, Lessor agrees
that Lessee shall have access to the Premises twenty-four (24)
hours per day, seven (7) days perweek. Lessee shall be entitled to
provide additional security guard service to the Office Complex
and/or the Premises at Lessee's option and expense subject to
Lessor's approval, which approval shall not be unreasonably
withheld, conditioned or delayed.
(h) ACCESS. Access to the Office Complex and Premises at all times.
SECTION 5.2 LESSEE'S UTILITY SERVICES. Lessee shall be solely
responsible for the direct payment of all utilities which are separately
metered or separately charged (electric, natural gas, telephone, cable
television and any other special utility requirements of Lessee), if any, to
the Premises or to the Lessee and shall make such payments to the respective
utility companies prior to delinquency. Such amounts shall not be included as
Operating Expenses.
SECTION 5.3 OTHER PROVISIONS RELATING TO SERVICES. No interruption in,
or temporary stoppage of, any of the aforesaid services caused by repairs,
renewals, improvements, alterations, strikes, lockouts, labor controversy,
accidents, inability to obtain fuel or supplies, or other causes beyond
Lessor's control shall be deemed an eviction or disturbance of Lessee's use
and possession, or render Lessor liable for damages, by abatement of rent or
otherwise or relieve Lessee from any obligation herein set forth; provided,
however, notwithstanding the foregoing, if such interruption or temporary
stoppage substantially interferes with Lessee's use of the Premises, and if
same continues for a period in excess of thirty (30) days following written
notice from Lessee to Lessor, Lessee shall be entitled to correct the same at
Lessor's expense and, if Lessor fails to reimburse Lessee within thirty (30)
days after written notice of the cost (and accompanying invoices), to deduct
the cost thereof from the Rent next becoming due under the Lease; provided,
in no event shall Lessee be entitled to offset more than twenty percent (20%)
of monthly Base Rent in any month. In no event shall Lessor be required to
provide any heat, air conditioning, electricity or other service in excess of
that permitted by voluntary or involuntary guidelines or laws, ordinances or
regulations of governmental authority. Lessor reserves the right, from time
to time, to make reasonable and non-discriminatory modifications to the above
standards for utilities and services.
SECTION 5.4 EFFECTS ON UTILITIES. Lessee shall not, without the prior
written consent of Lessor, which consent shall not be unreasonably withheld,
conditioned or delayed, use any apparatus or device in or about the Premises
which shall cause any substantial noise or vibration or which will increase
the amount of electricity or water, if any, usually furnished or supplied for
use of the Premises as general office space. Lessee shall not connect with
electric current or water pipes, except through existing electrical or water
outlets already in the Premises, any apparatus or device for the purposes of
using electric current or water.
ARTICLE 6
INSURANCE
SECTION 6.1 LESSOR'S CASUALTY INSURANCE OBLIGATIONS. Lessor shall keep
the Office Complex insured for the benefit of Lessor in an amount equivalent
to the full replacement value thereof (excluding foundation, grading and
excavation costs) against:
(a) loss or damage by fire; and
(b) such other risk or risks of a similar or dissimilar nature as are now
or may be customarily covered with respect to buildings and
improvements similar in construction, general location, use, occupancy
and design to the Office Complex, including, but without limiting the
generality of the foregoing, windstorms, hail, explosion, vandalism,
malicious mischief, civil commotion, and such other coverage as may be
deemed necessary by Lessor, providing such additional coverage is
obtainable and providing such additional coverage
-8-
<PAGE>
is such as is customarily carried with respect to buildings and
improvements similar in construction, general location, use,
occupancy and design to the Office Complex.
These insurance provisions shall in no way limit or modify any of the
obligations of Lessee under any provision of this Lease Agreement. Lessor
agrees that such policy or policies of insurance shall permit releases of
liability as provided herein and/or waiver of subrogation clause as to Lessee
and Lessor waives, releases and discharges Lessee from all claims or demands
whatsoever which Lessor may have or acquire arising out of damage to or
destruction of the Office Complex or loss of use thereof occasioned by fire
or other casualty, WHETHER SUCH CLAIM OR DEMAND MAY ARISE BECAUSE OF THE
NEGLIGENCE OR FAULT OF LESSEE, ITS AGENTS, EMPLOYEES, CUSTOMERS, CONTRACTORS
OR BUSINESS INVITEES, OR OTHERWISE, and Lessor agrees to look to the
insurance coverage only in the event of such loss. Insurance premiums paid
for insurance coverage required under this Article 6 by Lessor shall be a
portion of the "Operating Expenses" described in Article 2 hereof.
SECTION 6.2 LESSEE'S CASUALTY INSURANCE OBLIGATIONS. Lessee shall keep
all of its machinery, equipment, furniture, fixtures and personal property
(including also property under the care, custody, or control of Lessee) which
may be located in, upon, or about the Premises insured for the benefit of
Lessee in an amount equivalent to the full insurable value thereof against:
(a) loss or damage by fire; and
(b) such other risk or risks of a similar or dissimilar nature as are now,
or may in the future be customarily covered with respect to a tenant's
machinery, equipment, furniture, fixtures, personal property and
business located in a building similar in construction, general
location, use, occupancy and design to the Office Complex, including,
but without limiting the generality of the foregoing, windstorms,
hail, explosions, vandalism, theft, malicious mischief, civil
commotion, and such other coverage as Lessee may deem appropriate or
necessary.
Lessee agrees that such policy or policies of insurance shall permit
release of liability as provided herein and/or waiver of subrogation clause
as to Lessor and Lessee waives, releases and discharges Lessor, its agents,
employees, and contractors from all claims or demands whatsoever which Lessee
may have or acquire arising out of damage to or destruction of the machinery,
equipment, furniture, fixtures, personal property, and loss of use thereof
occasioned by fire or other casualty, whether such claim or demand may arise
because of the negligence or fault of Lessor, its agents, employees,
contractors or otherwise, and Lessee agrees to look to the insurance coverage
only in the event of such loss.
SECTION 6.3 LESSOR'S LIABILITY INSURANCE OBLIGATIONS. Lessor shall, as
a portion of the Operating Expenses defined in Article 2, maintain, for its
benefit and the benefit of its managing agent and Lessee, general public
liability insurance against claims for personal injury, death or property
damage occurring upon, in or about the Office Complex, such insurance to
afford protection to Lessor and its managing agent to the limit of not less
than Two Million and No/1 00 Dollars ($2,000,000.00) in respect to injury or
death to a single person, and to the limit of not less than Five Million and
No/1 00 Dollars ($5,000,000.00) in respect to any one accident, and to the
limit of not less than Two Million and No/1 00 Dollars ($2,000,000.00) in
respect to any property damage. Lessor shall provide Lessee with evidence
that it has satisfied its insurance obligations hereunder upon request
therefor.
SECTION 6.4 LESSEE'S LIABILITY INSURANCE OBLIGATIONS. Lessee shall, at
Lessee's sole cost and expense but for the mutual benefit of Lessor, its
managing agent and Lessee, maintain general public liability insurance
against claims for personal injury, death or property damage occurring upon,
in or about the Premises, such insurance to afford protection to Lessor, its
managing agent and Lessee to the limit of not less than Two Million and
No/100 Dollars ($2,000,000.00) in respect to the injury or death to a single
person, and to the limit of not less than Five Million and No/100 Dollars
($5,000,000.00) in respect to any one accident, and to the limit of not less
than Two Million and No/1 00 Dollars ($2,000,000.00) in respect to any
property damage. Such policies of insurance shall be written in companies
reasonably satisfactory to Lessor, naming Lessor and its managing agent as
additional insureds thereunder, and such policies, or a memorandum or
certificate of such insurance, shall be delivered to Lessor endorsed "Premium
Paid" by the company or agency issuing the same or accompanied by other
evidence satisfactory to Lessor that the premium thereon has been paid. Any
such coverage shall be deemed primary to any liability coverage secured by
Lessor. Such insurance shall also afford coverage for all claims based upon
acts, omissions, injury or damage,
-9-
<PAGE>
which claims occurred or arose (or the onset of which occurred or arose) in
whole or in part during the policy period.
SECTION 6.5 INDEMNIFICATION. Lessor agrees to indemnify, protect, defend
and hold Lessee and Lessee's shareholders, employees, lender and agents
harmless from and against any and all uninsured claims, costs, liabilities,
actions and damages, including without limitation, reasonable attorneys' fees
and costs on behalf of any person or persons, firm or firms, corporation or
corporations, arising from any accident, injury or damage to the extent that
same occurred prior to the Commencement Date or was caused by Lessor, its
agents, and employees to any person, firm or corporation occurring during the
term of this Lease or any extension or renewal hereof, in or about the Office
Complex, and from and against all costs, reasonable counsel fees, expenses
and liabilities in or about any such uninsured claim or action or proceeding
brought thereon; and in case any action or proceeding be brought against
Lessee or its agents by reason of any such uninsured claim, Lessor, upon
notice from Lessee, covenants to resist or defend such action or proceeding
by counsel reasonably satisfactory to Lessee.
Lessee agrees to indemnify, protect, defend and hold Lesser and Lessor's
shareholders, employees, lender and managing agent harmless from and against
any and all uninsured claims, costs, liabilities, actions, and damages,
including, without limitation, reasonable attorneys' fees and costs on behalf
of any person or persons, firm or firms, corporation or corporations, arising
from any act or negligence on the part of Lessee or its agents, contractors,
servants, employees or licensees, or arising from any accident, injury or
damage to the extent caused by Lessee, its agents, and employees to any
person, firm or corporation occurring during the term of this Lease or any
renewal thereof, in or about the Premises and Office Complex, and from and
against all costs, reasonable counsel fees, expenses and liabilities incurred
in or about any such claim or action or proceeding brought thereon; and in
case any action or proceeding be brought against Lessor or its managing agent
by reason of any such claim, Lessee, upon notice from Lessor, covenants to
resist or defend such action or proceeding by counsel reasonably satisfactory
to Lessor.
SECTION 6.6 LESSEE'S WAIVER. Lessee agrees, to the extent not expressly
prohibited by law, that Lessor, its agents, employees and servants shall not
be liable, and Lessee waives all claims for damage to property and business
sustained during the term of this Lease by Lessee occurring in or about the
Office Complex, resulting directly or indirectly from any existing or future
condition, defect, matter or thing in the Premises, the Office Complex, or
any part thereof, or from equipment or appurtenances becoming out of repair
or from accident, or from any occurrence or act or omission of Lessor, its
agents, employees or servants, or any tenant or occupant of the Office
Complex or any other person, other than damage resulting from the intentional
misconduct or gross negligence of Lessor, its agents, employees or servants,
or the breach by Lessor of its obligations under this Lease. This paragraph
shall apply especially but not exclusively, to damage caused by aforesaid or
by the flooding of basements or other subsurface areas, or by refrigerators,
sprinkling devices, air conditioning apparatus, water, snow, frost, steam,
excessive heat or cold, falling plaster, broken glass, sewage, gas, odors or
noise, or the bursting or leaking of pipes or plumbing fixtures, and shall
apply equally, whether any such damage results from the act or omission of
other tenants or occupants in the Office Complex or any other persons, and
whether such damage be caused by or result from any of the aforesaid, or
shall be caused by or result from other circumstances of a similar or
dissimilar nature.
SECTION 6.7 LESSOR'S DEDUCTIBLE AND LESSEE'S PROPERTY. Provisions herein
to the contrary notwithstanding, in the event any damage to the Office
Complex results solely from the gross negligence or willful misconduct of
Lessee, its agents, employees or invitees, and all or any portion of Lessor's
loss is "deductible," Lessee shall pay to Lessor the amount of such
deductible loss (not to exceed $1,000 per event).
SECTION 6.8 LESSEE'S PROPERTY. All property in the Office Complex or on
the Premises belonging to Lessee, its agents, employees, invitees or
otherwise located at the Premises, shall be at the risk of Lessee only, and
Lessor shall not be liable for damage thereto or theft, misappropriation or
loss thereof unless caused solely by the gross negligence or willful
misconduct of Lessor and Lessee agrees to defend and hold Lessor, its agents,
employees and servants harmless and indemnify them against claims and
liability for injuries to such property.
SECTION 6.9 INCREASE IN INSURANCE. Lessee shall not do or permit
anything to be done in or about the Premises nor bring or keep anything
therein which will in any way increase the existing rate of or affect in any
other way any fire or other insurance upon the Office Complex or any of its
contents,
-10-
<PAGE>
or cause a cancellation of any insurance policy covering the Office Complex
or any of its contents. Notwithstanding anything to the contrary contained
herein, Lessee shall, within thirty (30) days following its receipt of
written demand, reimburse Lessor for the full amount of any additional
premium charged for such policy by reason of Lessee's failure to comply with
the provisions of the paragraph, it being understood that such demand for
reimbursement shall not be Lessor's exclusive remedy. Lessee shall , within
thirty (30) days following its receipt of written demand, reimburse Lessor
for any additional premium charged for any such policy by reason of Lessee's
failure to comply with the provisions of this Article.
SECTION 6.10 LESSEE'S FAILURE TO INSURE. In the event Lessee fails to
provide Lessor with evidence of insurance required under this Article 6, Lessor
may, but shall not be obligated to, without further demand upon Lessee, and
without waiving or releasing Lessee from any obligation contained in this Lease,
effect such insurance and Lessee agrees to repay, upon demand, all such sums
incurred by Lessor in effecting such insurance. All such sums shall become a
part of the Additional Rent payable hereunder, but no such payment by Lessor
shall relieve Lessee from any default under this Lease.
ARTICLE 7
CERTAIN RIGHTS RESERVED BY LESSOR
SECTION 7.1 RIGHTS RESERVED BY LESSOR. Lessor reserves the following
rights exercisable without notice and without liability to Lessee and without
effecting an eviction, constructive or actual, or disturbance of Lessee's use
or possession, or giving rise to any claim for setoff or abatement of rent:
(a) CONTROL SIGNAGE. To control, install, affix and maintain any and all
signs on the Property, or on the exterior of the Office Complex and in
the corridors, entrances and other common areas thereof, except those
signs within the Premises not visible from outside the Premises,
subject to applicable law. Notwithstanding anything to the contrary
contained herein, subject to Article 8, the Building Rules and
Regulations (attached hereto as EXHIBIT "A") and compliance with
applicable laws and ordinances, Lessee may, at its sole expense,
install one (1) sign on each office tower of the Office Complex in a
location and or a design that is mutually acceptable to Lessor and
Lessee, such signage to be substantially similar to the design
attached hereto as EXHIBIT "B".
(b) RETAIN KEYS. To retain at all times and to use in appropriate
instances keys to all doors within and into the Premises. No locks
shall be changed without the prior written consent of Lessor. This
provision shall not apply to Lessee's safes, or other areas maintained
by Lessee for the safety and security of monies, securities,
negotiable instruments or similar items, or proprietary or
confidential information.
(c) MAKE REPAIRS. To make repairs, alterations, additions, or
improvements, whether structural or otherwise, in and about the Office
Complex, or any part thereof, and for such purposes to enter upon the
Premises, and during the continuation of any of said work, to
temporarily close doors, entryways, public spaces, and corridors in
the Office Complex and to interrupt or temporarily suspend services
and facilities.
(d) REGULATE HEAVY EQUIPMENT. To approve the weight, size and location of
safes and other heavy equipment and articles in and about the Premises
and the Office Complex, such approval not to be unreasonably withheld,
conditioned or delayed, and to require all such items to be moved into
and out of the Office Complex and the Premises only at such times and
in such manner as Lessor shall reasonably direct in writing.
(e) EXCLUSIVE BUSINESSES. To grant to anyone the exclusive right to
conduct any particular business or undertaking in the Office Complex
other than general office use, including but not limited to the
following businesses: banks, savings and loan associations,
restaurants, cafeterias, candy and/or tobacco shops, and other stores
selling retail products.
SECTION 7.2 EMERGENCY ENTRY. Lessor and its agents may enter the
Premises at any time in case of emergency and shall have the right to use any
and all means which Lessor may deem proper to open such doors during an
emergency in order to obtain entry to the Premises. Any entry to the Premises
obtained by Lessor in the event of an emergency shall not, under any
circumstances, be
-11-
<PAGE>
construed or deemed to be a forcible or unlawful entry into, or detainer of,
the Premises, or to be an eviction of Lessee from the Premises or any portion
thereof.
SECTION 7.3 EXHIBITION OF PREMISES. Lessee shall permit Lessor and its
agents, upon at least twenty-four (24) hours prior notice, to enter and pass
through the Premises or any part thereof at reasonable times during normal
business hours to: (a) post notices of nonresponsibility; (b) exhibit the
Premises to holders of encumbrances on the interest of Lessor under the Lease
and to prospective purchasers, mortgagees or lessees of the Office Complex;
and (c) during the period of six (6) months prior to the expiration of the
Lease Term, exhibit the Premises to prospective lessees thereof, provided, in
each case, that Lessor shall not unreasonably interfere with Tenant's use and
occupancy of the Premises. If during the last month of the Lease Term, Lessee
shall have removed substantially all of Lessee's property and personnel from
the Premises, Lessor may, with the prior written consent of Lessee, which
consent may not be unreasonably withheld or delayed, enter the Premises and
repair, alter, and redecorate the same, without abatement of Rent and without
liability to Lessee; and such acts shall have no effect on this Lease.
SECTION 7.4 RIGHT OF LESSOR TO PERFORM. All covenants and agreements to
be performed by Lessee under any of the terms of this Lease shall be
performed by Lessee at Lessee's sole cost and expense and without any
abatement of Rent, except as otherwise provided herein. If Lessee shall fail
to pay any sum of money (other than Rent due Lessor) required to be paid by
it hereunder or shall fail to perform any other act on its part to be
performed hereunder, including, but not limited to, the failure to commence
and complete repairs promptly and adequately, and the failure to remove any
liens or otherwise to perform any act or fulfill any obligation required of
Lessee under this Lease within any applicable notice and cure periods
provided herein, Lessor may, but shall not be obligated to do so, and without
waiving or releasing Lessee from any obligations of Lessee, make any such
payment or perform any such act on Lessee's part to be made or performed as
in this Lease provided. All sums so paid by Lessor and all necessary
incidental costs, together with an administrative charge in the amount of
five percent (5%) of any costs incurred by Lessor, and interest thereon at
the maximum rate per annum then permitted by law accruing from the date which
is ten (10) days following Lessee's receipt of written notice that same has
been paid or incurred by Lessor until reimbursed to Lessor by Lessee, shall
be payable to Lessor by Lessee as Rent within thirty (30) days following
Lessee's receipt of written demand and Lessee covenants to pay all such sums.
Lessor shall have (in addition to any other right or remedy of Lessor) the
same rights and remedies in the event of Lessee's non payment of such sums,
as in the case of default by Lessee in the payment of Rent to Lessor.
ARTICLE 8
ALTERATIONS AND IMPROVEMENTS
SECTION 8.1 PROCEDURES FOR LESSEE'S IMPROVEMENTS. Except as provided in
Section 16.27 hereof, Lessee shall not make any improvements, alterations,
additions or installations in or to the Premises (hereinafter referred to as
the "Work") without Lessor's prior written consent, which consent shall not
be unreasonably withheld, conditioned or delayed; provided, Lessor may
withhold its consent, in its sole discretion, to any structural alterations,
exterior alterations or other alterations that are visible within the common
areas of the Office Complex ("Major Alterations"). Before commencement of the
Work or delivery of any materials to be used in the Work to the Premises or
into the Office Complex, Lessee shall furnish Lessor with plans and
specifications, names and addresses of contractors, copies of contracts,
necessary permits and licenses, and an indemnification in such form and
amount as may be reasonably satisfactory to Lessor and a performance bond
executed by a commercial surety reasonably satisfactory to Lessor, and in an
amount equal to the Work and the payment of all liens for labor and material
arising therefrom. Lessee agrees to defend and hold Lessor forever harmless
from any and all claims and liabilities of any kind and description which may
arise out of or be connected in any way with said improvements, alterations,
additions or installations. All Work shall be done only by contractors or
mechanics reasonably approved by Lessor and at such time and in such manner
as Lessor may from time to time reasonably designate. All work done by
Lessee, its agents, employees, or contractors shall be done in such a manner
as to avoid labor disputes. Lessee shall pay the cost of all such
improvements, alterations, additions or installations (including a reasonable
charge for Lessor's services and for Lessor's inspection and engineering
time), and also the cost of painting, restoring, or repairing the Premises
and the Office Complex occasioned by such improvements, alterations,
additions or installations. Upon completion of the Work, Lessee shall furnish
Lessor with contractor's affidavits or unconditional lien releases and full
and final waivers of liens, and receipted bills covering all labor and
materials expended and used. The Work shall comply with all insurance
requirements and all laws, ordinances, rules and regulations of all
governmental authorities and shall be constructed in a good and workmanlike
manner. Lessee shall permit Lessor
-12-
<PAGE>
to inspect construction operations in connection with the Work. Lessee shall
not be allowed to make any alterations, modifications, improvements,
additions, or installations if such action results or would result in a labor
dispute or otherwise would materially interfere with Lessor's operation of
the Office Complex. Lessor, by written notice to Lessee given at or prior to
termination of this Lease, may require Lessee to remove any improvements,
additions or installation installed by Lessee in the Premises at Lessee's
sole cost and expense, and repair or restore any damage caused by the
installation and removal of such improvements, additions, or installations;
provided, however, the only improvements, additions or installations which
Lessee shall remove shall be those specified in such notice. With respect to
approval rights granted to Lessor in this Article 8 for other than Major
Alterations, Lessor's approval shall be deemed given following the expiration
of thirty (30) days after Lessee delivers to Lessor in writing plans and
specifications for the item or items for which Lessor's approval is sought if
Lessor has not sooner disapproved same.
SECTION 8.2 FREEDOM FROM LIENS. Lessee shall keep the Premises and the
Office Complex free from any liens arising out of any work performed,
material furnished or obligations incurred by Lessee, and shall indemnify,
protect, defend and hold Lessor harmless from any liens and encumbrances
arising out of any work performed or material furnished by or at the
direction of Lessee. In the event that Lessee shall not, within thirty (30)
days following the imposition of any such lien, cause such-lien to be
released of record by payment or posting of a proper bond, Lessor shall have,
in addition to all other remedies provided herein and by law, the right, but
not the obligation, to cause the same to be released by such means as it
shall deem proper, including payment of and/or defense against the claim
giving rise to such lien. All such sums paid by Lessor and all expenses
incurred by it in connection therewith, including attorneys' fees and costs,
shall be payable as Additional Rent to Lessor by Lessee on demand with
interest at the maximum rate per annum then permitted by law accruing from
the date which is five (5) days following Lessee's receipt of written notice
that same has been paid or incurred by Lessor until reimbursed to Lessor by
Lessee.
SECTION 8.3 ALTERATIONS A PAD OF THE PREMISES. Any permanent additions
to, or alterations of, the Premises, except as specified in Lessor's notice
to Lessee, shall become at once a part of the Premises and belong to Lessor
without compensation to Lessee. The foregoing shall not be applicable to
removable equipment, trade fixtures, shelving, attached modular furniture or
Lessee's personal property, which Lessee shall remove, and upon removal shall
repair any damage to the Premises due to such removal.
ARTICLE 9
REPAIRS
SECTION 9.1 LESSEE'S REPAIR OBLIGATIONS. Subject to Article 6 hereof,
Lessee shall, during the term of this Lease, at Lessee's expense, keep the
Premises in as good order, condition and repair as they were at the time
Lessee took possession of the same, reasonable wear and tear and damage from
fire and other casualties and/or which is the responsibility of Lessor
excepted. Lessee shall keep the Premises in a neat and sanitary condition and
shall not commit any nuisance or waste on the Premises or in, on, or about
the Office Complex, throw improper substances in the plumbing facilities, or
waste any of the utilities furnished by the Lessor. All uninsured damage or
injury to the Premises, or to the Office Complex caused by Lessee moving
furniture, fixtures, equipment, or other devices in or out of the Premises or
Office Complex or by installation or removal of furniture, fixtures,
equipment, devices or other property of Lessee, its agents, contractors,
servants or employees, due to carelessness, omission, neglect, improper
conduct, or other cause of Lessee, its servants, employees, agents, visitors,
or licensees, shall be repaired, restored and replaced promptly by Lessee at
its sole cost and expense. All repairs, restorations and replacements shall
be in quality and class equal to the original work and shall comply with all
requirements of the Lease.
SECTION 9.2 LESSOR'S INSPECTION. Lessor or its employees, or agents,
shall have the right to enter the Premises following at least twelve (12)
hours prior notice thereof to Lessee (except that no prior notice to Lessee
shall be required in the event of an emergency or for the performance of
cleaning, janitorial and any other service required to be performed by Lessor
under this Lease) at any reasonable time or times for the purpose of
inspection, cleaning, repairs, altering, or improving the same but nothing
contained herein shall be construed as imposing any obligation on Lessor to
make any repairs, alterations or improvements which are the obligation of
Lessee; provided, however, that Lessor shall not unreasonably interfere with
Lessee's use and occupancy of the Premises.
SECTION 9.3 JOINT INSPECTION UPON VACATION. Lessee shall give written
notice to Lessor at least thirty (30) days prior to vacating the Premises for
the express purpose of arranging a meeting with
-13-
<PAGE>
Lessor for a joint inspection of the Premises. In the event of Lessee's
failure to give such notice and arrange such joint inspection, Lessor's
inspection at or after Lessee's vacation of the Premises shall be
conclusively deemed correct for purposes of determining Lessee's
responsibility for repairs and restoration hereunder.
SECTION 9.4 LESSOR'S REPAIR OBLIGATIONS. Lessor shall, during the term
of this Lease, at Lessor's expense, keep the common areas, landscaping,
parking facilities and the roof, foundation, slab, floors, exterior walls and
load bearing columns and all other structural, mechanical, electrical and
plumbing portions of the Office Complex in first class condition and repair
and in a neat, clean and healthful manner. All repairs, restorations and
replacements shall be performed in good and workmanlike manner and in quality
and class equal to the original work and shall comply with all requirements
of the Lease. If Lessor fails to perform any of Lessor's obligations under
this paragraph, and if such failure continues for thirty (30) days after
written notice thereof is delivered to Lessor (provided, that, in the event
of an emergency or situation where damage to person or property is at risk,
no notice shall be required), Lessee may perform such obligation, in which
event, Lessor shall pay to Lessee the reasonable cost incurred by Lessee in
performing such obligation within thirty (30) days after demand therefor
(with accompanying paid invoices), failing,which Lessee shall be entitled to
offset such sums against the Rent becoming due under this Lease, provided any
offset shall not exceed twenty percent (20%) of monthly Base Rent until such
offset has been fully made. In the event the expenditure cannot be fully
recouped from the next monthly payment of Base Rent as a result of such
limitation, Lessee shall be entitled to recover interest with respect to each
subsequent monthly offset from the date of the expenditure to the date of
offset at a per annum rate equal to the bank prime rate publicized in the
WALL STREET JOURNAL as the same may change from time to time.
ARTICLE 10
ASSIGNMENT AND SUBLETTING
SECTION 10.1 PROCEDURE FOR OBTAINING LESSOR'S CONSENT. Lessee shall not,
without the prior written consent of Lessor, (a) transfer, pledge, mortgage
or assign this Lease or any interest hereunder; (b) permit any assignment of
this Lease by voluntary act, operation of law or otherwise; (c) sublet the
Premises or any part thereof; or (d) permit the use of the Premises by any
parties other than Lessee, its agents and employees. Lessee shall seek such
written consent of Lessor by a written request therefor, setting forth such
information as Lessor may deem reasonably necessary. Lessee shall, by notice
in writing, advise Lessor of its intention from, on and after a stated date
(which shall not be less than thirty [30] days after date of Lessee's
notice), to assign this Lease or to sublet any part or all of the Premises
for the balance or any part of the term. Lessee's notice shall include all of
the terms of the proposed assignment or sublease and shall state the
consideration therefor. In such event, Lessor shall have the right to be
exercised by giving written notice to Lessee within thirty (30) days after
receipt of Lessee's notice, to recapture the space described in Lessee's
notice and such recapture notice shall, if given, cancel and terminate this
Lease with respect to the space therein described as of the date stated in
Lessee's notice; provided, however, that Lessor shall not have such right to
recapture if the proposed assignment is a transfer of the stock of Lessee as
described in Section 10.5 hereof. Lessee's notice shall state the name and
address of the proposed assignee or subtenant and a true and complete copy of
the proposed assignment or sublease shall be delivered to Lessor with
Lessee's notice. If Lessee's notice shall cover all of the Premises, and
Lessor shall have exercised its foregoing recapture right, the term of this
Lease shall expire and end on the date stated in Lessee's notice as fully and
completely as if that date had been herein definitely fixed for the
expiration of the term. If, however this Lease be canceled with respect to
less than the entire Premises, the Base Rent and Additional Rent shall be
equitably adjusted by Lessor with due consideration of the size, location,
type and quality of the portion of the Premises so remaining after the
"recapture" and such rent shall be reduced accordingly from and after the
termination date for said portion, and this Lease as so amended shall
continue thereafter in full force and effect. The rent adjustments provided
for herein shall be evidenced by an amendment to Lease executed by Lessor and
Lessee. If this Lease shall be terminated in the manner aforesaid, either as
to the entire Premises or only a portion thereof, to such extent the term of
this Lease shall end upon the appropriate effective date of the proposed
sublease or assignment as if that date had been originally fixed in this
Lease for such expiration, and in the event of a termination affecting less
than the entire Premises, Lessee shall comply with Article 13 ("Surrender of
Premises") of this Lease with respect to such portion of the Premises
affected thereby.
SECTION 10.2 DISCHARGE OF COMMISSION. Lessee shall, at its sole cost and
expense, discharge in full (a) any outstanding commission obligation on the
part of Lessor with respect to this Lease in the event that all or any
portion of this Lease is recaptured pursuant to this Article 10, and (b) any
-14-
<PAGE>
commission which may be due and owing as a result of any proposed assignment
or subletting, whether or not the subject portion of the Premises is
"recaptured" pursuant thereto and rented by Lessor to the proposed tenant or
any other tenant.
SECTION 10.3 RIGHT TO RECAPTURE NOT EXERCISED. If Lessor, upon receiving
Lessee's notice with respect to any such space, shall not exercise its right
to recapture as aforesaid, Lessor will not unreasonably withhold its consent
to Lessee's assignment of the Lease or subletting such space to the party
identified in Lessee's notice, provided, however, that in the event Lessor
consents to any such assignment or subletting, and as a condition thereto,
Lessee shall pay to Lessor ninety percent (90%) of all profit derived by
Lessee from such assignment or subletting. For purposes of the foregoing,
profit shall be deemed to include, but shall not be limited to, the amount of
all rent payable by such assignee or sublessee in excess of the Base Rent,
and rent adjustments, payable by Lessee under this Lease. If a part of the
consideration for such assignment or subletting shall be payable other than
in cash, the payment to Lessor shall be in cash for its share of any non-cash
consideration based upon the fair market value thereof.
SECTION 10.4 LESSEE'S PROFIT STATEMENT. Lessee shall and hereby agrees
that it will furnish to Lessor upon request from Lessor a complete statement,
certified by an independent certified public accountant, setting forth in
detail the computation of all profit derived and to be derived from such
assignment or subletting, such computation to be made in accordance with
generally accepted accounting principles. Lessee agrees that Lessor or its
authorized representatives shall be given access at all reasonable times to
the books, records and papers of Lessee relating to any such assignment or
subletting, and Lessor shall have the right to make copies thereof. The
percentage of Lessee's profit due Lessor hereunder shall be paid to Lessor
within five (5) days of receipt by Lessee of all payments made from time to
time by such assignee or sublessee to Lessee.
SECTION 10.5 LESSEE'S CHANGES DEEMED AN ASSIGNMENT. For purposes of the
foregoing, any change in the partners of Lessee, if Lessee is a partnership
which results in a transfer of at least fifty percent (50%) or more of the
interests in the partnership, or, if Lessee is a corporation, any transfer of
at least fifty percent (50%) of the shares of stock of Lessee by sale,
assignment, operation of law or otherwise, shall be deemed to be an
assignment within the meaning of this Article 10; provided, however, that the
sale of stock in a public offering for an aggregate price of at least Twenty
Million Dollars ($20,000,000.00) shall not be deemed to be an assignment
within the meaning of this ARTICLE 10.
SECTION 10.6 CONTINUING LESSEE LIABILITY. Any subletting or assignment
hereunder shall not release or discharge Lessee of or from any liability,
whether past, present or future, under this Lease, and Lessee shall continue
fully liable thereunder. The subtenant or subtenants or assignee shall agree
in a form satisfactory to Lessor to comply with and be bound by all of the
terms, covenants, conditions, provisions and agreements of this Lease to the
extent of the space sublet or assigned, and Lessee shall deliver to Lessor
promptly after execution an executed copy of each such sublease or assignment
and an agreement of compliance by each such subtenant or assignee. Consent by
Lessor to any assignment of this Lease or to any subletting of the Premises
shall not be a waiver of Lessor's rights under this Article 10 as to any
subsequent assignment or subletting.
SECTION 10.7 VOID TRANSFERS. Any sale, assignment, mortgage, transfer,
or subletting of this Lease which is not in compliance with the provisions of
this Article 10 shall be of no effect and void. Lessor's right to assign its
interest in this Lease shall remain unqualified. Lessor may make a reasonable
charge to Lessee for any reasonable attorneys' fees or expenses incident to a
review of any documentation related to any proposed assignment or subletting
by Lessee. Notwithstanding anything contained herein to the contrary, Lessee
shall be entitled, without otherwise complying with the provisions of this
Article 10, to assign this Lease or sublet the Premises to any parent,
affiliate or subsidiary of Lessee, without first obtaining Lessor's consent;
provided, Lessee shall remain fully liable for the obligations of this Lease,
and the assignee or sublessee shall assume all obligations of Lessee
hereunder.
SECTION 10.8 PROHIBITED TRANSFEREES. Notwithstanding anything to the
contrary in this Lease, Lessee shall not assign its rights under this Lease
or sublet all or any part of the Premises to a person, firm or corporation
which is (or, immediately prior to such subletting or assignment, was) a
tenant or occupant of the Office Complex or the building located at 7701
Stemmons Freeway, Dallas, Texas, or any office building on property
contiguous to the Office Complex owned by Lessor under the Lease.
-15-
<PAGE>
SECTION 10.9 CRITERIA FOR WITHHOLDING CONSENT. The consent of Lessor to
a transfer may not be unreasonably withheld, conditioned or delayed, provided
that should Lessor withhold its consent for any of the following reasons,
which list is not exclusive, such withholding shall be deemed to be
reasonable:
(a) Financial strength of the proposed transferee is not at least equal to
that of Lessee at the time of execution of this Lease or of lessees
occupying comparable premises in the Office Complex or in other
buildings owned or operated by Lessor located in the same metropolitan
area as the Office Complex;
(b) A proposed transferee whose occupation of the Premises would cause a
diminution in the reputation of the Office Complex or the other
businesses located therein;
(c) A proposed transferee whose occupancy will require any material
variation in the terms and conditions of this Lease.
Lessee agrees that its personal business skills and philosophy,were an
important inducement to Lessor for entering into this Lease and that Lessor may
reasonably object to the transfer of the Premises to another whose proposed use,
while permitted by this Lease, would involve a different, quality, manner or
type of business skills than that of Lessee.
ARTICLE 11
DAMAGE BY FIRE OR OTHER CASUALTY
SECTION 11.1 TENANTABLE WITHIN 240 DAYS. If fire or other casualty shall
render the whole or any material portion of the Premises untenantable, and the
Premises can reasonably be expected to be made tenantable within two hundred
forty (240) days from the date of such event, then Lessor shall repair and
restore the Premises and the Office Complex to as near their condition prior to
the fire or other casualty as is reasonably possible within such two hundred
forty (240) day period (subject to delays for causes beyond Lessor's reasonable
control) and notify Lessee that it will be doing so, such notice to be mailed
within thirty (30) days from the date of such damage or destruction, and this
Lease shall remain in full force and effect, but the Rent for the period during
which the Premises are untenantable shall be abated pro rata (based upon the
portion of the Premises which is untenantable). If Lessor is required to repair
the Office Complex and/or the Premises as aforesaid, said work shall be
undertaken and prosecuted with all due diligence and speed, and shall be
completed within two hundred forty (240) days following the date of such fire or
other casualty (subject to force majeure) failing which, Lessee shall be
entitled to terminate this Lease in the event that such repairs are not
completed within sixty (60) days after written notice from Lessee that Lessee
desires to terminate this Lease because such repairs have not been completed
within such two hundred forty (240) day period.
SECTION 11.2 NOT TENANTABLE WITHIN 240 DAYS. If fire or other casualty
shall render the whole or any material part of the Premises untenantable and
the Premises cannot reasonably be expected to be made tenantable within two
hundred forty (240) days from the date of such event, then either party, by
notice in writing to the other mailed within thirty (30) days from the date
of such damage or destruction, may terminate this Lease effective upon a date
within thirty (30) days from the date of such notice.
SECTION 11.3 OFFICE COMPLEX SUBSTANTIALLY DAMAGED. In the event that
more than fifty percent (50%) of the value of the Office Complex is damaged
or destroyed by fire or other casualty, and irrespective of whether damage or
destruction can be made tenantable within two hundred forty (240) days
thereafter, then at Lessor's or Lessee's option, by written notice to the
other, mailed within forty-five (45) days from the date of such damage or
destruction, either party may terminate this Lease effective upon the date
ninety (90) days after such notice.
SECTION 11.4 DEDUCTIBLE PAYMENTS. If the Premises or the Office Complex
is damaged, and such damage is of the type insured against under the fire and
special form property damage insurance maintained by Lessor hereunder, the
cost of repairing said damage up to the amount of the deductible under said
insurance policy shall be included as a part of the Operating Expenses.
SECTION 11.5 LESSOR'S REPAIR OBLIGATIONS. If fire or other casualty
shall render the whole or any material part of the Premises untenantable and
the Premises cannot reasonably be expected to be made tenantable within two
hundred forty (240) days from the date of such event and neither party hereto
terminates this Lease pursuant to its rights herein or in the event that more
than fifty percent
-16-
<PAGE>
(50%) of the value of the Office Complex is damaged or destroyed by fire or
other casualty, and neither party terminates this Lease pursuant to its
option granted herein, or in the event that fifty percent (50%) or less of
the value of the Office Complex is damaged or destroyed by fire or other
casualty and neither the whole nor any material portion of the Premises is
rendered untenantable, then Lessor shall repair and restore the Premises and
the Office Complex to as near their condition prior to the fire or other
casualty as is reasonably possible with all due diligence and speed (subject
to delays for causes beyond Lessor's reasonable control) and shall be
completed within two hundred forty (240) days following the date of such fire
or other casualty (subject to force majeure) failing which, Lessee shall be
entitled to terminate this Lease in the event that such repairs are not
completed within sixty (60) days after written notice from Lessee that Lessee
desires to terminate this Lease because such repairs have not been completed
within such 240 day period. Rent for the period during which the Premises are
untenantable shall be abated pro rata (based upon the portion of the Premises
which is untenantable). In no event shall Lessor be obligated to repair or
restore any special equipment or improvements installed by Lessee at Lessee's
expense.
SECTION 11.6 RENT APPORTIONMENT. In the event of a termination of this
Lease pursuant to this Article 11, Rent shall be apportioned on a per diem
basis and paid to the date of the fire or other casualty.
ARTICLE 12
EMINENT DOMAIN
SECTION 12.1 LESSEE'S TERMINATION. If the whole of or any substantial
part of the Premises is taken by any public authority under the power of
eminent domain, or taken in any manner for any public or quasi-public use, so
as to render (in Lessee's reasonable judgment) the remaining portion of the
Premises unsuitable for the purposes intended hereunder, then the term of
this Lease shall cease as of the day possession shall be taken by such public
authority and Lessor shall make a pro rata refund of any prepaid rent. All
damages awarded for such taking under the power of eminent domain or any like
proceedings shall belong to and be the property of Lessor, Lessee hereby
assigning to Lessor its interest, if any, in said award; provided, however,
Lessor shall have no interest in any award made to Lessee for loss of
business or goodwill. In the event that fifty percent (50%) or more of the
building area or fifty percent (50%) or more of the value of the Office
Complex is taken by public authority under the power of eminent domain, then
either party may terminate this Lease by delivering, within sixty (60) days
after possession is taken, written notice thereof to the other party, which
termination shall be effective as of the date ninety (90) days after such
termination notice is given.
SECTION 12.2 LESSEE'S PARTICIPATION. Provisions in this Article 12 to
the contrary notwithstanding, Lessee shall have the right to prove in any
condemnation proceedings and to receive any separate award which may be made
for damages to or condemnation of Lessee's movable trade fixtures and
equipment and for moving expenses; provided, however, Lessee shall in no
event have any right to receive any award for its interest in this Lease or
for loss of leasehold. Provisions in this Article 12 to the contrary
notwithstanding, in the event of a partial condemnation of the Office Complex
or the Premises and this Lease is not terminated, Lessor shall, at its sole
cost and expense, restore the Premises and Office Complex to a complete
architectural unit and the Base Rent provided for herein during the period
from and after the date of delivery of possession pursuant to such
proceedings to the termination of this Lease shall be reduced to a sum equal
to the product of the Base Rent provided for herein multiplied by a fraction,
the numerator of which is the fair market rent of the Premises after such
taking and after same has been restored to a complete architectural unit, and
the denominator of which is the fair market rent of the Premises prior to
such taking.
ARTICLE 13
SURRENDER OF PREMISES
SECTION 13.1 SURRENDER OF POSSESSION. On the last day of the term of this
Lease, or on the sooner termination thereof, Lessee shall peaceably surrender
the Premises in good condition and repair consistent with Lessee's duty to make
repairs as herein provided. On or before the last day of the term of this Lease,
or the date of sooner termination thereof, Lessee shall, at its sole cost and
expense, remove all of its property and trade fixtures and equipment from the
Premises, and all property not removed shall be deemed abandoned. Lessee hereby
appoints Lessor its agent to remove all abandoned property of Lessee from the
Premises upon termination of this Lease and to cause its transportation and
storage for Lessee's benefit, all at the sole cost and risk of Lessee and Lessor
shall not be liable for damage, theft, misappropriation or loss thereof and
Lessor shall not be
-17-
<PAGE>
liable in any manner in respect thereto. Lessee shall pay all reasonable
costs and expenses of such removal, transportation and storage. Lessee shall
leave the Premises in good order, condition and repair, reasonable wear and
tear and damage from fire and other casualty or which is the responsibility
of Lessor excepted. Lessee shall reimburse Lessor within thirty (30) days
following its receipt of written demand for any expenses incurred by Lessor
with respect to removal, transportation, or storage of abandoned property and
with respect to restoring said Premises to the condition required by this
Lease. All alterations, additions and fixtures, other than Lessee's
furniture, personal property, trade fixtures and equipment which have been
made or installed by either Lessor or Lessee Upon the Premises, shall remain
the property of Lessor and shall be surrendered with the Premises as a part
thereof. If the Premises are not surrendered at the end of the term or sooner
termination thereof, Lessee shall indemnify Lessor against loss or liability
resulting from delay by Lessee in so surrendering the Premises, including,
without limitation, claims made by any succeeding tenants founded on such
delay and any attorneys' fees resulting therefrom. Lessee shall promptly
surrender all keys for the Premises to Lessor at the place then fixed for the
payment of rent and shall inform Lessor of combinations on any vaults, locks
and safes left on the Premises.
SECTION 13.2 LESSEE RETAINING POSSESSION. In the event Lessee remains in
possession of the Premises after expiration of this Lease, and without the
execution of a new lease, but with Lessor's written consent, it shall be
deemed to be occupying the Premises as a tenant from month to month, subject
to all the provisions, conditions and obligations of this Lease insofar as
the same can be applicable to a month-to-month tenancy, except that the Base
Rent shall be escalated to Lessor's then current base rent for the Premises
according to Lessor's then current rental rate schedule for prospective
tenants, but not in excess of 150% of the Base Rent otherwise payable under
the Lease. In the event Lessee remains in possession of the Premises after
expiration of this Lease and without the execution of a new lease and without
Lessor's written consent, Lessee shall be deemed to be occupying the Premises
without claim of right and Lessee shall pay Lessor for all costs arising out
of loss or liability resulting from delay by Lessee in so surrendering the
Premises as above provided and shall pay a charge for each day of occupancy
an amount equal to one hundred fifty percent (150%) of the Base Rent and
Additional Rent (on a daily basis) payable under this Lease upon expiration.
ARTICLE 14
DEFAULT OF LESSEE
SECTION 14.1 EVENTS OF DEFAULT. The occurrence of any one or more of the
following events (in this Article sometimes called "Event of Default") shall
constitute a default and breach of this Lease by Lessee:
(a) If Lessee fails to pay any Base Rent or Additional Rent payable under
this Lease or fails to pay any obligation required to be paid by
Lessee when and as the same shall become due and payable, and such
default continues for a period of ten (10) days after written notice
thereof given by Lessor to Lessee.
(b) If Lessee fails to perform any of Lessee's nonmonetary obligations
under this Lease for a period of thirty (30) days after written notice
from Lessor; provided that if more time is required to complete such
performance, Lessee shall not be in default if Lessee commences such
performance within the thirty (30)-day period and thereafter
diligently pursues its completion. The notice required by this
subsection is intended to satisfy any and all notice requirements
imposed by law on Lessor and is not in addition to any such
requirement.
(c) If Lessee, by operation of law or otherwise, violates the provisions
of Article 10 hereof relating to assignment, sublease, mortgage or
other transfer of Lessee's interest in this Lease or in the Premises
or in the income arising therefrom.
(d) If Lessor discovers that any financial statement, warranty,
representation or other information given to Lessor by Lessee, any
assignee of Lessee, any subtenant of Lessee, any successor in interest
of Lessee or any guarantor of Lessee's obligation hereunder, and any
of them, in connection with this Lease, was materially false or
misleading when made or furnished.
(e) Lessee, by operation of law or otherwise, violates the provisions of
Section 4.4 relating to compliance with environmental laws.
-18-
<PAGE>
(f) If there is a default by the lessee under that certain Office Lease
dated of even date herewith, between Lessor and Lessee, covering Tower
II of the Office Complex.
(g) If (i) Lessee makes a general assignment or general arrangement for
the benefit of creditors; (ii) a petition for adjudication of
bankruptcy or for reorganization or rearrangement is filed by or
against Lessee and is not dismissed within sixty (60) days; (iii) if a
trustee or receiver is appointed to take possession of substantially
all of Lessee's assets located at the Premises or of Lessee's interest
in the Lease and possession is not restored to Lessee within sixty
(60) days; or (iv) if substantially all of Lessee's assets located at
the Premises or of Lessee's interest in this Lease is subjected to
attachment, execution or other judicial seizure which is not
discharged within sixty (60) days. If a court of competent
jurisdiction determines that any of the acts described in this
subsection does not constitute an Event of Default and a trustee is
appointed to take possession (or if Lessee remains a debtor in
possession) and such trustee or Lessee transfers Lessee's interest
hereunder, then Lessor shall receive, as Additional Rent, the
difference between the Rent (or any other consideration) paid in
connection with such assignment or sublease and the Rent payable by
Lessee hereunder. As used in this subsection, the term "Lessee" shall
also mean any guarantor of Lessee's obligations under this Lease. If
any such Event of Default shall occur, Lessor, at any time during the
continuance of any such Event of Default, may give written notice to
Lessee stating that this Lease shall expire and terminate on the date
specified in such notice, and upon the date specified in such notice
this Lease, and all rights of Lessee under this Lease, including all
rights of renewal whether exercised or not, shall expire and
terminate, or in the alternative or in addition to the foregoing
remedy, Lessor may assert and have the benefit of any other remedy
allowed herein, at law, or in equity.
SECTION 14.2 LESSOR'S REMEDIES. Upon the occurrence and during the
continuance of an Event of Default by Lessee, with or without notice or
demand and without limiting Lessor in the exercise of any right or remedy
which Lessor may have, Lessor shall be entitled to the rights and remedies
set forth below.
(a) TERMINATION OF POSSESSION. Terminate Lessee's right to possession of
the Premises by any lawful means, in which case the Lease shall
terminate and Lessee shall immediately surrender possession of the
Premises to Lessor. In such event, Lessor shall have the immediate
right to reenter and remove all persons and property, and such
property may be removed and stored in a public warehouse or elsewhere
at the cost of, and for the account of Lessee, all without service of
notice or resort to legal process and without being deemed guilty of
trespass, or becoming liable for any loss or damage which may be
occasioned thereby. Lessor shall have the right to change the locks on
any door of the Premises without notifying Lessee of the name, address
or telephone number of an individual or company from whom a new key
may be obtained, nor shall Lessor have any obligation to provide a new
key to Lessee until such time as all Events of Default have been cured
and Lessee has provided to Lessor additional security for or further
assurances of Lessee's future performance of all Lessee's obligations
arising under this Lease, such security and assurances to be
satisfactory to Lessor in the exercise of Lessor's sole and absolute
discretion. In the event that Lessor shall elect to so terminate this
Lease, then Lessor shall be entitled to recover from Lessee all
damages incurred by Lessor by reason of Lessee's default, including:
(i) The equivalent of the amount of the Base Rent and Additional Rent
which would be payable under this Lease by Lessee if this Lease
were still in effect, less
(ii) The net proceeds of any reletting affected pursuant to the
provisions of Section 14.2 hereof after deducting all of Lessor's
reasonable expenses in connection with such reletting, including,
without limitation, all repossession costs, brokerage
commissions, legal expenses, reasonable attorneys' fees,
alteration costs, and expenses of preparation of the Premises, or
any portion thereof, for such reletting.
Lessee shall pay such current damages in the amount determined in
accordance with the terms of this Section 14.2 as set forth in a
written statement thereof from Lessor to Lessee (hereinafter called
the "Deficiency"), to Landlord in monthly installments on the days on
which the Rent would have been payable under this Lease if this Lease
were still in effect,
-19-
<PAGE>
and Landlord shall be entitled to recover from Tenant each monthly
installment of the Deficiency as the same shall arise.
(b) DAMAGES. In lieu of recovering the monthly Deficiency as set forth in
Section 14.2, Lessor shall be entitled to recover from Lessee, and
Lessee shall pay to Lessor, within thirty (30) days after its receipt
of written demand, as and for final damages for Lessee's default, an
amount equal to the difference between the then present worth of the
aggregate of the Base Rent and Additional Rent and any other charges
to be paid by Lessee hereunder for the unexpired portion of the term
of this Lease (assuming this Lease had not been so terminated), and
the then present worth of the then aggregate fair and reasonable fair
market rent of the Premises for the same period. In the computation of
present worth, a discount at the rate of 6% per annum shall be
employed. If the Premises, or any portion thereof, shall be relet by
Lessor for the unexpired term of this Lease, or any part thereof,
before presentation of proof of such damages to any court, commission
or tribunal, the amount of Rent reserved upon such reletting shall,
prima facie, be the fair and reasonable fair market rent for the part
or the whole of the Premises so relet during the term of the
reletting. Nothing herein contained or contained in Section 14.2 shall
limit or prejudice the right of Lessor to prove for and obtain, as
damages by reason of such expiration or termination, an amount equal
to the maximum allowed by any statute or rule of law in effect at the
time when, and governing the proceedings in which, such damages are to
be proved, whether or not such amount be greater, equal to or less
than the amount of the difference referred to above.
(c) REENTRY AND REMOVAL. Upon the occurrence and during the continuance of
an Event of Default by Lessee, Lessor shall also have the right, with
or without terminating this Lease, to reenter the Premises to remove
all persons and property from the Premises. Such property may be
removed and stored in a public warehouse or elsewhere at the cost of
and for the account of Lessee. If Lessor shall elect to reenter the
Premises, Lessor shall not be liable for damages by reason of such
reentry.
(d) NO TERMINATION; RECOVERY OF RENT. If Lessor does not elect to
terminate this Lease as provided in this Section 14.2, then Lessor
may, from time to time, recover all Rent as it becomes due under this
Lease. At any time thereafter before the default is cured, Lessor may
elect to terminate this Lease and to recover damages to which Lessor
is entitled.
(e) RELETTING THE PREMISES. In the event that Lessor should elect to
terminate this Lease and to relet the Premises, it may execute any new
lease in its own name. Lessee hereunder shall have no right or
authority whatsoever to collect any Rent from such Lessee. The
proceeds of any such reletting shall be applied as follows:
(i) First, to the payment of any indebtedness other than Rent due
hereunder from Lessee to Lessor, including but not limited to
storage charges or brokerage commissions owing from Lessee to
Lessor as the result of such reletting;
(ii) Second, to the payment of the costs and expenses of reletting
the Premises, including alterations and repairs which Lessor
deems reasonably necessary and advisable and reasonable
attorneys' fees incurred by Lessor in connection with the
retaking of the said Premises and such reletting;
(iii) Third, to the payment of Rent and other charges due and unpaid
hereunder; and
(iv) Fourth, to the payment of future Rent and other damages
payable by Lessee under this Lease.
The parties hereto shall, and they hereby do, waive trial by jury in any
action, proceeding, or counterclaim brought by either of the parties hereto
against the other on any matters whatsoever arising out of, or in any way
connected with, this Lease, the relationship of Lessor and Lessee, Lessee's
use or occupancy of the Premises and/or Office Complex, and/or claim or
injury or damage.
SECTION 14.3 WRITTEN NOTICE OF TERMINATION REQUIRED. Lessor shall not be
deemed to have terminated this Lease and the Lessee's right to possession of the
leasehold or the liability of Lessee to pay Rent thereafter to accrue or its
liability for damages under any of the provisions hereof, unless
-20-
<PAGE>
Lessor shall have notified Lessee in writing that it has so elected to
terminate this Lease. Lessee covenants that the service by Lessor of any
notice pursuant to the applicable unlawful detainer statutes of the state in
which the Office Complex is located and the Lessee's surrender of possession
pursuant to such notice shall not (unless Lessor elects to the contrary at
the time of, or at any time subsequent to the service of, such notice, and
such election be evidenced by a written notice to Lessee) be deemed to be a
termination of this Lease or of Lessee's right to possession thereof.
SECTION 14.4 REMEDIES CUMULATIVE; NO WAIVER. All rights, options and
remedies of Lessor contained in this Lease shall be construed and held to be
cumulative, and no one of them shall be exclusive of the other, and Lessor
shall have the right to pursue any one or all of such remedies or any other
remedy or relief which may be provided by law whether or not stated in this
Lease, except as otherwise expressly set forth herein. No waiver by Lessor
of a breach of any of the terms, covenants or conditions of this Lease by
Lessee shall be construed or held to be a waiver of any succeeding or
preceding breach of the same or any other term, covenant or condition therein
contained. No waiver of any default of Lessee hereunder shall be implied from
any omission by Lessor to take any action on account of such default if such
default persists or is repeated, and no express waiver shall affect default
other than as specified in said waiver. The consent or approval by Lessor to
or of any act by Lessee requiring Lessor's consent or approval shall not be
deemed to waive or render unnecessary Lessor's consent to or approval of any
subsequent similar acts by Lessee.
Section 14.5 LEGAL COSTS. The prevailing party in any dispute hereunder
shall be entitled to recover, upon demand, for any reasonable costs or
expenses incurred in connection with any breach or default under this Lease,
whether or not suit is commenced or judgment entered. Such costs shall
include reasonable legal fees and costs incurred for the negotiation of a
settlement, enforcement of rights or otherwise. Furthermore, if any action
for breach of or to enforce the provisions of this Lease is commenced, the
court in such action shall award to the party in whose favor a judgment is
entered a reasonable sum as attorneys' fees and costs. Such attorneys' fees
and costs shall be paid by the losing party in such action. Lessee shall also
indemnify Lessor against and hold Lessor harmless from all costs, expenses,
demands and liability incurred by Lessor if Lessor becomes or is made a party
to any claim or action (a) instituted by Lessee, or by any third party
against Lessee; (b) for foreclosure of any lien for labor or material
furnished to or for Lessee or such other person; (c) otherwise arising out of
or resulting from any act or transaction of Lessee or such other person; or
(d) necessary to protect Lessor's interest under this Lease in a bankruptcy
proceeding, or other proceeding under Title 11 of the United States Code, as
amended. Lessee shall defend Lessor against any such claim or action at
Lessee's expense with counsel reasonably acceptable to Lessor or, at Lessor's
election, Lessee shall reimburse Lessor for any legal fees or costs incurred
by Lessor in any such claim or action.
In addition, Lessee shall pay Lessor's reasonable attorneys' fees incurred
in connection with Lessee's request for Lessor's consent in connection with any
act which Lessee proposed to do and which requires Lessor's consent.
SECTION 14.6 WAIVER OF DAMAGES FOR REENTRY. Lessee hereby waives all
claims by Lessor's reentering and taking possession of the Premises or
removing and storing the property of Lessee as permitted under this Lease and
will save Lessor harmless from all losses, costs or damages occasioned Lessor
thereby. No such reentry shall be considered or construed to be a forcible
entry by Lessor.
ARTICLE 15
SUBORDINATION/ESTOPPEL
SECTION 15.1 LEASE SUBORDINATE. This Lease shall be subject and
subordinate to any mortgage, deed of trust or ground lease now or hereafter
placed upon the Premises, the Office Complex, the Property, or any portion
thereof by Lessor, its successors or assigns, and to amendments, replacements,
renewals and extensions thereof. Lessee agrees at any time hereafter, within ten
(10) days following Lessee's receipt of written demand, to execute and deliver
any instruments, releases, or other documents that may be reasonably required
for the purpose of subjecting and subordinating this Lease, as above provided,
to the lien of any such mortgage, deed of trust or ground lease. It is agreed,
nevertheless, that as long as Lessee is not in default beyond any applicable
curative periods in the payment of Base Rent, Additional Rent, and the payment
of other charges to be paid by Lessee under this Lease, and the performance of
all covenants, agreements and conditions to be performed by Lessee under this
Lease, then neither Lessee's right to quiet enjoyment under this Lease, nor the
right of Lessee to continue to occupy the Premises and
-21-
<PAGE>
to conduct its business thereon, in accordance with the terms of this Lease
as against any lessor, lessee, mortgagee, trustee, or their successors or
assigns shall be interfered with.
SECTION 15.2 ATTORNMENT. The above subordination shall be effective
without the necessity of the execution and delivery of any further
instruments on the part of Lessee to effectuate such subordination.
Notwithstanding anything hereinabove contained in this Article 15, in the
event the holder of any mortgage, deed of trust or ground lease shall at any
time elect to have this Lease constitute a prior and superior lien to its
mortgage, deed of trust or ground lease, then, and in such event, upon any
such holder or landlord notifying Lessee to that effect in writing, this
Lease shall be deemed prior and superior in lien to such mortgage, deed of
trust, ground lease, whether this Lease is dated prior or subsequent to the
date of such mortgage, deed of trust or ground lease and Lessee shall execute
such attornment agreement as may be reasonably requested by said holder or
landlord.
SECTION 15.3 LESSEE'S NOTICE OF DEFAULT. Lessee agrees, provided the
mortgagee, ground lessor or trust deed holder under any mortgage, ground
lease, deed of trust or other security instrument shall have notified Lessee
in writing (by the way of a notice of assignment of lease or otherwise) of
its address, Lessee shall give such mortgagee, ground lessor or trust deed
holder or other secured party ("Mortgagee"), simultaneously with delivery of
notice to Lessor, by registered or certified mail, a copy of any such notice
of default served upon Lessor. Lessee further agrees that said Mortgagee
shall have the right to cure any alleged default during the same period that
Lessor has to cure such default.
SECTION 15.4 ESTOPPEL CERTIFICATES. Lessee agrees from time to time upon
not less than twenty (20) days prior written request by Lessor to deliver to
Lessor a statement in writing certifying (a) that this Lease is unmodified
and in full force and effect (or if there have been modifications that the
Lease as modified is in full force and effect and stating the modifications);
(b) the dates to which the rent and other charges have been paid; (c) Lessor
is not in default in any provision of this Lease or, if in default, the
nature thereof specified in detail; (d) the amount of monthly rental
currently payable by Lessee; (e) the amount of any prepaid rent, and (f) such
other matters as may be reasonably requested by Lessor or any mortgagee or
prospective purchaser of the Office Complex.
If Lessee does not deliver such statement to Lessor within such twenty
(20) day period, Lessor and any prospective purchaser or encumbrancer of the
Premises or the Office Complex may conclusively presume and rely upon the
following facts: (i) that the terms and provisions of this Lease have not
been changed except as otherwise represented by Lessor; (ii) that this Lease
has not been canceled or terminated and is in full force and effect, except
as otherwise represented by Lessor; (iii) that the current amounts of the
Base Rent and Security Deposit are as represented by Lessor and that any
changes made against the Security Deposit are uncontested and valid; (iv)
that there have been no subleases or assignments of the Lease; (v) that not
more than one month's Base Rent or other charges have been paid in advance;
and (vi) that Lessor is not in default under the Lease. In such event, Lessee
shall be estopped from denying the truth of such facts.
SECTION 15.5 NON-DISTURBANCE AGREEMENT. Notwithstanding anything
contained herein to the contrary: prior to the Commencement Date hereof,
Lessor shall deliver to Lessee an agreement executed by the holder of any
mortgage lien against the Office Complex confirming its agreement not to
disturb Lessee's possession of the Premises or to terminate this Lease so
long as Lessee is not in default of this Lease, except as specifically set
forth in this Lease (a "Non-Disturbance Agreement").
ARTICLE 16
MISCELLANEOUS
SECTION 16.1 TIME IS OF THE ESSENCE. Time is of the essence with respect
to the performance of every provision of this Lease in which time of
performance is a factor.
SECTION 16.2 MEMORANDUM OF LEASE. No Memorandum of this Lease may be
recorded by Lessee without the prior written consent of Lessor.
SECTION 16.3 JOINT AND SEVERAL LIABILITY. All parties signing this Lease
as Lessee shall be jointly and severally liable for all obligations of Lessee.
SECTION 16.4 BROKER. Lessee represents that Lessee has dealt directly
with and only with Bradford Realty Services of Dallas, Inc. and Jackson &
Cooksey, as broker, in connection with this Lease and that insofar as Lessee
knows, no other broker negotiated or participated in negotiations
-22-
<PAGE>
of this Lease or submitted or showed the Premises or is entitled to any
commission in connection therewith. Each party shall indemnify and hold the
other party harmless from any claim by a broker or finder claiming a right to
a fee or commission under or through it.
SECTION 16.5 NOTICES. All notices, demands and requests shall be in
writing, and shall be effectively served by forwarding such notice, demand or
request by certified or registered mail, postage prepaid, or by commercial
overnight courier service addressed as follows:
(a) IF ADDRESSED TO LESSEE:
EXE Technologies, Inc.
300 Baldwin Tower Boulevard
Eddystone, Pennsylvania 19022
Attn: Joanie Hadick
with a copy to:
EXE Technologies, Inc.
8787 Stemmons Freeway, Suite _______
Dallas, Texas _______
Attn: Raymond Hood
(b) IF ADDRESSED TO LESSOR:
BLI-8787, Ltd.
8235 Douglas Avenue, Suite 200
Dallas, Texas 75225
Attn: David A. Lane
with a copy to:
Andrews & Barth, P.C.
8235 Douglas Avenue, Suite 1120
Dallas, Texas 75225
Attn: Jeffrey W. Harrison
or at such other address as Lessor and Lessee may hereafter designate by
written notice. The effective date of all notices shall be the time of
mailing such notice or the date of delivery to a commercial overnight courier
service.
SECTION 16.6 LESSOR'S AGENT. All rights and remedies of Lessor under
this Lease or that may be provided by law may be executed by Lessor in its
own name individually, or in the name of its agent, and all legal proceedings
for the enforcement of any such rights or remedies, including those set forth
in Article 14, may be commenced and prosecuted to final judgment and
execution by Lessor in its own name or in the name of its agent.
SECTION 16.7 QUIET POSSESSION. Lessor covenants and agrees that Lessee,
upon paying the Base Rent, Additional Rent and other charges herein provided
for and observing and keeping the covenants, agreements and conditions of
this Lease on its part to be kept and performed, shall lawfully and quietly
hold, occupy and enjoy the Premises during the term of this Lease. If Lessor
fails to perform any of its obligations hereunder within thirty (30) days
after written notice thereof from Lessee or such longer period of time if
such default is not capable of cure within thirty (30) days but Lessor is
pursuing a cure, Lessee shall be entitled, as its sole remedy, in the event
that such default is not cured within the applicable cure period, to take
such action as may be required to have been taken by Lessor under the Lease,
in which event Lessor agrees to pay to Lessee within thirty (30) days after
receipt of written notice from Lessee (with accompanying paid invoices) all
reasonable cost and expenses incurred by Lessee in connection therewith,
failing which Lessee shall be entitled to offset such sums against the Rent
next becoming due under the Lease; provided, such offset shall not exceed
more than twenty percent (20%) of monthly Base Rent payable each month until
such offset has been fully recouped. In the event the expenditure cannot be
fully recouped from the next monthly payment of Base Rent as a result of such
limitation, Lessee shall be entitled to recover interest with respect to each
subsequent monthly offset from the date of the expenditure to the date of
offset at a
-23-
<PAGE>
per annum rate equal to the bank prime rate publicized in the Wall Street
Journal, as the same may change from time to time.
SECTION 16.8 SUCCESSORS AND ASSIGNS. The covenants and agreements herein
contained shall bind and inure to the benefit of the Lessor, its successors
and assigns, and Lessee and its permitted successors and assigns.
SECTION 16.9 SEVERABILITY. If any term or provision of this Lease shall
to any extent be held invalid or unenforceable, the remaining terms and
provisions of this Lease shall not be affected thereby, but each term and
provision of this Lease shall be valid and enforced to the fullest extent
permitted by law. This Lease shall be construed and enforced in accordance
with the laws of the state in which the Premises are located.
SECTION 16.10 NO ABANDONMENT OR WASTE. Lessee covenants not to do or
suffer any waste or damage or disfigurement or injury to the Premises or
Office Complex and Lessee further covenants that it will not vacate or
abandon the Premises during the term of this Lease.
SECTION 16.11 TRANSFERS BY LESSOR. The term "Lessor" as used in this
Lease so far as covenants or obligations on the part of Lessor are concerned
shall be limited to mean and include only the owner or owners of the Office
Complex at the time in question, and in the event of any transfer or
transfers or conveyances the then grantor, provided that the grantee
expressly assumes the obligations of Lessor hereunder, shall be automatically
freed and released from all personal liability accruing from and after the
date of such transfer or conveyance as respects the performance of any
covenant or obligation on the part of Lessor contained in this Lease to be
performed, it being intended hereby that the covenants and obligations
contained in this Lease on the part of Lessor shall be binding on the Lessor,
its successors and assigns, only during and in respect to their respective
successive periods of ownership.
In the event of a sale or conveyance by Lessor of the Office Complex or
any part of the Office Complex, the same shall operate to release Lessor from
any future liability upon any of the covenants or conditions herein
contained, provided that the grantee expressly assumes the obligations of
Lessor hereunder, and in such event Lessee agrees to look solely to the
responsibility of the successor in interest of Lessor in and to this Lease.
This Lease shall not be affected by any such sale or conveyance, and Lessee
agrees to attorn to the purchaser or grantee, which shall be personally
obligated on this Lease only so long as it is the owner of Lessor's interest
in and to this Lease.
SECTION 16.12 HEADINGS. The marginal or topical headings of the several
articles and sections are for convenience only and do not define, limit or
construe the contents of said articles and sections.
SECTION 16.13 WRITTEN AGREEMENT. All preliminary negotiations are
merged into and incorporated in this Lease, except for written collateral
agreements executed contemporaneously herewith.
SECTION 16.14 MODIFICATIONS OR AMENDMENTS. This Lease can only be
modified or amended by an agreement in writing signed by the parties hereto.
No receipt of money by Lessor from Lessee or any other person after
termination of this Lease or after the service of any notice or after the
commencement of any suit, or after final judgment for possession of the
Premises shall reinstate, continue or extend the term of this Lease or affect
any such notice, demand or suit, or imply consent for any action for which
Lessor's consent is required, unless specifically agreed to in writing by
Lessor. Any amounts received by Lessor after a default may be allocated to
any specific amounts due from Lessee to Lessor as Lessor determines.
SECTION 16.15 LESSOR CONTROL. Lessor shall have the right to close any
portion of the building area or land area to the extent as may, in Lessor's
reasonable opinion, be necessary to prevent a dedication thereof or the
accrual of any rights to any person or the public therein; provided, however,
notwithstanding anything contained herein to the contrary, if any activity by
Lessor under this Section 16.15 prevents Lessee's access to the Premises or
if same otherwise substantially interferes with Lessee's use of the Premises
for a period of at least thirty (30) days, Lessee shall be entitled to
receive an equitable and proportionate abatement of Base Rent until same has
been corrected. Lessor shall at all times have full control management and
direction of the Office Complex, subject to the rights of Lessee in the
Premises, and Lessor reserves the right at any time and from time to time to
reduce, increase, enclose or otherwise change the size, number and location
of buildings, layout and nature of the Office Complex, to construct
additional buildings and additions to any building,
-24-
<PAGE>
and to create additional rentable areas through use and/or enclosure of
common areas, or otherwise, and to place signs on the Office Complex, and to
change the name, address, number or designation by which the Office Complex
is commonly known. In the event Lessor changes the name or address of the
Office Complex, Lessor shall reimburse to Lessee the reasonable cost incurred
by Lessee for replacing its stationery, letterhead, employees' business cards
and other related items. No implied easements are granted by this Lease.
SECTION 16.16 UTILITY EASEMENT. Lessee shall permit Lessor (or its
designees) to erect, use, maintain, replace and repair pipes, cables,
conduits, plumbing, vents, and telephone, electric and other wires or other
items, in, to and through the Premises, as and to the extent that Lessor may
now or hereafter deem necessary or appropriate for the proper operation and
maintenance of the Office Complex, provided that Lessor shall not
unreasonably interfere with Lessee's use and occupancy of the Premises.
SECTION 16.17 NOT BINDING UNTIL PROPERLY EXECUTED. Employees or agents
of Lessor have no authority to make or agree to make a lease or other
agreement or undertaking in connection herewith. The submission of this
document for examination does not constitute an offer to lease, or a
reservation of, or option for, the Premises. This document becomes effective
and binding only upon the execution and delivery hereof by the proper
officers of Lessor and by Lessee. Lessee confirms that Lessor and its agents
have made no representations or promises with respect to the Premises or the
making of or entry into this Lease except as in this Lease expressly set
forth, and agrees that no claim or liability shall be asserted by Lessee
against Lessor for, and Lessor shall got be liable by reason of, breach of
any representations or promises not expressly stated in this Lease. This
Lease, except for the Building Rules and Regulations, in respect to which
Section 16.18 of this Article shall prevail, can be modified or altered only
by agreement in writing between Lessor and Lessee, and no act or omission of
any employee or agent of Lessor shall alter, change or modify any of the
provisions hereof.
SECTION 16.18 BUILDING RULES AND REGULATIONS. Lessee shall perform,
observe and comply with the Building Rules and Regulations of the Office
Complex as set forth below, with respect to the safety, care and cleanliness
of the Premises and the Office Complex, and the preservation of good order
thereon, and, upon written notice thereof to Lessee, Lessee shall perform,
observe, and comply with any reasonable changes, amendments or additions
thereto as from time to time shall be established and deemed advisable by
Lessor for tenants of the Office Complex. Lessor shall not be liable to
Lessee for any failure of any other tenant or tenants of the Office Complex
to comply with such Building Rules and Regulations; provided, however, Lessor
agrees to apply the Building Rules and Regulations equally to all tenants of
the Office Complex.
SECTION 16.19 COMPLIANCE WITH LAWS AND RECORDED COVENANTS. Lessee shall
not use the Premises or permit anything to be done in or about the Premises
which will, in any way, conflict with any law, statute, ordinance or
governmental rule or regulation now in force or which may hereafter be
enacted or promulgated. Lessee shall, at its sole cost and expense, promptly
comply with all laws, statutes, ordinances and governmental rules and
regulations now in force or which may hereafter be in force, and with the
requirements of any fire insurance underwriters or other similar body now or
hereafter constituted relating to or affecting the condition, use or
occupancy of the Premises. Lessee shall use the Premises and comply with any
recorded covenants, conditions, and restrictions affecting the Premises and
the Office Complex as of the commencement of the Lease or which are recorded
during the lease term, provided same do not prevent Lessee from occupying the
Premises in accordance with the permitted use. Lessor shall deliver the
Premises to Lessee in compliance with, and shall, at its sole cost and
expense (but subject to Article 2 hereof), cause the Office Complex to comply
with any and all such laws, statutes, ordinances and governmental rules and
regulations, all such requirements of fire insurance underwriters, and all
such recorded covenants, conditions and restrictions relating to the
structural components, exterior components, common areas and rentable space
(other than the Premises) of the Office Complex; provided, however, that
Lessor shall be responsible for compliance of the exterior and common areas
of the Office Complex and the "core" areas of the Premises, consisting of
elevators, lobbies and restrooms, with the Americans with Disabilities Act,
and Lessee shall be responsible for compliance of the remainder of the
Premises with the Americans with Disabilities Act. In no event shall Lessee
be responsible for making any structural alterations to the Premises which
may be required pursuant to such legal requirements.
SECTION 16.20 LESSEE OBLIGATIONS SURVIVE TERMINATION. All obligations of
Lessee hereunder not fully performed as of the expiration or earlier
termination of the term of this Lease shall survive the expiration or earlier
termination of the term hereof, including, without limitation, all payment
obligations
-25-
<PAGE>
with respect to Operating Expenses and Real Estate Taxes and all obligations
concerning the condition of the Premises.
SECTION 16.21 LESSEE'S WAIVER. Lessee agrees to look solely to Lessor's
interest in the Office Complex for the recovery of any judgment from Lessor,
it being agreed that Lessor, or if Lessor is a partnership, its partners
whether general or limited, or if Lessor is a corporation, its directors,
officers or shareholders, shall never be personally liable for any such
judgment.
SECTION 16.22 LESSEE AUTHORIZATION. Lessee shall furnish to Lessor
promptly upon demand, a corporate resolution, proof of due authorization of
partners, or other appropriate documentation reasonably requested by Lessor
evidencing the due authorization of Lessee to enter into this Lease.
SECTION 16.23 NO PARTNERSHIP OR JOINT VENTURE. This Lease shall not be
deemed or construed to create or establish any relationship or partnership or
joint venture or similar relationship or arrangement between Lessor and
Lessee hereunder.
SECTION 16.24 LESSEE'S OBLIGATION TO PAY MISCELLANEOUS TAXES. Lessee
shall pay, prior to delinquency, all taxes assessed or levied upon its
occupancy of the Premises, or upon the trade fixtures, furnishings, equipment
and all other personal property of Lessee located in the Premises, and when
possible, Lessee shall cause such trade fixtures, furnishings, equipment and
other personal property to be assessed and billed separately from the
property of Lessor. In the event any or all of Lessee's trade fixtures,
furnishings, equipment or other personal property, or Lessee's occupancy of
the Premises, shall be assessed and taxed with the property of Lessor, Lessee
shall pay to Lessor its share of such taxes within thirty (30) days after
delivery to Lessee by Lessor of a statement in writing setting forth the
amount of such taxes applicable to Lessee's personal property.
SECTION 16.25 PROHIBITED SIGNS. Subject to SECTION 7.1 hereof, Lessee
shall not place, or permit to be placed or maintained, on any exterior door,
wall or window of the Premises any sign, awning or canopy, or advertising
matter or other thing of any kind, and will not place or maintain any
decoration, lettering or advertising matter on the glass of any window or
door, or that can be seen through the glass, of the Premises except as
specifically approved in writing by Lessor. Lessee further agrees to maintain
such sign, awning, canopy, decoration, lettering, advertising matter or thing
as may be approved, in good condition and repair at all times, reasonable
wear and tear and fire excepted. Lessee agrees at Lessee's sole cost, that
any Lessee sign will be maintained in strict conformance with Lessor's sign
criteria, if any, as to design, material, color, location, size, letter
style, and method of installation.
SECTION 16.26 RENEWAL OPTION. Lessor hereby grants Lessee (but no
assignee or subtenant) two (2) options to renew this Lease, each option to be
for a period of sixty(60) months, for a total of one hundred twenty (120)
months in the event both renewal options are exercised. Each said renewal
option shall be exercised by Lessee notifying Lessor thereof in writing not
more than two hundred seventy (270) and at least two hundred ten (210) days
prior to the expiration of the then current lease or renewal term, as the
case may be. In the event a renewal agreement has not been executed at least
one hundred twenty (120) days prior to the expiration date of the current
lease or renewal term, the option shall automatically become null and void.
Each such renewal shall be subject to all of the terms and conditions of this
Lease except that (i) the rentals payable during each renewal term shall be
as set forth below and (ii) no further renewal option shall exist during the
second renewal term. It shall be a condition to Lessee's exercising any
renewal option herein granted that (y) Lessee not be then in default under
this Lease and (z) Lessee shall have previously exercised the immediately
preceding renewal option, if any, so that the second renewal option may not
be exercised if Lessee has failed to exercise the first renewal option.
The Base Rent for each renewal term shall be based on not less than 95%
of the then prevailing rental rates for properties of equivalent quality,
size, utility and location in the Dallas/Forth Worth market, with the length
of the lease term and the creditworthiness of the Lessee taken into account;
provided, however, that in no event shall the Base Rent in any renewal period
be less than the Base Rent for the last month immediately preceding said
renewal period.
Upon notification from Lessee of its intent to exercise each renewal
option, Lessor shall, within fifteen (15) days thereafter, notify Lessee in
writing of the Base Rent for the applicable renewal term; Lessee shall,
within fifteen (15) days following receipt of same, notify Lessor in writing
of the acceptance or rejection of the proposed Base Rent. In the event of
rejection by Lessee, Lessee may rescind the exercise of such renewal option
by written notice to Lessor within such fifteen (15) day
-26-
<PAGE>
period for acceptance or rejection. If Lessee does not so rescind such
exercise, the Base Rent for the applicable renewal term shall be determined
as follows:
(a) Within fifteen (15) days following notification of rejection, Lessor
and Lessee shall each select an arbitrator who shall be a Licensed
Texas real estate broker having a minimum of five (5) years experience
in leasing office space and being a member of the North Chapter of the
Texas Society of Office and Industrial Realtors (or its successor
organization). Notice shall be given to the other party of the name of
the arbitrator selected. If either Lessor or Lessee fails to appoint
such an arbitrator within the allocated time, the arbitrator appointed
by the other party shall make the determination of the Base Rent and
this determination shall be final and binding on both parties.
(b) If both Lessor and Lessee appoint an arbitrator in accordance with the
provisions above and the two arbitrators cannot agree upon a Base Rent
for the renewal term within thirty (30) days following their
appointment, the two arbitrators shall forthwith select a third
disinterested and qualified arbitrator having like qualifications and
each of the original arbitrators will immediately submit his or her
judgment as to the appropriate Base Rent in writing to the third
arbitrator. Within ten (10) days after such submittal, the third
arbitrator shall make the determination of the Base Rent for such
renewal period and the determination of the third arbitrator shall be
final and binding on both parties. In the event the two arbitrators
appointed by the Lessee and Lessor cannot agree upon a third
arbitrator, then the third arbitrator shall be appointed by the then
President of the North Chapter of the Texas Society of Office and
Industrial Realtors (or its successor organization). The Base Rent
agreed to by the two appointed arbitrators or, if applicable, the Base
Rent determined by the third arbitrator shall be final and binding
upon the parties hereto. Lessor and Lessee shall each bear the expense
of their arbitrator and the expense of a third arbitrator, if needed,
shall be shared equally by both parties.
SECTION 16.27 LEASEHOLD IMPROVEMENTS. As of the date hereof, Lessee has
not provided to Lessor any plans for any improvements to be made to the
Premises. Lessee accepts the Premises in the current, "as is" condition.
Subject to the terms and conditions of this SECTION 16.27, the Lessor agrees
to provide to Lessee a refurbishment allowance (the "Allowance") of up to
$30.00 per square foot of the Premises (including $26.00 for tenant
improvements, $2.00 for relocation costs, $1.90 for full construction
drawings and $.10 for preliminary drawings) to be utilized toward the design,
construction, refurbishment and remodeling of the Premises (herein called the
"Lessee Finish"). The Allowance shall be provided upon the fulfillment of the
following conditions:
(a) Lessor must approve all Lessee's plans and specifications respecting
the Lessee Finish to be undertaken, which approval shall not be
unreasonably withheld, conditioned or delayed and shall be deemed
given unless Lessor has disapproved same within twenty (20) days after
Lessee delivers same to Lessor.
(b) Following approval of the plans and specifications, Lessee shall
obtain bids from at least three (3) competent contractors for the
construction. The Lessor may select one (1) of the contractors to
submit bids and shall be allowed to participate in the review of the
bids. Following the review of the bids, Lessee shall select the
contractor to perform the Lessee Finish based on Lessee's
determination as to the most qualified contractor offering the lowest
bid, subject to Lessor's approval, which shall not be unreasonably
withheld, conditioned or delayed. Lessee shall promptly inform Lessor
of the final construction costs for the Lessee Finish. Lessee shall be
responsible for the management of the construction and the contractor.
(c) The Allowance shall be delivered by Lessor to Lessee incrementally as
construction progresses on a percentage completion basis within ten
(10) days following receipt of a draw request, invoices and lien
waivers therefor (and if required by Lessor, a certificate from the
contractor that all work has been completed in accordance with the
plans and specifications). The portion of the Allowance attributable
to relocation expenses, if not expended for improvements, shall be
paid by Lessor to Lessee within the later of (i) thirty (30) days
after the Commencement Date; or (ii) thirty (30) days after written
notice to Lessor with accompanying invoices substantiating such
relocation expenses. If the total cost of the Lessee Finish (including
design, demolition and construction costs) exceeds the Allowance,
Lessee shall deposit with Lessor the balance of the funds required to
complete the Lessee Finish within ten (10) days following Lessor's
notice to Lessee of the
-27-
<PAGE>
amount due. Lessee shall not commence any Lessee Finish until
Lessee deposits all amounts due. In no event will Lessor be
required to expend funds in excess of the Allowance or in excess of
the amount allocated to a particular item, and Lessee shall be and
remain liable and responsible for the prompt payment of all costs,
fees and expenses in excess of the Allowance. Any amounts expended
by Lessor in excess of the Allowance shall be payable to Lessor by
Lessee upon demand.
(d) The costs and fees for the design and space planning relating to the
Lessee Finish shall be charged against the Allowance.
(e) Prior to beginning any such work, Lessee shall provide Lessor with
evidence of builder's "all risk" insurance covering both Lessee and
all of Lessee's contractors against third party liability or workers'
compensation claims arising out of all construction and associated
activities. All policies of insurance shall be subject to Lessor's
prior approval, which approval shall not be unreasonably withheld,
conditioned or delayed, and shall be endorsed showing Lessor and such
agent or agents as Lessor may designate as additional named insureds.
The provisions of this paragraph (as well as all rights and remedies
available to Landlord as provided in the Lease should Tenant fail to
meet its obligations hereunder) shall expressly survive the expiration
or earlier termination of the Lease.
(f) The Lessee Finish shall be completed in accordance with the plans and
specifications approved by Lessor, and Lessee shall provide to Lessor
lien waivers and releases, in recordable form, from all contractors,
subcontractors and materialmen involved in such construction.
SECTION 16.28 EXHIBITS. The following are made a part hereof, with the
same force and effect as if specifically set forth herein:
(a) Building Rules and Regulations - Exhibit "A."
(b) Signage - Exhibit "B."
SECTION 16.29 LANDLORD'S LIEN. Lessor hereby agrees to subordinate any
and all statutory, constitutional and other landlord liens against the assets
or property of Lessee to the lien of Lessee's primary lender financing
Lessee's business operations, and agrees to execute and deliver upon request
of Lessee's lender such reasonable subordination agreement as may be
requested to evidence and/or confirm such subordination.
IN WITNESS WHEREOF, the parties have executed this Lease as of the day and
year first above written.
LESSOR:
BLI-8787, LTD.,
a Texas limited partnership
By: Barnett Lane Investments, Inc.,
a Texas corporation, general partner
By: /s/ David A. Lane
----------------------------------------------
David A. Lane, President
-28-
<PAGE>
LESSEE:
EXE TECHNOLOGIES, INC.,
a Delaware corporation
By: /s/ Raymond R. Hood
-----------------------------------
Name: Raymond R. Hood
---------------------------------
Its: President & CEO
-----------------------------------
-29-
<PAGE>
EXHIBIT "A"
BUILDING RULES AND REGULATIONS
1. Any sign, lettering, picture, notice or advertisement installed on
or in any part of the Premises and visible from the exterior of the Premises,
shall be installed at Lessee's sole cost and expense, and in such manner,
character and style as Lessor may approve in writing, which consent shall not
be unreasonably withheld, conditioned or delayed. In the event of a violation
of the foregoing by Lessee, Lessor may remove the same without any liability
and may charge the expense incurred by such removal to Lessee.
2. No awning or other projection shall be attached to the outside walls
of the Office Complex. No curtains, blinds, shades or screens visible from
the exterior of the Office Complex or visible from the exterior of the
Premises, shall be attached to or hung in, or used in connection with any
window or door of the Premises without the prior written consent of Lessor.
Such curtains, blinds, shades, screens or other fixtures must be of a
quality, type, design and color, and attached in the manner approved by
Lessor.
3. Lessee, its servants, employees, customers, invitees and guests
shall not obstruct sidewalks, entrances, passages, corridors, vestibules,
halls, elevators, or stairways in and about the Office Complex which are used
in common with other tenants and their servants, employees, customers, guests
and invitees, and which are not a part of the Premises of Lessee. Lessee
shall not place objects against glass partitions or doors or windows which
would be unsightly from the Office Complex corridors or from the exterior of
the Office Complex, or that would interfere with the operation of any device,
equipment, radio, television broadcasting or reception from or within the
Office Complex or elsewhere and shall not place or install any projections,
antennas, aerials or similar devices outside of the Premises or on the Office
Complex.
4. Lessee shall not waste electricity, water or air conditioning and
shall, at no cost to Lessee, cooperate fully with Lessor to insure the most
effective operation of the Office Complex's heating and air conditioning
systems and shall refrain from attempting to adjust any controls other than
unlocked room thermostats, if any, installed for Lessee's use. Lessee shall
keep corridor doors closed.
5. Lessee assumes full responsibility for protecting its space from
theft, robbery and pilferage, which includes keeping doors locked and other
means of entry to the Premises closed and secured after normal business
hours, subject to Lessor's security obligations hereunder.
6. No person or contractor not employed by Lessor shall be used to
perform janitorial work, window washing cleaning, maintenance, repair or
similar work in the Premises without the written consent of Lessor, which
consent shall not be unreasonably withheld, conditioned or delayed.
7. In no event shall Lessee bring into the Office Complex inflammables,
such as gasoline, kerosene, naphtha and benzine, or explosives or any other
article of intrinsically dangerous nature. If, by reason of the failure of
Lessee to comply with the provisions of this paragraph, any insurance premium
for all or any part of the Office Complex shall at any time be increased,
Lessee shall make immediate payment of the whole of the increased insurance
premium, without waiver of any of Lessor's other rights at law or in equity
for Lessee's breach of this Lease.
8. Lessee shall comply with all applicable federal, state and municipal
laws, ordinances and regulations, and building rules and shall not directly
or indirectly make any use of the Premises which may be prohibited by any of
the foregoing or which may be dangerous to persons or property or may
increase the cost of insurance or require additional insurance coverage.
9. Lessor shall have the right to prohibit any advertising by Lessee
which in Lessor's reasonable opinion tends to impair the reputation of the
Office Complex or its desirability as an office complex for office use, and
upon written notice from Lessor, Lessee shall refrain from or discontinue
such advertising.
10. The Premises shall not be used for cooking (except for the use of
ordinary office coffee makers and microwave ovens in kitchen areas), lodging,
sleeping or for any immoral or illegal purpose.
11. Lessee and Lessee's servants, employees, agents, visitors and
licensees shall observe faithfully and comply strictly with the foregoing
rules and regulations and such other and further appropriate rules and
regulations as Lessor or Lessor's agent may from time to time adopt.
Reasonable notice of any additional rules and regulations shall be given in
such a manner as Lessor may reasonably elect.
<PAGE>
12. Unless expressly permitted by the Lessor, no additional locks or
similar devices shall be attached to any door or window and no keys other
than those provided by the Lessor shall be made for any door. If more than
two keys for one lock are desired by the Lessee, the Lessor may provide the
same upon payment by the Lessee. Upon termination of this Lease or of the
Lessee's possession, the Lessee shall surrender all keys of the Premises and
shall explain to the Lessor all combination locks on safes, cabinets and
vaults.
13. Any carpeting cemented down by Lessee shall be installed with a
releasable adhesive. In the event of a violation of the foregoing by Lessee,
Lessor may charge the expense incurred by such removal to Lessee.
14. The water and wash closets, drinking fountains and other plumbing
fixtures shall not be used for any purpose other than those for which they
were constructed, and no sweepings, rubbish, rags, coffee grounds or other
substances shall be thrown therein. All damages resulting from any misuse of
the fixtures shall be borne by the Lessee who, or those servants, employees,
agents, visitors or licensees, shall have caused the same. No person shall
waste water by interfering or tampering with the faucets or otherwise.
15. No electrical circuits for any purpose shall be brought into the
leased premises without Lessor's written permission, which permission shall
not be unreasonably withheld, conditioned or delayed, specifying the manner
in which same may be done.
16. No bicycle or other vehicle, and no dog or other animal shall be
allowed in offices, halls, corridors, or elsewhere in the building.
17. Lessee shall not throw anything out of the door or windows, or down
any passageways or elevator shafts.
18. All loading, unloading, receiving or delivery of goods, supplies or
disposal of garbage or refuse shall be made only through entryways and
freight elevators provided for such purposes and indicated by Lessor. Lessee
shall be responsible for any damage to the building or property of its
employees or others and injuries sustained by any person whomsoever resulting
from the use or moving of such articles in or out of the leased premises, and
shall make all repairs and improvements required by governmental authorities
in connection with the use or moving of such articles.
19. All safes, equipment or other heavy articles shall be carried in or
out of the Premises only at such time and in such manner as shall be
prescribed in writing by Lessor, and Lessor shall in all cases have the right
to specify the proper position of any such safe, equipment or other heavy
article, which shall only be used by Lessee in a manner which will not
interfere with or cause damage to the leased premises or the building in
which they are located, or to the other tenants or occupants of said
building. Lessee shall be responsible for any damage to the building or the
property of its employees or others and injuries sustained by any person
whomsoever resulting from the use or moving of such articles in or out of the
leased premises, and shall make all repairs and improvements required by
governmental authorities in connection with the use or moving of such
articles.
20. Canvassing, soliciting, and peddling in the building is prohibited
and each Lessee shall cooperate to prevent the same.
21. Vending machines shall not be installed without permission of the
Lessor, which permission shall not be unreasonably withheld, conditioned or
delayed.
22. Wherever in these Building Rules and Regulations the word "Lessee"
occurs, it is understood and agreed that it shall mean Lessee's associates,
agents, clerks, servants and visitors. Wherever the word "Lessor" occurs, it
is understood and agreed that it shall mean Lessor's assigns, agents, clerks,
servants and visitors.
23. Lessor shall have the right to enter upon the leased premises at
all reasonable hours for the purpose of inspecting the same following notice
thereof to Lessee as provided in the Lease (except that in the case of
emergencies no notice shall be required), provided that Lessor shall not
unreasonably interfere with Lessee's use and occupancy of the Leased Premises.
24. Lessor shall have the right to enter the leased premises at hours
convenient to the Lessee for the purpose of exhibiting the same to
prospective tenants within the 60-day period prior to the expiration of this
Lease following notice thereof to Lessee as provided in the Lease, and may
place signs advertising the leased premises for rent on the windows and doors
of said Premises at any time within said 60-day period, provided that Lessor
shall not unreasonably interfere with Lessee's use and occupancy of the
Leased Premises.
<PAGE>
25. Lessees, its servants, employees, customers, invitees and guests
shall, when using the common parking facilities, if any, in and around the
building, observe and obey all signs regarding fire lanes and no parking
zones, and when parking always park between the designated lines. Lessor
reserves the right to tow away, at the expense of the owner, any vehicle
which is improperly parked in a no parking zone. All vehicles shall be parked
at the sole risk of the owner, and Lessor assumes no responsibility for any
damage to or loss of vehicles.
26. At all times the Office Complex shall be in charge of Lessor's
employee in charge and (a) persons may enter the Office Complex only in
accordance with Lessor's regulations, (b) persons entering or departing from
the Office Complex may be questioned as to their business in the Office
Complex, and the right is reserved to require the use of an identification
card or other access device and the registering of such persons as to the
hour of entry and departure, nature of visit, and other information deemed
necessary for the protection of the Office Complex, and (c) all entries into
and departures from the Office Complex will take place through such one or
more entrances as Lessor shall from time to time designate. Lessor will
normally not enforce clauses (a), (b) and (c) above from 7:00 a.m. to 6:00
p.m., Monday through Friday, and from 8:00 a.m. to 1:00 p.m. on Saturdays,
but it reserves the right to do so or not to do so at any time at its sole
discretion. In case of invasion, mob, riot, public excitement, or other
commotion, Lessor reserves the right to prevent access to the Office Complex
during the continuance of the same by closing the doors or otherwise, for the
safety of the tenants or the protection of the Office Complex and the
property therein. Lessor shall in no case be liable for damages for any error
or other action taken with regard to the admission to or exclusion from the
Office Complex of any person.
27. All entrance doors to the Premises shall be locked when the
Premises are not in use. All corridor doors shall also be closed during times
when the air conditioning equipment in the Office Complex is operating so as
not to dissipate the effectiveness of the system or place an overload thereon.
28. Lessor reserves the right at any time and from time to time to
rescind, alter or waive, in whole or in part, any of these Rules and Regulations
when it is deemed necessary, desirable, or proper, in Lessor's judgment, for its
best interest or for the best interest of the tenants of the Office Complex,
provided that such change shall affect all leases of the Office Complex.
<PAGE>
EXHIBIT B
Exterior Building Signage:
Option One - Fiber-optic outline illuminated Cube
EXE Cube to be fabricated from 1/8" stainless steel with .090" returns.
Color/Finish to be determined. Height to be approximately 9', and width to be
approximately 9'. Cube to be outline-illuminated with 5/8" diameter sideglow
fiber-optic cable with remote/accessible metal halide HID light source. Sign to
be pin-mounted from building facade with 4" steel standoffs and approved
fasteners.
Option Two - Illuminated channel letter Cube
EXE Cube to be fabricated as channel letter from 1/8" stainless steel with .090"
returns. Height to be approximately 9', and width to be approximately 9'.
Illuminated 1/4" thick white lexan letterfaces to be internally lit with either
neon or fiber-optic source as described above. Sign to be pin mounted from
building facade with 4" steel standoffs and approved fasteners.
Option Three - Backlit stainless steel EXE Cube
EXE Cube to be fabricated as channel letters from 1/8" stainless steel with .090
returns. Height to be approximately 9', and width to be approximately 9'. Gold
finish to match window color. Cube to be silhouette-illuminated with 60Ma/15mm
white neon with remote/accessible ballast. Sign to be pin-mounted from building
facade with 4" steel standoffs and approved fasteners.
Building Entrance Signage:
EXE Technologies signage (at front and back Tower building entries) EXE Cube and
EXE Technologies letterforms to be fabricated as channel letters (Cube
approximately 3' by 3'. Letterforms approximately 10" high x 1-1/2" thick) from
1/8" stainless steel with .090" returns. Color/finish to be determined. Cube and
Letterforms to be silhouette-illuminated with 60Ma/15mm white neon with
remote/accessible ballasts. Sign to be pin-mounted from building facade with
steel standoffs an approved fasteners.
Attachment: Logo
[LOGO]
<PAGE>
EXHIBIT "C"
SPECIFICATIONS FOR LETTER OF CREDIT
<TABLE>
<S> <C>
AMOUNT: $580,505.96
(3 months @ $19.67/sf)
EXPIRATION: The earlier of one of the following:
- 5 Years after the commencement date
or
- Initial public offering of securities by Lessee
or
- Lessee's net worth, determined in accordance with GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES consistently applied,
increases by an amount equal to or greater than ten million
dollars from that shown on Lessee's audited financial
statements dated December 31, 1997 and for the year then
ended.
</TABLE>
<PAGE>
EXHIBIT 10.12
OFFICE LEASE
THIS LEASE, dated this 21st day of May, 1998, by and between BLI-8787,
LTD., a Texas limited partnership ("Lessor"), and EXE TECHNOLOGIES, INC., a
Delaware corporation ("Lessee").
WITNESSETH:
That Lessor, in consideration of the rents and covenants hereinafter set
forth, does hereby lease and let unto Lessee, and Lessee does hereby hire and
take from Lessor, that certain space designated as Floors 1-5 of Tower II of
the office tower ("Office Tower II") known and described as Regal Stemmons
Corporate Center, located at 8777 Stemmons Freeway, Dallas, Texas, which is
located next to the adjacent office tower ("Office Tower I") located at 8787
Stemmons Freeway, Dallas, Texas. The aforesaid space leased and let unto
Lessee is hereinafter referred to as the "Premises"; the land (including all
easement areas appurtenant thereto) upon which the building or buildings of
which the Premises are a part is hereinafter referred to as the "Property";
and the Property and all buildings and improvements (including Office Tower I
and Office Tower II) and personal property of Lessor used in connection with
the operation or maintenance thereof located therein and thereon and the
appurtenant parking facilities, if any, are hereinafter called the "Office
Complex." Lessor represents and warrants to Lessee, to Lessor's actual
knowledge, that the Premises contains approximately 96,813 square feet of
rentable area and the Office Complex contains approximately 195,770 square
feet of rentable area. On or prior to the date sixty (60) days after the date
hereof, Lessor and Lessee shall be entitled to remeasure the rentable area of
the Premises in accordance with BOMA standards and if the measurements
reflect any discrepancy from the amounts stated herein, Lessor and Lessee
shall execute an amendment to this Lease for the purpose of adjusting, either
upward or downward, the Base Rent, Lessee's Proportionate Share of Real
Estate Taxes, Lessee's Proportionate Share of Operating Expenses and other
sums payable by Lessee hereunder. In the event that neither party obtains a
remeasurement of the rentable area of the Premises within such sixty (60) day
period as described above, then such right shall be waived and Base Rent,
Lessee's Proportionate Share of Real Estate Taxes, Lessee's Proportionate
Share of Operating Expenses and other sums payable by Lessee hereunder shall
be based upon the measurements as provided hereinabove.
Lessee hereby accepts this Lease and the Premises upon the covenants and
conditions set forth herein and subject to any covenants, conditions,
restrictions and other matters (other than liens) of record and all
applicable zoning, municipal, county, state and federal laws, ordinances and
regulations governing and regulating the use of the Premises (collectively,
the "Applicable Requirements"). Lessor represents and warrants to Lessee that
use of the Premises for office purposes is permitted, or will be permitted on
or prior to the Commencement Date (hereinafter defined), under all Applicable
Requirements, subject to Lessee Finish (defined in Section 16.27 hereof) and
obtaining a certificate of occupancy.
TO HAVE AND TO HOLD THE SAME, without any liability or obligation on the
part of Lessor to make any alterations, improvements or repairs of any kind
on or about the Premises, except as expressly provided herein, for a term of
ten (10) years and six (6) months, commencing on the date one hundred twenty
(120) days after the date hereof unless sooner terminated in the manner
provided hereinafter, to be occupied and used by Lessee for office purposes
and for any other lawful purpose consistent with a first class office
complex, subject to the covenants and agreements hereinafter contained.
ARTICLE 1
BASE RENT
SECTION 1.1 BASE RENT. In consideration of the leasing aforesaid, Lessee
agrees to pay to Lessor, at 8235 Douglas Avenue, Suite 200, Dallas, Texas
75225, or at such other place as Lessor from time to time may designate in
writing, rent in an amount equal to $19.67 per square foot of rentable area
contained within the Premises per year for months 7 through 66 and $21.18 per
square foot of rentable area contained within the Premises per year for
months 67 through 126, sometimes hereinafter referred to as the "Base Rent,"
payable monthly, in advance, in equal installments of $158,692.64 per month
for months 7 through 66 and $170,874.95 per month for months 67 through 126,
commencing on the first day of the seventh month of the term and continuing
on the first day of each and every month thereafter for the next succeeding
months during the balance of the term. If the term commences on a date other
than the first day of a calendar month or ends on a date other
-1-
<PAGE>
than the last day of a calendar month, monthly rent for the first month of
the term or the last month of the term, as the case may be, shall be prorated
based upon the ratio that the number of days in the term within such month
bears to the total number of days in such month. Base Rent and Additional
Rent for the Premises for the first six (6) months of the Lease term shall be
abated. Upon execution of this Lease, Lessee shall deliver to Lessor a check
in the amount of $158,692.64 for Base Rent for the seventh (7th) month of the
Lease term.
ARTICLE 2
ADDITIONAL RENT
SECTION 2.1 ADDITIONAL RENT. In addition to the Base Rent payable by
Lessee under the provisions of Article 1 hereof, Lessee shall pay to Lessor
"Additional Rent" as hereinafter provided for in this Article 2. All sums
under this Article and all other sums and charges required to be paid by
Lessee under the Lease (except Base Rent), however denoted, shall be deemed
to be "Additional Rent." If any such amounts or charges are not paid at the
time provided in the Lease, they shall nevertheless be collectible as
Additional Rent with the next installment of Base Rent falling due.
SECTION 2.2 DEFINITIONS. For the purposes of this Article 2, the parties
hereto agree upon the following definitions:
(a) "Lease Year" shall mean each of those calendar years commencing
with and including the year during which the term of this Lease
commences, and ending with the calendar year during which the term
of this Lease (including any extensions or renewals) terminates.
(b) "Real Estate Taxes" shall mean and include all personal property
taxes of Lessor relating to Lessor's personal property located in
Office Tower II and used or useful in connection with the operation
and maintenance thereof, real estate taxes and installments of
special assessments, including interest thereon, relating to Office
Tower II, and all other governmental charges, general and special,
ordinary and extraordinary, foreseen as well as unforeseen, of any
kind and nature whatsoever, or other tax, however described, which
is levied or assessed by the United States of America or the state
in which Office Tower II is located or any political subdivision
thereof, against Lessor or all or any part of Office Tower II as a
result of Lessor's ownership of Office Tower II, and payable during
the respective Lease Year. It shall not include any gross or net
income tax, estate tax, or inheritance tax, franchise taxes or
taxes imposed as a result of any transfer by Lessor of its interest
in this Lease, Office Tower II or any portion thereof.
(c) "Excess Real Estate Taxes" for an applicable Lease Year shall mean
the amount of Real Estate Taxes incurred for such applicable Lease
Year in excess of the sum of Real Estate Taxes incurred for 1998.
(d) "Operating Expenses" shall mean and include all expenses incurred
with respect to the maintenance and operation of the Property and
Office Complex as determined by Lessor's accountant in accordance
with generally accepted accounting principles consistently
followed, including, but not limited to, insurance premiums,
maintenance and repair costs, steam, electricity, water, sewer, gas
and other utility charges, fuel, lighting, window washing,
janitorial services, trash and rubbish removal, wages payable to
employees of Lessor whose duties are connected with the operation
and maintenance of the Property and Office Complex (but only for
the portion of their time allocable to work related to the Office
Complex), amounts paid to contractors or subcontractors for work or
services performed in connection with the operation and maintenance
of the Property and Office Complex, all costs of uniforms, supplies
and materials used in connection with the operation and maintenance
of the Property and Office Complex, all payroll taxes, unemployment
insurance costs, vacation allowances, and the cost of providing
disability insurance or benefits, pensions, profit sharing
benefits, hospitalization, retirement or other so-called fringe
benefits, and any other expense imposed on Lessor, its contractors
or subcontractors, pursuant to law or pursuant to any collective
bargaining agreement covering such employees (pro-rated according
to the portion of their time allocated to work related to the
Office Complex), all services, supplies, repairs, replacements or
other expenses for maintaining and operating the Office Complex,
reasonable attorneys' fees and costs in connection with appeal or
contest of real estate or other taxes or levies, and such other
expenses as may be ordinarily incurred in the operation and
maintenance of an office complex and not specifically set forth
herein, including reasonable management
-2-
<PAGE>
fees and the costs of a building office at the Office Complex,
including the compensation of an on-site building manager. The term
"Operating Expenses" shall not include any capital improvement to
the Office Complex other than replacements required for normal
maintenance and repair, nor shall it include repairs, restoration
or other work occasioned by fire, windstorm or other insured
casualty, expenses incurred in leasing or procuring tenants,
leasing commissions, advertising expenses, expenses for renovating
space for new tenants, legal expenses incident to enforcement by
Lessor of the terms of any lease, interest or principal payments on
any mortgage or other indebtedness of Lessor, compensation paid to
any employee of Lessor above the grade of the on-site building
manager or building superintendent, depreciation allowance or
expense; costs occasioned by the exercise of eminent domain;
overhead and profit increment paid to subsidiaries or other
affiliates of Lessor for services on or to the Office Complex
and/or Premises to the extent that the costs of such services
exceed the competitive cost for such services rendered by persons
or entities of similar skill, competence and experience; fines,
penalties, legal fees or costs of litigation incurred due to the
late payment of taxes, utility bills and other costs; any penalties
or liquidated damages that Lessor pays to Lessee under this Lease
or to any other tenants under their respective leases; costs
associated with correcting any violation of any law existing as of
the date hereof; rental or lease charges on any equipment or
property the acquisition of which would normally be capitalized
under generally accepted accounting principals; and all items
(including repairs) and services for which Lessee or other tenants
pay directly to third parties or for which Lessee or other tenants
reimburse Lessor (other than as a reimbursement of Operating
Expenses). Notwithstanding the foregoing, in the event Lessor
installs equipment in or makes improvements or alterations to the
Office Complex which are for the purpose of reducing energy costs,
maintenance costs or other Operating Expenses or which are required
under any governmental laws, regulations, or ordinances which were
not required at the date of commencement of the term of this Lease,
Lessor may include in Operating Expenses reasonable charges for
interest on such investment and reasonable charges for depreciation
on the same so as to amortize such investment over the reasonable
life of such equipment, improvement or alteration on a straight
line basis but only to the extent of the savings resulting
therefrom. Operating Expenses shall also be deemed to include
expenses incurred by Lessor in connection with city sidewalks
adjacent to the Property and any pedestrian walkway system (either
above or below ground) or other public facility to which Lessor of
the Office Complex is from time to time subject in connection with
operations of the Property and Office Complex. Notwithstanding any
provision contained herein to the contrary, commencing January 1,
1999, in no event shall the amount of Operating Expenses used for
purposes of calculating Lessee's Proportionate Share of Operating
Expenses exceed in any year the amount of Operating Expenses used
for purposes of making such calculation for the prior year by more
than six percent (6%).
(e) "Excess Operating Expenses" shall mean the amount of Operating
Expenses incurred for any applicable Lease Year in excess of the
sum of Operating Expenses incurred during the first twelve (12)
months after the Commencement Date, adjusted to reflect an
occupancy rate for the Office Complex of the greater of: (1)
ninety-five percent (95%), or (ii) the actual occupancy rate.
(f) "Lessee's Pro Rata Share of Excess Real Estate Taxes" shall mean a
fraction, the numerator of which is the number of rentable square
feet contained within the Premises and the denominator of which is
the number of rentable square feet contained within Office Tower II,
and, represented as a percentage, is hereby stipulated to be
One Hundred percent (100%) of the Excess Real Estate Taxes for the
applicable Lease Year. Said percentage has been agreed upon by the
parties hereto after due consideration of the rentable area of the
Premises compared to the rentable area of Office Tower II;
provided, however, the percentage for Lessee's Pro Rata Share of
Excess Real Estate Taxes shall be amended each year to the greater
of the following: (i) if the total rentable area leased in Office
Tower II (pursuant to leases under which the term has commenced) is
95% or less than the total rentable area of Office Tower II, the
percentage shall be that which the rentable area of the Premises
bears to 95% of the total rentable area of Office Tower II for such
Lease Year; or (ii) if the total rentable area leased in Office
Tower II (pursuant to leases under which the term has commenced) is
greater than 95%, the percentage shall be that which the rentable
area of the Premises bears to the actual rentable area of Office
Tower II for the Lease Year. Rentable area shall in no event
include basement storage space or garage space.
-3-
<PAGE>
(g) "Lessee's Pro Rata Share of Excess Operating Expenses" shall mean a
fraction, the numerator of which is the number of rentable square
feet contained within the Premises and the denominator of which is
the number of rentable square feet contained within the Office
Complex, and, represented as a percentage, is hereby stipulated to
be Forty-Nine percent (49%) of the Excess Operating Expenses for
the applicable Lease Year. Said percentage has been agreed upon by
the parties hereto after due consideration of the rentable area of
the Premises compared to the rentable area of the Office Complex;
provided, however, the percentage for Lessee's Pro Rata Share of
Excess Operating Expenses shall be amended each year to the greater
of the following: (i) if the total rentable area leased in the
Office Complex (pursuant to leases under which the term has
commenced) is 95% or less than the total rentable area of the
Office Complex, the percentage shall be that which the rentable
area of the Premises bears to 95% of the total rentable area of the
Office Complex for such Lease Year; or (ii) if the total rentable
area leased in the Office Complex (pursuant to leases under which
the term has commenced) is greater than 95%, the percentage shall
be that which the rentable area of the Premises bears to the actual
rentable area of the Office Complex for the Lease Year. Rentable
area shall in no event include basement storage space or garage
space.
SECTION 2.3 ADJUSTMENT OF OPERATING EXPENSES. Notwithstanding anything
to the contrary set forth above, it is agreed that in the event the Office
Complex is not fully occupied during any Lease Year, Operating Expenses for
such year shall be adjusted to the amount that would have been incurred had
the Office Complex been ninety-five percent (95%) occupied during such year;
provided, that a corresponding adjustment is made with respect to Operating
Expenses for 1998.
SECTION 2.4 NOT APPLICABLE.
SECTION 2.5 ESTIMATED EXCESS TAXES AND EXPENSES. As to each Lease Year
commencing January 1, 1999, Lessor shall estimate for each such Lease Year (a)
the total amount of Excess Real Estate Taxes; (b) the total amount of Excess
Operating Expenses; (c) Lessee's Pro Rata Share of Excess Real Estate Taxes;
(d) Lessee's Pro Rata Share of Excess Operating Expenses; (e) the computation
of the annual and monthly rental payable during such Lease Year as a result
of increases or decreases in Lessee's Pro Rata Share of Excess Real Estate
Taxes and Lessee's Pro Rata Share of Excess Operating Expenses. Said estimate
shall be in writing and shall be delivered or mailed to Lessee at the
Premises.
SECTION 2.6 PAYMENT OF ADDITIONAL RENT. Lessee shall pay, as Additional
Rent, the amount of Lessee's Pro Rata Share of Excess Real Estate Taxes for
each Lease Year and Lessee's Pro Rata Share of Excess Operating Expenses for
each Lease Year, so estimated, in equal monthly installments, in advance, on
the first day of each month during each applicable Lease Year. In the event
that said estimate is delivered to Lessee after the first day of January of
the applicable Lease Year, said amount, so estimated shall be payable as
Additional Rent, in equal monthly installments, in advance, on the first day
of each month over the balance of such Lease Year, with the number of
installments being equal to the number of full calendar months remaining in
such Lease Year.
SECTION 2.7 RE-ESTIMATES OF EXCESS TAXES AND EXPENSE. From time to time
during any applicable Lease Year, Lessor may re-estimate the amount of Excess
Real Estate Taxes and Excess Operating Expenses and Lessee's Pro Rata Share
thereof, and in such event Lessor shall notify Lessee, in writing, of such
re-estimate in the manner above set forth and fix monthly installments for
the then remaining balance of such Lease Year in an amount sufficient to pay
the re-estimated amount over the balance of such Lease Year after giving
credit for payments made by Lessee on the previous estimate.
SECTION 2.8 ADJUSTMENT OF ACTUAL TAXES AND EXPENSE. Upon completion of
each Lease Year, Lessor shall cause its accountants to determine the actual
amount of Excess Real Estate Taxes and Excess Operating Expenses for such
Lease Year and Lessee's Pro Rata Share thereof and deliver a written
certification of the amounts thereof to Lessee within ninety (90) days after
the end of each Lease Year. If Lessee has paid less than its Pro Rata Share
of Excess Real Estate Taxes or its Pro Rata $hare of Excess Operating
Expenses for any Lease Year, Lessee shall pay the balance of its Pro Rata
Share of the same within thirty (30) days after receipt of such statement. If
Lessee has paid more than its Pro Rata Share of Excess Real Estate Taxes or
its Pro Rata Share of Excess Operating Expenses for any Lease Year, Lessor
shall, at Lessee's option, either (a) refund such excess, or (b) credit such
excess against the most current monthly installment or installments due
Lessor for its estimate of Lessee's Pro Rata Share of Excess Real Estate
Taxes and Lessee's Pro Rata Share of
-4-
<PAGE>
Excess Operating Expenses for the next following Lease Year. A pro rata
adjustment shall be made for a fractional Lease Year occurring during the term
of this Lease or any renewal or extension thereof based upon the number of
days of the term of this Lease during said Lease Year as compared to three
hundred sixty-five (365) days and all additional sums payable by Lessee or
credits due Lessee as a result of the provisions of this Article 2 shall be
adjusted accordingly. Notwithstanding anything contained herein to the
contrary, Lessee shall be entitled to inspect Lessor's books and records
relating to Operating Expenses at any time during the term of this Lease by
delivering fifteen (15) days prior written notice thereof to Lessor. In the
event Lessee's inspection reflects that Lessor's determination of Operating
Expenses is in error, Lessor and Lessee shall promptly make any necessary
adjustments, and if Lessor's determination is in error by more than five
percent (5%), Lessor shall reimburse Lessee for the reasonable cost of such
inspection.
SECTION 2.9 OTHER ADDITIONAL RENT. Further, Lessee shall pay, also as
Additional Rent, all other sums and charges required to be paid by Lessee
under this lease, and any tax or excise on rents, gross receipts tax, or
other tax, however described, which is levied or assessed by the United
States of America or the state in which the Office Complex is located or any
political subdivision thereof, against Lessor in respect to the Base Rent,
Additional Rent, or other charges reserved under this Lease or as a result of
Lessor's receipt of such rents or other charges accruing under this Lease;
provided, however, Lessee shall have no obligation to pay gross or net income
or franchise taxes of Lessor.
ARTICLE 3
BASE AND ADDITIONAL RENT
SECTION 3.1 INTEREST ON PAST DUE OBLIGATIONS. Any installment of Base
Rent, Additional Rent, or other charges to be paid by Lessee accruing under
the provisions of this Lease which shall not be paid when due shall bear
interest at the rate of fifteen percent (15%) per annum from the date which
is ten (10) days after written notice from Lessor that same is due until the
same shall be paid, but if such rate exceeds the maximum interest rate
permitted by law, such rate shall be reduced to the highest rate allowed by
law under the circumstances.
SECTION 3.2 RENT INDEPENDENT. Lessee's covenants to pay the Base Rent
and the Additional Rent are independent of any other covenant, condition,
provision or agreement herein contained, except as otherwise provided herein.
Nothing herein contained shall be deemed to suspend or delay the payment of
any amount of money or charge at the time the same becomes due and payable
hereunder, or limit any other remedy of Lessor, except as otherwise provided
herein. Base Rent and Additional Rent are sometimes collectively referred to
as "Rent." Rent shall be payable without deduction, offset, prior notice or
demand, in lawful money of the United States, except as otherwise provided
herein.
SECTION 3.3 LETTER OF CREDIT. As security for its obligations under this
Lease and its lease of space in the adjacent office tower, Lessee shall
deliver to Landlord an irrevocable standby letter of credit (the "Letter of
Credit") issued by a bank with at least One Billion Dollars in assets by June
30, 1998. The Letter of Credit shall be in such amount and shall be released
as provided in EXHIBIT "C" attached hereto and made a part hereof for all
purposes. Lessor shall be permitted to draw the full amount of the Letter of
Credit in the event of a monetary default by Lessee hereunder which is not
cured within thirty (30) days after written notice from Lessor or if the
Letter of Credit is not renewed at least thirty (30) days prior to its
expiration date for so long as it is required to be maintained hereunder. Any
amount drawn by Lessor shall be held by Lessor in a separate account or
certificate of deposit with a federally insured financial institution and
shall serve as security for the obligations of Lessee, and may be applied by
Lessor to any damages incurred by Lessor as a result of the breach of
Lessee's obligations.
-5-
<PAGE>
ARTICLE 4
POSSESSION OF PREMISES
SECTION 4.1 DELAYED OR EARLIER POSSESSION. The parties hereto agree that
Lessee shall be entitled to occupy the second (2nd) floor of Office Tower II
of the Office Complex (the "Interim Premises"), on the date of execution of
this Lease and continuing thereafter until the Commencement Date of this
Lease and Lessee shall be entitled to occupy the first (1st) floor of Office
Tower II on the date of execution of this Lease for purposes of installing
and constructing Lessee's Finish. Such early occupancy shall be subject to
all of the terms and conditions hereof except the obligation to pay Rent;
provided, Lessee will be responsible for all costs and expenses incurred
because of Lessee's occupancy of the Interim Premises and the first (1st)
floor of Office Tower Il prior to the Commencement Date, including, without
limitation, the additional costs of electricity, utilities and security.
Furthermore, Lessee shall be responsible to return the Interim Premises to
Lessee in the condition that it was in prior to Lessee's occupancy of the
Interim Premises, and Lessee shall fully vacate the Interim Premises on or
prior to the Commencement Date.
SECTION 4.2 EFFECT OF POSSESSION. Lessee acknowledges that neither
Lessor nor any agent of Lessor has made any representation or warranty with
respect to the Premises or the Office Complex or with respect to the
suitability or fitness of either for the conduct of Lessee's business or for
any other purpose other than that the Premises may be used lawfully for
office purposes and that, to Lessor's actual knowledge, the Premises, the
Property and the Office Complex are in substantial compliance with all
applicable laws, including environmental laws, building and fire codes, and
the Americans with Disabilities Act. Nothing contained in this Article shall
affect the commencement of the lease term or the obligation of Lessee to pay
any Rent due under this Lease except as otherwise provided herein.
SECTION 4.3 PERMITTED USE. Lessee shall use and occupy the Premises for
the purpose described on page 1 of this Lease and shall not use or permit the
Premises to be used for any other purpose without the prior written consent
of Lessor, which consent Lessee agrees may be withheld by Lessor in its sole
and absolute discretion.
SECTION 4.4 COMPLIANCE WITH ENVIRONMENTAL LAWS. Lessee shall not (either
with or without negligence) cause or permit the escape, disposal or release
of any biologically or chemically active or other hazardous substances or
materials in violation of any applicable law, including any environmental
law. Lessee shall not allow the storage or use of such substances or
materials in any manner not permitted by all applicable laws, including
environmental laws and by the standards prevailing in the industry for the
storage and use of such substances or materials, nor allow to be brought into
the Office Complex any such materials or substances except to use in the
ordinary course of Lessee's business, and then only after written notice is
given to Lessor of the identity of such substances or materials. Without
limitation, hazardous substances and material shall include those described
in the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended, 42 U.S.C. Section 9601 et seq., the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. Section 6901 et seq.,
any applicable state or local laws and the regulations adopted under these
acts. If any lender or governmental agency shall ever require testing to
ascertain whether or not there has been any release of hazardous materials by
Lessee, then the reasonable costs thereof shall be reimbursed by Lessee to
Lessor upon demand as additional charges if such requirement applies to the
Premises. In addition, Lessee shall execute affidavits, representations and
the like from time to time at Lessor's request concerning Lessee's best
knowledge and belief regarding the presence of hazardous substances or
materials on the Premises. In all events, Lessee shall indemnify Lessor in
the manner elsewhere provided in this Lease from any release of hazardous
materials on the Premises occurring while Lessee is in possession, or
elsewhere if caused by Lessee or persons acting under Lessee. The within
covenants shall survive the expiration or earlier termination of the term of
this Lease. Lessor represents and warrants to Lessee that, to Lessor's actual
knowledge, the Premises and the Office Complex are in compliance with all
environmental laws and that, to Lessor's actual knowledge, except as
otherwise disclosed in an environmental report dated December 8,1997, from
Spectrum Assessment and Engineering, Inc., no hazardous materials have been
stored, used or released on the Office Complex as of the date of execution of
this Lease. Lesser shall indemnify Lessee from any release of hazardous
materials on the Premises occurring prior to Lessee's possession of the
Premises.
-6-
<PAGE>
SECTION 4.5 SUBLEASE. In the event that the Sublease of even date
herewith between Lessee, as sublessor, and Lessor, as sublessee, is
terminated by bankruptcy, operation of law or otherwise, then this Lease
shall terminate as to, and the Premises shall cease to include, the Sublease
Premises, as defined in such Sublease, and the obligations of Lessee,
including the obligation to pay rent hereunder, shall cease and abate as to
the Sublease Premises.
ARTICLE 5
SERVICES
SECTION 5.1 SERVICES PROVIDED BY LESSOR. Subject to the provisions of
Article 2 hereof, Lessor shall provide the following services on all days
excepting Saturdays, Sundays, holidays, and as otherwise stated:
(a) JANITORIAL SERVICE. Nightly janitorial services Monday through
Friday in and about the Premises. The janitorial services furnished
to the Premises shall include normal cleaning and upkeep services,
normal removal of trash and rubbish, vacuuming and spot cleaning of
carpeting, maintenance of towels, tissue and other restroom
supplies and such other work as is customarily performed in
connection with such nightly janitorial services in an office
complex similar in construction, general location, use and
occupancy to the Office Complex. Lessor shall also provide periodic
interior and exterior window washing and cleaning and waxing of
uncarpeted floors in accordance with Lessor's reasonable schedule.
(b) ELECTRICAL ENERGY. Electrical energy will be provided for lighting
and operation of office machines, air conditioning, and heating as
required for normal office usage during the normal working hours
set forth in subparagraph (c) of this Article. The cost for such
electrical energy shall be directly metered and be payable by
Lessee. Office machines will include computers, printers, copy
machines, scanners, fax machines, electronic and electric
typewriters and other office equipment. Lessee shall pay the cost
of all equipment and of the installation of all facilities provided
and installed by Lessor to provide such electrical capacity in
excess of the above normal office standards. Lessee shall not make
any installation requiring excess electrical energy without first
receiving Lessor's written consent thereto, which shall not be
unreasonably withheld; and provided further that Lessee shall pay
all costs of installation of facilities necessary to furnish such
excess capacity and for such increased electrical usage. All
electric lighting bulbs and tubes and all ballasts and starters
within the Premises shall be replaced by Lessor at the expense of
Lessor. The electrical service required of Lessor by this
subparagraph (b), and electricity for other uses consented to by
Lessor, shall be available at all times subject to the requirement
that Lessee pay for usage in excess of the electrical service to be
provided pursuant to the terms of this subparagraph (b).
(c) HEATING AND AIR CONDITIONING. Heat and air conditioning for normal
comfort from 8:00 a.m. to 5:30 p.m., and on Saturdays which are not
holidays, from 8:00 a.m. to 1:00 p.m. The cost for such heat and
air conditioning shall be directly metered and be payable by
Lessee. Air conditioning to the Premises is to be provided based on
standard lighting and normal incidental office use only. During
other hours, Lessor shall provide such amounts of heating and air
conditioning upon a reasonable advance notice from Lessee to
Lessor, which advance notice shall not be less than twenty-four
(24) hours.
(d) WATER. Hot and cold water from the regular building outlets and/or
as installed by Lessee at Lessee's cost, for lavatory and restrooms
and for drinking purposes.
(e) PASSENGER ELEVATOR SERVICE. Passenger elevator service in common
with other tenants to be provided by automatic elevators
twenty-four (24) hours per day. Lessor shall have the right to
restrict the use of elevators for freight purposes to the freight
elevator and to hours to be determined by Lessor. Lessor shall have
the right to limit the number of elevators to be in operation on
Saturdays, Sundays and holidays.
(f) PARKING FACILITIES, LANDSCAPED AREAS AND COMMON AREAS. Maintenance
in good order, condition and repair of the parking facilities and
all driveways leading thereto and keeping the same free from any
unreasonable accumulation of snow. Lessor shall keep and maintain
the Office Complex and landscaped area and parking facilities and
all common areas in a neat and orderly condition, and in first
class condition and repair.
-7-
<PAGE>
Lessor shall promptly remove or cause to be removed any
unauthorized vehicles from the parking facilities. Lessor reserves
the right to designate areas of the appurtenant parking facilities
where Lessee, its agents, employees and invitees shall park and may
exclude Lessee, its agents, employees and invitees from parking in
other areas as designated by Lessor, provided, however, Lessor
shall not be liable to Lessee for the failure of any tenant, its
invitees, employees, agents, and customers to abide by Lessor's
designations or restrictions. Notwithstanding anything to the
contrary contained herein, in no event may Lessee utilize, at any
time, more than Lessee's proportionate share of the number of
garage parking spaces, uncovered parking spaces and handicapped
spaces, respectively, located at the Office Complex. Lessee's
proportionate share of such parking spaces shall be calculated by
dividing the number of rentable square feet contained within the
Premises by the number of rentable square feet contained within the
Office Complex, and is hereby stipulated to be 253 garage parking
spaces, 123 uncovered spaces and 5 handicapped parking spaces.
(g) SECURITY. Security service for the Office Complex 24 hours per day,
which shall include, without limitation, at least one (1) uniformed
security guard on patrol and existing lighting of the common areas,
parking facilities and all other portions of the Office Complex.
Lessor shall restrict access to the Office Complex to tenants and
other authorized individuals after normal business hours and on
weekends and holidays. Notwithstanding the foregoing, Lessor agrees
that Lessee shall have access to the Premises twenty-four (24)
hours per day, seven (7) days per week. Lessee shall be entitled to
provide additional security guard service to the Office Complex
and/or the Premises at Lessee's option and expense subject to
Lessor's approval, which approval shall not be unreasonably
withheld, conditioned or delayed.
(h) ACCESS. Access to the Office Complex and Premises at all times.
SECTION 5.2 LESSEE'S UTILITY SERVICES. Lessee shall be solely
responsible for the direct payment of all utilities which are separately
metered or separately charged (electric, natural gas, telephone, cable
television and any other special utility requirements of Lessee), if any, to
the Premises or to the Lessee and shall make such payments to the respective
utility companies prior to delinquency. Such amounts shall not be included as
Operating Expenses.
SECTION 5.3 OTHER PROVISIONS RELATING TO SERVICES. No interruption in,
or temporary stoppage of, any of the aforesaid services caused by repairs,
renewals, improvements, alterations, strikes, lockouts, labor controversy,
accidents, inability to obtain fuel or supplies, or other causes beyond
Lessor's control shall be deemed an eviction or disturbance of Lessee's use
and possession, or render Lessor liable for damages, by abatement of rent or
otherwise or relieve Lessee from any obligation herein set forth; provided,
however, notwithstanding the foregoing, if such interruption or temporary
stoppage substantially interferes with Lessee's use of the Premises, and if
same continues for a period in excess of thirty (30) days following written
notice from Lessee to Lessor, Lessee shall be entitled to correct the same at
Lessor's expense and, if Lessor fails to reimburse Lessee within thirty (30)
days after written notice of the cost (and accompanying invoices), to deduct
the cost thereof from the Rent next becoming due under the Lease; provided,
in no event shall Lessee be entitled to offset more than twenty percent (20%)
of monthly Base Rent in any month. In no event shall Lessor be required to
provide any heat, air conditioning, electricity or other service in excess of
that permitted by voluntary or involuntary guidelines or laws, ordinances or
regulations of governmental authority. Lessor reserves the right, from time
to time, to make reasonable and non-discriminatory modifications to the above
standards for utilities and services.
SECTION 5.4 EFFECTS ON UTILITIES. Lessee shall not, without the prior
written consent of Lessor, which consent shall not be unreasonably withheld,
conditioned or delayed, use any apparatus or device in or about the Premises
which shall cause any substantial noise or vibration or which will increase
the amount of electricity or water, if any, usually furnished or supplied for
use of the Premises as general office space. Lessee shall not connect with
electric current or water pipes, except through existing electrical or water
outlets already in the Premises, any apparatus or device for the purposes of
using electric current or water.
-8-
<PAGE>
ARTICLE 6
INSURANCE
SECTION 6.1 LESSOR'S CASUALTY INSURANCE OBLIGATIONS. Lessor shall keep
the Office Complex insured for the benefit of Lessor in an amount equivalent
to the full replacement value thereof (excluding foundation, grading and
excavation costs) against:
(a) loss or damage by fire; and
(b) such other risk or risks of a similar or dissimilar nature as are
now or may be customarily covered with respect to buildings and
improvements similar in construction, general location, use,
occupancy and design to the Office Complex, including, but
without limiting the generality of the foregoing, windstorms,
hail, explosion, vandalism, malicious mischief, civil commotion,
and such other coverage as may be deemed necessary by Lessor,
providing such additional coverage is obtainable and providing
such additional coverage is such as is customarily carried with
respect to buildings and improvements similar in construction,
general location, use, occupancy and design to the Office
Complex.
These insurance provisions shall in no way limit or modify any of the
obligations of Lessee under any provision of this Lease Agreement. Lessor
agrees that such policy or policies of insurance shall permit releases of
liability as provided herein and/or waiver of subrogation clause as to Lessee
and Lessor waives, releases and discharges Lessee from all claims or demands
whatsoever which Lessor may have or acquire arising out of damage to or
destruction of the Office Complex or loss of use thereof occasioned by fire
or other casualty, WHETHER SUCH CLAIM OR DEMAND MAY ARISE BECAUSE OF THE
NEGLIGENCE OR FAULT OF LESSEE, ITS AGENTS, EMPLOYEES, CUSTOMERS, CONTRACTORS
OR BUSINESS INVITEES, OR OTHERWISE, and Lessor agrees to look to the
insurance coverage only in the event of such loss. Insurance premiums paid
for insurance coverage required under this Article 6 by Lessor shall be a
portion of the "Operating Expenses" described in Article 2 hereof.
SECTION 6.2 LESSEE'S CASUALTY INSURANCE OBLIGATIONS. Lessee shall keep
all of its machinery, equipment, furniture, fixtures and personal property
(including also property under the care, custody, or control of Lessee) which
may be located in, upon, or about the Premises insured for the benefit of
Lessee in an amount equivalent to the full insurable value thereof against:
(a) loss or damage by fire; and
(b) such other risk or risks of a similar or dissimilar nature as are
now, or may in the future be customarily covered with respect to
a tenant's machinery, equipment, furniture, fixtures, personal
property and business located in a building similar in
construction, general location, use, occupancy and design to the
Office Complex, including, but without limiting the generality of
the foregoing, windstorms, hail, explosions, vandalism, theft,
malicious mischief, civil commotion, and such other coverage as
Lessee may deem appropriate or necessary.
Lessee agrees that such policy or policies of insurance shall permit
release of liability as provided herein and/or waiver of subrogation clause
as to Lessor and Lessee waives, releases and discharges Lessor, its agents,
employees, and contractors from all claims or demands whatsoever which Lessee
may have or acquire arising out of damage to or destruction of the machinery,
equipment, furniture, fixtures, personal property, and loss of use thereof
occasioned by fire or other casualty, whether such claim or demand may arise
because of the negligence or fault of Lessor, its agents, employees,
contractors or otherwise, and Lessee agrees to look to the insurance coverage
only in the event of such loss.
SECTION 6.3 LESSOR'S LIABILITY INSURANCE OBLIGATIONS. Lessor shall, as
a portion of the Operating Expenses defined in Article 2, maintain, for its
benefit and the benefit of its managing agent and Lessee, general public
liability insurance against claims for personal injury, death or property
damage occurring upon, in or about the Office Complex, such insurance to
afford protection to Lessor and its managing agent to the limit of not less
than Two Million and No/100 Dollars ($2,000,000.00) in respect to injury or
death to a single person, and to the limit of not less than Five Million and
No/100 Dollars ($5,000,000.00) in respect to any one accident, and to the
limit of not less than Two Million and No/100 Dollars ($2,000,000.00) in
respect to any property damage. Lessor shall provide Lessee with evidence
that it has satisfied its insurance obligations hereunder upon request
therefor.
-9-
<PAGE>
SECTION 6.4 LESSEE'S LIABILITY INSURANCE OBLIGATIONS. Lessee shall, at
Lessee's sole cost and expense but for the mutual benefit of Lessor, its
managing agent and Lessee, maintain general public liability insurance
against claims for personal injury, death or property damage occurring upon,
in or about the Premises, such insurance to afford protection to Lessor, its
managing agent and Lessee to the limit of not less than Two Million and
No/100 Dollars ($2,000,000.00) in respect to the injury or death to a single
person, and to the limit of not less than Five Million and No/100 Dollars
($5,000,000.00) in respect to any one accident, and to the limit of not less
than Two Million and No/100 Dollars ($2,000,000.00) in respect to any
property damage. Such policies of insurance shall be written in companies
reasonably satisfactory to Lessor, naming Lessor and its managing agent as
additional insureds thereunder, and such policies, or a memorandum or
certificate of such insurance, shall be delivered to Lessor endorsed "Premium
Paid" by the company or agency issuing the same or accompanied by other
evidence satisfactory to Lessor that the premium thereon has been paid. Any
such coverage shall be deemed primary to any liability coverage secured by
Lessor. Such insurance shall also afford coverage for all claims based upon
acts, omissions, injury or damage, which claims occurred or arose (or the
onset of which occurred or arose) in whole or in part during the policy
period.
SECTION 6.5 INDEMNIFICATION. Lessor agrees to indemnify, protect, defend
and hold Lessee and Lessee's shareholders, employees, lender and agents
harmless from and against any and all uninsured claims, costs, liabilities,
actions and damages, including without limitation, reasonable attorneys' fees
and costs on behalf of any person or persons, firm or firms, corporation or
corporations, arising from any accident, injury or damage to the extent that
same occurred prior to the Commencement Date or was caused by Lessor, its
agents, and employees to any person, firm or corporation occurring during the
term of this Lease or any extension or renewal hereof, in or about the Office
Complex, and from and against all costs, reasonable counsel fees, expenses
and liabilities in or about any such uninsured claim or action or proceeding
brought thereon; and in case any action or proceeding be brought against
Lessee or its agents by reason of any such uninsured claim, Lessor, upon
notice from Lessee, covenants to resist or defend such action or proceeding
by counsel reasonably satisfactory to Lessee.
Lessee agrees to indemnify, protect, defend and hold Lessor and Lessor's
shareholders, employees, lender and managing agent harmless from and against
any and all uninsured claims, costs, liabilities, actions, and damages,
including, without limitation, reasonable attorneys' fees and costs on behalf
of any person or persons, firm or firms, corporation or corporations, arising
from any act or negligence on the part of Lessee or its agents, contractors,
servants, employees or licensees, or arising from any accident, injury or
damage to the extent caused by Lessee, its agents, and employees to any
person, firm or corporation occurring during the term of this Lease or any
renewal thereof, in or about the Premises and Office Complex, and from and
against all costs, reasonable counsel fees, expenses and liabilities incurred
in or about any such claim or action or proceeding brought thereon; and in
case any action or proceeding be brought against Lessor or its managing agent
by reason of any such claim, Lessee, upon notice from Lessor, covenants to
resist or defend such action or proceeding by counsel reasonably satisfactory
to Lessor.
SECTION 6.6 LESSEE'S WAIVER. Lessee agrees, to the extent not expressly
prohibited by law, that Lessor, its agents, employees and servants shall not
be liable, and Lessee waives all claims for damage to property and business
sustained during the term of this Lease by Lessee occurring in or about the
Office Complex, resulting directly or indirectly from any existing or future
condition, defect, matter or thing in the Premises, the Office Complex, or
any part thereof, or from equipment or appurtenances becoming out of repair
or from accident, or from any occurrence or act or omission of Lessor, its
agents, employees or servants, or any tenant or occupant of the Office
Complex or any other person other than damage resulting from the intentional
misconduct or gross negligence of Lessor, its agents, employees or servants,
or the breach by Lessor of its obligations under this Lease. This paragraph
shall apply especially but not exclusively, to damage caused by aforesaid or
by the flooding of basements or other subsurface areas, or by refrigerators,
sprinkling devices, air conditioning apparatus, water, snow, frost, steam,
excessive heat or cold, falling plaster, broken glass, sewage, gas, odors or
noise, or the bursting or leaking of pipes or plumbing fixtures, and shall
apply equally, whether any such damage results from the act or omission of
other tenants or occupants in the Office Complex or any other persons, and
whether such damage be caused by or result from any of the aforesaid, or
shall be caused by or result from other circumstances of a similar or
dissimilar nature.
SECTION 6.7 LESSOR'S DEDUCTIBLE AND LESSEE'S PROPERTY. Provisions herein
to the contrary notwithstanding, in the event any damage to the Office
Complex results solely from the gross
-10-
<PAGE>
negligence or willful misconduct of Lessee, its agents, employees or
invitees, and all or any portion of Lessor's loss is "deductible," Lessee
shall pay to Lessor the amount of such deductible loss (not to exceed $1,000
per event).
SECTION 6.8 LESSEE'S PROPERTY. All property in the Office Complex or on
the Premises belonging to Lessee, its agents, employees, invitees or
otherwise located at the Premises, shall be at the risk of Lessee only, and
Lessor shall not be liable for damage thereto or theft, misappropriation or
loss thereof unless caused solely by the gross negligence or willful
misconduct of Lessor and Lessee agrees to defend and hold Lessor, its agents,
employees and servants harmless and indemnify them against claims and
liability for injuries to such property.
SECTION 6.9 INCREASE IN INSURANCE. Lessee shall not do or permit
anything to be done in or about the Premises nor bring or keep anything
therein which will in any way increase the existing rate of or affect in any
other way any fire or other insurance upon the Office Complex or any of its
contents, or cause a cancellation of any insurance policy covering the Office
Complex or any of its contents. Notwithstanding anything to the contrary
contained herein, Lessee shall, within thirty (30) days following its receipt
of written demand, reimburse Lessor for the full amount of any additional
premium charged for such policy by reason of Lessee's failure to comply with
the provisions of the paragraph, it being understood that such demand for
reimbursement shall not be Lessor's exclusive remedy. Lessee shall, within
thirty (30) days following its receipt of written demand, reimburse Lessor
for any additional premium charged for any such policy by reason of Lessee's
failure to comply with the provisions of this Article.
SECTION 6.10 LESSEE'S FAILURE TO INSURE. In the event Lessee fails to
provide Lessor with evidence of insurance required under this Article 6,
Lessor may, but shall not be obligated to, without further demand upon
Lessee, and without waiving or releasing Lessee from any obligation contained
in this Lease, effect such insurance and Lessee agrees to repay, upon demand,
all such sums incurred by Lessor in effecting such insurance. All such sums
shall become a part of the Additional Rent payable hereunder, but no such
payment by Lessor shall relieve Lessee from any default under this Lease.
ARTICLE 7
CERTAIN RIGHTS RESERVED BY LESSOR
SECTION 7.1 RIGHTS RESERVED BY LESSOR. Lessor reserves the following
rights exercisable without notice and without liability to Lessee and without
effecting an eviction, constructive or actual, or disturbance of Lessee's use
or possession, or giving rise to any claim for setoff or abatement of rent:
(a) CONTROL SIGNAGE. To control, install, affix and maintain any and
all signs on the Property, or on the exterior of the Office Complex
and in the corridors, entrances and other common areas thereof,
except those signs within the Premises not visible from outside the
Premises, subject to applicable law. Notwithstanding anything to
the contrary contained herein, subject to Article 8, the Building
Rules and Regulations (attached hereto as EXHIBIT "A") and
compliance with applicable laws and ordinances, Lessee may, at its
sole expense, install one (1) sign on each office tower of the
Office Complex in a location and or a design that is mutually
acceptable to Lessor and Lessee, such signage to be substantially
similar to the design attached hereto as EXHIBIT "B".
(b) RETAIN KEYS. To retain at all times and to use in appropriate
instances keys to all doors within and into the Premises. No locks
shall be changed without the prior written consent of Lessor. This
provision shall not apply to Lessee's safes, or other areas
maintained by Lessee for the safety and security of monies,
securities, negotiable instruments or similar items, or proprietary
or confidential information.
(c) MAKE REPAIRS. To make repairs, alterations, additions, or
improvements, whether structural or otherwise, in and about the
Office Complex, or any part thereof, and for such purposes to enter
upon the Premises, and during the continuation of any of said work,
to temporarily close doors, entryways, public spaces, and corridors
in the Office Complex and to interrupt or temporarily suspend
services and facilities.
(d) REGULATE HEAVY EQUIPMENT. To approve the weight, size and location of
safes and other heavy equipment and articles in and about the Premises
and the Office Complex, such
-11-
<PAGE>
approval not to be unreasonably withheld, conditioned or delayed,
and to require all such items to be moved into and out of the Office
Complex and the Premises only at such times and in such manner as
Lessor shall reasonably direct in writing.
(e) EXCLUSIVE BUSINESSES. To grant to anyone the exclusive right to
conduct any particular business or undertaking in the Office
Complex other than general office use, including but not limited to
the following businesses: banks, savings and loan associations,
restaurants, cafeterias, candy and/or tobacco shops, and other
stores selling retail products.
SECTION 7.2 EMERGENCY ENTRY. Lessor and its agents may enter the
Premises at any time in case of emergency and shall have the right to use any
and all means which Lessor may deem proper to open such doors during an
emergency in order to obtain entry to the Premises. Any entry to the Premises
obtained by Lessor in the event of an emergency shall not, under any
circumstances, be construed or deemed to be a forcible or unlawful entry
into, or detainer of, the Premises, or to be an eviction of Lessee from the
Premises or any portion thereof.
SECTION 7.3 EXHIBITION OF PREMISES. Lessee shall permit Lessor and its
agents, upon at least twenty-four (24) hours prior notice, to enter and pass
through the Premises or any part thereof at reasonable times during normal
business hours to: (a) post notices of non-responsibility; (b) exhibit the
Premises to holders of encumbrances on the interest of Lessor under the Lease
and to prospective purchasers, mortgagees or lessees of the Office Complex;
and (c) during the period of six (6) months prior to the expiration of the
Lease Term, exhibit the Premises to prospective lessees thereof, provided, in
each case, that Lessor shall not unreasonably interfere with Tenant's use and
occupancy of the Premises. If during the last month of the Lease Term, Lessee
shall have removed substantially all of Lessee's property and personnel from
the Premises, Lessor may, with the prior written consent of Lessee, which
consent may not be unreasonably withheld or delayed, enter the Premises and
repair, alter, and redecorate the same, without abatement of Rent and without
liability to Lessee; and such acts shall have no effect on this Lease.
SECTION 7.4 RIGHT OF LESSOR TO PERFORM. All covenants and agreements to
be performed by Lessee under any of the terms of this Lease shall be
performed by Lessee at Lessee's sole cost and expense and without any
abatement of Rent, except as otherwise provided herein. If Lessee shall fail
to pay any sum of money (other than Rent due Lessor) required to be paid by
it hereunder or shall fail to perform any other act on its part to be
performed hereunder, including, but not limited to, the failure to commence
and complete repairs promptly and adequately, and the failure to remove any
liens or otherwise to perform any act or fulfill any obligation required of
Lessee under this Lease within any applicable notice and cure periods
provided herein, Lessor may, but shall not be obligated to do so, and without
waiving or releasing Lessee from any obligations of Lessee, make any such
payment or perform any such act on Lessee's part to be made or performed as
in this Lease provided. All sums so paid by Lessor and all necessary
incidental costs, together with an administrative charge in the amount of
five percent (5%) of any costs incurred by Lessor, and interest thereon at
the maximum rate per annum then permitted by law accruing from the date which
is ten (10) days following Lessee's receipt of written notice that same has
been paid or incurred by Lessor until reimbursed to Lessor by Lessee, shall
be payable to Lessor by Lessee as Rent within thirty (30) days following
Lessee's receipt of written demand and Lessee covenants to pay all such sums.
Lessor shall have (in addition to any other right or remedy of Lessor) the
same rights and remedies in the event of Lessee's non-payment of such sums,
as in the case of default by Lessee in the payment of Rent to Lessor.
ARTICLE 8
ALTERATIONS AND IMPROVEMENTS
SECTION 8.1 PROCEDURES FOR LESSEE'S IMPROVEMENTS. Except as provided in
SECTION 16.27 hereof, Lessee shall not make any improvements, alterations,
additions or installations in or to the Premises (hereinafter referred to as
the "Work") without Lessor's prior written consent, which consent shall not
be unreasonably withheld, conditioned or delayed; provided, Lessor may
withhold its consent, in its sole discretion, to any structural alterations,
exterior alterations or other alterations that are visible within the common
areas of the Office Complex ("Major Alterations"). Before commencement of the
Work or delivery of any materials to be used in the Work to the Premises or
into the Office Complex, Lessee shall furnish Lessor with plans and
specifications, names and addresses of contractors, copies of contracts,
necessary permits and licenses, and an indemnification in such form and
amount as may be reasonably satisfactory to Lessor and a performance bond
executed by a commercial surety reasonably satisfactory to Lessor, and in an
amount equal to the Work and the payment of all liens for labor and material
arising therefrom. Lessee agrees to defend and hold Lessor
-12-
<PAGE>
forever harmless from any and all claims and liabilities of any kind and
description which may arise out of or be connected in any way with said
improvements, alterations, additions or installations. All Work shall be done
only by contractors or mechanics reasonably approved by Lessor and at such
time and in such manner as Lessor may from time to time reasonably designate.
All work done by Lessee, its agents, employees, or contractors shall be done
in such a manner as to avoid labor disputes. Lessee shall pay the cost of all
such improvements, alterations, additions or installations (including a
reasonable charge for Lessor's services and for Lessor's inspection and
engineering time), and also the cost of painting, restoring, or repairing the
Premises and the Office Complex occasioned by such improvements, alterations,
additions or installations. Upon completion of the Work, Lessee shall furnish
Lessor with contractor's affidavits or unconditional lien releases and full
and final waivers of liens, and receipted bills covering all labor and
materials expended and used. The Work shall comply with all insurance
requirements and all laws, ordinances, rules and regulations of all
governmental authorities and shall be constructed in a good and workmanlike
manner. Lessee shall permit Lessor to inspect construction operations in
connection with the Work. Lessee shall not be allowed to make any
alterations, modifications, improvements, additions, or installations if such
action results or would result in a labor dispute or otherwise would
materially interfere with Lessor's operation of the Office Complex. Lessor,
by written notice to Lessee given at or prior to termination of this Lease,
may require Lessee to remove any improvements, additions or installation
installed by Lessee in the Premises at Lessee's sole cost and expense, and
repair or restore any damage caused by the installation and removal of such
improvements, additions, or installations; provided, however, the only
improvements, additions or installations which Lessee shall remove shall be
those specified in such notice. With respect to approval rights granted to
Lessor in this Article 8 for other than Major Alterations, Lessor's approval
shall be deemed given following the expiration of thirty (30) days after
Lessee delivers to Lessor in writing plans and specifications for the item or
items for which Lessor's approval is sought if Lessor has not sooner
disapproved same.
SECTION 8.2 FREEDOM FROM LIENS. Lessee shall keep the Premises and the
Office Complex free from any liens arising out of any work performed,
material furnished or obligations incurred by Lessee, and shall indemnify,
protect, defend and hold Lessor harmless from any liens and encumbrances
arising out of any work performed or material furnished by or at the
direction of Lessee. In the event that Lessee shall not, within thirty (30)
days following the imposition of any such lien, cause such lien to be
released of record by payment or posting of a proper bond, Lessor shall have,
in addition to all other remedies provided herein and by law, the right, but
not the obligation, to cause the same to be released by such means as it
shall deem proper, including payment of and/or defense against the claim
giving rise to such lien. All such sums paid by Lessor and all expenses
incurred by it in connection therewith, including attorneys' fees and costs,
shall be payable as Additional Rent to Lessor by Lessee on demand with
interest at the maximum rate per annum then permitted by law accruing from
the date which is five (5) days following Lessee's receipt of written notice
that same has been paid or incurred by Lessor until reimbursed to Lessor by
Lessee.
SECTION 8.3 ALTERATIONS A PART OF THE PREMISES. Any permanent additions
to, or alterations of, the Premises, except as specified in Lessor's notice
to Lessee, shall become at once a part of the Premises and belong to Lessor
without compensation to Lessee. The foregoing shall not be applicable to
removable equipment, trade fixtures, shelving, attached modular furniture or
Lessee's personal property, which Lessee shall remove, and upon removal shall
repair any damage to the Premises due to such removal.
ARTICLE 9
REPAIRS
SECTION 9.1 LESSEE'S REPAIR OBLIGATIONS. Subject to Article 6 hereof,
Lessee shall, during the term of this Lease, at Lessee's expense, keep the
Premises in as good order, condition and repair as they were at the time
Lessee took possession of the same, reasonable wear and tear and damage from
fire and other casualties and/or which is the responsibility of Lessor
excepted. Lessee shall keep the Premises in a neat and sanitary condition and
shall not commit any nuisance or waste on the Premises or in, on, or about
the Office Complex, throw improper substances in the plumbing facilities, or
waste any of the utilities furnished by the Lessor. All uninsured damage or
injury to the Premises, or to the Office Complex caused by Lessee moving
furniture, fixtures, equipment, or other devices in or out of the Premises or
Office Complex or by installation or removal of furniture, fixtures,
equipment, devices or other property of Lessee, its agents, contractors,
servants or employees, due to carelessness, omission, neglect, improper
conduct, or other cause of Lessee, its servants, employees, agents, visitors,
or licensees, shall be repaired, restored and replaced promptly by Lessee at
its sole
-13-
<PAGE>
cost and expense. All repairs, restorations and replacements shall be in
quality and class equal to the original work and shall comply with all
requirements of the Lease.
SECTION 9.2 LESSOR'S INSPECTION. Lessor or its employees, or agents,
shall have the right to enter the Premises following at least twelve (12)
hours prior notice thereof to Lessee (except that no prior notice to Lessee
shall be required in the event of an emergency or for the performance of
cleaning, janitorial and any other service required to be performed by Lessor
under this Lease) at any reasonable time or times for the purpose of
inspection, cleaning, repairs, altering, or improving the same but nothing
contained herein shall be construed as imposing any obligation on Lessor to
make any repairs, alterations or improvements which are the obligation of
Lessee; provided, however, that Lessor shall not unreasonably interfere with
Lessee's use and occupancy of the Premises.
SECTION 9.3 JOINT INSPECTION UPON VACATION. Lessee shall give written
notice to Lessor at least thirty (30) days prior to vacating the Premises for
the express purpose of arranging a meeting with Lessor for a joint inspection
of the Premises. In the event of Lessee's failure to give such notice and
arrange such joint inspection, Lessor's inspection at or after Lessee's
vacation of the Premises shall be conclusively deemed correct for purposes of
determining Lessee's responsibility for repairs and restoration hereunder.
SECTION 9.4 LESSOR'S REPAIR OBLIGATIONS. Lessor shall, during the term
of this Lease, at Lessor's expense, keep the common areas, landscaping,
parking facilities and the roof, foundation, slab, floors, exterior walls and
load bearing columns and all other structural, mechanical, electrical and
plumbing portions of the Office Complex in first class condition and repair
and in a neat, clean and healthful manner. All repairs, restorations and
replacements shall be performed in good and workmanlike manner and in quality
and class equal to the original work and shall comply with all requirements
of the Lease. If Lessor fails to perform any of Lessor's obligations under
this paragraph, and if such failure continues for thirty (30) days after
written notice thereof is delivered to Lessor (provided, that, in the event
of an emergency or situation where damage to person or property is at risk,
no notice shall be required), Lessee may perform such obligation, in which
event, Lessor shall pay to Lessee the reasonable cost incurred by Lessee in
performing such obligation within thirty (30) days after demand therefor
(with accompanying paid invoices), failing which Lessee shall be entitled to
offset such sums against the Rent becoming due under this Lease, provided any
offset shall not exceed twenty percent (20%) of monthly Base Rent until such
offset has been fully made. In the event the expenditure cannot be fully
recouped from the next monthly payment of Base Rent as a result of such
limitation, Lessee shall be entitled to recover interest with respect to each
subsequent monthly offset from the date of the expenditure to the date of
offset at a per annum rate equal to the bank prime rate publicized in the
WALL STREET JOURNAL, as the same may change from time to time.
ARTICLE 10
ASSIGNMENT AND SUBLETTING
SECTION 10.1 PROCEDURE FOR OBTAINING LESSOR'S CONSENT. Lessee shall not,
without the prior written consent of Lessor, (a) transfer, pledge, mortgage
or assign this Lease or any interest hereunder; (b) permit any assignment of
this Lease by voluntary act, operation of law or otherwise; (c) sublet the
Premises or any part thereof; or (d) permit the use of the Premises by any
parties other than Lessee, its agents and employees. Lessee shall seek such
written consent of Lessor by a written request therefor, setting forth such
information as Lessor may deem reasonably necessary. Lessee shall, by notice
in writing, advise Lessor of its intention from, on and after a stated date
(which shall not be less than thirty [30] days after date of Lessee's
notice), to assign this Lease or to sublet any part or all of the Premises
for the balance or any part of the term. Lessee's notice shall include all of
the terms of the proposed assignment or sublease and shall state the
consideration therefor. In such event, Lessor shall have the right to be
exercised by giving written notice to Lessee within thirty (30) days after
receipt of Lessee's notice, to recapture the space described in Lessee's
notice and such recapture notice shall, if given, cancel and terminate this
Lease with respect to the space therein described as of the date stated in
Lessee's notice; provided, however, that Lessor shall not have such right to
recapture if the proposed assignment is a transfer of the stock of Lessee as
described in Section 10.5 hereof. Lessee's notice shall state the name and
address of the proposed assignee or subtenant and a true and complete copy of
the proposed assignment or sublease shall be delivered to Lessor with
Lessee's notice. If Lessee's notice shall cover all of the Premises, and
Lessor shall have exercised its foregoing recapture right, the term of this
Lease shall expire and end on the date stated in Lessee's notice as fully and
completely as if that date had been herein definitely fixed for the
expiration of the term. If, however this Lease be canceled with respect to
less than the entire Premises, the Base Rent and Additional Rent shall be
equitably adjusted by Lessor with due
-14-
<PAGE>
consideration of the size, location, type and quality of the portion of the
Premises so remaining after the "recapture" and such rent shall be reduced
accordingly from and after the termination date for said portion, and this
Lease as so amended shall continue thereafter in full force and effect. The
rent adjustments provided for herein shall be evidenced by an amendment to
Lease executed by Lessor and Lessee. If this Lease shall be terminated in the
manner aforesaid, either as to the entire Premises or only a portion thereof,
to such extent the term of this Lease shall end upon the appropriate
effective date of the proposed sublease or assignment as if that date had
been originally fixed in this Lease for such expiration, and in the event of
a termination affecting less than the entire Premises, Lessee shall comply
with Article 13 ("Surrender of Premises") of this Lease with respect to such
portion of the Premises affected thereby.
SECTION 10.2 DISCHARGE OF COMMISSION. Lessee shall, at its sole cost and
expense, discharge in full (a) any outstanding commission obligation on the
part of Lessor with respect to this Lease in the event that all or any
portion of this Lease is recaptured pursuant to this ARTICLE 10, and (b) any
commission which may be due and owing as a result of any proposed assignment
or subletting, whether or not the subject portion of the Premises is
"recaptured" pursuant thereto and rented by Lessor to the proposed tenant or
any other tenant.
SECTION 10.3 RIGHT TO RECAPTURE NOT EXERCISED. If Lessor, upon receiving
Lessee's notice with respect to any such space, shall not exercise its right
to recapture as aforesaid, Lessor will not unreasonably withhold its consent
to Lessee's assignment of the Lease or subletting such space to the party
identified in Lessee's notice, provided, however, that in the event Lessor
consents to any such assignment or subletting, and as a condition thereto,
Lessee shall pay to Lessor ninety percent (90%) of all profit derived by
Lessee from such assignment or subletting. For purposes of the foregoing,
profit shall be deemed to include, but shall not be limited to, the amount of
all rent payable by such assignee or sublessee in excess of the Base Rent,
and rent adjustments, payable by Lessee under this Lease. If a part of the
consideration for such assignment or subletting shall be payable other than
in cash, the payment to Lessor shall be in cash for its share of any non-cash
consideration based upon the fair market value thereof.
SECTION 10.4 LESSEE'S PROFIT STATEMENT. Lessee shall and hereby agrees
that it will furnish to Lessor upon request from Lessor a complete statement,
certified by an independent certified public accountant, setting forth in
detail the computation of all profit derived and to be derived from such
assignment or subletting, such computation to be made in accordance with
generally accepted accounting principles. Lessee agrees that Lessor or its
authorized representatives shall be given access at all reasonable times to
the books, records and papers of Lessee relating to any such assignment or
subletting, and Lessor shall have the right to make copies thereof. The
percentage of Lessee's profit due Lessor hereunder shall be paid to Lessor
within five (5) days of receipt by Lessee of all payments made from time to
time by such assignee or sublessee to Lessee.
SECTION 10.5 LESSEE'S CHANGES DEEMED AN ASSIGNMENT. For purposes of the
foregoing, any change in the partners of Lessee, if Lessee is a partnership
which results in a transfer of at least fifty percent (50%) or more of the
interests in the partnership, or, if Lessee is a corporation, any transfer of
at least fifty percent (50%) of the shares of stock of Lessee by sale,
assignment, operation of law or otherwise, shall be deemed to be an
assignment within the meaning of this Article 10; provided, however, that the
sale of stock in a public offering for an aggregate price of at least Twenty
Million Dollars ($20,000,000.00) shall not be deemed to be an assignment
within the meaning of this ARTICLE 10.
SECTION 10.6 CONTINUING LESSEE LIABILITY. Any subletting or assignment
hereunder shall not release or discharge Lessee of or from any liability,
whether past, present or future, under this Lease, and Lessee shall continue
fully liable thereunder. The subtenant or subtenants or assignee shall agree
in a form satisfactory to Lessor to comply with and be bound by all of the
terms, covenants, conditions, provisions and agreements of this Lease to the
extent of the space sublet or assigned, and Lessee shall deliver to Lessor
promptly after execution an executed copy of each such sublease or assignment
and an agreement of compliance by each such subtenant or assignee. Consent by
Lessor to any assignment of this Lease or to any subletting of the Premises
shall not be a waiver of Lessor's rights under this Article 10 as to any
subsequent assignment or subletting.
SECTION 10.7 VOID TRANSFERS. Any sale, assignment, mortgage, transfer,
or subletting of this Lease which is not in compliance with the provisions of
this Article 10 shall be of no effect and void. Lessor's right to assign its
interest in this Lease shall remain unqualified. Lessor may make a reasonable
charge to Lessee for any reasonable attorneys' fees or expenses incident to a
review of
-15-
<PAGE>
any documentation related to any proposed assignment or subletting by Lessee.
Notwithstanding anything contained herein to the contrary, Lessee shall be
entitled, without otherwise complying with the provisions of this Article 10,
to assign this Lease or sublet the Premises to any parent, affiliate or
subsidiary of Lessee, without first obtaining Lessor's consent; provided,
Lessee shall remain fully liable for the obligations of this Lease, and the
assignee or sublessee shall assume all obligations of Lessee hereunder.
SECTION 10.8 PROHIBITED TRANSFEREES. Notwithstanding anything to the
contrary in this Lease, Lessee shall not assign its rights under this Lease
or sublet all or any part of the Premises to a person, firm or corporation
which is (or, immediately prior to such subletting or assignment, was) a
tenant or occupant of the Office Complex or the building located at 7701
Stemmons Freeway, Dallas, Texas, or any office building on property
contiguous to the Office Complex owned by Lessor under the Lease.
SECTION 10.9 CRITERIA FOR WITHHOLDING CONSENT. The consent of Lessor to
a transfer may not be unreasonably withheld, conditioned or delayed, provided
that should Lessor withhold its consent for any of the following reasons,
which list is not exclusive, such withholding shall be deemed to be
reasonable:
(a) Financial strength of the proposed transferee is not at least equal to
that of Lessee at the time of execution of this Lease or of lessees
occupying comparable premises in the Office Complex or in other
buildings owned or operated by Lessor located in the same metropolitan
area as the Office Complex;
(b) A proposed transferee whose occupation of the Premises would cause a
diminution in the reputation of the Office Complex or the other
businesses located therein;
(c) A proposed transferee whose occupancy will require any material
variation in the terms and conditions of this Lease.
Lessee agrees that its personal business skills and philosophy were an
important inducement to Lessor for entering into this Lease and that Lessor
may reasonably object to the transfer of the Premises to another whose
proposed use, while permitted by this Lease, would involve a different,
quality, manner or type of business skills than that of Lessee.
ARTICLE 11
DAMAGE BY FIRE OR OTHER CASUALTY
SECTION 11.1 TENANTABLE WITHIN 240 DAYS. If fire or other casualty shall
render the whole or any material portion of the Premises untenantable, and
the Premises can reasonably be expected to be made tenantable within two
hundred forty (240) days from the date of such event, then Lessor shall
repair and restore the Premises and the Office Complex to as near their
condition prior to the fire or other casualty as is reasonably possible
within such two hundred forty (240) day period (subject to delays for causes
beyond Lessor's reasonable control) and notify Lessee that it will be doing
so, such notice to be mailed within thirty (30) days from the date of such
damage or destruction, and this Lease shall remain in full force and effect,
but the Rent for the period during which the Premises are untenantable shall
be abated pro rata (based upon the portion of the Premises which is
untenantable). If Lessor is required to repair the Office Complex and/or the
Premises as aforesaid, said work shall be undertaken and prosecuted with all
due diligence and speed, and shall be completed within two hundred forty
(240) days following the date of such fire or other casualty (subject to
force majeure) failing which, Lessee shall be entitled to terminate this
Lease in the event that such repairs are not completed within sixty (60) days
after written notice from Lessee that Lessee desires to terminate this Lease
because such repairs have not been completed within such two hundred forty
(240) day period.
SECTION 11.2 NOT TENANTABLE WITHIN 240 DAYS. If fire or other casualty
shall render the whole or any material part of the Premises untenantable and
the Premises cannot reasonably be expected to be made tenantable within two
hundred forty (240) days from the date of such event, then either party, by
notice in writing to the other mailed within thirty (30) days from the date
of such damage or destruction, may terminate this Lease effective upon a date
within thirty (30) days from the date of such notice.
SECTION 11.3 OFFICE COMPLEX SUBSTANTIALLY DAMAGED. In the event that
more than fifty percent (50%) of the value of the Office Complex is damaged
or destroyed by fire or other casualty, and irrespective of whether damage or
destruction can be made tenantable within two hundred forty
-16-
<PAGE>
(240) days thereafter, then at Lessor's or Lessee's option, by written notice
to the other, mailed within forty-five (45) days from the date of such damage
or destruction, either party may terminate this Lease effective upon the date
ninety (90) days after such notice.
SECTION 11.4 DEDUCTIBLE PAYMENTS. If the Premises or the Office Complex
is damaged, and such damage is of the type insured against under the fire and
special form property damage insurance maintained by Lessor hereunder, the
cost of repairing said damage up to the amount of the deductible under said
insurance policy shall be included as a part of the Operating Expenses.
SECTION 11.5 LESSOR'S REPAIR OBLIGATIONS. If fire or other casualty
shall render the whole or any material part of the Premises untenantable and
the Premises cannot reasonably be expected to be made tenantable within two
hundred forty (240) days from the date of such event and neither party hereto
terminates this Lease pursuant to its rights herein or in the event that more
than fifty percent (50%) of the value of the Office Complex is damaged or
destroyed by fire or other casualty, and neither party terminates this Lease
pursuant to its option granted herein, or in the event that fifty percent
(50%) or less of the value of the Office Complex is damaged or destroyed by
fire or other casualty and neither the whole nor any material portion of the
Premises is rendered untenantable, then Lessor shall repair and restore the
Premises and the Office Complex to as near their condition prior to the fire
or other casualty as is reasonably possible with all due diligence and speed
(subject to delays for causes beyond Lessor's reasonable control) and shall
be completed within two hundred forty (240) days following the date of such
fire or other casualty (subject to force majeure) failing which, Lessee shall
be entitled to terminate this Lease in the event that such repairs are not
completed within sixty (60) days after written notice from Lessee that Lessee
desires to terminate this Lease because such repairs have not been completed
within such 240 day period. Rent for the period during which the Premises are
untenantable shall be abated pro rata (based upon the portion of the Premises
which is untenantable). In no event shall Lessor be obligated to repair or
restore any special equipment or improvements installed by Lessee at Lessee's
expense.
SECTION 11.6 RENT APPORTIONMENT. In the event of a termination of this
Lease pursuant to this Article 11, Rent shall be apportioned on a per diem
basis and paid to the date of the fire or other casualty.
ARTICLE 12
EMINENT DOMAIN
SECTION 12.1 LESSEE'S TERMINATION. If the whole of or any substantial
part of the Premises is taken by any public authority under the power of
eminent domain, or taken in any manner for any public or quasi-public use, so
as to render (in Lessee's reasonable judgment) the remaining portion of the
Premises unsuitable for the purposes intended hereunder, then the term of
this Lease shall cease as of the day possession shall be taken by such public
authority and Lessor shall make a pro rata refund of any prepaid rent. All
damages awarded for such taking under the power of eminent domain or any like
proceedings shall belong to and be the property of Lessor, Lessee hereby
assigning to Lessor its interest, if any, in said award; provided, however,
Lessor shall have no interest in any award made to Lessee for loss of
business or goodwill. In the event that fifty percent (50%) or more of the
building area or fifty percent (50%) or more of the value of the Office
Complex is taken by public authority under the power of eminent domain, then
either party may terminate this Lease by delivering, within sixty (60) days
after possession is taken, written notice thereof to the other party, which
termination shall be effective as of the date ninety (90) days after such
termination notice is given.
SECTION 12.2 LESSEE'S PARTICIPATION. Provisions in this Article 12 to
the contrary notwithstanding, Lessee shall have the right to prove in any
condemnation proceedings and to receive any separate award which may be made
for damages to or condemnation of Lessee's movable trade fixtures and
equipment and for moving expenses; provided, however, Lessee shall in no
event have any right to receive any award for its interest in this Lease or
for loss of leasehold. Provisions in this Article 12 to the contrary
notwithstanding, in the event of a partial condemnation of the Office Complex
or the Premises and this Lease is not terminated, Lessor shall, at its sole
cost and expense, restore the Premises and Office Complex to a complete
architectural unit and the Base Rent provided for herein during the period
from and after the date of delivery of possession pursuant to such
proceedings to the termination of this Lease shall be reduced to a sum equal
to the product of the Base Rent provided for herein multiplied by a fraction,
the numerator of which is the fair market rent of the Premises after such
taking and after same has been restored to a complete architectural unit, and
the denominator of which is the fair market rent of the Premises prior to
such taking.
-17-
<PAGE>
ARTICLE 13
SURRENDER OF PREMISES
SECTION 13.1 SURRENDER OF POSSESSION. On the last day of the term of
this Lease, or on the sooner termination thereof, Lessee shall peaceably
surrender the Premises in good condition and repair consistent with Lessee's
duty to make repairs as herein provided. On or before the last day of the
term of this Lease, or the date of sooner termination thereof, Lessee shall,
at its sole cost and expense, remove all of its property and trade fixtures
and equipment from the Premises, and all property not removed shall be deemed
abandoned. Lessee hereby appoints Lessor its agent to remove all abandoned
property of Lessee from the Premises upon termination of this Lease and to
cause its transportation and storage for Lessee's benefit, all at the sole
cost and risk of Lessee and Lessor shall not be liable for damage, theft,
misappropriation or loss thereof and Lessor shall not be liable in any manner
in respect thereto. Lessee shall pay all reasonable costs and expenses of
such removal, transportation and storage. Lessee shall leave the Premises in
good order, condition and repair, reasonable wear and tear and damage from
fire and other casualty or which is the responsibility of Lessor excepted.
Lessee shall reimburse Lessor within thirty (30) days following its receipt
of written demand for any expenses incurred by Lessor with respect to
removal, transportation, or storage of abandoned property and with respect to
restoring said Premises to the condition required by this Lease. All
alterations, additions and fixtures, other than Lessee's furniture, personal
property, trade fixtures and equipment which have been made or installed by
either Lessor or Lessee upon the Premises, shall remain the property of
Lessor and shall be surrendered with the Premises as a part thereof. If the
Premises are not surrendered at the end of the term or sooner termination
thereof, Lessee shall indemnify Lessor against loss or liability resulting
from delay by Lessee in so surrendering the Premises, including, without
limitation, claims made by any succeeding tenants founded on such delay and
any attorneys' fees resulting therefrom. Lessee shall promptly surrender all
keys for the Premises to Lessor at the place then fixed for the payment of
rent and shall inform Lessor of combinations on any vaults, locks and safes
left on the Premises.
SECTION 13.2 LESSEE RETAINING POSSESSION. In the event Lessee remains in
possession of the Premises after expiration of this Lease, and without the
execution of a new lease, but with Lessor's written consent, it shall be
deemed to be occupying the Premises as a tenant from month to month, subject
to all the provisions, conditions and obligations of this Lease insofar as
the same can be applicable to a month-to-month tenancy, except that the Base
Rent shall be escalated to Lessor's then current base rent for the Premises
according to Lessor's then current rental rate schedule for prospective
tenants, but not in excess of 150% of the Base Rent otherwise payable under
the Lease. In the event Lessee remains in possession of the Premises after
expiration of this Lease and without the execution of a new lease and without
Lessor's written consent, Lessee shall be deemed to be occupying the Premises
without claim of right and Lessee shall pay Lessor for all costs arising out
of loss or liability resulting from delay by Lessee in so surrendering the
Premises as above provided and shall pay a charge for each day of occupancy
an amount equal to one hundred fifty percent (150%) of the Base Rent and
Additional Rent (on a daily basis) payable under this Lease upon expiration.
ARTICLE 14
DEFAULT OF LESSEE
SECTION 14.1 EVENTS OF DEFAULT. The occurrence of any one or more of the
following events (in this Article sometimes called "Event of Default") shall
constitute a default and breach of this Lease by Lessee:
(a) If Lessee fails to pay any Base Rent or Additional Rent payable
under this Lease or fails to pay any obligation required to be paid
by Lessee when and as the same shall become due and payable, and
such default continues for a period of ten (10) days after written
notice thereof given by Lessor to Lessee.
(b) If Lessee fails to perform any of Lessee's nonmonetary obligations
under this Lease for a period of thirty (30) days after written
notice from Lessor; provided that if more time is required to
complete such performance, Lessee shall not be in default if Lessee
commences such performance within the thirty (30)-day period and
thereafter diligently pursues its completion. The notice required
by this subsection is intended to satisfy any and all notice
requirements imposed by law on Lessor and is not in addition to any
such requirement.
-18-
<PAGE>
(c) If Lessee, by operation of law or otherwise, violates the
provisions of Article 10 hereof relating to assignment, sublease,
mortgage or other transfer of Lessee's interest in this Lease or in
the Premises or in the income arising therefrom.
(d) If Lessor discovers that any financial statement, warranty,
representation or other information given to Lessor by Lessee, any
assignee of Lessee, any subtenant of Lessee, any successor in
interest of Lessee or any guarantor of Lessee's obligation
hereunder, and any of them, in connection with this Lease, was
materially false or misleading when made or furnished.
(e) Lessee, by operation of law or otherwise, violates the provisions of
Section 4.4 relating to compliance with environmental laws.
(f) If there is a default by the lessee under that certain Office Lease
dated of even date herewith, between Lessor and Lessee, covering
Tower I of the Office Complex.
(g) If (i) Lessee makes a general assignment or general arrangement for
the benefit of creditors; (ii) a petition for adjudication of
bankruptcy or for reorganization or rearrangement is filed by or
against Lessee and is not dismissed within sixty (60) days; (iii)
if a trustee or receiver is appointed to take possession of
substantially all of Lessee's assets located at the Premises or of
Lessee's interest in the Lease and possession is not restored to
Lessee within sixty (60) days; or (iv) if substantially all of
Lessee's assets located at the Premises or of Lessee's interest in
this Lease is subjected to attachment, execution or other judicial
seizure which is not discharged within sixty (60) days. If a court
of competent jurisdiction determines that any of the acts described
in this subsection does not constitute an Event of Default and a
trustee is appointed to take possession (or if Lessee remains a
debtor in possession) and such trustee or Lessee transfers Lessee's
interest hereunder, then Lessor shall receive, as Additional Rent,
the difference between the Rent (or any other consideration) paid
in connection with such assignment or sublease and the Rent payable
by Lessee hereunder. As used in this subsection, the term "Lessee"
shall also mean any guarantor of Lessee's obligations under this
Lease. If any such Event of Default shall occur, Lessor, at any
time during the continuance of any such Event of Default, may give
written notice to Lessee stating that this Lease shall expire and
terminate on the date specified in such notice, and upon the date
specified in such notice this Lease, and all rights of Lessee under
this Lease, including all rights of renewal whether exercised or
not, shall expire and terminate, or in the alternative or in
addition to the foregoing remedy, Lessor may assert and have the
benefit of any other remedy allowed herein, at law, or in equity.
SECTION 14.2 LESSOR'S REMEDIES. Upon the occurrence and during the
continuance of an Event of Default by Lessee, with or without notice or
demand and without limiting Lessor in the exercise of any right or remedy
which Lessor may have, Lessor shall be entitled to the rights and remedies
set forth below.
(a) TERMINATION OF POSSESSION. Terminate Lessee's right to possession
of the Premises by any lawful means, in which case the Lease shall
terminate and Lessee shall immediately surrender possession of the
Premises to Lessor. In such event, Lessor shall have the immediate
right to reenter and remove all persons and property, and such
property may be removed and stored in a public warehouse or
elsewhere at the cost of, and for the account of Lessee, all
without service of notice or resort to legal process and without
being deemed guilty of trespass, or becoming liable for any loss or
damage which may be occasioned thereby. Lessor shall have the right
to change the locks on any door of the Premises without notifying
Lessee of the name, address or telephone number of an individual or
company from whom a new key may be obtained, nor shall Lessor have
any obligation to provide a new key to Lessee until such time as
all Events of Default have been cured and Lessee has provided to
Lessor additional security for or further assurances of Lessee's
future performance of all Lessee's obligations arising under this
Lease, such security and assurances to be satisfactory to Lessor in
the exercise of Lessor's sole and absolute discretion. In the event
that Lessor shall elect to so terminate this Lease, then Lessor
shall be entitled to recover from Lessee all damages incurred by
Lessor by reason of Lessee's default, including:
-19-
<PAGE>
(i) The equivalent of the amount of the Base Rent and Additional
Rent which would be payable under this Lease by Lessee if this
Lease were still in effect, less
(ii) The net proceeds of any reletting affected pursuant to the
provisions of Section 14.2 hereof after deducting all of
Lessor's reasonable expenses in connection with such
reletting, including, without limitation, all repossession
costs, brokerage commissions, legal expenses, reasonable
attorneys' fees, alteration costs, and expenses of preparation
of the Premises, or any portion thereof, for such reletting.
Lessee shall pay such current damages in the amount determined in
accordance with the terms of this Section 14.2 as set forth in a
written statement thereof from Lessor to Lessee (hereinafter called
the "Deficiency"), to Landlord in monthly installments on the days
on which the Rent would have been payable under this Lease if this
Lease were still in effect, and Landlord shall be entitled to
recover from Tenant each monthly installment of the Deficiency as
the same shall arise.
(b) DAMAGES. In lieu of recovering the monthly Deficiency as set forth
in Section 14.2, Lessor shall be entitled to recover from Lessee,
and Lessee shall pay to Lessor, within thirty (30) days after its
receipt of written demand, as and for final damages for Lessee's
default, an amount equal to the difference between the then present
worth of the aggregate of the Base Rent and Additional Rent and any
other charges to be paid by Lessee hereunder for the unexpired
portion of the term of this Lease (assuming this Lease had not been
so terminated), and the then present worth of the then aggregate
fair and reasonable fair market rent of the Premises for the same
period. In the computation of present worth, a discount at the rate
of 6% per annum shall be employed. If the Premises, or any portion
thereof, shall be relet by Lessor for the unexpired term of this
Lease, or any part thereof, before presentation of proof of such
damages to any court, commission or tribunal, the amount of Rent
reserved upon such reletting shall, prima facie, be the fair and
reasonable fair market rent for the part or the whole of the
Premises so relet during the term of the reletting. Nothing herein
contained or contained in Section 14.2 shall limit or prejudice the
right of Lessor to prove for and obtain, as damages by reason of
such expiration or termination, an amount equal to the maximum
allowed by any statute or rule of law in effect at the time when,
and governing the proceedings in which, such damages are to be
proved, whether or not such amount be greater, equal to or less
than the amount of the difference referred to above.
(c) REENTRY AND REMOVAL. Upon the occurrence and during the continuance
of an Event of Default by Lessee, Lessor shall also have the right,
with or without terminating this Lease, to reenter the Premises to
remove all persons and property from the Premises. Such property
may be removed and stored in a public warehouse or elsewhere at the
cost of and for the account of Lessee. If Lessor shall elect to
reenter the Premises, Lessor shall not be liable for damages by
reason of such reentry.
(d) NO TERMINATION; RECOVERY OF RENT. If Lessor does not elect to
terminate this Lease as provided in this Section 14.2, then Lessor
may, from time to time, recover all Rent as it becomes due under
this Lease. At any time thereafter before the default is cured,
Lessor may elect to terminate this Lease and to recover damages to
which Lessor is entitled.
(e) RELETTING THE PREMISES. In the event that Lessor should elect to
terminate this Lease and to relet the Premises, it may execute any
new lease in its own name. Lessee hereunder shall have no right or
authority whatsoever to collect any Rent from such Lessee. The
proceeds of any such reletting shall be applied as follows:
(i) First, to the payment of any indebtedness other than Rent due
hereunder from Lessee to Lessor, including but not limited to
storage charges or brokerage commissions owing from Lessee to
Lessor as the result of such reletting;
(ii) Second, to the payment of the costs and expenses of reletting
the Premises, including alterations and repairs which Lessor
deems reasonably necessary and advisable and reasonable
attorneys' fees incurred by Lessor in connection with the
retaking of the said Premises and such reletting;
-20-
<PAGE>
(iii) Third, to the payment of Rent and other charges due and
unpaid hereunder; and
(iv) Fourth, to the payment of future Rent and other damages
payable by Lessee under this Lease.
The parties hereto shall, and they hereby do, waive trial by jury in any
action, proceeding, or counterclaim brought by either of the parties
hereto against the other on any matters whatsoever arising out of, or in
any way connected with, this Lease, the relationship of Lessor and
Lessee, Lessee's use or occupancy of the Premises and/or Office Complex,
and/or claim or injury or damage.
SECTION 14.3 WRITTEN NOTICE OF TERMINATION REQUIRED. Lessor shall not be
deemed to have terminated this Lease and the Lessee's right to possession of
the leasehold or the liability of Lessee to pay Rent thereafter to accrue or
its liability for damages under any of the provisions hereof, unless Lessor
shall have notified Lessee in writing that it has so elected to terminate
this Lease. Lessee covenants that the service by Lessor of any notice
pursuant to the applicable unlawful detainer statutes of the state in which
the Office Complex is located and the Lessee's surrender of possession
pursuant to such notice shall not (unless Lessor elects to the contrary at
the time of, or at any time subsequent to the service of, such notice, and
such election be evidenced by a written notice to Lessee) be deemed to be a
termination of this Lease or of Lessee's right to possession thereof.
SECTION 14.4 REMEDIES CUMULATIVE; NO WAIVER. All rights, options and
remedies of Lessor contained in this Lease shall be construed and held to be
cumulative, and no one of them shall be exclusive of the other, and Lessor
shall have the right to pursue any one or all of such remedies or any other
remedy or relief which may be provided by law whether or not stated in this
Lease, except as otherwise expressly set forth herein. No waiver by Lessor
of a breach of any of the terms, covenants or conditions of this Lease by
Lessee shall be construed or held to be a waiver of any succeeding or
preceding breach of the same or any other term, covenant or condition therein
contained. No waiver of any default of Lessee hereunder shall be implied from
any omission by Lessor to take any action on account of such default if such
default persists or is repeated, and no express waiver shall affect default
other than as specified in said waiver. The consent or approval by Lessor to
or of any act by Lessee requiring Lessor's consent or approval shall not be
deemed to waive or render unnecessary Lessor's consent to or approval of any
subsequent similar acts by Lessee.
SECTION 14.5 LEGAL COSTS. The prevailing party in any dispute hereunder
shall be entitled to recover, upon demand, for any reasonable costs or
expenses incurred in connection with any breach or default under this Lease,
whether or not suit is commenced or judgment entered. Such costs shall
include reasonable legal fees and costs incurred for the negotiation of a
settlement, enforcement of rights or otherwise. Furthermore, if any action
for breach of or to enforce the provisions of this Lease is commenced, the
court in such action shall award to the party in whose favor a judgment is
entered a reasonable sum as attorneys' fees and costs. Such attorneys' fees
and costs shall be paid by the losing party in such action. Lessee shall also
indemnify Lessor against and hold Lessor harmless from all costs, expenses,
demands and liability incurred by Lessor if Lessor becomes or is made a party
to any claim or action (a) instituted by Lessee, or by any third party
against Lessee; (b) for foreclosure of any lien for labor or material
furnished to or for Lessee or such other person; (c) otherwise arising out of
or resulting from any act or transaction of Lessee or such other person; or
(d) necessary to protect Lessor's interest under this Lease in a bankruptcy
proceeding, or other proceeding under Title 11 of the United States Code, as
amended. Lessee shall defend Lessor against any such claim or action at
Lessee's expense with counsel reasonably acceptable to Lessor or, at Lessor's
election, Lessee shall reimburse Lessor for any legal fees or costs incurred
by Lessor in any such claim or action.
In addition, Lessee shall pay Lessor's reasonable attorneys' fees
incurred in connection with Lessee's request for Lessor's consent in
connection with any act which Lessee proposed to do and which requires
Lessor's consent.
SECTION 14.6 WAIVER OF DAMAGES FOR REENTRY. Lessee hereby waives all
claims by Lessor's reentering and taking possession of the Premises or
removing and storing the property of Lessee as permitted under this Lease and
will save Lessor harmless from all losses, costs or damages occasioned Lessor
thereby. No such reentry shall be considered or construed to be a forcible
entry by Lessor.
-21-
<PAGE>
ARTICLE 15
SUBORDINATION/ESTOPPEL
SECTION 15.1 LEASE SUBORDINATE. This Lease shall be subject and
subordinate to any mortgage, deed of trust or ground lease now or hereafter
placed upon the Premises, the Office Complex, the Property, or any portion
thereof by Lessor, its successors or assigns, and to amendments,
replacements, renewals and extensions thereof. Lessee agrees at any time
hereafter, within ten (10) days following Lessee's receipt of written demand,
to execute and deliver any instruments, releases, or other documents that may
be reasonably required for the purpose of subjecting and subordinating this
Lease, as above provided, to the lien of any such mortgage, deed of trust or
ground lease. It is agreed, nevertheless, that as long as Lessee is not in
default beyond any applicable curative periods in the payment of Base Rent,
Additional Rent, and the payment of other charges to be paid by Lessee under
this Lease, and the performance of all covenants, agreements and conditions
to be performed by Lessee under this Lease, then neither Lessee's right to
quiet enjoyment under this Lease, nor the right of Lessee to continue to
occupy the Premises and to conduct its business thereon, in accordance with
the terms of this Lease as against any lessor, lessee, mortgagee, trustee, or
their successors or assigns shall be interfered with.
SECTION 15.2 ATTORNMENT. The above subordination shall be effective
without the necessity of the execution and delivery of any further
instruments on the part of Lessee to effectuate such subordination.
Notwithstanding anything hereinabove contained in this Article 15, in the
event the holder of any mortgage, deed of trust or ground lease shall at any
time elect to have this Lease constitute a prior and superior lien to its
mortgage, deed of trust or ground lease, then, and in such event, upon any
such holder or landlord notifying Lessee to that effect in writing, this
Lease shall be deemed prior and superior in lien to such mortgage, deed of
trust, ground lease, whether this Lease is dated prior or subsequent to the
date of such mortgage, deed of trust or ground lease and Lessee shall execute
such attornment agreement as may be reasonably requested by said holder or
landlord.
SECTION 15.3 LESSEE'S NOTICE OF DEFAULT. Lessee agrees, provided the
mortgagee, ground lessor or trust deed holder under any mortgage, ground
lease, deed of trust or other security instrument shall have notified Lessee
in writing (by the way of a notice of assignment of lease or otherwise) of
its address, Lessee shall give such mortgagee, ground lessor or trust deed
holder or other secured party ("Mortgagee"), simultaneously with delivery of
notice to Lessor, by registered or certified mail, a copy of any such notice
of default served upon Lessor. Lessee further agrees that said Mortgagee
shall have the right to cure any alleged default during the same period that
Lessor has to cure such default.
SECTION 15.4 ESTOPPEL CERTIFICATES. Lessee agrees from time to time upon
not less than twenty (20) days prior written request by Lessor to deliver to
Lessor a statement in writing certifying (a) that this Lease is unmodified
and in full force and effect (or if there have been modifications that the
Lease as modified is in full force and effect and stating the modifications);
(b) the dates to which the rent and other charges have been paid; (c) Lessor
is not in default in any provision of this Lease or, if in default, the
nature thereof specified in detail; (d) the amount of monthly rental
currently payable by Lessee; (e) the amount of any prepaid rent, and (f) such
other matters as may be reasonably requested by Lessor or any mortgagee or
prospective purchaser of the Office Complex.
If Lessee does not deliver such statement to Lessor within such twenty
(20) day period, Lessor and any prospective purchaser or encumbrancer of the
Premises or the Office Complex may conclusively presume and rely upon the
following facts: (i) that the terms and provisions of this Lease have not
been changed except as otherwise represented by Lessor; (ii) that this Lease
has not been canceled or terminated and is in full force and effect, except
as otherwise represented by Lessor; (iii) that the current amounts of the
Base Rent and Security Deposit are as represented by Lessor and that any
changes made against the Security Deposit are uncontested and valid; (iv)
that there have been no subleases or assignments of the Lease; (v) that not
more than one month's Base Rent or other charges have been paid in advance;
and (vi) that Lessor is not in default under the Lease. In such event, Lessee
shall be estopped from denying the truth of such facts.
SECTION 15.5 NON-DISTURBANCE AGREEMENT. Notwithstanding anything
contained herein to the contrary: prior to the Commencement Date hereof,
Lessor shall deliver to Lessee an agreement executed by the holder of any
mortgage lien against the Office Complex confirming its agreement not to
disturb Lessee's possession of the Premises or to terminate this Lease so
long as Lessee is not in default of this Lease, except as specifically set
forth in this Lease (a "Non-Disturbance Agreement").
-22-
<PAGE>
ARTICLE 16
MISCELLANEOUS
SECTION 16.1 TIME IS OF THE ESSENCE. Time is of the essence with respect
to the performance of every provision of this Lease in which time of
performance is a factor.
SECTION 16.2 MEMORANDUM OF LEASE. No Memorandum of this Lease may be
recorded by Lessee without the prior written consent of Lessor.
SECTION 16.3 JOINT AND SEVERAL LIABILITY. All parties signing this Lease
as Lessee shall be jointly and severally liable for all obligations of Lessee.
SECTION 16.4 BROKER. Lessee represents that Lessee has dealt directly
with and only with Bradford Realty Services of Dallas, Inc. and Jackson &
Cooksey, as broker, in connection with this Lease and that insofar as Lessee
knows, no other broker negotiated or participated in negotiations of this
Lease or submitted or showed the Premises or is entitled to any commission in
connection therewith. Each party shall indemnify and hold the other party
harmless from any claim by a broker or finder claiming a right to a fee or
commission under or through it.
SECTION 16.5 NOTICES. All notices, demands and requests shall be in
writing, and shall be effectively served by forwarding such notice, demand or
request by certified or registered mail, postage prepaid, or by commercial
overnight courier service addressed as follows:
(a) IF ADDRESSED TO LESSEE:
EXE Technologies, Inc.
300 Baldwin Tower Boulevard
Eddystone, Pennsylvania 19022
Attn: Joanie Hadick
with a copy to:
EXE Technologies, Inc.
8787 Stemmons Freeway, Suite ______
Dallas, Texas _______
Attn: Raymond Hood
(b) IF ADDRESSED TO LESSOR:
BLI-8787, Ltd.
8235 Douglas Avenue, Suite 200
Dallas, Texas 75225
Attn: David A. Lane
with a copy to:
Andrews & Barth, P.C.
8235 Douglas Avenue, Suite 1120
Dallas, Texas 75225
Attn: Jeffrey W. Harrison
or at such other address as Lessor and Lessee may hereafter designate by
written notice. The effective date of all notices shall be the time of
mailing such notice or the date of delivery to a commercial overnight courier
service.
SECTION 16.6 LESSOR'S AGENT. All rights and remedies of Lessor under
this Lease or that may be provided by law may be executed by Lessor in its
own name individually, or in the name of its agent and all legal proceedings
for the enforcement of any such rights or remedies, including those set forth
in Article 14, may be commenced and prosecuted to final judgment and
execution by Lessor in its own name or in the name of its agent.
-23-
<PAGE>
SECTION 16.7 QUIET POSSESSION. Lessor covenants and agrees that Lessee,
upon paying the Base Rent, Additional Rent and other charges herein provided
for and observing and keeping the covenants, agreements and conditions of
this Lease on its part to be kept and performed, shall lawfully and quietly
hold, occupy and enjoy the Premises during the term of this Lease. If Lessor
fails to perform any of its obligations hereunder within thirty (30) days
after written notice thereof from Lessee or such longer period of time if
such default is not capable of cure within thirty (30) days but Lessor is
pursuing a cure, Lessee shall be entitled, as its sole remedy, in the event
that such default is not cured within the applicable cure period, to take
such action as may be required to have been taken by Lessor under the Lease,
in which event Lessor agrees to pay to Lessee within thirty (30) days after
receipt of written notice from Lessee (with accompanying paid invoices) all
reasonable cost and expenses incurred by Lessee in connection therewith,
failing which Lessee shall be entitled to offset such sums against the Rent
next becoming due under the Lease; provided, such offset shall not exceed
more than twenty percent (20%) of monthly Base Rent payable each month until
such offset has been fully recouped. In the event the expenditure cannot be
fully recouped from the next monthly payment of Base Rent as a result of such
limitation, Lessee shall be entitled to recover interest with respect to each
subsequent monthly offset from the date of the expenditure to the date of
offset at a per annum rate equal to the bank prime rate publicized in the
WALL STREET JOURNAL, as the same may change from time to time.
SECTION 16.8 SUCCESSORS AND ASSIGNS. The covenants and agreements herein
contained shall bind and inure to the benefit of the Lessor, its successors
and assigns, and Lessee and its permitted successors and assigns.
SECTION 16.9 SEVERABILITY. If any term or provision of this Lease shall
to any extent be held invalid or unenforceable, the remaining terms and
provisions of this Lease shall not be affected thereby, but each term and
provision of this Lease shall be valid and enforced to the fullest extent
permitted by law. This Lease shall be construed and enforced in accordance
with the laws of the state in which the Premises are located.
SECTION 16.10 NO ABANDONMENT OR WASTE. Lessee covenants not to do or
suffer any waste or damage or disfigurement or injury to the Premises or
Office Complex and Lessee further covenants that it will not vacate or
abandon the Premises during the term of this Lease.
SECTION 16.11 TRANSFERS BY LESSOR. The term "Lessor" as used in this
Lease so far as covenants or obligations on the part of Lessor are concerned
shall be limited to mean and include only the owner or owners of the Office
Complex at the time in question, and in the event of any transfer or
transfers or conveyances the then grantor, provided that the grantee
expressly assumes the obligations of Lessor hereunder, shall be automatically
freed and released from all personal liability accruing from and after the
date of such transfer or conveyance as respects the performance of any
covenant or obligation on the part of Lessor contained in this Lease to be
performed, it being intended hereby that the covenants and obligations
contained in this Lease on the part of Lessor shall be binding on the Lessor,
its successors and assigns, only during and in respect to their respective
successive periods of ownership.
In the event of a sale or conveyance by Lessor of the Office Complex or
any part of the Office Complex, the same shall operate to release Lessor from
any future liability upon any of the covenants or conditions herein
contained, provided that the grantee expressly assumes the obligations of
Lessor hereunder, and in such event Lessee agrees to look solely to the
responsibility of the successor in interest of Lessor in and to this Lease.
This Lease shall not be affected by any such sale or conveyance, and Lessee
agrees to attorn to the purchaser or grantee, which shall be personally
obligated on this Lease only so long as it is the owner of Lessor's interest
in and to this Lease.
SECTION 16.12 HEADINGS. The marginal or topical headings of the several
articles and sections are for convenience only and do not define, limit or
construe the contents of said articles and sections.
SECTION 16.13 WRITTEN AGREEMENT. All preliminary negotiations are
merged into and incorporated in this Lease, except for written collateral
agreements executed contemporaneously herewith.
SECTION 16.14 MODIFICATIONS OR AMENDMENTS. This Lease can only be
modified or amended by an agreement in writing signed by the parties hereto.
No receipt of money by Lessor from Lessee or any other person after
termination of this Lease or after the service of any notice or after the
commencement of any suit, or after final judgment for possession of the
Premises shall reinstate,
-24-
<PAGE>
continue or extend the term of this Lease or affect any such notice, demand
or suit, or imply consent for any action for which Lessor's consent is
required, unless specifically agreed to in writing by Lessor. Any amounts
received by Lessor after a default may be allocated to any specific amounts
due from Lessee to Lessor as Lessor determines.
SECTION 16.15 LESSOR CONTROL. Lessor shall have the right to close any
portion of the building area or land area to the extent as may, in Lessor's
reasonable opinion, be necessary to prevent a dedication thereof or the
accrual of any rights to any person or the public therein; provided, however,
notwithstanding anything contained herein to the contrary, if any activity by
Lessor under this Section 16.15 prevents Lessee's access to the Premises or
if same otherwise substantially interferes with Lessee's use of the Premises
for a period of at least thirty (30) days, Lessee shall be entitled to
receive an equitable and proportionate abatement of Base Rent until same has
been corrected. Lessor shall at all times have full control management and
direction of the Office Complex, subject to the rights of Lessee in the
Premises, and Lessor reserves the right at any time and from time to time to
reduce, increase, enclose or otherwise change the size, number and location
of buildings, layout and nature of the Office Complex, to construct
additional buildings and additions to any building, and to create additional
rentable areas through use and/or enclosure of common areas, or otherwise,
and to place signs on the Office Complex, and to change the name, address,
number or designation by which the Office Complex is commonly known. In the
event Lessor changes the name or address of the Office Complex, Lessor shall
reimburse to Lessee the reasonable cost incurred by Lessee for replacing its
stationery, letterhead, employees' business cards and other related items. No
implied easements are granted by this Lease.
SECTION 16.16 UTILITY EASEMENT. Lessee shall permit Lessor (or its
designees) to erect, use, maintain, replace and repair pipes, cables,
conduits, plumbing, vents, and telephone, electric and other wires or other
items, in, to and through the Premises, as and to the extent that Lessor may
now or hereafter deem necessary or appropriate for the proper operation and
maintenance of the Office Complex, provided that Lessor shall not
unreasonably interfere with Lessee's use and occupancy of the Premises.
SECTION 16.17 NOT BINDING UNTIL PROPERLY EXECUTED. Employees or agents
of Lessor have no authority to make or agree to make a lease or other
agreement or undertaking in connection herewith. The submission of this
document for examination does not constitute an offer to lease, or a
reservation of, or option for, the Premises. This document becomes effective
and binding only upon the execution and delivery hereof by the proper
officers of Lessor and by Lessee. Lessee confirms that Lessor and its agents
have made no representations or promises with respect to the Premises or the
making of or entry into this Lease except as in this Lease expressly set
forth, and agrees that no claim or liability shall be asserted by Lessee
against Lessor for, and Lessor shall not be liable by reason of, breach of
any representations or promises not expressly stated in this Lease. This
Lease, except for the Building Rules and Regulations, in respect to which
Section 16.18 of this Article shall prevail, can be modified or altered only
by agreement in writing between Lessor and Lessee, and no act or omission of
any employee or agent of Lessor shall alter, change or modify any of the
provisions hereof.
SECTION 16.18 BUILDING RULES AND REGULATIONS. Lessee shall perform,
observe and comply with the Building Rules and Regulations of the Office
Complex as set forth below, with respect to the safety, care and cleanliness
of the Premises and the Office Complex, and the preservation of good order
thereon, and, upon written notice thereof to Lessee, Lessee shall perform,
observe, and comply with any reasonable changes, amendments or additions
thereto as from time to time shall be established and deemed advisable by
Lessor for tenants of the Office Complex. Lessor shall not be liable to
Lessee for any failure of any other tenant or tenants of the Office Complex
to comply with such Building Rules and Regulations; provided, however, Lessor
agrees to apply the Building Rules and Regulations equally to all tenants of
the Office Complex.
SECTION 16.19 COMPLIANCE WITH LAWS AND RECORDED COVENANTS. Lessee shall
not use the Premises or permit anything to be done in or about the Premises
which will, in any way, conflict with any law, statute, ordinance or
governmental rule or regulation now in force or which may hereafter be
enacted or promulgated. Lessee shall, at its sole cost and expense, promptly
comply with all laws, statutes, ordinances and governmental rules and
regulations now in force or which may hereafter be in force, and with the
requirements of any fire insurance underwriters or other similar body now or
hereafter constituted relating to or affecting the condition, use or
occupancy of the Premises. Lessee shall use the Premises and comply with any
recorded covenants, conditions, and restrictions affecting the Premises and
the Office Complex as of the commencement of the Lease or which are recorded
-25-
<PAGE>
during the lease term, provided same do not prevent Lessee from occupying the
Premises in accordance with the permitted use. Lessor shall deliver the
Premises to Lessee in compliance with, and shall, at its sole cost and
expense (but subject to Article 2 hereof), cause the Office Complex to comply
with any and all such laws, statutes, ordinances and governmental rules and
regulations, all such requirements of fire insurance underwriters, and all
such recorded covenants, conditions and restrictions relating to the
structural components, exterior components, common areas and rentable space
(other than the Premises) of the Office Complex; provided, however, that
Lessor shall be responsible for compliance of the exterior and common areas
of the Office Complex and the "core" areas of the Premises, consisting of
elevators, lobbies and restrooms, with the Americans with Disabilities Act,
and Lessee shall be responsible for compliance of the remainder of the
Premises with the Americans with Disabilities Act. In no event shall Lessee
be responsible for making any structural alterations to the Premises which
may be required pursuant to such legal requirements.
SECTION 16.20 LESSEE OBLIGATIONS SURVIVE TERMINATION. All obligations of
Lessee hereunder not fully performed as of the expiration or earlier
termination of the term of this Lease shall survive the expiration or earlier
termination of the term hereof, including, without limitation, all payment
obligations with respect to Operating Expenses and Real Estate Taxes and all
obligations concerning the condition of the Premises.
SECTION 16.21 LESSEE'S WAIVER. Lessee agrees to look solely to Lessor's
interest in the Office Complex for the recovery of any judgment from Lessor,
it being agreed that Lessor, or if Lessor is a partnership, its partners
whether general or limited, or if Lessor is a corporation, its directors,
officers or shareholders, shall never be personally liable for any such
judgment.
SECTION 16.22 LESSEE AUTHORIZATION. Lessee shall furnish to Lessor
promptly upon demand, a corporate resolution, proof of due authorization of
partners, or other appropriate documentation reasonably requested by Lessor
evidencing the due authorization of Lessee to enter into this Lease.
SECTION 16.23 NO PARTNERSHIP OR JOINT VENTURE. This Lease shall not be
deemed or construed to create or establish any relationship or partnership or
joint venture or similar relationship or arrangement between Lessor and
Lessee hereunder.
SECTION 16.24 LESSEE'S OBLIGATION TO PAY MISCELLANEOUS TAXES. Lessee
shall pay, prior to delinquency, all taxes assessed or levied upon its
occupancy of the Premises, or upon the trade fixtures, furnishings, equipment
and all other personal property of Lessee located in the Premises, and when
possible, Lessee shall cause such trade fixtures, furnishings, equipment and
other personal property to be assessed and billed separately from the
property of Lessor. In the event any or all of Lessee's trade fixtures,
furnishings, equipment or other personal property, or Lessee's occupancy of
the Premises, shall be assessed and taxed with the property of Lessor, Lessee
shall pay to Lessor its share of such taxes within thirty (30) days after
delivery to Lessee by Lessor of a statement in writing setting forth the
amount of such taxes applicable to Lessee's personal property.
SECTION 16.25 PROHIBITED SIGNS. Subject to SECTION 7.1 hereof, Lessee
shall not place, or permit to be placed or maintained, on any exterior door,
wall or window of the Premises any sign, awning or canopy, or advertising
matter or other thing of any kind, and will not place or maintain any
decoration, lettering or advertising matter on the glass of any window or
door, or that can be seen through the glass, of the Premises except as
specifically approved in writing by Lessor. Lessee further agrees to maintain
such sign, awning, canopy, decoration, lettering, advertising matter or thing
as may be approved, in good condition and repair at all times, reasonable
wear and tear and fire excepted. Lessee agrees at Lessee's sole cost, that
any Lessee sign will be maintained in strict conformance with Lessor's sign
criteria, if any, as to design, material, color, location, size, letter
style, and method of installation.
SECTION 16.26 RENEWAL OPTION. Lessor hereby grants Lessee (but no
assignee or subtenant) two (2) options to renew this Lease, each option to be
for a period of sixty (60) months, for a total of one hundred twenty (120)
months in the event both renewal options are exercised. Each said renewal
option shall be exercised by Lessee notifying Lessor thereof in writing not
more than two hundred seventy (270) and at least two hundred ten (210) days
prior to the expiration of the then current lease or renewal term, as the
case may be. In the event a renewal agreement has not been executed at least
one hundred twenty (120) days prior to the expiration date of the current
lease or renewal term, the option shall automatically become null and void.
Each such renewal shall be subject to all of the terms and conditions of this
Lease except that (i) the rentals payable during each renewal term shall be
as set forth below and (ii) no further renewal option shall exist during the
second renewal term. It
-26-
<PAGE>
shall be a condition to Lessee's exercising any renewal option herein granted
that (y) Lessee not be then in default under this Lease and (z) Lessee shall
have previously exercised the immediately preceding renewal option, if any,
so that the second renewal option may not be exercised if Lessee has failed
to exercise the first renewal option.
The Base Rent for each renewal term shall be based on not less than 95%
of the then prevailing rental rates for properties of equivalent quality,
size, utility and location in the Dallas/Forth Worth market, with the length
of the lease term and the creditworthiness of the Lessee taken into account;
provided, however, that in no event shall the Base Rent in any renewal period
be less than the Base Rent for the last month immediately preceding said
renewal period.
Upon notification from Lessee of its intent to exercise each renewal
option, Lessor shall, within fifteen (15) days thereafter, notify Lessee in
writing of the Base Rent for the applicable renewal term; Lessee shall,
within fifteen (15) days following receipt of same, notify Lessor in writing
of the acceptance or rejection of the proposed Base Rent. In the event of
rejection by Lessee, Lessee may rescind the exercise of such renewal option
by written notice to Lessor within such fifteen (15) day period for
acceptance or rejection. If Lessee does not so rescind such exercise, the
Base Rent for the applicable renewal term shall be determined as follows:
(a) Within fifteen (15) days following notification of rejection,
Lessor and Lessee shall each select an arbitrator who shall be a
Licensed Texas real estate broker having a minimum of five (5)
years experience in leasing office space and being a member of the
North Chapter of the Texas Society of Office and Industrial
Realtors (or its successor organization). Notice shall be given to
the other party of the name of the arbitrator selected. If either
Lessor or Lessee fails to appoint such an arbitrator within the
allocated time, the arbitrator appointed by the other party shall
make the determination of the Base Rent and this determination
shall be final and binding on both parties.
(b) If both Lessor and Lessee appoint an arbitrator in accordance with
the provisions above and the two arbitrators cannot agree upon a
Base Rent for the renewal term within thirty (30) days following
their appointment, the two arbitrators shall forthwith select a
third disinterested and qualified arbitrator having like
qualifications and each of the original arbitrators will
immediately submit his or her judgment as to the appropriate Base
Rent in writing to the third arbitrator. Within ten (10) days after
such submittal, the third arbitrator shall make the determination
of the Base Rent for such renewal period and the determination of
the third arbitrator shall be final and binding on both parties. In
the event the two arbitrators appointed by the Lessee and Lessor
cannot agree upon a third arbitrator, then the third arbitrator
shall be appointed by the then President of the North Chapter of
the Texas Society of Office and Industrial Realtors (or its
successor organization). The Base Rent agreed to by the two
appointed arbitrators or, if applicable, the Base Rent determined
by the third arbitrator shall be final and binding upon the parties
hereto. Lessor and Lessee shall each bear the expense of their
arbitrator and the expense of a third arbitrator, if needed, shall
be shared equally by both parties.
SECTION 16.27 LEASEHOLD IMPROVEMENTS. As of the date hereof, Lessee has
not provided to Lessor any plans for any improvements to be made to the
Premises. Lessee accepts the Premises in the current, "as is" condition.
Subject to the terms and conditions of this SECTION 16.27, the Lessor agrees
to provide to Lessee a refurbishment allowance (the "Allowance") of up to
$572,760.00 (including $496,392.00 for tenant improvements, $38,184.00 for
relocation costs, $36,274.80 for full construction drawings and $1,909.20 for
preliminary drawings) to be utilized toward the design, construction,
refurbishment and remodeling of the Premises (herein called the "Lessee
Finish"). The Allowance shall be provided upon the fulfillment of the
following conditions:
(a) Lessor must approve all Lessee's plans and specifications
respecting the Lessee Finish to be undertaken, which approval shall
not be unreasonably withheld, conditioned or delayed and shall be
deemed given unless Lessor has disapproved same within twenty (20)
days after Lessee delivers same to Lessor.
(b) Following approval of the plans and specifications, Lessee shall
obtain bids from at least three (3) competent contractors for the
construction. The Lessor may select one (1) of the contractors to
submit bids and shall be allowed to participate in the review of
the bids. Following the review of the bids, Lessee shall select the
contractor to perform the Lessee Finish based on Lessee's
determination as to the most qualified contractor offering the
-27-
<PAGE>
lowest bid, subject to Lessor's approval, which shall not be
unreasonably withheld, conditioned or delayed. Lessee shall
promptly inform Lessor of the final construction costs for the
Lessee Finish. Lessee shall be responsible for the management of
the construction and the contractor.
(c) The Allowance shall be delivered by Lessor to Lessee incrementally
as construction progresses on a percentage completion basis within
ten (10) days following receipt of a draw request, invoices and
lien waivers therefor (and if required by Lessor, a certificate
from the contractor that all work has been completed in accordance
with the plans and specifications). The portion of the Allowance
attributable to relocation expenses, if not expended for
improvements, shall be paid by Lessor to Lessee within the later of
(i) thirty (30) days after the Commencement Date; or (ii) thirty
(30) days after written notice to Lessor with accompanying invoices
substantiating such relocation expenses. If the total cost of the
Lessee Finish (including design, demolition and construction costs)
exceeds the Allowance, Lessee shall deposit with Lessor the balance
of the funds required to complete the Lessee Finish within ten (10)
days following Lessor's notice to Lessee of the amount due. Lessee
shall not commence any Lessee Finish until Lessee deposits all
amounts due. In no event will Lessor be required to expend funds in
excess of the Allowance or in excess of the amount allocated to a
particular item, and Lessee shall be and remain liable and
responsible for the prompt payment of all costs, fees and expenses
in excess of the Allowance. Any amounts expended by Lessor in
excess of the Allowance shall be payable to Lessor by Lessee upon
demand.
(d) The costs and fees for the design and space planning relating to
the Lessee Finish shall be charged against the Allowance.
(e) Prior to beginning any such work, Lessee shall provide Lessor with
evidence of builder's "all risk" insurance covering both Lessee and
all of Lessee's contractors against third party liability or
workers' compensation claims arising out of all construction and
associated activities. All policies of insurance shall be subject
to Lessor's prior approval, which approval shall not be
unreasonably withheld, conditioned or delayed, and shall be
endorsed showing Lessor and such agent or agents as Lessor may
designate as additional named insureds. The provisions of this
paragraph (as well as all rights and remedies available to Landlord
as provided in the Lease should Tenant fail to meet its obligations
hereunder) shall expressly survive the expiration or earlier
termination of the Lease.
(f) The Lessee Finish shall be completed in accordance with the plans
and specifications approved by Lessor, and Lessee shall provide to
Lessor lien waivers and releases, in recordable form, from all
contractors, subcontractors and materialmen involved in such
construction.
SECTION 16.28 EXHIBITS. The following are made a part hereof, with the same
force and effect as if specifically set forth herein:
(a) Building Rules and Regulations - Exhibit "A."
(b) Signage - Exhibit "B."
SECTION 16.29 LANDLORD'S LIEN. Lessor hereby agrees to subordinate any
and all statutory, constitutional and other landlord liens against the assets
or property of Lessee to the lien of Lessee's primary lender financing
Lessee's business operations, and agrees to execute and deliver upon request
of Lessee's lender such reasonable subordination agreement as may be
requested to evidence and/or confirm such subordination.
IN WITNESS WHEREOF, the parties have executed this Lease as of the day
and year first above written.
-28-
<PAGE>
LESSOR:
BLI-8787, LTD.,
a Texas limited partnership
By: Barnett Lane Investments, Inc.,
a Texas corporation, general partner
By: /s/ David A. Lane
--------------------------------------
David A. Lane, President
LESSEE:
EXE TECHNOLOGIES, INC.
a Delaware corporation
By: /s/ Raymond R. Hood
--------------------------------------
Name: Raymond R. Hood
------------------------------------
Its: President & CEO
-------------------------------------
-29-
<PAGE>
EXHIBIT "A"
BUILDING RULES AND REGULATIONS
1. Any sign, lettering, picture, notice or advertisement installed on
or in any part of the Premises and visible from the exterior of the Premises,
shall be installed at Lessee's sole cost and expense, and in such manner,
character and style as Lessor may approve in writing, which consent shall not
be unreasonably withheld, conditioned or delayed. In the event of a violation
of the foregoing by Lessee, Lessor may remove the same without any liability
and may charge the expense incurred by such removal to Lessee.
2. No awning or other projection shall be attached to the outside walls
of the Office Complex. No curtains, blinds, shades or screens visible from
the exterior of the Office Complex or visible from the exterior of the
Premises, shall be attached to or hung in, or used in connection with any
window or door of the Premises without the prior written consent of Lessor.
Such curtains, blinds, shades, screens or other fixtures must be of a
quality, type, design and color, and attached in the manner approved by
Lessor.
3. Lessee, its servants, employees, customers, invitees and guests
shall not obstruct sidewalks, entrances, passages, corridors, vestibules,
halls, elevators, or stairways in and about the Office Complex which are used
in common with other tenants and their servants, employees, customers, guests
and invitees, and which are not a part of the Premises of Lessee. Lessee
shall not place objects against glass partitions or doors or windows which
would be unsightly from the Office Complex corridors or from the exterior of
the Office Complex, or that would interfere with the operation of any device,
equipment, radio, television broadcasting or reception from or within the
Office Complex or elsewhere and shall not place or install any projections,
antennas, aerials or similar devices outside of the Premises or on the Office
Complex.
4. Lessee shall not waste electricity, water or air conditioning and
shall, at no cost to Lessee, cooperate fully with Lessor to insure the most
effective operation of the Office Complex's heating and air conditioning
systems and shall refrain from attempting to adjust any controls other than
unlocked room thermostats, if any, installed for Lessee's use. Lessee shall
keep corridor doors closed.
5. Lessee assumes full responsibility for protecting its space from
theft, robbery and pilferage, which includes keeping doors locked and other
means of entry to the Premises closed and secured after normal business
hours, subject to Lessor's security obligations hereunder.
6. No person or contractor not employed by Lessor shall be used to
perform janitorial work, window washing cleaning, maintenance, repair or
similar work in the Premises without the written consent of Lessor, which
consent shall not be unreasonably withheld, conditioned or delayed.
7. In no event shall Lessee bring into the Office Complex inflammables,
such as gasoline, kerosene, naphtha and benzine, or explosives or any other
article of intrinsically dangerous nature. If, by reason of the failure of
Lessee to comply with the provisions of this paragraph, any insurance premium
for all or any part of the Office Complex shall at any time be increased,
Lessee shall make immediate payment of the whole of the increased insurance
premium, without waiver of any of Lessor's other rights at law or in equity
for Lessee's breach of this Lease.
8. Lessee shall comply with all applicable federal, state and municipal
laws, ordinances and regulations, and building rules and shall not directly
or indirectly make any use of the Premises which may be prohibited by any of
the foregoing or which may be dangerous to persons or property or may
increase the cost of insurance or require additional insurance coverage.
9. Lessor shall have the right to prohibit any advertising by Lessee
which in Lessor's reasonable opinion tends to impair the reputation of the
Office Complex or its desirability as an office complex for office use, and
upon written notice from Lessor, Lessee shall refrain from or discontinue
such advertising.
10. The Premises shall not be used for cooking (except for the use of
ordinary office coffee makers and microwave ovens in kitchen areas), lodging,
sleeping or for any immoral or illegal purpose.
11. Lessee and Lessee's servants, employees, agents, visitors and
licensees shall observe faithfully and comply strictly with the foregoing
rules and regulations and such other and further appropriate rules and
regulations as Lessor or Lessor's agent may from time to time adopt.
Reasonable notice of any additional rules and regulations shall be given in
such manner as Lessor may reasonably elect.
<PAGE>
12. Unless expressly permitted by the Lessor, no additional locks or
similar devices shall be attached to any door or window and no keys other
than those provided by the Lessor shall be made for any door. If more than
two keys for one lock are desired by the Lessee, the Lessor may provide the
same upon payment by the Lessee. Upon termination of this Lease or of the
Lessee's possession, the Lessee shall surrender all keys of the Premises and
shall explain to the Lessor all combination locks on safes, cabinets and
vaults.
13. Any carpeting cemented down by Lessee shall be installed with a
releasable adhesive. In the event of a violation of the foregoing by Lessee,
Lessor may charge the expense incurred by such removal to Lessee.
14. The water and wash closets, drinking fountains and other plumbing
fixtures shall not be used for any purpose other than those for which they
were constructed, and no sweepings, rubbish, rags, coffee grounds or other
substances shall be thrown therein. All damages resulting from any misuse of
the fixtures shall be borne by the Lessee who, or those servants, employees,
agents, visitors or licensees, shall have caused the same. No person shall
waste water by interfering or tampering with the faucets or otherwise.
15. No electrical circuits for any purpose shall be brought into the
leased premises without Lessor's written permission, which permission shall
not be unreasonably withheld, conditioned or delayed, specifying the manner
in which same may be done.
16. No bicycle or other vehicle, and no dog or other animal shall be
allowed in offices, halls, corridors, or elsewhere in the building.
17. Lessee shall not throw anything out of the door or windows, or down
any passageways or elevator shafts.
18. All loading, unloading, receiving or delivery of goods, supplies or
disposal of garbage or refuse shall be made only through entryways and
freight elevators provided for such purposes and indicated by Lessor. Lessee
shall be responsible for any damage to the building or property of its
employees or others and injuries sustained by any person whomsoever resulting
from the use or moving of such articles in or out of the leased premises, and
shall make all repairs and improvements required by governmental authorities
in connection with the use or moving of such articles.
19. All safes, equipment or other heavy articles shall be carried in or
out of the Premises only at such time and in such manner as shall be
prescribed in writing by Lessor, and Lessor shall in all cases have the right
to specify the proper position of any such safe, equipment or other heavy
article, which shall only be used by Lessee in a manner which will not
interfere with or cause damage to the leased premises or the building in
which they are located, or to the other tenants or occupants of said
building. Lessee shall be responsible for any damage to the building or the
property of its employees or others and injuries sustained by any person
whomsoever resulting from the use or moving of such articles in or out of the
leased premises, and shall make all repairs and improvements required by
governmental authorities in connection with the use or moving of such
articles.
20. Canvassing, soliciting, and peddling in the building is prohibited
and each Lessee shall cooperate to prevent the same.
21. Vending machines shall not be installed without permission of the
Lessor, which permission shall not be unreasonably withheld, conditioned or
delayed.
22. Wherever in these Building Rules and Regulations the word "Lessee"
occurs, it is understood and agreed that it shall mean Lessee's associates,
agents, clerks, servants and visitors. Wherever the word "Lessor" occurs, it
is understood and agreed that it shall mean Lessor's assigns, agents, clerks,
servants and visitors.
23. Lessor shall have the right to enter upon the leased premises at
all reasonable hours for the purpose of inspecting the same following notice
thereof to Lessee as provided in the Lease (except that in the case of
emergencies no notice shall be required), provided that Lessor shall not
unreasonably interfere with Lessee's use and occupancy of the Leased Premises.
24. Lessor shall have the right to enter the leased premises at hours
convenient to the Lessee for the purpose of exhibiting the same to
prospective tenants within the 60-day period prior to the expiration of this
Lease following notice thereof to Lessee as provided in the Lease, and may
place signs advertising the leased premises for rent on the windows and doors
of said Premises at any time within said 60-day period, provided that Lessor
shall not unreasonably interfere with Lessee's use and occupancy of the
Leased Premises.
<PAGE>
25. Lessees, its servants, employees, customers, invitees and guests
shall, when using the common parking facilities, if any, in and around the
building, observe and obey all signs regarding fire lanes and no parking
zones, and when parking always park between the designated lines. Lessor
reserves the right to tow away, at the expense of the owner, any vehicle
which is improperly parked in a no parking zone. All vehicles shall be parked
at the sole risk of the owner, and Lessor assumes no responsibility for any
damage to or loss of vehicles.
26. At all times the Office Complex shall be in charge of Lessor's
employee in charge and (a) persons may enter the Office Complex only in
accordance with Lessor's regulations, (b) persons entering or departing from
the Office Complex may be questioned as to their business in the Office
Complex, and the right is reserved to require the use of an identification
card or other access device and the registering of such persons as to the
hour of entry and departure, nature of visit, and other information deemed
necessary for the protection of the Office Complex, and (c) all entries into
and departures from the Office Complex will take place through such one or
more entrances as Lessor shall from time to time designate. Lessor will
normally not enforce clauses (a), (b) and (c) above from 7:00 a.m. to 6:00
p.m., Monday through Friday, and from 8:00 a.m. to 1:00 p.m. on Saturdays,
but it reserves the right to do so or not to do so at any time at its sole
discretion. In case of invasion, mob, riot, public excitement, or other
commotion, Lessor reserves the right to prevent access to the Office Complex
during the continuance of the same by closing the doors or otherwise, for the
safety of the tenants or the protection of the Office Complex and the
property therein. Lessor shall in no case be liable for damages for any error
or other action taken with regard to the admission to or exclusion from the
Office Complex of any person.
27. All entrance doors to the Premises shall be locked when the
Premises are not in use. All corridor doors shall also be closed during times
when the air conditioning equipment in the Office Complex is operating so as
not to dissipate the effectiveness of the system or place an overload thereon.
28. Lessor reserves the right at any time and from time to time to
rescind, alter or waive, in whole or in part, any of these Rules and
Regulations when it is deemed necessary, desirable, or proper, in Lessor's
judgment, for its best interest or for the best interest of the tenants of
the Office Complex, provided that such change shall affect all leases of the
Office Complex.
<PAGE>
EXHIBIT B
Exterior Building Signage:
Option One - Fiber-optic outline illuminated Cube
EXE Cube to be fabricated from 1/8" stainless steel with .090" returns.
Color/Finish to be determined. Height to be approximately 9', and width to be
approximately 9'. Cube to be outline-illuminated with 5/8" diameter sideglow
fiber-optic cable with remote/accessible metal halide HID light source. Sign
to be pin-mounted from building facade with 4" steel standoffs and approved
fasteners.
Option Two - Illuminated channel letter Cube
EXE Cube to be fabricated as channel letter from 1/8" stainless steel with
.090" returns. Height to be approximately 9', and width to be approximately
9'. Illuminated 1/4" thick white lexan letterfaces to be internally lit with
either neon or fiber-optic source as described above. Sign to be pin mounted
from building facade with 4" steel standoffs and approved fasteners.
Option Three - Backlit stainless steel EXE Cube
EXE Cube to be fabricated as channel letters from 1/8" stainless steel with
.090 returns. Height to be approximately 9', and with to be approximately 9'.
Gold finish to match window color. Cube to be silhouette-illuminated with
60Ma/15mm white neon with remote/accessible ballast. Sign to be pin-mounted
from building facade with 4" steel standoffs and approved fasteners.
Building Entrance Signage:
EXE Technologies signage (at front and back Tower building entries) EXE Cube
and EXE Technologies letterforms to be fabricated as channel letters (Cube
approximately 3' by 3'. Letterforms approximately 10" high x 1-1/2" thick)
from 1/8" stainless steel with .090" returns. Color/finish to be determined.
Cube and Letterforms to be silhouette-illuminated with 60Ma /15mm white neon
with remote/accessible ballasts. Sign to be pin-mounted from building facade
with steel standoffs an approved fasteners.
Attachment: Logo
[LOGO]
<PAGE>
EXHIBIT "C"
SPECIFICATIONS FOR LETTER OF CREDIT
AMOUNT: $580,505.96
(3 months @ $19.67/sf)
EXPIRATION: The earlier of one of the following:
- 5 Years after the commencement date
or
- Initial public offering of securities by Lessee
or
- Lessee's net worth, determined in accordance with GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES consistently applied,
increases by an amount equal to or greater than ten million
dollars from that shown on Lessee's audited financial
statements dated December 31, 1997 and for the year then
ended.
<PAGE>
SUBLEASE
This Sublease is made on this the 21st day of May, 1998, between EXE
TECHNOLOGIES, INC., a Delaware corporation ("Sublessor"), having an office at
640 Baldwin Tower Boulevard, Eddyston, Pennsylvania 19022 and BLI-8787, LTD.,
a Texas limited partnership ("Sublessee"), having its office at 8235 Douglas
Avenue, Suite 200, Dallas, Texas 75225, and said parties hereby agree as
follows:
RECITALS
1. This Sublease is made with reference to the following facts and
objectives:
a. Sublessee, as Lessor, and Sublessor, as Lessee, entered into a
written Office Lease dated May 21,1998 (hereinafter referred to as
the "Master Lease") covering floors 1 through 5 of the office
building located at 8777 Stemmons Freeway as described in said
Master Lease (the "Premises"), a copy of which is attached hereto
as EXHIBIT "A" and made a part hereof.
b. Sublessee desires to sublet from Sublessor approximately 2,000
square feet on the first floor and floor 5 of the Premises (the
"Sublease Premises") comprising approximately 21,430 rentable
square feet of space upon the terms and conditions contained in
this Sublease.
2. PREMISES. Sublessor hereby leases to Sublessee the Sublease
Premises upon the terms set forth herein.
3. TERM: POSSESSION. The term of this Sublease shall commence on the
Commencement Date as defined in the Master Lease (which shall be the
"Effective Date" of this Sublease) and shall terminate on the date of
termination of the Master Lease, including any renewals or extensions
pursuant to Options under the Master Lease. Sublessor shall deliver
possession of the Sublease Premises to Sublessee upon the Effective Date.
4. RENT. Sublessee shall pay to Sublessor as annual Base Rent, the sum
of $421,528.10 per year for months 7 through 66 and $453,887.40 per year for
months 67 through 126, which rent will be paid via a credit from Sublessee to
Sublessor in the amount of $35,127.35 per month for months 7 through 66 and
$37,823.95 per month for months 67 through 126, against the Base Rent due
under the Master Lease.
5. NOTICES. All communications shall be forwarded by certified mail,
return receipt requested, postage prepaid, addressed to:
Sublessor: EXE Technologies, Inc.
300 Baldwin Tower Boulevard
Eddyston, Pennsylvania 19022
Sublessee: BLI-8787, Ltd.
8235 Douglas Avenue, Suite 200
Dallas, Texas 75225
Attention: David A. Lane
subject to the right of either party to designate by notice in writing,
forwarded in compliance with this Paragraph 5 any new address to which
communications and installments of rent may be sent.
6. INCORPORATION BY REFERENCE; ASSUMPTION. The terms and provisions of
the Master Lease are incorporated by reference into this Sublease as if fully
set forth herein and this Sublease is subject to the terms and conditions of
the Master Lease except that
Page 1
<PAGE>
in the event of a conflict between the Master Lease and this Sublease the
terms of the Sublease shall control. For the purpose of interpreting this
Sublease in conjunction with an interpretation of its application to the
Master Lease, whenever the term "Lessee" appears in the Master Lease the word
"Sublessee" shall be inserted and whenever the term "Lessor" appears, the
word "Sublessor" shall be inserted. Unless otherwise specifically provided
in this Sublease, Sublessee shall have all the rights Sublessor, as Lessee,
has under the Master Lease with respect to the Sublease Premises.
It is intended that Sublessor and Sublessee shall each be responsible
for a pro rata share of all Additional Rent due under the Master Lease
including charges for real estate and personal property taxes, assessments,
maintenance, insurance, utilities, etc., to the end that all such obligations
under the Master Lease imposed expressly or by operation of law against the
Sublessor shall be timely discharged by Sublessor or Sublessee. Sublessor
shall be responsible for 77.86% of Lessee's Pro Rata Share of Excess Real
Estate Taxes and 77.86% of Lessee's Pro Rata Share of Excess Operating
Expenses, and Sublessee shall be responsible for eighty percent (80%) of
Lessee's Pro Rata Share of Excess Real Estate Taxes and eighty percent (80%)
of Lessee's Pro Rata Share of Excess Operating Expenses. So for example,
Sublessor's current share of Lessee's Pro Rata Share of Excess Operating
Expenses is 38.15% (calculated by .7786 multiplied by the 49% Lessee's Pro
Rata Share currently applicable under the Master Lease) and Sublessor's
current share of Lessee's Pro Rata Share of Excess Real Estate Taxes is
.7786% (calculated by .20 multiplied by the 100% Lessee's Pro Rata Share
currently applicable under the Master Lease), and Sublessee's current share
of Lessee's Pro Rata Share of Excess Operating Expenses is 10.85% (calculated
by .2214 multiplied by the 49% Lessee's Pro Rata Share currently applicable
under the Master Lease), and Sublessee's current share of Lessee's Pro Rata
Share of Excess Real Estate Taxes is 22.14% (calculated by .2214 multiplied
by the 100% Lessee's Pro Rata Share currently applicable under the Master
Lease).
Sublessee shall assume and timely perform Lessee's obligations under the
Master Lease with respect to the Sublease Premises; provided, to the extent
that Master Landlord waives such obligations, Sublessee shall not be required
to perform such obligations. Sublessor shall continue to remain responsible
for Lessee's obligations under the Master Lease with respect to the Premises,
excluding the Sublease Premises. Sublessor does not assume, and shall not be
responsible to perform, any of Lessor's obligations under the Master Lease
with respect to the Sublease Premises.
7. BROKERAGE COMMISSION. The parties represent to one another that no
other party is entitled to a brokerage fee relating to this Sublease, by,
through or under such party. Each of the parties indemnifies the other
against claims for any loss, damage, judgment, fees or costs regarding a
brokerage commission asserted against a party hereto due to the acts or
omissions of such indemnitor.
8. CONDITIONS OF DELIVERY. Sublessee shall accept possession of the
Premises in its present, "AS IS" condition without any warranties or
representations by Sublessor and in reliance upon Sublessee's inspection of
the Premises.
9. NON-MERGER. Sublessor and Sublessee acknowledge and agree that the
Sublease, Master Lease and fee title in and to the Premises shall not merge,
but shall remain separate and distinct, despite the fact that BLI-8787, Ltd.
is the owner of fee simple title to the Premises and is the Master Landlord
under the Master Lease and the Sublessee under this Sublease.
10. ASSIGNMENT AND SUBLEASE. Sublessee may assign or sublet all or any
part of the Sublease Premises without the prior written consent of the
Sublessor, subject to the right of first refusal hereinafter set forth, and
any profits received from such assignment or sublease shall be for the sole
benefit of Sublessee. Sublessor may not assign its rights or obligations
hereunder without the prior written consent of Sublessee, which may be
withheld in Sublessee's sole and absolute discretion.
Page 2
<PAGE>
11. RIGHT OF FIRST REFUSAL/OPTION. Sublessee hereby grants to Sublessor
a right of first refusal to lease all or any portion of the Sublease Premises
upon the following terms and conditions. In the event that Sublessee receives
a bona fide offer from a third party to sub-sublease (the "Outside Offer")
all or a part of the Sublease Premises which Sublessee desires to accept,
Sublessee will notify Sublessor ("Sublessee's Notice") of the rental rate and
other terms and provisions of any such proposed Outside Offer, and Sublessor
will have the right within five (5) business days after Sublessee's Notice to
provide written notice to Sublessee of Sublessor's desire to negotiate a
lease on such portion of the Sublease Premises upon the same general terms
and conditions as set forth in Sublessee's Notice; provided, however, in the
event that Sublessor fails to provide Sublessee such written notice within
five (5) business days after Sublessee's Notice then Sublessor shall be
deemed to have waived its rights hereunder and Sublessee may negotiate and
enter into a lease on the Sublease Premises upon the general terms and
conditions as provided in Sublessee's Notice. In the event that Sublessor
notifies Sublessee in writing within five (5) business days after Sublessee's
Notice that Sublessor desires to lease such portion of the Sublease Premises
upon such general terms and conditions as provided in Sublessee's Notice,
then Sublessee and Sublessor shall execute an amendment hereto acknowledging
that Sublessor is leasing such portion of the Sublease Premises upon the same
terms and conditions as set forth in the Master Lease, except as otherwise
provided in the Outside Offer.
Notwithstanding anything to the contrary contained in this Paragraph 11
hereof, the lease rate and tenant allowance shall be consistent with the
terms of the Master Lease with respect to any of the Sublease Premises, in
the event that Sublessor accepts Sublessee's Notice (and Sublessor and
Sublessee execute an amendment hereto acknowledging that Sublessor is leasing
the Sublease Premises upon the same terms as the Master Lease) on such space
within the first twelve (12) months of the lease term. Notwithstanding
anything herein to the contrary, Sublessor shall have an option to lease the
fifth floor of the Sublease Premises upon the terms and conditions of the
Master Lease for a period of twelve (12) months after the Effective Date
hereof, and Sublessee shall not lease the fifth floor of the Sublease
Premises to any third party during such twelve (12) month period without the
prior written consent of Sublessor which consent of Sublessor shall be deemed
granted if the lease to the third party allows Sublessee to terminate such
lease upon thirty (30) days prior written notice. Notwithstanding anything
herein to the contrary, Sublessor and Sublessee shall each cooperate with one
another in connection with qualification for tax incentives for the Premises
and the Office Complex of which it is a part. Notwithstanding anything to the
contrary herein, the right of first refusal shall expire and be waived as to
all or any portion of the Sublease Premises upon which Sublessee complies
with the provisions of this paragraph and Sublessor waives or is deemed to
have waived its right in the event that Sublessee then leases such portion of
the Sublease Premises under the Outside Offer.
SUBLESSOR:
EXE TECHNOLOGIES, INC.
By: /s/ Raymond R. Hood
------------------------------------
Printed Name: Raymond R. Hood
--------------------------
Title: President & CEO
---------------------------------
Page 3
<PAGE>
SUBLESSEE:
BLI-8787, LTD.,
a Texas limited partnership
By: Barnett Lane Investments, Inc.,
a Texas corporation, general partner
By: /s/ David A. Lane
------------------------------------
Printed Name: David A. Lane
--------------------------
Title: President
---------------------------------
Page 4
<PAGE>
EXHIBIT "A"
Page 5
<PAGE>
EXHIBIT 10.14
AGREEMENT OF LEASE
BETWEEN
BALDWIN TOWERS ASSOCIATES, L.P.
AS LANDLORD
AND
Neptune Systems, Inc.
AS TENANT
<PAGE>
OFFICE LEASE
LEASE made this 3 day of April , 1995 by and between BALDWIN TOWERS
ASSOCIATES, L.P. (hereinafter called "Landlord"), and NEPTUNE SYSTEMS INC. a
Pennsylvania Corporation (hereinafter called "Tenant").
WITNESSETH, THAT:
1. DEMISED PREMISES. Landlord, for the term and subject to the
provisions and conditions hereof, leases to Tenant and Tenant accepts from
Landlord, the space consisting of 5,366 rentable square feet on the SEVENTH
floor known as Suite 700 (hereinafter referred to as the "Demised Premises")
of the building known as 1510 Chester Pike located in Eddystone, Pennsylvania
(hereinafter referred to as the "Building"), and more particularly described
by the cross-hatched area on the floor plans annexed herein as Exhibit "A",
to be used by Tenant for the purpose of GENERAL OFFICES AND SOFTWARE DESIGN
and for no other purpose.
2. TERM. Tenant shall use and occupy the Demised Premises for a term
of TEN (10) years, commencing on the FIRST day of JULY, 1995 and ending on
the THIRTIETH day of JUNE, 2005 unless sooner terminated as herein provided.
3. MINIMUM RENT.
(a) See Rent Rider attached. The first installment to be payable
on the execution of this Lease and subsequent installments to be payable on
the first day of each successive month of term hereof following the first
month of such terms.
(b) If the term of this Lease begins on a day other than the first
day of a month, rent from such day until the first day of the following month
shall be prorated at the rate of one-thirtieth of the fixed monthly rental
for each day of the first full calendar month of the term hereof (and, in
such event, the installment of rent paid at execution hereof shall be applied
to the rent due for the first full calendar month of the term hereof).
(c) All rent and other sums due to Landlord hereunder shall be
payable to BALDWIN TOWERS ASSOCIATES. L.P. and mailed to the office of
Landlord at 555 NORTH LANE, SUITE 6101, CONSHOHOCKEN, PENNSYLVANIA, 19428, or
to such other party or at such other address as Landlord may designate, from
time to time, by written notice to Tenant, without demand and without
deduction, set-off or counterclaim (except to the extent demand or notice
shall be expressly provided for herein).
(d) If Landlord, at any time or times, shall accept said rent or any
other sum due to it hereunder after the same, shall become due and payable such
acceptance shall not excuse delay upon subsequent occasions, or constitute or be
construed as, a waiver of any of Landlord's rights hereunder.
Page-2
<PAGE>
4. ESCALATION IN TAXES, OPERATING COSTS, COSTS OF LIVING: COST OF
ELECTRICITY.
(a) Definitions. As used in this section 4, the following terms
shall be defined as hereinafter set forth.
(i) "TAXES" shall mean all real estate taxes and assessments, general
and special, ordinary or extraordinary, foreseen or unforeseen, imposed upon the
Building or with respect to the ownership thereof and the parcel of land
appurtenant thereto. If, due to a future change in the method of taxation, any
franchise, income, profit or other tax, however designated, shall be levied or
imposed in substitution in whole or in part, for (or in lieu of) any tax which
would otherwise be included within the defined herein.
(ii) "Base year operating expenses" shall be $3.50 per square foot.
(iii) "TENANT'S FRACTION" shall be a fraction, the numerator of
which is the Demised Rentable Square Feet and the denominator of which is the
Rentable Square Feet in the Building. [5,366/175,878]
(iv) (A) "Operating Expenses" shall mean except as hereinafter
limited, Landlord's actual out-of-pocket expenses in respect of the
operation, maintenance and management of the Building (after deducting any
reimbursement, discount, credit, reduction or other allowance received by
Landlord) and shall include, without limitation: (1) wages and salaries (and
taxes imposed upon employers with respect to such employed by Landlord for
rendering service in the normal operation, cleaning, maintenance, and repair
of the Building: (2) contract costs of contractors hired for the operation,
maintenance and repair of the Building; (3) the cost of steam, electricity,
water and sewer and other utilities (except for electricity, which is
separately charged by Landlord as herein provided) chargeable to the
operation and maintenance of the Building; (4) cost of insurance for the
Building including fire and extended coverage, elevator, boiler, sprinkler
leakage, water damage, public liability and property damage, plate glass, and
rent protection, but excluding any charge for increased premiums due to acts
or omissions of other occupants of the Building or because of extra risk
which are reimbursed to Landlord by such other occupants; (5) supplies; and
(6) legal and accounting expenses; (7) real estate taxes (8) management
expense.
The term "Operating Expenses" shall not include: (1) the cost of redecorating
or repairing not provided on a regular basis to tenants of the Building; (2)
the cost of any repair or replacement item which, by standard accounting
practice, should be capitalized; (3) any charge for depreciation, interest or
rents paid or incurred by Landlord; (4) any charge for Landlord's income tax,
excess profit taxes, franchise taxes or similar taxes on Landlord's business;
(5) commissions.
(B) In determining Operating expenses for any year, if less than
ninety-five percent (95%) of the Building rentable area shall have been
occupied by tenants at any time during such year, Operating Expenses shall be
deemed for such year to be an amount equal to the like expenses which
Landlord reasonably determines would normally be incurred had such occupancy
been ninety-five percent (95%) throughout such year.
Page-3
<PAGE>
(C) If, after the Base Year for Operating Expenses, Landlord shall
eliminate any component of Operating Expenses, as a result of the introduction
of a labor saving device or other capital improvement, the corresponding item of
Operating Expenses shall be deducted from the Operating Expenses expended by
Landlord in said Base Year for purposes of calculating Tenant's Proportionate
Share of any increased Operating Expenses.
(vi) "DEMISED RENTABLE SQUARE FEET" shall mean 5,366 square feet.
(vii) "RENTABLE SQUARE FEET IN THE BUILDING" shall mean 175,878 square
feet.
(b) Escalation of Operating Expenses
(i) For and with respect to each calendar year of the term of this
Lease (and any renewals or extensions thereof) subsequent to the Base Year for
Operating Expenses, there shall accrue, as additional rent, an amount equal to
the product obtained by multiplying the Tenant's Fraction by the amount of the
increase, if any, of Operating Expenses for such year over the Base Year
Operating Expenses (appropriately prorated for any partial calendar year
included within the beginning and of the term).
(ii) Landlord shall furnish to Tenant as soon as reasonably possible
after the beginning of each calendar year of the term hereof subsequent to the
Base Year for Operating Expenses;
(A) A statement (the "Expense Statement:) setting forth (1) Operating
Expenses for the previous calendar year, and (2) Tenant's Fraction of the
Operating Expenses for the previous calendar year; and
(B) A statement of Landlord's good faith estimate of Operating
Expenses, and the amount of Tenant's Fraction thereof (the "Estimated Share"),
for the current calendar year.
(iii) Beginning with the next installment of minimum rent due after
delivery of the foregoing statements to Tenant, Tenant shall pay to Landlord, on
account of its share of Operating Expenses (or Landlord shall pay to Tenant, if
the following quantity is negative):
(A) One-twelfth of the Estimated Share multiplied by the number of
full or partial calendar months elapsed during the current calendar year up to
and including the month payment is made, plus any amounts due from Tenant to
Landlord on account of Operating Expenses for prior periods of time, less:
(B) The amount, if any, by which the aggregate of payments made by
Tenant on account of Operating Expenses for the previous calendar year exceed
those actually due as specified in the Expense Statement.
Page-4
<PAGE>
(iv) On the first day of each succeeding month up to the time Tenant
shall receive a new Expense Statement and statement of Tenant's Estimated Share,
Tenant shall pay to Landlord, on account of its share of Operating Expenses,
one-twelfth of the then current Estimated Share. Any payment due from Tenant to
Landlord, or any refund due from Landlord to Tenant, on account of Operating
Expenses not yet determined as of the expiration of the term hereof shall be
made within twenty (20) days after submission to Tenant of the next Expense
Statement.
5. UTILITIES SEPARATELY CHARGED TO DEMISED PREMISES. Tenant shall be
responsible for all utilities (including gas and electric) which are consumed
within the Demised Premises. If a separate meter is installed, Tenant shall
pay for the consumption of such utilities based on its metered usage. If no
meter is installed, Tenant shall pay a pro-rata share of any utility charges
covering the Demised Premises and other areas of the Building which pro-rata
share shall be based on the percentage which the Demised Rentable Square Feet
bears to the square footage of the areas of the Building serviced by such
utility. Utility bills shall be paid by Tenant within ten (10) days after the
receipt and non-payment or late payment of such bills shall be considered a
default under this Lease.
6. SECURITY DEPOSIT. As additional security for the full and prompt
performance by Tenant of the terms and covenants of this Lease, Tenant has
deposited with the Landlord the sum of SIX THOUSAND TWO HUNDRED SIXTY DOLLARS
($6,260.00) which shall not constitute rent for any month (unless so applied by
Landlord on account of Tenant's default). Tenant shall, upon demand, restore any
portion of said security deposit which may be applied by Landlord to the cure of
any default by Tenant hereunder. To the extent that Landlord has not applied
said sum on account of a default, the security deposit shall be returned
(without interest) to Tenant promptly at termination of this Lease.
7. SERVICES. Landlord agrees that it shall:
(a) Provide passenger elevator service to the Demised Premises during
all days with one (1) elevator subject to call at all other times. Tenant and
its employees and agents shall have access to the Demised Premises at all times,
subject to compliance with such security measures as shall be in effect for the
Building.
(b) Provide water for drinking, lavatory and toilet purposes drawn
through fixtures installed by Landlord; and
(c) Furnish the Demised Premises with electric for heating, hot and
chilled water and air-conditioning. Tenant shall not install or operate in the
Demised Premises any electrically operated equipment or other machinery, other
than typewriters, adding machine and other machinery and equipment normally used
in modern offices, or any plumbing fixtures, without first obtaining the prior
written consent of the Landlord. Landlord may condition such consent upon the
payment by Tenant of additional rent as compensation for the additional
consumption of water and/or electricity occasioned by the operation of said
equipment, fixtures, or machinery.
Page-5
<PAGE>
Tenant, at Tenant's sole expense, shall be responsible for the installation,
maintenance, and use of any equipment or any kind or nature whatsoever which
would or might necessitate any changes, replacements, or additions to the water
system, plumbing system, heating system, air-conditioning system, or the
electrical system servicing the Demised Premises or any other portion of the
Building without the prior written consent of the Landlord, and in the event
such consent is granted, such replacement, changes or additions shall be paid
for by Tenant. It is understood that Landlord does not warrant that any of the
services referred to in this Section 6 will be free from interruption from
causes beyond the reasonable control of Landlord. No interruption of service
shall ever be deemed an eviction or disturbance of Tenant's use and possession
of the Demised Premises or any part thereof or render Landlord liable to Tenant
for damages by abatement or rent or otherwise relieve Tenant from performance of
Tenant's obligations under this Lease, unless Landlord, after reasonable notice,
shall willfully and without cause fail or refuse to take action within its
control.
8. CARE OF DEMISED PREMISES. Tenant agrees, on behalf of itself, its
employees and agents, that it shall:
(a) Comply at all times with any and all federal, state and local
statutes, regulations, ordinances, and other requirements of any of the
constituted public authorities relating to its use and occupancy of the Demised
Premises.
(b) Give Landlord access to the Demised Premises at all reasonable
times, without charge or diminution of rent, to enable Landlord (i) to examine
the same and to make such repairs, additions and alterations as Landlord may be
permitted to make hereunder or as Landlord may deem advisable for the
preservation of the integrity, safety and good order of the Building or any part
thereof; and (ii) upon reasonable notice, to show the Demised Premises to
prospective mortgagees and purchasers and, during the six (6) months prior to
expiration of the term, to prospective tenants;
(c) Keep the Demised Premises in good order and condition and replace
all glass broken by Tenant, its agents, employees or invitees with glass of the
same quality as that broken, except for glass broken by fire and extended
coverage type risks, and commit no waste in the Demised Premises;
(d) Upon the termination of this Lease in any manner whatsoever,
remove Tenant's goods effects and those of any other person claiming under
Tenant, and quit and deliver up the Demised Premises to Landlord peaceably and
quietly in as good order and condition at the inception of the term of this
Lease or as the same hereafter may be improved by Landlord or Tenant, reasonable
use and wear thereof, damage from fire and extended coverage type risks, and
repairs which are Landlord's obligation excepted. Goods and effects not removed
by Tenant at the termination of this Lease, however terminated, shall be
considered abandoned and Landlord may dispose of and/or store the same as it
deems expedient, the cost thereof to be charged to Tenant;
(e) Not place signs on the Demised Premises except on doors and then
only of a type and with lettering and text approved by Landlord. Identification
of Tenant and Tenant's location shall be provided in a directory in the Building
Lobby;
Page-6
<PAGE>
(f) Not overload, damage or deface the Demised Premises or do any
act which might make void or voidable any insurance on the Demised Premises
or the Building or which may render an increased or extra premium payable for
insurance (and without prejudice to any right or remedy of Landlord regarding
this subparagraph, Landlord shall have the right to collect from Tenant, upon
demand, any such increase or extra premium). Tenant shall maintain at its own
sole cost adequate insurance coverage for all of its equipment, furniture,
supplies and fixtures and provide Landlord with certificates evidencing such
coverage;
(g) Not make any alteration of or addition to the Demised Premises
without the prior written approval of Landlord (except for work of a
decorative nature);
(h) Not install or authorize the installation of any coin operated
vending machine, except for the dispensing of cigarettes, coffee, and similar
items to the employees of Tenant for consumption upon the Demised Premises;
and
(i) Observe the rules and regulations annexed hereto as Exhibit
"C", as the same may from time to time be amended by Landlord for the general
safety, comfort and convenience of Landlord, occupants and tenants of the
Building.
9. SUBLETTING AND ASSIGNING. Tenant shall not assign this Lease or
sublet all or any portion of the Demised Premises without first obtaining
Landlord's prior written consent thereto. If such consent is given, it will
not release Tenant from its obligations hereunder and which will not be
deemed a consent to any further subletting or assignment. if Landlord
consents to any such subletting or assignment, it shall nevertheless be a
condition to the effectiveness thereof that a fully executed copy of the sub
lease or assignment be furnished to Landlord and that any assignee assume in.
writing all obligations of Tenant hereunder., Tenant shall not mortgage or
encumber this Lease.
10. DELAY IN POSSESSION. If Landlord shall be unable to deliver
possession of the Demised Premises to Tenant on the date specified for
commencement of the term hereof because of the holding over or retention of
possession of any tenant or occupant, or if repairs improvements or
decoration of the Demised Premises are not completed, or for any repairs,
improvements or decoration of the Demised Premises are not completed, or for
any other reason. Landlord shall not be subject to any liability to Tenant
Under such circumstances, the rent reserved and covenanted to be paid herein
shall not commence until possession of Demised Premises is given or until
Landlord shall give written notice to Tenant that the Demised Premises are
available for occupancy by Tenant, whichever shall first occur, and no such
failure to give possession shall in any other respect affect the validity of
this Lease or any obligation to extend the term of this Lease.
Notwithstanding the foregoing, if Landlord fails to deliver possession to
Tenant by August 1, 1995, Tenant shall receive one day of free rent for each
day after August 1, 1995, that Tenant is delayed in obtaining possession.
11. FIRE OR CASUALTY. In case of damage to the Demised Premises or the
Building by fire or other casualty, Tenant shall give immediate notice
thereof to Landlord. Landlord shall thereupon cause the damage to be repaired
with reasonable speed, subject to delays which may arise by reason of
adjustment of loss under insurance policies and for delays beyond the
reasonable control of Landlord. To the extent and for the time that the
Demised Premises are thereby rendered untenantable, the rent shall
proportionately abate.
Page-7
<PAGE>
In the event the damage shall be so extensive that Landlord shall decide not
to repair or rebuild, or if any mortgagee, having the right to do so shall
direct that the insurance proceeds are to be applied to reduce the mortgage
debt rather than to the repair of such damage, this Lease shall, at the
option of Landlord, exercisable by written notice to Tenant given within
thirty (30) days after Landlord is notified of the casualty, be terminated as
of a date specified in such notice (which shall not be more than ninety (90)
days thereafter), and the rent (taking into account any abatement as
aforesaid) shall be adjusted to the termination date. Thereafter, Tenant
shall promptly vacate the Demised Premises.
12. LIABILITY. Tenant agrees that Landlord and its building manager and
their officers, employees and agents shall not be liable to Tenant, and
Tenant hereby releases said parties, for any personal injury or damage to or
loss of personal property in the Demised Premise from any cause whatsoever
unless such damage, loss or injury is the result of the willful and gross
negligence of Landlord, its building manager, or their officers, employees or
agents, and Landlord and its building manager and their officers or employees
shall not be liable to Tenant for any such damage or loss whether or not the
result of their willful and gross negligence to the extent Tenant is
compensated therefor by Tenant's insurance. Tenant shall and does hereby
indemnify and hold Landlord harmless of and from all loss or liability
incurred by Landlord in connection with any failure of Tenant to fully
perform its obligations under this Lease and in connection with any personal
injury or damage of any type or nature occurring in or resulting out of
Tenant's use of the Demised Premises, unless due to Landlord's fault.
13. EMINENT DOMAIN. If the whole or a substantial part of the Building
shall be taken or condemned for a public or quasi-public use under an statute
or by right of eminent domain or private purchase in lieu thereof by any
competent authority, Tenant shall have no claim against Landlord and shall
not have any claim or right to any portion of the amount that may be awarded
as damages or paid as a result of any such condemnation or purchase; and all
right of the Tenant to damages therefore are hereby assigned by Tenant to
Landlord. The foregoing shall not, however, deprive Tenant of any separate
award for moving expenses or for any other award which would not reduce the
award payable to Landlord. Upon the date the right to possession shall vest
in the condemning authority, this Lease shall cease and terminate with rent
adjusted to such date, and Tenant shall have no claim against Landlord for
the value of any unexplored term of this Lease.
14. INSOLVENCY.
(a) The appointment of a receiver or trustee to take possession of all
or a portion of the assets of Tenant, or (b) an assignment by Tenant for the
benefit of creditors, or (c) the institution by or against Tenant of any
proceedings for bankruptcy or reorganization under any state or federal law
(unless in the case of involuntary proceedings, the same shall be dismissed
within thirty (30) days after institution), or (d) any execution issued
against Tenant which is not stayed or discharged within fifteen (15) days
after issuance of any execution sale of the assets of Tenant, shall
constitute a breach of this Lease by Tenant. Landlord in the event of such a
breach, shall have, without need of further notice, the rights enumerated in
Section 15 herein.
Page-8
<PAGE>
15. DEFAULT.
(a) If Tenant shall fail to pay rent or any other sum payable to
Landlord hereunder when due, or if Tenant shall fail to perform or observe
any of the other covenants, terms or conditions contained in this Lease
within fifteen (15) days (or such longer period as is reasonably required to
correct any such default, provided Tenant promptly commences and diligently
continues to effectuate a cure), but in any event within thirty (30) days
after written notice thereof by Landlord, or if any of the events specified
in Section 14 occur, or if Tenant vacates or abandons the Demised Premises
during the term hereof or removes or manifests an intention to remove any of
Tenant's goods or property therefrom other than in the ordinary and usual
course of Tenant's business, then and in any of said cases (notwithstanding
any former breach of covenant or waiver thereof in a former instance),
Landlord, in addition to all other rights and remedies available to it by law
or equity or by any other provisions hereof, may at any time thereafter:
(i) upon three (3) days notice to Tenant, declare to be
immediately due and payable, the rent and other charges herein reserved for
the balance of the term of this Lease (taken without regard to any early
termination of said term on account of default), a sum equal to the
Accelerated Rent Component (as hereinafter defined), and Tenant shall remain
liable to Landlord as hereinafter provided; and/or
(ii) whether or not Landlord has elected to recover the Accelerated
Rent Component, terminate this Lease on at least five (5) days notice to
Tenant and, on the date specified in said notice, this Lease and the term
hereby demised and all rights of Tenant hereunder shall expire and terminate
and Tenant shall thereupon quit and surrender possession of the Demised
Premises to Landlord in the condition elsewhere herein required and Tenant
shall remain liable to Landlord as hereinafter provided.
(b) For purposes herein, the Accelerated Rent Component shall mean the
aggregate of:
(i) all rent and other charges, payments, costs and expenses due
from Tenant to Landlord and in arrears at the time of the election of
Landlord to recover the Accelerated Rent Component;
(ii) the minimum rent reserved for the then entire unexpired
balance of the term of this Lease (taken without regard to any early
termination of the term by virtue of any default), plus all other charges,
payments, costs and expenses herein agreed to be paid by Tenant up to the end
of said term which shall be capable of precise determination at the time of
Landlord's election to recover the Accelerated Rent Component; and
(iii) Landlord's good faith estimate of all charges, payments,
costs and expenses herein agreed to be paid by Tenant up to the end of said
term which shall not be capable to precise determination as aforesaid (and
for such purposes no estimate of any component of the additional rent to
accrue pursuant to the provisions of Section 4 hereof shall be less than the
amount which would be due if each such component continued at the highest
monthly rate or amount in effect during the twelve (12) months immediately
preceding the default).
Page-9
<PAGE>
(c) In any case in which this Lease shall have been terminated, or in
any case in which Landlord shall have elected to recover the Accelerated Rent
Component and any portion of such sum shall remain unpaid, Landlord may
without further notice, enter upon and repossess the Demised Premises, by
force, summary proceedings, ejectment or otherwise, and may dispossess Tenant
and remove Tenant and al! other persons and property from the Demised
Premises and may have, hold and enjoy the Demised Premises and the rents and
profits therefrom. Landlord may, in its own name, as agent for Tenant, if
this Lease has not been terminated, or in its own behalf, if this Lease has
been terminated, relet the Demised Premises or any part thereof for such term
or terms (which may be greater or less than the period which would otherwise
have constituted the balance of the term of this Lease) and on such terms
(which may include concessions of free rent) as Landlord in its sole
discretion may determine. Landlord may, in connection with any such
reletting, cause the Demised Premises to be decorated, altered, divided,
consolidated with other space or otherwise changed or prepared for reletting.
No reletting shall be deemed a surrender and acceptance of the Demised
Premises.
(d) Tenant shall, with respect to all periods of time up to and
including the expiration of the term of this Lease (or what would have been
the expiration date in the absence of default or breach) remain liable to
Landlord as follows:
(i) In the event of termination of this Lease on account of
Tenant's default or breach, Tenant shall remain liable to Landlord for
damages equal to the rent and other charges payable under this Lease by
Tenant as if this Lease Were still in effect, less the net proceeds of any
reletting after deducting all costs incident thereto (including without
limitation all repossession costs, brokerage and' management commission,
operating and legal expenses and fees, alteration costs and expenses of
preparation for reletting ( and to the extent such damages shall not have
been recovered by Landlord by virtue of payment by Tenant of the Accelerated
Rent Component (but without prejudice to the right of Landlord to demand and
receive the Accelerated Rent Component), such damages shall be payable to
Landlord monthly upon presentation to Tenant of a bill for the amount due.
(ii) In the event and so long as this Lease shall not have been
terminated after default or breach by Tenant, the rent and all other charges
payable under this Lease shall be reduced by the net proceeds of any
reletting by Landlord (after deducting all costs incident thereto as above
set forth) and by any portion of the Accelerated Rent Component paid by
Tenant to Landlord, and any amount due to Landlord shall be payable monthly
upon presentation to Tenant of a bill for the amount due.
(e) In the event Landlord shall, after default or breach by Tenant,
recover the Accelerated Rent Component from Tenant and it shall be determined
at the expiration of the term of this Lease (taken without regard to early
termination for default) that a credit is due Tenant because the net proceeds
of reletting, as aforesaid, plus amounts paid to Landlord by Tenant exceed
the aggregate of rent and other charges accrued in favor of Landlord to the
end of said term, Landlord shall refund such excess to Tenant, without
interest, promptly after such determination.
Page-10
<PAGE>
(f) Landlord shall in no event be responsible or liable for any failure
to relet the Demised Premises or any part thereof, or for any failure to
collect any rent due upon a reletting.
(g) As an additional and cumulative remedy of Landlord in the event of
termination of this Lease by Landlord following any breach or default by
Tenant, Landlord, at its option, shall be entitled to recover damages for
such breach in an amount equal to the Accelerated Rent Component (determined
from and after the date of Landlord's election under this subsection (g) less
the fair rental value of the Demised Premises for the remainder of the term
of this Lease (taken without regard to the early termination) and such
damages shall be payable by Tenant upon demand. Nothing contained in this
Lease shall limit or prejudice the right of Landlord to prove and obtain as
damages incident to a termination of this Lease, in any bankruptcy
reorganization or other court proceedings, the maximum amount allowed by any
statute or rule of law in effect with such damages are to be proved.
(h) In the event of any default occurrence by which Landlord shall have
the rights and remedies specified in this Section 15:
(i) Tenant hereby authorizes and empowers any prothonotary or
attorney of any court of record to appear for Tenant and to Confess Judgment
against Tenant (whether by Complaint to Confess Judgment or otherwise) in
favor of Landlord for any amount due to Landlord hereunder (including without
limitation the Accelerated Rent Component), together with interest and costs
and an attorney's commission of five percent (5%) of the amount due;
(ii) For the purpose of obtaining possession of the Demised
Premises, Tenant hereby authorizes and empowers any prothonotary or attorney
of any court of record to appear for Tenant and to file in any court an
agreement for entering an amicable action and judgment in ejectment for
recovery of possession, and/or to confess judgment for possession against
Tenant and those claiming by, through or under Tenant in favor of Landlord by
Complaint to Confess Judgment or otherwise, and Tenant agrees that upon such
entry or judgment a writ of possession for the Demised Premises may forthwith
issue; and
(i) Tenant hereby waives all errors and defect of a procedural nature
in any proceedings brought against it by Landlord under this Lease. Tenant
further waives the right to any notices to quit as may be specified in the
Landlord and Tenant Act of Pennsylvania, as amended, and agrees that five (5)
days notice shall be sufficient in any case where a longer period may be
statutorily specified.
(j) If rent or any other sum due from Tenant to Landlord shall be over
due for more than five (5) days after notice from Landlord, it shall
thereafter bear interest at the rate of twenty percent (20%) per annum (or,
if lower, the highest legal rate) until paid.
Page-11
<PAGE>
16. SUBORDINATION. This lease is and shall be subject and subordinate
to all the terms and conditions of all underlying mortgages and to all ground
or underlying leases of the entire Building which may now or hereafter be
secured upon the Building, and to all renewals, modifications,
consolidations, replacements and extensions thereof. This clause shall be
self-operative and no further instrument of subordination, Tenant shall
execute, within fifteen (15) days after request, any certificate that
Landlord may reasonably require acknowledging such subordination.
Notwithstanding the foregoing, the party holding the instrument to which this
Lease is subordinate shall have the right to recognize and preserve this
Lease in the event of any foreclosure sale or possessory action, and in such
case this Lease shall continue in full force and effect at the option of the
party holding the superior lien, and Tenant shall attorn to such party and
shall execute, acknowledge and deliver any instrument that has for its
purpose and effect the confirmation of such attornment.
17. NOTICES. All bills, statements, notices or communications which
Landlord may desire or be required to give to Tenant shall be deemed
sufficiently given or rendered if in writing and either delivered to an
officer of Tenant or sent by registered or certified mail addressed to Tenant
at the Building, and the time of the giving of such notice or communication
shall be deemed to be the time when the same is delivered to Tenant or
deposited in the mail, as the case may be. Any notice by Tenant to Landlord
must be served by registered or certified mail addressed to Landlord at the
address where the last previous rental hereunder was payable, or in the case
of subsequent change upon notice given, to the latest address furnished.
18. HOLDING-OVER. Should Tenant continue to occupy the Demised
Premises after expiration of the term of this Lease or any renewal or
renewals thereof, or after a forfeiture incurred, such tenancy shall (without
limitation of any of Landlord's rights or remedies therefor) be one at
sufferance from month to month at a minimum monthly rental equal to twice the
rent payable for the last month of the term of this Lease.
19. MISCELLANEOUS.
(a) Tenant represents and warrants that it has not employed any
broker or agent as its representative in the negotiation for or the obtaining
of this Lease, and agrees to indemnify and hold Landlord harmless from any
and all cost or liability for compensation claimed by any broker or agent
with whom it has dealt.
(b) The word "Tenant" as used in this Lease shall be construed to
mean tenants in all cases where there is more than one tenant, and the
necessary grammatical changes required to make the provisions hereof apply to
corporations, partnerships or individuals, men or women, shall in all cases
be assumed as though in each case fully expressed. This Lease shall not inure
to the benefit of any assignee, heir , legal representative, transferee or
successor of Tenant except upon the express written consent or election of
Landlord. Subject to the foregoing limitation, each provision hereof shall
extend to and shall, as the case may require, bind and inure to the benefit
of Tenant and its heirs, legal representatives, successors and assigns.
Page-12
<PAGE>
(c) The term "Landlord" as used in this Lease means the fee owner
of the Building or, if different, the party holding and exercising the right,
as against all others (except space Tenants of the Building) to possession of
the entire Building. Landlord above-named represents that it is the holder of
such rights as of the date of execution hereof. In the event of the voluntary
transfer of such ownership or right to a successor-in-interest of Landlord,
Landlord shall be freed and relieved of all liability and obligation
hereunder which shall thereafter accrue (and, as to any unapplied portion of
Tenant's security deposit, Landlord shall be relieved of all liability
therefor upon transfer of such portion to its successor in interest) and
Tenant shall look solely to such successor in interest for the performance of
the covenants and obligations of the Landlord hereunder (either in terms of
ownership or possessory rights). The successor in interest shall not (i) be
liable for any previous act or omission of a prior landlord; (ii) be subject
to any rental offsets or defenses against a prior landlord; (iii) be bound by
any amendment of this Lease made without its written consent, or by payment
by Tenant of rent in advance in excess of one (i) month's rent; or (iv) be
liable for any security not actually received by it. Subject to the
foregoing, the provisions hereof shall be binding upon and inure to the
benefit of the successors and assigns of Landlord. Notwithstanding anything
to the contrary contained in this Lease, any liability of Landlord, its
agents, partners or employees, arising out of or in respect of this Lease,
the Demised Premises or the Building, and if Landlord shall default in the
performance of Landlord's obligation under this Lease or otherwise Tenant
shall look solely to the equity of Landlord in its interest in the Building.
(d) Tenant agrees to execute a memorandum of this Lease in the
form submitted by Landlord, which may be recorded by Landlord. Tenant also
agrees to execute any assignment of this Lease by Landlord, evidencing its
consent to such assignment.
20. LANDLORD IMPROVEMENT. Landlord shall , in a good and workmanlike
manner, cause the Demised Premises to be completed in accordance with the
plans approved by Landlord and Tenant pursuant to Exhibit "A" hereof,
reserving the right to: (a) make substitutions of material of equivalent
grade and quality when and if any specified material shall not be readily and
reasonably available; (b) make changes necessitated or by conditions met
during the course of construction, provided that Tenant's approval of any
substantial change (and any reduction of cost incident thereto) shall first
be obtained (which approval shall not be reasonably withheld so long as there
shall be general conformity with said working drawings).
21. WAIVER OF SUBROGATION. Each party hereto hereby waives any and
every claim which arises or which may arise in its favor and against the
other party hereto during the term of this Lease, or any extension or renewal
thereof, for any and all loss of; or damage to, any of its property located
within or upon or constituting a part of the Building, to the extent that
such loss or damage is recovered under an insurance policy or policies and to
the extent such policy or policies contain provisions permitting such waivers
of claims. Each party agrees to request its insurers to issue policies
containing such provisions and if any extra premium is payable therefor, the
party which would benefit from the provision shall have the option to pay
such additional premium in order to obtain such benefit.
Page-13
<PAGE>
22. RENT TAX. If; during the term of this Lease or any renewal or
extension thereof; any tax is imposed upon the privilege of renting or
occupying the Demised Premises or upon the amount of rentals collected there
for, Tenant will pay each month, as additional rent, a sum equal to such tax
or charge that is imposed for such month, but nothing herein shall be taken
to require Tenant to pay any income, estate, inheritance or franchise tax
imposed upon Landlord.
23. PRIOR AGREEMENT, AMENDMENTS. Neither party hereto has made any
representations or promises except as contained herein or in some further
writing signed by the party making such representation or promise. No other
agreement hereinafter made shall be effective to change, modify, discharge or
effect an abandonment of this Lease, in whole or in part, unless such
agreement is in writing and signed by the party against whom enforcement of
the change, modification, discharge or abandonment is sought. Tenant agrees
to execute any amendment to this Lease required by a mortgagee of the
Building, which amendment does not materially adversely affect Tenant's
rights or obligation hereunder.
24. CAPTIONS. The captions of the paragraphs in this Lease are
inserted and included solely for convenience and shall not be considered or
given any effect in construing the provisions hereof.
25. MECHANIC'S LIEN. Tenant shall, within ten (10) days after notice
from Landlord, discharge any mechanic's lien for materials or labor claimed
to have been furnished to the Demised Premises on Tenant's behalf (except for
work contracted for by Landlord) and shall indemnify and hold harmless
Landlord from any loss incurred in connection therewith.
26. LANDLORD'S RIGHT TO CURE. Landlord may (but shall not be
obligated), on five (5) days notice to Tenant (except that no notice need be
given in case of emergency) cure on behalf of Tenant any default hereunder by
Tenant, and the cost of such cure (including any attorney's fees incurred)
shall be deemed additional rent payable upon demand.
27. PUBLIC LIABILITY INSURANCE. Tenant shall at all times during the
term hereof maintain in full force and effect with respect to the Demised
Premises and Tenants use thereof; comprehensive public liability insurance,
naming Landlord as an additional insured, covering injury to person in
amounts at least equal to One Million ($1,000,000) Dollars combined single
limit bodily injury and property. Tenant shall lodge with Landlord duplicate
originals or certificates of such insurance at or prior to the commencement
date of the term hereof; together with evidence of paid-up premiums, and
shall lodge with Landlord renewals thereof at least fifteen (15) days prior
to expiration.
Page-14
<PAGE>
28. ESTOPPEL STATEMENT. Tenant shall from time to time, within ten
(10) days after request by Landlord, execute, acknowledge and deliver to
Landlord a statement certifying that this Lease is unmodified and in full
force and effect (or that the same is in full force and effect as modified,
listing any instruments or modifications), the dates to which rent and other
charges have been paid, and whether or not, to the best of Tenant's
knowledge, Landlord is in default or whether Tenant has any claims or demands
against Landlord (and, if so, the default, claim and/or demand shall be
specified).
29. RELOCATION OF TENANT. Landlord, at its sole expense, on at least
sixty (60) days prior written notice, may require Tenant to move from the
Demised Premises to another suite of comparable size and decor in order to
permit landlord to consolidate the Premises with other adjoining space leased
or to he leased to another tenant in or coming into the Building. In the
event of any such relocation, Landlord will pay all the expenses of preparing
and decorating the new premises so that they will be substantially similar to
the premises and the expense of moving Tenant's furniture and equipment to
the relocated premises. Occupancy of the new Premises shall be under and
pursuant to the terms of this lease. Tenant will have right of first offer to
lease contiguous space after initial lease-up of such space.
30. TENANT'S APPROVAL. Prior to installation, Tenant shall have the
right to inspect the following items that are included as Tenant
Improvements:
1. All telephone and data cable within the Demised Premises (to meet
specifications provided by Tenant).
2. All pinouts to be used on end connectors prior to being punched
down within the Demised Premises (to meet specifications provided
by Tenant).
3. All lighting fixtures within the Demised Premises
IN WITNESS WHEREOF, the parties hereto have executed this Lease or
caused this Lease to be executed by their duly authorized representatives the
day and year first above written.
LANDLORD: BALDWIN TOWERS ASSOCIATES, L.P.
BY: /s/ [illegible]
-------------------------------------
DATE: 4/3/95
--------
TENANT: NEPTUNE SYSTEMS, INC.
BY: /s/ [illegible]
-------------------------------------
DATE: 4/3/95
--------
Page-15
<PAGE>
SCHEDULE "A"
RENT RIDER
<TABLE>
<CAPTION>
PERIOD ANNUALLY MONTHLY PER SQ.FT.
------ -------- ------- ----------
<S> <C> <C> <C>
7/1/95 - 6/30/96 $59,026.00 $4,18.33 $11.00
7/1/96 - 6/30/00 $80,490.00 $6,707.50 $15.00
7/1/00 - 6/30/05 $85,856.00 $7,154.67 $16.00
</TABLE>
Page-16
<PAGE>
EXHIBIT "C"
BUILDING RULES AND REGULATIONS
1. The sidewalks, entryways, passages, corridors, stairways and elevators
shall not be obstructed by any of the tenants, their employees or agents, or
used by them for purposes other than ingress or egress to and from their
respective suites. All safes or other heavy articles shall be carried up or into
the leased premises only at such times and in such manner as shall be prescribed
by the Landlord and the Landlord shall in all cases have the right to specify a
maximum weight and proper position or location of any such safe or other heavy
article. Any damage done to the Building by taking in or removing any safe or
from overloading any floor in any way shall be paid by the Tenant. The cost of
repairing or restoring any part of the Building which shall be defaced or
injured by a tenant, its agents or employees, shall be paid for by the Tenant.
2. Each Tenant will refer all contractors, contractors representatives
and installation techniques rendering any service on or to the leased premises
for the tenant to Landlord for Landlord's approval and supervision before
permanence of any contractual service. This provision shall apply to all work
performed in the Building, including installation of telephones, telegraph
equipment, electrical devices and attachments and installations of any nature
affecting floors, walls, woodwork, trim, windows, ceilings, equipment or any
other physical portion of the Building.
3. No, sign, advertisement or notice shall be inscribed, painted or
affixed on any part of the inside or outside of the Building unless of such
color, size and style and in such place upon or in the Building as shall first
be designated by Landlord; there shall be no obligation or duty on Landlord to
allow any sign, , advertisement or notice to be inscribed, painted or affixed on
any part of the inside or outside of the Building except as specified in a
tenant's lease. Signs on or adjacent to doors shall be in color, size and style
approved by Landlord, the cost to be paid by the tenants. A directory in a
conspicuous place, with the names of tenants, will be provided by Landlord; any
necessary revision in this will be made by Landlord within a reasonable time
after notice from the tenant of an error or of a change making revision
necessary. No furniture shall be placed in front of the Building or in any lobby
or corridor without written consent of Landlord.
4. No tenant shall do or permit anything to be done in its leased
premises, or bring to keep anything therein, which will in any way increase the
rate of fire insurance on the Building, or on property kept therein, or obstruct
or interfere with the rights of other tenants, or in any way injure or annoy
them, or conflict with the laws relating to fire prevention and safety, or with
any regulations of the fire department, or with any rules or ordinances of any
Board of Health or other governing bodies having jurisdiction over the Building.
5. The janitor of the Building may at all times keep a pass-key, and he
and other agents of the Landlord shall at all times, be allowed admittance to
the leased premises for purposes permitted in Tenant's lease.
Initial [ILLEGIBLE]
---------------
[ILLEGIBLE]
---------------
Page-17
<PAGE>
6. No additional locks shall be placed upon any doors without the written
consent of the Landlord. All necessary keys shall be furnished by the Landlord,
and the same shall be surrendered upon the termination of this Lease, and the
Tenant shall then give the Landlord or his agents explanation of the combination
of all locks upon the doors of vaults.
7. The water closets and other water fixtures shall not be used for any
purpose other than those for which they were constructed, and any damage
resulting to them from misuse or abuse by a tenant or its agents, employees or
invitees, shall be borne by the Tenant.
8. No person shall disturb the occupants of the Building by the use of
any musical instruments, the making or transmittal of noises which are audible
outside the leased premises, or any unreasonable use. No dogs or other animals
or pets of any kind will be allowed in the Building.
9. No bicycles or similar vehicles will be allowed in the building.
10. Nothing shall be thrown out the windows of the building or down the
stairways or other passages.
11. Tenants shall not be permitted to use or to keep in the Building any
kerosene, camphene, burning fluid or other illuminating materials.
12. If any tenant desires telegraphic, telephonic or other electric
connections, Landlord or its agents will direct the electricians as to what and
how the wires may be introduced, and without such directions no boring or
cutting for wires will be permitted.
13. If a tenant desires shades, they must be of such shape, color,
materials and make as shall be prescribed by Landlord. No outside awning shall
be permitted.
14. No portion of the Building shall be used for the purposes of lodging
rooms or for any immoral or unlawful purposes.
15. No tenant shall store anything outside the building or in any common
areas in the building.
Initial [ILLEGIBLE]
---------------
[ILLEGIBLE]
---------------
Page-18
<PAGE>
[MAP]
<PAGE>
LEASE AMENDMENT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This Agreement dated JULY 6, 1995 to be made part of a certain Lease dated
APRIL 3, 1995 between BALDWIN OFFICE ASSOCIATES, L.P. (henceforth called
"Landlord") and NEPTUNE SOFTWARE (henceforth called "Tenant") for OFFICE
space in the BALDWIN TOWERS OFFICE BUILDING, EDDYSTONE, PENNSYLVANIA as more
particularly described below:
1. The Commencement Date noted in Section 1 of the Lease shall change to
September 1, 1995 or later by XXXXXXXXXXXX three weeks prior written notice
to Tenant.
2. Schedule "A" of the Lease shall change to the following:
<TABLE>
<CAPTION>
PERIOD MONTHLY ANNUALLY PER SQ. FT.
------ ------- -------- -----------
<S> <C> <C> <C>
Months 01-04 $0 $0 $0
Months 05-12 $4,918.83 $59,026.00 $11.00
Months 13-60 $6,707.50 $80,490.00 $15.00
Months 61-120 $7,154.67 $85,856.00 $16.00
</TABLE>
3. Upon Tenant occupancy, Landlord shall issue a payment to Tenant of
$5,000.00 as additional XXXXXXXXX.
4. The XX sentence of Section 10. DELAY IN POSSESSION, noted with an
asterisk, becomes void and unenforceable.
5. All other terms and conditions of the Lease shall remain in full force and
effect.
6. Provided Tenant is XXX in Default of any of the terms or conditions of this
Lease XXXXXXXX this Lease on the date of the sixth anniversary of the
Commencement Date by XXXXXXXXXXXXXX months' prior written notice of such
intention and delivering a fee (the XXXXXXXXXXX eight months rent plus all
Landlord's costs associated with the lease transaction XXXXXXXXX to be
amortized over the remaining Lease Term assuming an interest rate of twelve
percent (12%).
7. Landlord shall be known as Baldwin Office Associates, L.P.
AGREED AND ACCEPTED
/s/ [illegible]
- ----------------------------------- -----------------------------------
NEPTUNE SOFTWARE BALDWIN OFFICE ASSOCIATES, L.P.
DATE: 7/6/95 DATE:
<PAGE>
AMENDMENT TO LEASE
THIS AMENDMENT TO LEASE ("AMENDMENT") is made this 17th day of June, 1996
between BALDWIN OFFICE ASSOCIATES, L.P. ("LANDLORD") and NEPTUNE SYSTEMS,
INC. ("TENANT").
BACKGROUND
A. Landlord and Tenant are parties to that certain Lease dated April 3,
1995 (the "Lease"), pursuant to which Landlord leased to Tenant approximately
5,366 square feet of space (the "Original Leased Premises") on the sixth
(6th) floor of the building ("Building") known as Baldwin Tower located at
1510 Chester Pike, Eddystone, Pennsylvania.
B. The parties desire to relocate the premises leased to Tenant under the
Lease from the sixth (6th) floor to the third (3rd) floor and to increase the
total leased square footage to thirteen thousand nine hundred eighty (13,980)
rentable square feet (the "New Demised Premises").
C. The parties desire to amend the Lease to provide for the New Demised
Premises and to make certain other amendments to the Lease as provided herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereto, intending to be legally bound, hereby agree as follows:
1. The Demised Premises defined in Section 1 of the Lease changes to the New
Demised Premises containing 13,980 rentable square feet located on the
third floor of the Building, known as suite 640.
2. The Term defined in Section 2 of the Lease shall be ten (10) years and
nine days commencing on July 22, 1996 and ending on July 31, 2006.
3. The Schedule "A" Rent Rider to the Lease changes to the following:
<TABLE>
PERIOD MONTHLY ANNUALLY
<S> <C> <C>
July 15, 1996 - July 31, 1997 $15,757.50 $189,090.00
August 1, 1997 - July 31, 2001 $19,222.50 $230,670.00
August 1, 2001 - July 31, 2006 $20,387.50 $244,650.00
</TABLE>
4. Tenant's fraction defined in Section 4(a)(iii) of the Lease changes to
13,980/166,250 (i.e. 8.41%).
5. Landlord shall improve the New Demised Premises according to the plan
drawn by T. E. Hall Architects dated May 28, 1996, Revision #2, a copy
of which Plan is attached hereto as EXHIBIT "A" and made a part hereof.
The cost of improving the New Demised Premises (the "Relocation Cost")
which includes a contribution for office furniture of $27,995.20, a
moving allowance of $5,000.00 and an improvement allowance of $15.00 per
rentable square foot ($209,000.00) shall be borne by the Landlord. In
the event that the actual Relocation Cost is greater than $242,695.50
but less than $271,303.00, the portion which is greater than $242,695.50
will be paid 50% by the Landlord and 50% by the Tenant. In the event the
actual Relocation Cost is greater than $271,303.00, the portion which is
greater than $271,303.00 will be paid entirely by the Tenant.
6. Tenant shall be notified and offered any space in the Buiding which
becomes available on the second, third or fourth floor of the Building
prior to such space being leased to a third party. However, Tenant shall
not have a right of first refusal with regard to such space.
<PAGE>
EXPANSION, EXTENSION & RELOCATION
AMENDMENT
- -------------------------------------------------------------------------------
This Amendment dated ___________ to be made part of a certain Lease
("Lease")dated APRIL 3, 1995 between BALDWIN OFFICE ASSOCIATES, L.P. (henceforth
called "Landlord") and NEPTUNE SOFTWARE (henceforth called "Tenant") for OFFICE
space in the BALDWIN TOWER OFFICE BUILDING, EDDYSTONE, PENNSYLVANIA as more
particularly described below:
1. The Demised Premises defined in Section 1 of the Lease changes to 13,980
rentable square feet on the third floor of the Building, known as suite
640.
2. The Term defined in Section 2 of the Lease shall be ten (10) years and two
weeks commencing on July 15, 1996 and ending on July 31, 2006.
3. Schedule "A" Rent Rider changes to the following:
<TABLE>
PERIOD MONTHLY ANNUALLY
<S> <C> <C>
July 15, 1996 - July 31, 1997 $15,757.50 $189,090.00
August 1, 1997 - July 31, 2001 $19,222.50 $230,670.00
August 1, 2001 - July 31, 2006 $20,387.50 $244,650.00
</TABLE>
4. Tenant's fraction defined in Section 4(a)(iii) changes to 13,980/166,250
(i.e. 8.41%)
5. Landlord shall improve the Demised Premises according to the attached plan
drawn by T. E. Hall Architects dated May 28, 1996, Revision #2. The cost of
such buildout which includes a contribution for office furniture of
$27,995.20, a moving allowance of $5,000.00 and an improvement allowance of
$15.00 per rentable square foot ($209,000.00) shall be borne by the
Landlord.
In the event that the actual costs for improvements are greater than
$242,695.50 but less than $271,303.00, the portion which is greater than
$242,695.50 will be paid 50% by the Landlord and 50% by the Tenant. In the
event the actual costs for improvements is greater than $271,303.00, the
portion which is greater than this amount will be paid entirely by the
Tenant.
6. Tenant shall be notified of any unit which becomes available on the second,
third or fourth floor of the Building - prior to such space being leased to
a third party. However, Tenant shall not have a right of first refusal with
regard to such space.
<PAGE>
7. Provided that Tenant is not in default of any of the terms or conditions of
the Lease; as amended hereby, and Landlord is unable to provide additional
square footage in the Building sufficient to accommodate the reasonable
expansion needs of Tenant, Tenant may buy out of this Lease by providing
one year's prior written notice to Landlord, of Tenant's intention to
terminate the Lease and paying, at the time of such notice, an amount equal
to:
A. The cost of improvements, commissions, and free rent period
associated with this Amendment that will remain unamortized
over the balance of the lease term assuming an interest rate
of ten percent (10%) at the time of the notice; plus
B. A Lease Cancellation Payment in accordance with the following
schedule:
<TABLE>
LEASE YEAR DURING WHICH NOTICE IS GIVEN PAYMENT AMOUNT
<S> <C>
1 2 1/2 yrs. rent
2 2 1/4 yrs. rent
3 2 years rent
4 1 3/4 yrs. rent
5 1 1/2 yrs. rent
6 1 1/4 yrs. rent
7 1 years rent
8 3/4 years rent
9 1/2 years rent
10 0 years rent
</TABLE>
8. Upon Tenant's relocation to the third floor, all partition furniture in the
sixth floor space will become the property of the Landlord.
9. All other terms and conditions of the Lease shall remain in full force and
effect.
AGREED AND ACCEPTED
- -------------------------- ------------------------------
NEPTUNE SOFTWARE BALDWIN OFFICE ASSOCIATES, L.P.
Date: / / Date: / /
<PAGE>
BALDWIN OFFICE, INC.
SUBCONTRACT
THIS SUBCONTRACT ("Subcontract") is made the day of , 1995, by
(hereinafter) referred to as the ("Subcontractor") and BALDWIN
OFFICE, INC. (hereinafter referred to as the ("Contractor").
The subcontractor and the Contractor, in consideration of the mutual
promises contained herein, and intending to be legally bound hereby, agree as
follows:
1. THE SUBCONTRACT WORK.
A. The Subcontractor shall furnish all labor and material for
equipment for, and perform all services necessary to complete the Subcontract
Work (as hereinafter described) in connection with the rehabilitation of the
existing Baldwin Towers general office building located in the Borough of
Eddystone, Delaware County, Pennsylvania (hereinafter referred to as the
"Project"). The Subcontract Work shall be performed in accordance with the
Construction Agreement between Baldwin Office, Inc.(hereinafter referred to as
the "Owner") and the Contractor, the exhibits thereto, drawings, plans
specifications and other contract documents referred to therein and dated the
January 22, 1991, all of which documents are hereinafter referred to as the
"Principal Contract" and are incorporated herein by reference. The Subcontract
Work shall consist of the items listed on Exhibit "A" attached hereto.
B. The Subcontractor acknowledges that he has completely reviewed
all drawings, specifications, addenda and other contact documents with regard to
the Project and is satisfied that it can complete all Subcontract Work in
accordance with this Subcontract and the Principal Contract.
C. The Subcontractor shall perform the Subcontract Work in strict
accordance with the Principal Contract as it relates to the Subcontract Work and
assumes all the responsibilities and obligations which the Contractor, by the
Principal Contract, has assumed and agreed to perform for the Owner. Any work
not specifically referred to in this Subcontract but which may be reasonably
inferred therefrom shall also be performed and completed when and as required by
the Subcontractor. To the extent that the Principal Contract imposes standards
that are stricter than those in this Subcontract, the provisions of the
Principal Contract shall be given effect.
D. The Subcontractor acknowledges that it has taken steps reasonably
necessary to ascertain the nature and location of the Subcontract Work, and that
it has investigated and satisfied itself as to the general and local conditions
which can effect the Subcontract Work or its cost, including but not limited to
(1) conditions bearing upon transportation, disposal, handling, and storage of
materials; (2) the availability of labor, water, electric power, and roads; (3)
uncertainties of weather; (4) the confirmation of conditions of the ground; and
(5) the character of equipment and facilities needed preliminary to and during
performance. The Subcontractor also acknowledges that it has satisfied itself
as to the character, quality, and quantity of surface and subsurface materials
or obstacles and assumes all responsibilities for all such conditions. Any
failure of the Subcontractor to take the actions described and acknowledged in
this paragraph will not relieve the Subcontractor from responsibility for
estimating properly the difficult and cost of successfully performing the
Subcontract Work, or for proceeding to successfully perform the Subcontract Work
without additional expense to the Subcontractor. The Contractor assumes no
responsibility for any conclusions or interpretations made the Subcontractor
based on the information made available by the Contractor, any engineer or
Owner. Nor does the Contractor assume the Subcontract Work by any of its
officers or agents before the execution of this Subcontract, unless that
understanding or representation is expressly stated in this subcontract.
<PAGE>
E. The contractor may at any time issue written orders requiring
alterations or additions to the Subcontract Work. The Subcontractor shall not
alter or perform additions to the Subcontract Work except upon receipt of such
written orders.
2. TIME OF PERFORMANCE
A. Time being of the essence hereunder, the Subcontractor shall
begin, prosecute, and complete the Subcontract Work at the times required by the
Contractor.
B. If the Subcontractor shall be delayed in beginning, prosecuting
or completing the Subcontract Work by the act, omission, neglect or default of
the Contractor, the Owner, or any contractor subcontractor performing work upon
the Project, or by any damage caused by fire or other casualty for which the
Subcontractor is not responsible, the time of the completion of the Subcontract
Work shall be extended for such period of time as the time lost by reason of any
of the aforesaid causes. Such an extension shall be the Subcontractor's sole
and exclusive remedy for such delay and the Contractor shall not be responsible
for any increased costs, charges, expenses or damages of any kind resulting from
such delay.
C. No allowance of an extension of the time for performance of the
Subcontract Work will be granted, unless a claim therefore is presented to the
Contractor in writing within forty-eight hours of the occurrence of the cause
hereof.
D. If the contractor shall at any time be behind in the Subcontract
Work, or if in the opinion of the Contractor, the Subcontractor is delaying the
progress of the work necessary to complete the Project, then and in either such
event, if requested by the Contractor, the Subcontractor, at its sole cost and
expense, shall perform such overtime work as may be necessary to keep abreast
with the general progress of the work at the Project, and/or to complete the
Subcontract Work at the time required by the Contractor and Subcontractor is set
forth on Exhibit "A" together with the description of the Subcontract Work.
3. PAYMENT
A. The space Contractor shall pay the Subcontractor for the
performance of the Subcontract Work the Sum of
($ )(hereinafter referred to as the "Subcontract Price"), subject
to such additions and deductions for alterations or additions to the
Subcontract Work as may be ordered by the Contractor. The Subcontract Price
shall be paid to the Subcontractor as hereinafter provided.
B. Before beginning the Subcontract Work, the Subcontract shall
prepare and submit to the Contractor for approval an itemized breakdown of the
Subcontract Price, allocating amounts thereof to the several items of work and
material of the Subcontract Work conforming to the breakdown of items designated
by the Contractor, which itemized breakdown, upon approval by the Contractor,
shall be used as the basis for all requisitions for payment submitted by the
Subcontractor to the Contractor.
C. The Subcontractor, unless otherwise directed by the Contractor,
shall submit to the Contractor on or about the tenth (10th) day of each calendar
month a requisition containing an itemized estimate of the Subcontract Work done
and materials furnished and incorporated into the Project during the recent
calendar month which shall be in such form and be supported by such information,
certificates and documents as the contractor shall require. The amount to which
the Subcontractor shall be entitled upon any such monthly requisition shall be
the amount approved by the Owner's construction lender.
2
<PAGE>
D. It is the intent of the Contractor and the Subcontract that:
(1) payments to the Subcontractor shall be made from a fund, the sole source
of which shall be funds paid by the Owner to the Contractor, and (2) the risk
of the Owner's insolvency and/or failure to make such payments shall be borne
by the Subcontractor. With the foregoing in mind, the Contractor and
Subcontractor agree that the Contractor shall pay to the Subcontractor within
five (5) days after receipt of the corresponding payment from the Owner,
ninety percent (90%) of the amount approved by the Owner's construction
lender.
E. The balance due or final payment to the Subcontractor shall be
paid by the Contractor to the Subcontractor within five (5) days after receipt
of final payment from the Owner for the Subcontract Work. Before issuance of the
final payment, the Subcontractor shall submit evidence satisfactory to the
Contractor that all payrolls, bills for materials and equipment, and all known
indebtedness connected with the Subcontractor's Work have been satisfied.
F. The Subcontractor agrees to and does hereby accept full and
exclusive liability for the payment of any and all contributions, taxes or
insurance of any description whatsoever, now or hereafter imposed by any
authority, which are measured by the wages, salaries or other remuneration's
paid to persons employed by the Subcontractor on work performed pursuant to the
terms of this Subcontract. Furthermore, the Subcontractor agrees to and does
hereby accept full and exclusive liability for payment of any all personal
property taxes, inventory taxes, sales taxes, use taxes, excise taxes, fuel
taxes, transportation taxes, franchise taxes, and all other taxes and/or tax
assessments in any manner whatsoever relating to the materials, supplies, tools,
machinery, equipment and plant which may be purchased, acquired, rented or used
by Subcontractor relating to all work performed under this Subcontract as is or
may be imposed or assessed by any Federal, State, Local, or other political
subdivision or agency. Notwithstanding the foregoing, the Contractor shall have
the right, but not the obligation to pay directly to anyone performing any part
of the Subcontract Work any amount due for labor, materials, equipment or
services supplied in connection with the performance of the Subcontract Work. In
such event, the Contractor shall also have the right but not the obligation to
pay directly to any tax authority or agency any tax or other payment or charge
which the Contractor would have been required to pay or to have withheld and
pay. All such payments made by the Contractor shall be credited against the
payment then due the Subcontractor. This provision is not intended to and shall
not create any third party beneficiary rights in any third party nor shall it
impose any obligation upon the Contractor to supervise payments due by the
Subcontractor to any of its subcontractors, materialmen, laborers, suppliers or
taxing authorities.
G. The Contractor may deduct from amounts due or to become due to
the Subcontractor, any sums due or to become due to the Contractor from the
Subcontractor whether or not said sums are in any way related to this
Subcontract or Project. Contractor may apply such deducted funds to any account
related or unrelated to this Subcontract or Project, wherein the obligations of
the Subcontractor have not been discharged and wherein the Contractor's
interests are directly or indirectly involved.
If the Subcontractor is in default of, or breaches or fails to
comply with any provision, covenant or requirement of this Subcontract; or
any person assets, or indicates that he will assert, any lien, claim, demand
or charge against the Project or land or improvements or funds related to the
Project, or against the Owner or the Contractor, arising from Subcontractor's
performance of this Subcontract, the Contractor may, at this option, withhold
out of any payments due or to become due to the Subcontractor such amounts as
the Contractor, in its sole discretion, may deem sufficient to completely
protect and indemnify the Contractor and the Owner from any and all loss,
damage and/or expense therefore, including attorney's fees and litigation
costs, until the condition requiring such measures has been remedied by the
Subcontractor. If the offending condition is not remedied by the
Subcontractor within a reasonable period of time, the Contractor may, in its
discretion, determine as being in the best interest of itself and/or the
Owner. If the Contractor is compelled to expend monies in defending,
discharging or otherwise disposing of any claim or lien or other demand in
excess of retained or withheld sums, the Subcontractor shall, upon demand,
reimburse the Contractor for the excess amount so expended, including
reasonable attorney fees and costs incurred by Contractor incident to such
defense, discharge or disposition and/or incident to Contractor's collection
from Subcontractor of such excess.
3
<PAGE>
H. Payments made hereunder shall not be evidence of the acceptance
of performance of this Subcontract, either wholly or in part, and no payment
shall be construed to be an acceptance of the Subcontract Work, or any part
thereof. Acceptance by the Subcontractor of the final payment hereunder shall be
deemed to be a complete and unconditional release of any and all existing or
future claims or demands by the Subcontractor against the Contractor, known or
unknown, hereunder or in connection herewith, whatever they may be or howsoever
they may arise, as well as for every action and neglect of the Contractor and
any person or firm for whom the Contractor shall or may be deemed responsible.
I. The Subcontract Price includes all federal, state, municipal and
local taxes including but not limited to sales and or use taxes applicable to
the performance of the Subcontract Work.
4. INSURANCE
A. The Subcontractor, before beginning the Subcontract Work, shall
procure from such insurance company or companies and/or its or their affiliated
companies as may be approved by the Contractor, policies with such limits of
liability as the Contractor shall deem necessary to protect the Contractor from
claims under Workmen's Compensation, Public Liability, Property Damage, and such
other insurance or coverage as required by the Contractor or the Principal
Contract, including without limitation claims for damages for personal injury,
including death, which may arise from operations under this Subcontract carried
on either by the Subcontractor or by any of its subcontractors. The
Subcontractor shall, by making all payments of the premiums due thereon,
maintain said insurance policies in full force and effect until such time as all
the Subcontract Work shall have been entirely completely and accepted in
accordance with the Principal Contract. Certificates evidencing that such
required insurance is in with the Principal Contract. Certificates evidencing
that such required insurance is in effect shall be furnished by the
Subcontractor to the Contractor promptly after such insurance has been procured.
Such certificates shall not be altered, amended or terminated until the
insurance company which has issued said policy has given the Contractor notice
thereof and thirty (30) days have elapsed from the date of Contractor's receipt
of said notice.
B. In case of the failure of the Subcontractor to provide or
maintain such insurance and policies in full force and effect as aforesaid,
the Subcontractor hereby authorizes the Contractor, without any notice of its
intention to do so, to provide such required policies of insurance and other
coverage, on behalf for the account of the Subcontractor and to pay any and
all premiums due thereon, and to deduct the aggregate amount of such premiums
so paid by the Contractor from any monies, which may be due or thereafter
become due to the Subcontractor under this Subcontract.
C. This Subcontractor, by compliance with the foregoing requirements
as to insurance, shall not be relieved from any liability whatsoever imposed by
the provisions of this Subcontract, the Principal Contract or otherwise.
5. INDEMNIFICATIONS.
A. The Subcontractor hereby agrees to indemnify and hold harmless
the Contractor and its officer's directors, agents, representatives, employees,
successors and assigns from and against any and all claims, loss, damage, costs,
suits, actions, causes of action, expenses and liability of any kind which it or
any of them may incur, suffer, sustain or be required to pay by reason of the
injury or death of any person or the damage to any property whatsoever, caused
or alleged to have been caused by any act or omission of the Subcontractor or
any of its suppliers or subcontractors, or the employees, agents or
representatives of the Subcontractor or any of its suppliers or subcontractors,
arising out of, or in any manner connected with the performance of the
Subcontract Work.
B. The Subcontractor agrees to indemnify and hold harmless the
Contractor from and against any and all actions, suits, proceedings, claims
or demands arising out of, or alleged to have arisen out of the performance
of, or the operations under this Subcontract. If any action, suit or
proceeding is instituted against
4
<PAGE>
the Contractor based upon any liability or defect arising out of or alleged
to have risen out of the performance or the operations under this Subcontract,
the Contractor shall, within thirty (30) days, give notice in writing thereof
to the Subcontractor. Upon the receipt of such notice, the Subcontractor, at
its own cost and expense, shall defend against such action, suit proceeding,
claim, counterclaim, set-off, recoupment or other defense and take all such
steps as the Contractor may deem necessary to prevent the obtaining of
Judgment against or the successful maintenance of such claim, counterclaim,
set-off, recoupment or other defense against the Contractor. Notwithstanding
the foregoing, the Contractor shall be permitted to be represented by its own
counsel should Contractor so desire.
C. If any action, suit, proceeding, claim or demand is made against
the Contractor, its officers, directors, agents, representatives, employees,
successors or assigns against which the Subcontractor has herein agreed to
indemnify the Contractor, then the Contractor may withhold from any payment due
or hereafter to become due to the Subcontractor hereunder, an amount sufficient
in its sole judgment to protect and indemnify it from such action, suit,
proceeding, claim or demand, together with legal fees ad disbursements.
6. ADDITIONAL OBLIGATIONS OF THE SUBCONTRACTOR
A. The Subcontractor shall:
(1) provide and supply, in the performance of the Subcontract Work
a sufficient number of properly skilled and other workmen and whatever
material, tools, equipment, machines, services, storage sheds, workshops,
offices, other temporary structures and other facilities which shall be
necessary to the performance of the Subcontract Work. The Subcontractor
agrees that the Contractor's equipment shall be available to the
Subcontractor only at the Contractor's discretion and on mutually agreeable
terms. All equipment, materials and articles incorporated in the Subcontract
Work shall be new and of the most suitable grade for the purpose intended,
otherwise specifically provided in this Subcontract or the contract documents
for the Project. References in the contract, documents for the Project to
equipment, material, articles, or patented processes by trade, make, or
catalog number shall be regarded as establishing a standard of quality. The
Subcontractor at its option, may use any equipment, material, article or
process that, in the sole judgment of the Contractor, is equal to that named
in the Specifications provided in the Principal Contract. The Contractor may
withhold such approval for any reason.
(2) obtain the Contractor's approval of the machinery and mechanical
and other equipment to be incorporated into the Subcontract Work. Machinery,
equipment, material and articles that are not approved shall be installed or
used at the risk of subsequent rejection.
(3) give all notices and comply with all laws, ordinances, rules and
regulations and orders of any public authority bearing on the performance of the
Subcontract Work. The Subcontractor shall secure and pay for permits and
governmental fees, licenses and inspections necessary for the proper execution
and completion of the Subcontract Work. The Subcontractor shall also comply
with federal, state and local tax laws, social security acts, unemployment
compensation acts and worker's or workmen's compensation acts insofar as
applicable to the performance of this Subcontract.
5
<PAGE>
(4) within twenty-four hours after receiving written notice from
the Contractor to that effect, proceed to remove from the Project site all
materials condemned by the Contractor or the Owner's construction lender,
whether worked or unworked, and to take down all portions of the Subcontract
Work which the Contractor or the Owner's construction lender shall by like
written notice condemn as unsound or improper, or which in any way fails to
conform to the drawings or specifications for the Project. The Subcontractor
shall make good all work damaged or destroyed thereby.
(5) at all times keep the Project site free from accumulation of
waste material and rubbish resulting from operations under this Subcontract
and shall at completion clean up and remove from the Project site all rubbish
and debris resulting from the performance of the Subcontract Work.
(6) coordinate the Subcontract Work with all subcontractors
provided however that the Contractor may, at its election, control and direct
such coordination. In carrying out its Subcontract Work the Subcontractor
shall take all necessary precautions to protect the finished work of other
trades from damage caused by its operation.
(7) not employ any persons in the performance of this Subcontract
whose employment might be reasonably objected by the Contractor or Owner. In
the interest of harmonious relations and to facilitate the orderly and
efficient progress of the work on this Project, the Subcontractor hereby
agrees to promptly remove from the Project any supervisor, employee, workman
or subcontractor to whom the Contractor reasonably objects and such person or
party shall not again be employed in an portion of the Subcontract Work.
(8) abide by the safety rules and regulations established by the
Contractor or promulgated by any federal, state or local government body or
agency with appropriate jurisdiction.
B. The Subcontractor shall not sell, let, assign or transfer this
Subcontract, or any part of the Subcontract Work, or any balances or sums of
money due or to become due and payable hereunder, without the written consent
of the Contractor which consent may be withheld by the Contractor for any
reason or no reason.
C. In the event of any failure of the Subcontractor to complete the
Subcontract Work within the required time or upon the dates set forth on
Exhibit "A", the Subcontractor shall pay to the Contractor such damages as
the Contractor may sustain by reason of any such delay directly or indirectly
attributable to or caused by the Subcontractor, including but not limited to,
recovery of the Contractor's overhead and expense related to managing and
supervising the Principal Contract work during or equal to any period of time
resulting from such delay of the Subcontractor; and the Subcontractor further
agrees that neither the payment of such damages nor any liability incurred
for the payment of such damages shall release the Subcontractor from its
obligation to otherwise fully perform this Subcontract; provided however,
that the Contractor, in its sole discretion, may in addition to and not in
lieu of any foregoing right or remedy immediately and without further notice
to the Subcontractor terminate this Subcontract. The Subcontractor further
agrees that the Contractor may set-off against any sums due from the
Contractor to the Subcontractor for work performed, all damages or
reimbursements payable from the Subcontractor to the Contractor pursuant to
the terms of this Agreement.
6
<PAGE>
D. If at any time the Contractor in its sole discretion determines
that the Subcontractor's financial condition has become impaired, unstable or
unsatisfactory, the Contractor shall have the option to immediately cancel
this Subcontract or to initiate such other action as the Contractor may, in
its sole discretion, deem necessary for the protection or preservation of its
interests and/or the prevention of delay in the efficient and or delay
progress of work on the Project, including but not limited to that portion of
such work to be performed by Subcontractor hereunder. In the event of such
cancellation, the rights of the Contractor shall be the same as if the
Subcontractor has willfully refused to further perform this Subcontract.
E. It is acknowledged that the Subcontract Work provided for in this
Subcontract constitutes only a part of the work being performed on this
Project for the Owner by the Contractor and other subcontractors. The
Subcontractor therefore agrees to perform the Subcontract Work in such a
manner that it will not injure or damage any other work performed by the
Contractor or any other subcontractor, and Subcontractor further agrees:
(1) to furnish continuous and effective protection at all times
for its work in place and all materials stored for use under this Subcontract
and to bear and be solely liable for all loss and/or damage of any kind to it
in connection with said work and [ILLEGIBLE] liable for all loss and/or
damage of any kind to or in connection with said work and materials at any
time [ILLEGIBLE] final completion and acceptance thereof unless said loss or
damage is caused solely by the negligence [ILLEGIBLE] and is subject to
recovery [ILLEGIBLE] applicable insurance policies as may be in effect.
(2) to furnish [ILLEGIBLE] be required to adequately protect the
work in place and the property of the [ILLEGIBLE] other subcontractors from
damage or injury as a result of its execution of this [ILLEGIBLE] from its
operations hereunder.
(3) to report to [ILLEGIBLE] any damage to its property or work
in place, describing such damage and circumstances [ILLEGIBLE] available, an
estimate of the cost of restoration and identification of the [ILLEGIBLE]
(4) to repay or [ILLEGIBLE] any damage or injury to the work or
property of the Owner, the Contractor and [ILLEGIBLE] to the work or the
property of the Owner, the Contractor and other [ILLEGIBLE] by or arising
from the performance of its subcontract work, including the cost of
replacing, [ILLEGIBLE] removed or displaced in the course of correcting or
repairing work [ILLEGIBLE] rejected by the Owner or the Owner's construction
lender or which are [ILLEGIBLE] of this [ILLEGIBLE].
F. Whenever it may [ILLEGIBLE] Contractor to [ILLEGIBLE] Contractor
shall be permitted to occupy and/or use any [ILLEGIBLE] of the Subcontract
Work which has been either partially or fully completed by the Subcontractor
before [ILLEGIBLE] inspection and acceptance thereof by the Owner, but such
use and/or occupation shall not relieve the Subcontractor of its guarantee of
said work and materials nor of its obligation to make good at its own expense
any defect in materials and workmanship which may occur or develop prior to
the Contractor's release from responsibility to the Owner, provided, however,
the Subcontractor shall not be responsible for the maintenance of such
portion of work as may be used and/or occupied by the Contractor, not for
any damage thereto that is due to or caused by the Contractor during such
period of use.
7. MECHANICS' LIEN AND CLAIMS.
A. The Subcontractor any person or persons acting through or
under the Subcontractor shall not file or maintain any mechanics' claims or
liens against the Project, or any of the building included in the he Project,
or the ground which the Subcontract Work is to be performed, for or on
account of any work done or materials furnished by the Subcontractor and any
such person or persons as aforesaid for the Subcontract Work under this
Subcontract, or otherwise. The Subcontractor, for and on behalf of the
Subcontractor any other person or persons as aforesaid, hereby expressly
waive and relinquish the right to have, file or maintain any mechanics'
7
<PAGE>
claim or lien against the Project, the buildings included in the Project and
the ground upon which the Subcontract Work is to be performed, or any of
them, which waiver shall be and hereby is made an independent covenant and
shall operate and be effective also with respect to work and labor done and
materials furnished under any supplemental agreement between the Contractor
and Subcontractor, or any agreement for extra work done, performed, furnished
or supplied in and about the Project, although not therein referred to as
work and labor performed and materials furnished under this Subcontract.
Upon the execution of this Subcontract, the Subcontractor shall properly
execute and deliver to the Contractor a waiver of liens in the form supplied
to it by the Contractor.
B. The Subcontractor when required by the Contractor as a
condition precedent to the making of the final payment hereunder, shall
furnish to the Contractor a full and complete release and discharge, in a form
satisfactory to the Contractor, of all liens, claims, and demands arising out
of or relation to the Subcontract Work and any and all materials furnished,
work done and equipment used in connection therewith. Furthermore, if, prior
to final payment, the Owner or any party providing financing for the Project
requests a release of liens from the Subcontractor, the Subcontractor shall
execute and deliver such release of lien in a form satisfactory to the Owner
or such other party.
8. DEFAULT.
A. If the Subcontractor fails to comply, or becomes unable to
comply, or with reasonable probability (as determined solely by Contractor)
will become unable to comply with any of the provisions of this Subcontract;
or if the Subcontractor fails at any time to supply a sufficient number of
properly skilled workmen or sufficient supplies, materials, machines,
equipment or plant of proper quality or fails in any respect to prosecute the
Subcontract Work with promptness and diligence, or cause by any action or
omission a stoppage of, delay in, or interference with the work of the
Contractor or other subcontractors of the Contractor; or if the Subcontractor
abandons the Subcontract Work, or any part thereof, the Contractor may, in
addition to and without prejudice to any other right or remedy, terminate
this Subcontract and immediately without notice to Subcontractor take over
and complete the performance of the Subcontract Work to have been performed
hereunder at the expense of the Subcontractor, or the Contractor may, without
terminating this Subcontract taking over the Subcontract Work, immediately
and without notice to the Subcontractor, furnish the necessary materials and
labor by itself or through others, to remedy the situation, all at the
expense of the Subcontractor. The parties hereto further agree that any of
the following shall, without limitation, at the option of the Contractor,
constitute inability to comply with the provisions of this Subcontract for
purposes of this Article: (a) the filing of a petition in bankruptcy or a
petition for the appointment of a receiver by or against the Subcontractor;
or (b) the insolvency of the Subcontractor or its inability to meet its debts
as they mature; or (c) the establishment of a committee of creditors
involving the Subcontractor's business or assets, or the making of an
assignment for the benefit of Subcontractor's creditors, or (d) the failure
or refusal of the Subcontractor to respond by written reply to or by
satisfactory compliance with, any written order or notice duly issued by the
Contractor.
B. If the Subcontractor shall be adjudged bankrupt, or make a
general assignment for the benefit of creditors, or a Receiver be appointed
on account of the insolvency of the Subcontractor, or if the Subcontractor at
any time refuses or neglects to supply a sufficient number of properly
skilled and other workmen and equipment or an adequate amount of materials of
the proper quality, as required by the Contractor, or fails to make prompt
payment for materials, labor or equipment furnished and supplied in the
performance of the Subcontract Work, or fails to submit to the Contractor
satisfactory evidence of the payment by the Subcontractor of all indebtedness
incurred for material labor and equipment included in any previous monthly
statement or fails in the performance of any of the agreements herein
contained, the Contractor has the right, without prejudice to any other right
or remedy available to the Contractor on forty-eight (48) hours written
notice to the Subcontractor, either to provide any such labor, materials or
equipment and deduct the cost thereof from any payments then or thereafter
due to the Subcontractor, or to terminate the employment of the Subcontractor
for the Subcontract Work and to enter upon the Project site and take
possession, for the purpose of completing the Subcontract Work, of all
materials, tools and appliances thereon and to employ any other person or
persons to finish the Subcontract
8
<PAGE>
Work and to provide the materials therefor; and in case of such
discontinuance of the employment of the Subcontractor, the Subcontractor
shall not be entitled to receive any further payment under this Subcontract.
After the work under the principal contract has been finished and accepted, if
the expense incurred by the Contractor in finishing the Subcontract Work exceeds
the unpaid balance of the amount to be paid under this Subcontract, the
Subcontractor shall pay the difference to the Contractor.
9. MISCELLANEOUS
A. The waiver by the Contractor of any breach or default of this
Subcontract by the Subcontractor shall not be construed as a waiver of any other
breach or default of the same or any other terms, conditions, provisions or
covenants of this or any other agreement between the parties hereto. Forbearance
from demanding strict compliance with any term or provision of this Subcontract
or any other agreement between the parties hereto shall not operate as a waiver
and shall not prevent the Contractor from subsequently demanding strict
compliance therewith.
B. Disputes which may arise hereunder between the Contractor and the
Subcontractor shall not interfere with the diligent performance by the
Subcontractor of the Subcontract Work.
C. The laws of the Commonwealth of Pennsylvania shall be applicable
to this Subcontract and shall be used to decide any dispute related to this
Subcontract.
D. The Subcontractor agrees that the sole and exclusive venue for
any suit brought by it against the Contractor shall be Delaware County,
Pennsylvania.
E. The Contractor and the Subcontractor, and their heirs, executors,
administrators, successors and assigns shall be bound by and shall fully perform
the covenants herein contained.
F. Any and all notices given hereunder shall be in writing and shall
be sent by certified mail, return receipt requested, addressed as follows:
If to Contractor:
BALDWIN OFFICE, INC.
555 NORTH LANE, SUITE # 6101
CONSHOHOCKEN, PA 19428
If to Subcontractor:
______________________________
______________________________
______________________________
9
<PAGE>
or to such other address or addresses as either of the parties hereto shall
notify the other in accordance with the terms of this Agreement.
CONTRACTOR
BALDWIN OFFICE, INC.
ATTEST:__________________ BY: ____________________
SUBCONTRACTOR
ATTEST: ________________ BY: ____________________
10
<PAGE>
GUARANTEE
The undersigned hereby jointly and severally guarantee to the Contractor
the performance of all of the Subcontractor's obligations at the time and in the
manner provided for in the foregoing Subcontract including, but not limited to,
payment of any sums which the Subcontractor may be required to pay the
Contractor because of the Subcontractor's breach of the foregoing Subcontract.
The undersigned hereby irrevocably authorize and empower any attorney or
attorneys or the Prothonotary or Clerk of the Court of record in the
Commonwealth of Pennsylvania or elsewhere if the Subcontractor becomes obligated
to pay any sum to the Contractor under the terms of the foregoing Subcontract
and fails or refuses to do so within ten (10) days of receipt of notice of
demand for such payment to appear for and to confess judgment therein against
the undersigned for the unpaid amount due the Contractor, together with
interest at the rate of twelve percent (12%) per annum from the date of judgment
until actual payment is obtained by the Contractor. The undersigned hereby
waivers and relinquishes all errors, defects and imperfections in the entry of
judgment as aforesaid, or in any proceeding pursuant thereto. If a copy hereof,
verified by affidavit, shall be filed in said proceedings, it shall not be
necessary to file the original as a warrant of attorney. The Warrant of Attorney
to Confess Judgment hereunder shall not be extinguished by one or more exercises
thereof, but may be exercised from time to time until all of the Subcontractor's
obligations to the Contractor under the foregoing Subcontract are paid in full.
Witnessed by:
____________________________________ __________________________________(SEAL)
____________________________________ __________________________________(SEAL)
11
<PAGE>
EXHIBIT "A"
DESCRIPTION OF SUBCONTRACT WORK AND
DATE FOR COMPLETION OF THE SUBCONTRACT WORK
A. DATE OF COMPLETION.
The Subcontractor shall complete the Subcontract Work on or before the
31st day of August, 1995.
B. The Subcontract Work shall consist of the following:
12
<PAGE>
SCHEDULE "A"
RENT RIDER
PERIOD ANNUALLY MONTHLY PER SQ. FT.
- ---------------- ---------- --------- -----------
7/1/95 - 6/30/96 $59,026.00 $4,918.33 $11.00
7/1/96 - 6/30/00 $80,490.00 $6,707.50 $15.00
7/1/00 - 6/30/05 $85,856.00 $7,154.67 $16.00
Page-16
<PAGE>
IN THE COURT OF COMMON PLEAS
DELAWARE COUNTY, PENNSYLVANIA
BALDWIN OFFICE ASSOCIATES, L. P. :
A Pennsylvania Limited Partnership :
:
Owner-Plaintiff :
v. :
:
- ----------------------------------- :
Subcontractor-Defendant :
:
AND :
- ----------------------------------- :
Subcontractor-Plaintiff :
v. :
:
BALDWIN OFFICE ASSOCIATES, L. P. :
A Pennsylvania Limited Partnership :
:
Owner-Defendant :
WAIVER OF LIENS
THIS WAIVER OF LIENS ("Waiver") is made this _______ day of______________,
1995 by _________________ (the "Subcontractor") in favor of BALDWIN OFFICE
ASSOCIATES, L. P. (the "Owner").
WHEREAS, the Owner is the legal owner of the real estate located in the
BOROUGH OF EDDYSTONE, with an address of 1510 CHESTER PIKE, EDDYSTONE, PA
(the "Property"); and
WHEREAS, by an agreement dated July 7, 1995 ("Agreement"), Owner and Baldwin
Office, Inc. ("General Contractor") contracted for the construction and
completion of certain improvements on the Property as more fully described in
the Agreement ("Improvements"); and
WHEREAS, by the terms of the Agreement, General Contractor has agreed that no
mechanics or materialman's lien or claim would be filed or maintained on the
Property or any part thereof, either by itself or anyone else for or on
account of any work, labor, or materials supplied in the performance of the
Agreement, or under any supplemental contract for extra work, in the
construction or completion of the Improvements on the Property; and
WHEREAS, prior to the date of this Waiver, General Contractor has executed
and delivered to Owner a waiver of liens similar to this Waiver; and
WHEREAS, the Subcontractor excecuted a contract with the General Contractor
(the "Contract") to provide labor, work, materials and/or supplies at the
Property, and the Contract requires the Subcontractor to execute a waiver of
liens.
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained herein and in the Contract, the parties hereto, intending to be
legally bound hereby, agree as follows:
13
<PAGE>
1. The Subcontractor, for itself and anyone else acting or claiming
through or under it, hereby waives and relinquished all right to file a
mechanics' lien, claim or notice of intention to file any lien or claim, and
hereby covenants, promises and agrees that no mechanics' lien or claim or
other lien or claim of any kind whatsoever shall be filed or maintained
against the Improvements or the estate of title of Owner in the Property or
curtilage or curtilages appurtenant thereto, by or in the name of
Subcontractor or any subcontractor, materialmen or laborers for work done or
materials furnished under the Contract or by any of them for and about the
Improvements or the Property or any part thereof, or on credit thereof, so
that there shall not be any legal or lawful claim of any kind whatever
against the Owner for any work done or labor or materials furnished under the
Contract for and about the erection, construction and completion of the
Improvements, or under any contract for extra work, or for work supplemental
thereto, or otherwise.
2. This Waiver waiving the right of lien shall be an independent covenant
and shall operate and be effective as well with respect to work done and
materials furnished under any supplemental contract for extra work in the
erection, construction and completion of the Improvements as to any work and
labor done and materials furnished under the Contract.
3. In order to give the Owner full power and authority to protect
themselves, the Improvements, the Property, the estate or title of the Owner
therein, and the curtilage or curtilages appurtenant thereto against any and all
liens or claims filed by the Subcontractor or anyone acting under or through him
in violation of the foregoing covenant, the Commonwealth of Pennsylvania, to
appear as attorney for it, them, or any of them, in any such Court and in its or
their name or names, (a) to the extent permitted by law, mark satisfied of
record at the cost and expense of the Subcontractor or of any subcontractor,
materialman, any and all claim or claims, lien or liens, filed in violation of
the foregoing covenant, or (b) cause to be filed and served in the name of
Subcontractor or any subcontractor or anyone else acting under or through if any
pleading or instrument, or any amendment to any pleasing or instrument
previously filed by it or them, to incorporate therein, as part of the record,
the waiver contained in this instrument, and for such act or acts, a copy of
this executed instrument shall be good and sufficient warrant and authority, and
a reference to the court, term and number in which and where this Waiver stall
have been filed shall be sufficient exhibit of the authority herein contained to
warrant such action, and the Subcontractor does hereby remise, release and
quitclaim all rights and all manner of errors, defects and imperfections
whatsoever in entering such satisfaction or in filing such pleading, instrument
or amendment, or in any way concerning them.
4. The Subcontractor hereby warrants that no work or labor of whatsoever
kind or nature, has as yet been done and that no materials or services
whatsoever have as yet been furnished by anyone, under, towards or in connection
with the execution or performance of said Contract.
5. This Waiver shall bind the Subcontractor and its successors and
assigns.
IN WITNESS WHEREOF, the Subcontractor has caused this Waiver of Liens to be
duly executed the day and year first written above written.
CORPORATE SUBCONTRACTOR
ATTEST ---------------------------
By:
- ---------------------- -----------------------
Its:
-----------------------
[CORPORATE SEAL]
WITNESS: INDIVIDUAL SUBCONTRACTOR
(SEAL)
- --------------------------- ---------------------------
PRINTED INDIVIDUAL SUBCONTRACTOR NAME
14
<PAGE>
THIRD AMENDMENT TO LEASE
- -------------------------------------------------------------------------------
THIS THIRD AMENDMENT TO LEASE ("THIRD AMENDMENT") is made this 26th day of
June, 1996 between BALDWIN OFFICE ASSOCIATES, L.P. ("LANDLORD") and NEPTUNE
SYSTEMS, INC. ("TENANT").
BACKGROUND
A. Landlord and Tenant are parties to that certain Lease ("LEASE") dated April
3, 1995, pursuant to which Landlord leased to Tenant approximately 5,366
square feet of space (the "ORIGINAL LEASED PREMISES") on the sixth floor of
the building ("BUILDING") known as Baldwin Tower located at 1510 Chester
Pike, Eddystone, Pennsylvania. The Lease was amended pursuant to that
certain Lease Amendment dated July 6, 1995 (the "FIRST AMENDMENT") and was
further amended pursuant to that certain Amendment to Lease dated June 17,
1996 (the "SECOND AMENDMENT").
B. The Second Amendment expanded and relocated the Demised Premises to 13,980
square feet on the third floor of the Building which was referred to as the
"NEW DEMISED PREMISES", and the Tenant relinquished its rights in the
Original Leased Premises.
C. The Tenant desires to include the Original Leased Premises with the New
Demised Premises as part of Tenant's leasehold interest under the Lease.
D. The parties desire to amend the Lease to provide for the inclusion of the
Original Leased Premises and to make certain other amendments to the Lease
as provided herein.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto, intending to be legally bound, hereby agree as
follows:
1. The Demised Premises under the Lease shall include the Original Leased
Premises and the New Demised Premises totaling 19,346 rentable square feet.
2. The Schedule "A" Rent Rider to the Lease changes to the following:
<TABLE>
<CAPTION>
PERIOD MONTHLY ANNUALLY
------ ------- --------
<S> <C> <C>
July 15, 1996 - September 15, 1996 $15,757.50 $189,090.00
September 16, 1996 - July 31, 1997 $22,465.00 $269,580.00
August 1, 1997 - July 31, 2001 $25,930.00 $311,160.00
August 1, 2001 - July 31, 2006 $27,542.17 $330,506.04
</TABLE>
<PAGE>
3. Tenant's Fraction defined in Section 4 of the Lease changes to
19,346/166,250 (i.e. 11.6%).
4. The first sentence of Paragraph 5 of the Second Amendment is deleted.
Tenant shall select its own architect to design the New Demised Premises
("TENANT'S ARCHITECT'S DESIGN"). The Relocation Cost shall be allocated as
specified in the Second Amendment. Provided that Landlord approves of
Tenant's Architect's Design, in Landlord's sole and absolute discretion,
Landlord shall complete the improvement of the New Demised Premises in
accordance with Tenant's Architect's Design within sixty (60) days of such
approval. In the event Landlord disapproves of Tenant's Architect's Design,
Landlord shall deliver the sum of $257,695.20 to be paid as the
construction is completed to Tenant, and Tenant shall complete the
improvement of the New Demised Premises in accordance with Tenant's
Architect's Design at Tenant's sole cost and expense within sixty (60) days
of such disapproval. The cost of architectural services associated with the
Tenant's Architect's Design shall be included as part of the Relocation
Cost.
5. Section 8 of the Second Amendment is deleted.
7. The terms and conditions of the Lease as modified hereby shall remain in
full force and effect and are hereby ratified, confirmed, and reaffirmed
for all purposes and in all respects. All capitalized words not otherwise
defined herein shall have the meanings as defined in the Lease, the First
Amendment or the Second Amendment.
AGREED AND ACCEPTED
/s/ [illegible] /s/ [illegible]
- ----------------------------------- -----------------------------------
NEPTUNE SYSTEMS, INC. BALDWIN OFFICE ASSOCIATES, L.P.
DATE: 6/25/96 DATE: 6/26/96
<PAGE>
FOURTH AMENDMENT TO LEASE
- -------------------------------------------------------------------------------
THIS FOURTH AMENDMENT TO LEASE ("FOURTH AMENDMENT") is made this 29 day of
October, 1996 between BALDWIN OFFICE ASSOCIATES, L.P. ("LANDLORD") and
NEPTUNE SYSTEMS, INC. ("TENANT").
BACKGROUND
A. Landlord and Tenant are parties to that certain Lease ("LEASE") dated April
3, 1995, pursuant to which Landlord leased to Tenant approximately 5,366
square feet of space (the "ORIGINAL LEASED PREMISES") on the sixth floor of
the building ("BUILDING") known as Baldwin Tower located at 1510 Chester
Pike, Eddystone, Pennsylvania. The Lease was amended pursuant to that
certain Lease Amendment dated July 6, 1995 (the "FIRST AMENDMENT") and was
further amended pursuant to that certain Amendment to Lease dated June 17,
1996 (the "SECOND AMENDMENT"), and was further amended pursuant to that
certain Amendment to Lease dated June 26, 1996 (the "THIRD AMENDMENT").
B. The Second Amendment expanded and relocated the Demised Premises to 13,980
square feet on the third floor of the Building which was referred to as the
"NEW DEMISED PREMISES", and the Tenant relinquished its rights in the
Original Leased Premises.
C. The Third Amendment includes the Originals Leased Premises with the New
Demised Premises as part of Tenant's leasehold interest under the Lease for
a total size of the Demised Premises of 19,346 sq. ft.
D. The parties desire to amend the Lease to revise the construction procedures
for the New Demised Premises and the payment for those improvements.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto, intending to be legally bound, hereby agree as
follows:
1. Tenant will hire a third party (the "TENANT'S GENERAL CONTRACTOR") to
oversee the construction of the New Demised Premises to be built in
accordance with the plans and specifications drawn by Collaborative Design
dated September 20, 1996. Landlord will not be responsible for any portion
of the construction or any timing delays that may occur. Prior to any work
being commenced, Tenant's General Contractor and any subcontractors they
may employ must sign a Waiver of Liens for the Landlord and deliver
certificates of insurance confirming Tenant's General Contractor is
adequately insured in Landlords reasonable opinion. All work must be
coordinated with the building manager.
2. Landlord shall pay Tenant's General Contractor for work completed, on a
monthly basis, an amount not to exceed the Relocation Cost plus an
additional Seventy Five Thousand Dollars ($75,000.00) for a total of
$332,695.20. Landlord may retain ten percent of this amount until all work
is completed and final inspection by proper authorities have been made and
passed. Tenant's General Contractor must submit completed draw forms "AIA
G702" and "AIA G703" to Landlord in order to receive payment.
<PAGE>
3. Tenant agrees to pay, as additional rent, One Thousand Ninety Dollars and
Forty Cents per month ($1,090.40) for the remainder of the Lease Term as
repayment for Landlord's additional contribution of $75,000.00, plus 12%
interest amortized over the balance of the Lease Term.
4. Tenant's General Contractor is obligated to pay all subcontractors for work
completed, and Landlord shall have the right to pay all subcontractors
directly for work performed in lieu of Tenant's General Contractor.
5. Tenant's Fraction noted in the Lease shall be 19,346/166,250 (i.e. 11.6%).
6. The Term of the Lease shall end on July 31, 2006 unless sooner terminated
as provided in the Lease and/or Third Amendment.
7. The Schedule "A" Rent Rider to the Lease and Lease Amendment dated July 6,
1995, Second Amendment dated June 17, 1996 and Third Amendment dated June
26, 1996 changes to the following:
<TABLE>
<CAPTION>
PERIOD MONTHLY ANNUALLY
------ ------- --------
<S> <C> <C>
November 1, 1996 - July 31, 1997 $23,555.40 $282,664.80
August 1, 1997 - July 31, 2001 $27,020.40 $324,244.80
August 1, 2001 - July 31, 2006 $28,632.57 $343,590.84
</TABLE>
This schedule includes the additional rent noted in section 3 of this
Fourth Amendment.
8. The terms and conditions of the Lease as modified hereby shall remain in
full force and effect and are hereby ratified, confirmed, and reaffirmed
for all purposes and in all respects. All capitalized words not otherwise
defined herein shall have the meanings as defined in the Lease, the First
Amendment, the Second Amendment or the Third Amendment.
9. Landlord shall guarantee that existing HVAC (heating and cooling) units
supply enough tonnage to properly cool the Premises to a maximum of 80
degrees Fahrenheit. In the event that the HVAC units prove inadequate to
the task (as determined by and independent engineering consultant selected
jointly by Landlord and Tenant), Landlord shall, at Landlord's expense
provide additional cooling units to achieve the 80 degree threshold.
AGREED AND ACCEPTED
/s/ [illegible] /s/ [illegible]
- ----------------------------------- -----------------------------------
NEPTUNE SYSTEMS, INC. BALDWIN OFFICE ASSOCIATES, L.P.
DATE: 10/29/96 DATE: 10/23/96
<PAGE>
EXPANSION, EXTENSION & RELOCATION
AMENDMENT
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
This Amendment dated ___________ to be made part of a certain Lease ("LEASE")
dated APRIL 3, 1995 between BALDWIN OFFICE ASSOCIATES, L.P. (henceforth called
"Landlord") and NEPTUNE SOFTWARE (henceforth called "Tenant") for OFFICE space
in the BALDWIN TOWER OFFICE BUILDING, EDDYSTONE, PENNSYLVANIA as more
particularly described below:
1. The Demised Premises defined in Section 1 of the Lease changes to 13,980
rentable square feet on the third floor of the Building, known as suite
640.
2. The Term defined in Section 2 of the Lease shall be ten (10) years and two
weeks commencing on July 15, 1996 and ending on July 31, 2006.
3. Schedule "A" Rent Rider changes to the following:
<TABLE>
<CAPTION>
PERIOD MONTHLY ANNUALLY
------ ------- --------
<S> <C> <C>
July 15, 1996 - July 31, 1997 $15,757.50 $189,090.00
August 1, 1997- July 31, 2001 $19,222.50 $230,670.00
August 1, 2001 - July 31, 2006 $20,387.50 $244,650.00
</TABLE>
4. Tenant's fraction defined in Section 4(a)(iii) changes to 13,980/166,250
(i.e. 8.41%)
5. Landlord shall improve the Demised Premises according to the attached plan
drawn by T. E. Hall Architects dated May 28, 1996, Revision #2. The cost of
such buildout which includes a contribution for office furniture of
$27,995.20, a moving allowance of $5,000.00 and an improvement allowance of
$15.00 per rentable square foot ($209,000.00) shall be borne by the
Landlord.
In the event that the actual costs for improvements are greater than
$242,695.50 but less than $271,303.00, the portion which is greater than
$242,695.50 will be paid 50% by the Landlord and 50% by the Tenant. In the
event the actual costs for improvements is greater than $271,303.00, the
portion which is greater than this amount will be paid entirely by the
Tenant.
6. Tenant shall be notified of any unit which becomes available on the second,
third or fourth floor of the Building - prior to such space being leased to
a third party. However, Tenant shall not have a right of first refusal with
regard to such space.
<PAGE>
7. Provided that Tenant is not in default of any of the terms or conditions of
the Lease; as amended hereby, and Landlord is unable to provide additional
square footage in the Building sufficient to accommodate the reasonable
expansion needs of Tenant, Tenant may buy out of this Lease by providing
one year's prior written notice to Landlord, of Tenant's intention to
terminate the Lease and paying, at the time of such notice, an amount equal
to:
A. The cost of improvements, commissions, and free rent period
associated with this Amendment that will remain unamortized over
the balance of the lease term assuming an interest rate of ten
percent (10%) at the time of the notice; plus
B. A Lease Cancellation Payment in accordance with the following
schedule:
<TABLE>
<CAPTION>
Lease year during which notice is given Payment amount
--------------------------------------- --------------
<S> <C>
1 2 1/2 yrs. rent
2 2 1/4 yrs. rent
3 2 years rent
4 1 3/4 yrs. rent
5 1 1/2 yrs. rent
6 1 1/4 yrs. rent
7 1 years rent
8 3/4 years rent
9 1/2 years rent
10 0 years rent
</TABLE>
8. Upon Tenant's relocation to the third floor, all partition furniture in the
sixth floor space will become the property of the Landlord.
9. All other terms and conditions of the Lease shall remain in full force and
effect.
AGREED AND ACCEPTED
- ----------------------------------- -----------------------------------
NEPTUNE SOFTWARE BALDWIN OFFICE ASSOCIATES, L.P.
DATE: / / DATE: / /
<PAGE>
RELOCATION AMENDMENT
This Amendment dated MARCH 25, 1997 to be made part of a certain Lease dated
APRIL 3, 1995 between BALDWIN OFFICE ASSOCIATES, L.P. (henceforth called
"Landlord") and NEPTUNE SYSTEMS INC. (henceforth called "Tenant") for OFFICE
space in the BALDWIN TOWER BUILDING, EDDYSTONE, PA as more particularly
described below:
1. Tenant shall return 5,366 rentable square feet in the southwing of the 6th
floor of the building and shall lease an additional 3,090 rentable square
feet in the southwing of the 3rd floor of the building.
2. The Commencement Date for this Amendment shall be May 1, 1997.
3. Tenant's proportionate share shall noted in Section 4(a)(iii) shall change
to 17,070/166,250.
4. Minimum Rent shall be based on the following schedule:
<TABLE>
<CAPTION>
PERIOD MONTHLY ANNUALLY PER SF
------ ------- -------- ------
<S> <C> <C> <C>
5/1/97-7/31/97 $20,783 $249,396 $14.61
8/1/97-7/31/01 23,842 286,104 16.76
8/1/01-7/31/06 25,264 303,168 17.76
</TABLE>
5. Tenant shall lease the space in "AS IS" condition.
6. All other terms and conditions contained in the Lease shall remain in full
force and effect, including but not limited to the default provisions
contained in Section 15.
7. Four parking spaces dedicated to Neptune.
/s/ [illegible] /s/ [illegible]
- ------------------------------- ------------------------
BALDWIN OFFICE ASSOCIATES, L.P. NEPTUNE SYSTEMS INC.
Date: 4/29/97 Date: 4/18/97
<PAGE>
FIFTH AMENDMENT TO LEASE REVISED
This Revised Fifth Amendment to Lease ("Fifth Amendment Revised") is made
this 23 day of March, 1998 between BALDWIN OFFICE ASSOCIATES, L.P
("Landlord") and EXE TECHNOLOGIES, INC. ("Tenant").
BACKGROUND
A. Landlord and Tenant are parties to that certain Lease ("Lease") dated
April 3, 1995, pursuant to which Landlord leased to Tenant approximately
5,366 square feet of space (the "Original Leased Premises") on the sixth
floor of the building ("Building") known as Baldwin Tower located at
1510 Chester Pike, Eddystone, Pennsylvania. The Lease was amended pursuant
to that certain Lease Amendment dated July 6, 1995 (the "First Amendment")
and was further amended pursuant to that certain Amendment to Lease dated
June 17, 1996 (the "Second Amendment"), and was further amended pursuant to
that certain Amendment to Lease dated June 26, 1996 (the "Third
Amendment").
B. The Second Amendment expanded and relocated the Demised Premises to 13,980
square feet on the third floor of the Building which was referred to as the
"New Demised Premises", and the Tenant relinquished its rights in the
Original Leased Premises.
C. The Third Amendment includes the Original Leased Premises with the New
Demised Premises as part of Tenant's leasehold interest under the Lease for
a total size of the Demised premises of 19,345 square feet.
D. The Fourth Amendment amended the Lease to revise the construction
procedures for the New Demised Premises and the payment for those
improvements.
E. The Relocation Amendment changed the Tenant's proportionate share to
17,070/166,250.
F. The Fifth Amendment to Lease amended the Lease to add 2,908 square feet
located on the sixth floor to the Demised Premises for a total of 22,254
square feet.
G. The parties derive to correct the square footage and rent schedule noted in
the Fifth Amendment to the following.
<PAGE>
NOW THEREFORE, in consideration of the mutual covenants contained herein, the
parties hereto, intending to be legally bound, hereby agree as follows:
1. As of March 9, 1998 the 2,908 square feet on the sixth floor of the
building (Exhibit "A" attached) will become part of the Demised Premises
as outlined in the Lease. The total space known as the Demised Premises
will become 19,978 square feet.
2. The Schedule "A" Rent Rider of the Lease and Lease Amendment dated July 6,
1995, Second Amendment dated June 17, 1996, Third Amendment dated June 26,
1996, Fourth Amendment dated October 29, 1996 and Relocation Amendment
dated March 25, 1997 changes to the following:
<TABLE>
- --------------------------------------------------------------------------------
PERIOD MONTHLY ANNUALLY
- --------------------------------------------------------------------------------
<S> <C> <C>
April 1, 1998 - July 31, 2001 $27,737.82 $332,853.84
- --------------------------------------------------------------------------------
August 1, 2001 - July 31, 2006 $29,402.65 $352,831.80
- --------------------------------------------------------------------------------
</TABLE>
3. Tenant's Fraction noted in the Lease shall be 19,978/166,250. (i.e 12.02%)
4. The term of the Lease shall end on July 31, 2006 unless
sooner terminated as provided in the Lease and/or Third Amendment.
5. The terms and conditions of the Lease as modified hereby shall remain in
full force and effect and are hereby ratified, confirmed and reaffirmed
for all purposes and in all respects. All capitalized words not otherwise
defined herein shall have the meanings as defined in the Lease. The
First Amendment, the Second Amendment, the Third Amendment or the Fourth
Amendment.
AGREED AND ACCEPTED:
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
- ----------------------- ------------------------------
EXE Technologies, Inc. Baldwin Office Associates, L.P
Date: March 23, 1998 Date: March 23, 1998
<PAGE>
EXHIBIT A
[MAP]
BALDWIN TOWERS - SIXTH FLOOR
------------------------------------------
1510 Chester Pike, Eddystone, PA
Preferred Real Estate Investments, Inc.
(610) 834-1969
[LOGO] THOMAS E. HALL, ARCHITECTS
<PAGE>
EXHIBIT 10.15
LEASE AGREEMENT
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
THIS LEASE AGREEMENT (the "Lease"), made and entered into on this 15th
day of August, 1997 between LAB HOLDINGS, INC., a Texas Corporation
("Lessor"), and DALLAS SYSTEMS CORPORATION, a Texas Corporation ("Lessee"),
WITNESSETH:
SECTION 1. PREMISES.
Subject to and upon the terms and conditions hereinafter set forth,
and each in consideration of the covenants and obligations of the other
hereunder, Lessor does hereby lease and demise to Lessee, and Lessee does
hereby lease from Lessor, those certain premises (the "Premises") in the
building known as Three Hillcrest Green (the "Building") constructed on the
real property situated in the City of Dallas, Dallas County, Texas, more
particularly described on Exhibit A attached hereto and made a part hereof
for all purposes (the "Property"). The Premises shall mean that certain space
on the first and second floors of the Building comprising 63,753 square feet
of Rentable Area, as more specifically identified In Exhibit B attached
hereto. The term "Rentable Area" shall be defined as (a) in the case of a
single tenancy floor, all floor area measured from the inside surface of the
outer glass or finished column or exterior wall of the building to the inside
surface of the opposite exterior elevator mechanical rooms, building stairs,
fire towers, elevator shafts, flues, vents, stacks, pipe shafts, and vertical
ducts, but including any Service Areas which are for the specific use of the
particular tenant, such as special stairs or elevators, plus a pro rata
(based on Rentable Area in the Premises and in the Building) allocation of
the square footage of the Building's elevator mechanical rooms and central
mechanical room and ground floor and basement lobbies, and (b) in the case of
a partial floor, all floor areas within the inside surface of the outer glass
or finished column or exterior walls enclosing the walls separating areas
leased by or held for lease to other tenants or from areas devoted to
corridors, elevator foyers, rest rooms, mechanical rooms, janitor closets,
vending areas and other similar facilities for the use of all tenants on a
particular floor (hereinafter sometimes called the "Common Areas") located on
such floor based upon the ratio which the Lessee's Rentable Area on such
floor (determined by excluding such Common Areas) bears to the aggregate
Rentable Area on such floor (determined by excluding such Common Areas), plus
a pro rata (based on the Rentable Area in the Premises and in the Building)
allocation of the square footage of the Building's elevator mechanical rooms
and central mechanical room and ground floor and basement lobbies. No
deduction from Rentable Area are made for columns or projections necessary to
the Building. Usable area shall be computed by measuring to the inside finish
of permanent outer Building walls, or the glass line if at least 50% of the
outer building wall is glass, to the outer side of corridors and/or other
permanent partitions, and to the center of partitions that separate the
Premises from adjoining usable areas. No deduction shall be made for columns
and projections necessary to the Building. The Rentable Area in the Building
shall mean 66,653 square feet.
SECTION 2. TERM.
(a) Subject to and upon the terms and conditions set forth herein,
or in any Rider or exhibit hereto, this Lease shall continue, in force for a
term of Sixty (60) months,
PAGE 1
<PAGE>
beginning on the 15th day of August, 1997, and ending on the 14th day of
August, 2002, unless sooner terminated or extended to a later date under any
other term or provision hereof.
(b) If for any reason the Premises are not ready for occupancy by
Lessee on the commencement date specified In Paragraph 2(a) above, Lessor
shall not be liable or responsible for any claims, damages, or liabilities in
connection therewith or by reason thereof, and this Lease and the obligations
of Lessee shall nonetheless commence and continue in full force and effect;
provided, however, if the Premises are not ready for occupancy for any reason
other than omission, delay, or default on the part of Lessee or anyone acting
under or for Lessee, the rent herein provided shall not commence until the
Premises are ready for occupancy by Lessee. Such abatement of rent shall
constitute full settlement of all claims that Lessee might otherwise have
against Lessor by reason of the Premises not being ready for occupancy by
Lessee on the date of the commencement of the term hereof. Should the term of
this Lease commence on a date other than that specified In Paragraph 2(a)
above, Lessee will, at the request of Lessor, execute an amendment to this
Lease on a form provided by Lessor specifying the beginning date of the term
of this Lease. In such event, rental under this Lease shall not commence
until such revised commencement date, and the stated term of this Lease shall
thereupon commence, and the expiration date shall be extended so as to give
effect to the full stated term. The Premises shall be deemed to be ready for
occupancy on the first to occur (i) the date that there is delivered to
Lessee a certificate of substantial completion from Lessee's architect, which
certificate shall be binding and conclusive upon Lessee in the absence of bad
faith and collusion on the part of or between Lessor and Lessee's architect,
or (ii) upon the date on which Lessee begins occupancy of the Premises.
SECTION 3. BASE RENTAL.
(a) Lessee hereby agrees to pay to the Lessor, without set off or
deduction whatsoever, a base annual rental ("Base Rental") in the sum
of($1,020,048.00) in monthly installments of $85,004.00. Lessee shall also
pay, as additional rent, all such other sums of money as shall become due
from and payable by Lessee to Lessor under this Lease (Base Rental, and
adjustment thereto pursuant to Section 4 hereof and all such other sums of
money due from and payable by Lessee pursuant to this Lease are sometimes
hereinafter collectively called "rent"), for the nonpayment of which Lessor
shall be entitled to exercise all such rights and remedies as are herein
provided in the case of the nonpayment of Base Rental. The annual Base
Rental, together with any adjustment or increase thereto then in effect,
shall be due and payable in advance in twelve (12) equal installments on the
first (1st) day of each calendar month during the term of this Lease, and
Lessee hereby agrees so to pay such Base Rental and any adjustment or
increase thereto to Lessor at Lessor's address provided herein (or such other
address as my be designated by Lessor in writing from time to time) monthly,
in advance, and without demand. If the term of this Lease commences on a day
other than the first (1st) day of a month or terminates on a day other than
the last day of a month, then the installments of Base Rental and any
adjustments thereto for such month or months shall be prorated, and the
installment or installments so prorated shall be paid in advance.
(b) All past due Installments of rent shall bear interest at the
annual rate of 18% or the maximum lawful rate whichever is lesser, until paid.
SECTION 4. ADJUSTMENT TO BASE RENTAL.
(a) For purposes of ascertaining the adjustment to Base Rental, the
following terms shall have the following meanings:
PAGE 2
<PAGE>
(i) "Base Amount" shall mean the actual operating costs for
1997 per square foot of Rentable Area in the Building;
(ii) "Basic Costs" shall mean all Building and Complex Operating
Expenses;
(iii) "Complex" shall mean the Building and any other land or
improvements, including related parking facilities, now or hereafter
operated, in whole or in part, in common with the Building;
(iv) "Estimated Basic Costs" shall mean a good faith projection
of Basic Costs for the forthcoming calendar year;
(v) "Lessee's Share" shall mean the ratio determined by
dividing Rentable Area in the Premises by Rentable Area In the Building.
As of the time of execution of this Lease, Lessee's Share is 96%;
(vi) "Operating Expenses" shall mean all expenses, costs, and
disbursements (but not replacement of capital investment items nor
specific costs especially billed to and paid by specific tenants) of
every kind and nature which Lessor shall pay or become obligated to pay
because of or in connection with the ownership and operation of the
Building and or Complex, including, but not limited to, the following:
(A) Wages, salaries, and fees of all personnel engaged
in the operation, maintenance, leasing (but not to Include third
party leasing commissions), or security of the Building and/or
Complex and personnel who may provide traffic control relating to
ingress and egress from the parking areas for the Building to
adjacent streets. All taxes, insurance, and benefits relating to
employees providing these services shall also be included;
(B) All supplies and materials used in the operation and
maintenance of the Building and/or Complex;
(C) Costs of all utilities for the Building and/or
Complex, including but not limited to, the cost of water and
power, heating, lighting, air conditioning, and ventilation;
(D) Cost of all maintenance, janitorial, and service
agreements for the Building and/or Complex and the equipment
therein, including but not limited to, alarm service, window
cleaning, and elevator maintenance;
(E) Cost of all insurance relating to the Building
and/or Complex, including but not limited to, the cost of casualty
and liability Insurance and Lessor's personal property used in
connection therewith;
(F) All taxes, assessments, and other governmental
charges, whether federal, state, county, or municipal, and whether
they be by taxing districts or authorities presently taxing the
Premises or by others, subsequently created or otherwise, and any
other taxes and assessments attributable to the Building and/or
Complex or its operation. Lessee will be responsible for taxes on
its personal property and on the value of leasehold improvements
to the extent that same exceed standard Building allowances;
PAGE 3
<PAGE>
(G) Amortization of the cost of installation of capital
investment items which are primarily for the purpose of reducing
operating costs of the Building and/or Complex (e.g., energy
saving devices) or which may be required by governmental
authority. All such costs shall be amortized over the reasonable
life of the capital investment items by an additional charge to be
added to rent and paid by Lessee as additional rent, with the
reasonable life and amortization schedule being determined by
Lessor in accordance with generally accepted accounting
principles, but in no event to extend beyond the reasonable life
of the Building;
(H) Lessor's accounting, auditing, legal expenses
applicable to the Building and/or Complex;
Such operating expenses shall be computed on the accrual basis. All operating
expenses shall be computed on the accrual basis. All operating expenses shall be
determined in accordance with generally accepted accounting principles which
shall be consistently applied.
(b) For each calendar year during the term of this Lease, Base
Rental shall be adjusted upward by the amount of Lessee's Share of the
Increase, if any, of Basic Costs over the Base Amount. Prior to January 1,
1988 and January 1 of each calendar year during the term of this Lease, or as
soon as practicable thereafter, Lessor shall provide Lessee with Estimated
Basic Costs for the calendar year ahead and Lessee's Share of the increase of
Estimated Basic Costs over the Base Amount; thereafter, Lessee's Share of the
increase of Estimated Basic Costs over the Base Amount shall be paid in
twelve equal monthly installments together with the monthly installment of
rental due hereunder. However, for the first calendar year during which the
Lease is in effect, if the term of this Lease commences on a day other than
January l, as soon as practicable thereafter, Lessor shall provide Lessee
with Estimated Basic Costs for that calendar year and Lessee's Share of the
increase of such Estimated Basic Costs over the Base Amount. Lessee shall pay
in equal monthly installments together with the monthly installment of rental
due hereunder Lessee's Share the increase of Estimated Basic Costs over the
Base Amount prorated on the basis which the number days from the commencement
of the Lease to and including December 31 bears to 365.
(c) By June 1, 1999 and by June 1 of each calendar year thereafter
during the term of this Lease, or as soon thereafter as practicable, Lessor
shall wish to Lessee a statement of Basic Costs for the previous calendar
year. A lump sum payment (which payment shall be deemed a payment of rent
hereunder for all purposes) will be made from Lessee to Lessor, or, as the
case may be, from Lessor to Lessee within thirty (30) days after the delivery
of such statement equal to the (difference between Lessee's Share of the
increase of actual Basic Costs over the Base Amount and Lessee's share of the
increase of Estimated Basic Costs over the Base Amount for the previous
calendar year. The effect of this reconciliation payment is that Lessee will
pay during the term of this Lease its share of Basic Cost increases over the
actual operating costs of 1997 and no more.
(d) Lessee at its expense shall have the right at all reasonable
times, following prior written notice to Lessor, to audit Lessor's books and
records relating to this Lease for any year or years for which Base Rental is
adjusted pursuant to Section 4 hereof; or at Lessor's sole discretion, Lessor
will provide such audit prepared by a certified public accountant.
(e) If this Lease shall terminate on a day other than the last day
of a calendar year, the amount of an adjustment between Estimated Basic Costs
and actual Basic Costs with
PAGE 4
<PAGE>
respect to the calendar year in which such termination occurs shall be
prorated on the basis which the number of days from the commencement of such
calendar year to and including such termination date bears to 365; and any
amount payable by Lessor to Lessee or Lessee to Lessor with respect to such
adjustment shall be payable within thirty (30) days after delivery by Lessor
to Lessee of the statement of actual Basic Costs with respect to such
calendar year.
SECTION 5. LESSEE'S OCCUPANCY
Lessee shall occupy the Premises and conduct its normal business
operations therefrom and the Premises shall be used by Lessee solely for
office purposes and for no other purpose or use.
SECTION 6. SERVICES TO BE FURNISHED BY LESSOR
Lessor shall furnish to Lessee while occupying the Premises the
following services:
(a) hot and cold water at those points of supply provided for
general use of the tenants in the Building;
(b) heated and refrigerated air conditioning in season, during
normal business hours for the Building which shall be at such times as
are considered normal for other buildings similar to the building within
reasonable proximity thereto and at such temperatures and in such amounts
as are considered by Lessor to be standard. Such service at times other
than normal business hours shall be optional on the part of the Lessor;
provided that upon reasonable prior such notice such service will be
provided to Lessee at Lessee's expense.
(c) elevator service in common with other tenants for ingress
and egress to and from the Premises,
(d) janitorial service as may in the judgment of the Lessor be
reasonably required;
(e) electric current for normal office usage in the Premises
and electric lighting service for all public areas and special service
areas of the Building in the manner and to the extent considered by
Lessor to be standard; and
(f) access to the Premises at all times through keys, or any
other device used in lieu of keys, to the front and rear doors of the
Building for Lessee or, if Lessee is a corporation, a reasonable and
limited number of designated officers of Lessee.
Failure by Lessor to any extent to furnish, or any stoppage of, these
defined services, and resulting from causes beyond the control of Lessor or
from any other cause, shall not render Lessor liable in any respect for
damages to either person or property, nor be construed as an eviction of
Lessee, nor work an abatement of rent, nor relieve Lessee from fulfillment of
any covenant or agreement hereof, provided, however, that failure to provide
such service to the extent that the Premises are substantially unusable by
Lessee (e.g., 90 electrical current) for a period in excess of six (6)
consecutive business days shall entitle Lessee to an abatement of rental and
other sums and charges due hereunder from such sixth (6th) business day until
the Premises are again made usable.. Should any equipment or machinery break
down, or for any cause cease to function property, Lessor shall use
reasonable diligence to repair the same promptly. Lessee shall have no claim
PAGE 5
<PAGE>
for rebate of rent or damages on account of an interruption in service
occasioned thereby or resulting therefrom.
SECTION 7. KEYS AND LOCKS.
Lessor shall furnish Lessee two (2) keys for each corridor door
entering the Premises. Additional keys will be furnished at a charge by
Lessor on receipt of an order signed by Lessee or Lessee's authorized
representative. All such keys shall, remain the property of Lessor. No
additional locks shall be allowed on any door of the Premises without
Lessor's written permission, and Lessee shall not make or permit to be made
any duplicate keys, except those furnished by Lessor. Upon termination of
this Lease, Lessee shall surrender to Lessor all keys to the Premises.
SECTION 8. SIGNAGE.
(a) Lessor shall provide and Install, at Lessee's cost, all letters
or numerals on doors in the Premises as may from time to time be requested by
Lessee; all such letters and numerals shall be in the standard graphics for
the Building and no others shall be used or permitted on the Premises.
(b) Lessee shall not place signs or any other item on the Premises
which may be visible from outside the Building, without first obtaining the
written consent of Lessor in each such instance.
SECTION 9. RELOCATION OF LESSEE.
Lessor reserves the right, at its option, to transfer and remove
Lessee from the Premises to any other available space in the Building of
substantially equal size, location, and equivalent Base Rental per square
foot. Lessor shall bear the expense of said removal as well as the expense of
any renovations or alteration necessary to make the new space substantially
conform in layout and appointment with the original Premises.
SECTION 10. MAINTENANCE AND REPAIRS BY LESSOR.
Unless otherwise stipulated herein, Lessor shall be required to
maintain and repair only the structural portions of the Building, both
exterior and interior, including the heating, ventilating, and air
conditioning systems and equipment, the plumbing and electrical systems and
equipment, the public foyers and lobbies, the corridors, parking areas,
elevators, stairwells and restrooms and all other areas serving more than one
tenant of the Building; provided, however, that interior partitioning walls,
carpeting and other portions of the Premises which might otherwise be
considered building standard items shall not be the obligation of Lessor.
Such building standard items and any other leasehold improvements of Lessee
will, at Lessee's written request, and upon Lessor's written approval, be
maintained by Lessor at Lessee's expense, at a cost or equal to all costs
incurred in such maintenance plus an additional 15% charge to cover overhead,
which costs and charges shall be payable by Lessee to Lessor promptly upon
being billed therefor.
SECTION 11. REPAIRS BY LESSEE
Lessee covenants and agrees with Lessor, at Lessee's own cost and
expense, to repair or replace any damage or injury done to the Premises,
Building, or any part thereof, or to the Complex, caused by Lessee or
Lessee's agents, employees, invites, or visitors, and such repairs shall
restore the Premises, Building, or Complex, as the case may be, to the same
or as good conditions it was prior to such injury or damage, and shall
PAGE 6
<PAGE>
be effected In compliance with all building and fire codes and other
applicable laws an regulations; provided, however, if Lessee fails to make
such repairs or replacements promptly, Lessor may at its option, make such
repairs or replacements, and Lessee shall repay the cost thereof, plus an
additional 15% charge to cover overhead, to Lessor on demand.
SECTION 12. CARE OF THE PREMISES
Lessee covenants and agrees with Lessor to take good care of the
Premises and the fixtures and appurtenances therein and, at Lessee's expense,
to make all nonstructural repairs thereto as and when needed to preserve them
in good order and condition except for ordinary wear and tear. Lessee shall
not commit or allow any waste or damage to be committed on any portion of the
Premises, and at the termination of this Lease, by lapse of time or
otherwise, shall deliver up the Premises to Lessor in as good a condition as
at the date of the commencement of the term of this Lease, ordinary wear and
tear excepted, and upon any termination of this Lease, Lessor shall have the
right to re-enter and resume possession of the Premises.
SECTION 13. PARKING.
During the term of this Lease, Lessee shall have the non-exclusive use
in common with Lessor and other tenants of the Building and their guests and
invites, of the uncovered automobile parking areas, driveways, and footways
serving the Building, subject to rules and regulations for the use thereof as
prescribed from time to time by Lessor. Lessor shall not be liable or
responsible for any loss of or to any car or vehicle or equipment or other
property therein or damage to property or injuries (fatal or nonfatal),
unless such loss, damage, or injury be proximately caused by the negligence
of Lessor or its employees. Lessor may make, modify, and enforce rules and
regulations relating to the parking of automobiles including without
limitation, rules respecting parking charges or fees applicable to all
tenants of the Building, and Lessee will abide by such rules and regulations.
SECTION 14. PEACEFUL ENJOYMENT.
Lessee shall, and may peacefully have, hold, and enjoy the Premises,
subject to the other terms hereof, provided that Lessee pays the rent and
other sums herein recited to be paid by Lessee and performs all Lessee's
covenants and agreements herein contained. It is understood and agreed that
this covenant and any and all other covenants of Lessor contained in the
Lease shall be binding upon Lessor and its successors only with respect to
breaches occurring during its or their respective periods of ownership of
Lessor's interest hereunder.
SECTION 15. HOLDING OVER
In the event of holding over by Lessee without the written consent of
Lessor, after the expiration or other termination of this Lease, Lessee
shall, throughout the entire holdover period, pay rent equal to one and
one-half the Base Rental, as adjusted herein, and additional rent which would
have been applicable had the term of this Lease continued through the period
of such holding over by Lessee. No holding over by Lessee after the
expiration of the term of this Lease shall be construed to extend the term of
this Lease; and in the event of any unauthorized holding over, Lessee shall
indemnify Lessor against all claims for damages by any other lessee or
prospective lessee to whom Lessor may have leased all or any part of the
Premises effective before or after the expiration of the term of this Lease,
resulting from delay by Lessee in delivering possession of all or any part of
the Premises. Any holding over with the written consent of Lessor shall
PAGE 7
<PAGE>
thereafter constitute a lease from month-to-month, under the terms and
provisions of this Lease to the extent applicable to a tenancy from
month-to-month.
SECTION 16. ALTERATIONS, ADDITIONS, AND IMPROVEMENTS.
Lessee covenants and agrees with Lessor not to permit the Premises to
be used for any purpose other than that stated in Section 5 hereof or make or
allow to be made any alterations or physical additions in or to the Premises
without first obtaining the written consent of Lessor in each such instance.
Lessor's consent shall not be required for nonstructural alterations made by
Lessee from time to time as necessary to adapt the Premises for the uses and
business purposes permitted hereby, provided that such alterations do not
affect any part of the Building other than the Premises, are not visible from
outside the Building and do not adversely affect any service required to be
furnished by Lessor to Lessee or to any other tenant or occupant of the
Building. Lessee shall be responsible for any lien filed against the Premises
or any portion of the Building for work claimed to have been done for, or
materials claimed to have been furnished to Lessee. Any and all such
alterations, physical additions, or improvements, when made to the Premises
by Lessee, shall be at Lessee's expense and shall at once become the property
of Lessor and shall be surrendered to Lessor upon termination of this Lease
by lapse of time or otherwise; provided, however, this clause shall not apply
to the movable fixtures, office equipment, and other personal property owned
by Lessee.
SECTION 17. LEGAL USE AND VIOLATIONS OF INSURANCE COVERAGE
Lessee covenants and agrees with Lessor not to occupy or use, or
permit any portion of the Premises to be occupied or used, for any business
or purpose which is unlawful, disreputable, or deemed to be extrahazardous on
account of fire, or permit anything to be done which would in any way
increase the rate of fire, liability, or any other insurance coverage on the
Building and/or its contents.
SECTION 18. LAWS AND REGULATIONS: BUILDING RULES.
Lessee covenants and agrees with Lessor to comply with all laws,
ordinances, rules, and regulation of any state, federal, municipal, or other
government or governmental agency having jurisdiction of the Premises that
relate to the use, condition, or occupancy of the Premises. Lessee will
comply with the rules of the Building adopted and altered by Lessor from time
to time for the safety, care, and cleanliness of the Premises and Building
and for the preservation of good order therein, all changes to which will be
sent by Lessor to Lessee in writing and shall be thereafter carried out and
observed by Lessee. Lessor agrees not to enforce any such rules against
Lessee which Lessor is not enforcing against all other tenants of the
Building. In the event of a conflict or inconsistency between the provisions
of this Lease and any such rules, the revisions of this Lease shall control.
See attached Exhibit 'C'.
SECTION 19. NUISANCE.
Lessee covenants and agrees with Lessor to conduct its business and
control its agents, employees, invites, and visitors in such manner as not to
create any nuisance, or interfere with, annoy, or disturb any other tenant or
Lessor in its operation of the Building.
SECTION 20. ENTRY BY LESSOR
Lessee covenants and agrees with Lessor to permit Lessor or its agents
or representatives to enter into and upon any part of the Premises at all
reasonable hours
PAGE 8
<PAGE>
(and in emergencies at all times) to inspect the same, or to show the
Premises to prospective purchasers, mortgagees, or insurers, to clean or make
repairs, alterations, or additions thereto, as Lessor may deem necessary or
desirable, and Lessee shall not be entitled to an abatement or reduction of
rent by reason thereof.
SECTION 21. ASSIGNMENT AND SUBLETTING.
(a) Lessee shall not, without the prior written consent of Lessor
(i) assign or in any manner transfer Lessee's Interest in this Lease or any
estate or interest therein, or (ii) permit any assignment or transfer of this
Lease or any estate or interest therein by operation of law, merger or
consolidation, or (iii) sublet the Premises or any part thereof, or (iv)
grant any license, concessions or other right of occupancy of any portion of
the Premises. Consent by Lessor to one or more assignments or sublettings
shall not operate as a waiver of Lessor's rights as to any subsequent
assignments and sublettings. Notwithstanding any approved assignment or
subletting, Lessee shall at all times remain fully responsible and liable for
the payment of the rent herein specified and for compliance with all Lessee's
other obligations under this Lease and in the event of any assignment, by
operation of law, merger, consolidation or otherwise, any assignee shall
assume and agree to perform all obligations of Lessee hereunder. If an event
of default, as hereinafter defined, should occur while the Premises or any
part thereof are then assigned or sublet, Lessor in addition to any other
remedies herein provided or provided by law, may at its option, collect
directly from such assignee or sublessee all rents becoming due to Lessee
under such assignment or sublease, and apply such rent against any sums due
to Lessor by Lessee hereunder, and Lessee hereby authorizes and directs any
such assignee or sublessee to make such payments of rent directly to Lessor
upon receipt of notice from Lessor. No direct collection by Lessor from any
such assignee or sublessee shall be construed to constitute a novation or a
release of Lessee from the further performance of its obligations hereunder.
Receipt by Lessor of rent from any assignee, sublessee, or occupant of the
Premises shall not be deemed a waiver of the covenant contained in this Lease
against assignment and subletting or a release of Lessee under this Lease.
Lessee shall not mortgage, pledge, or otherwise encumber its interest in this
Lease or in the Premises. Any attempted assignment or sublease by Lessee in
violation of the terms and covenants of this paragraph shall be void.
(b) In the event Lessee desires Lessor's consent to an assignment
of the Lease or subletting of all or part of the Premises and as a condition
to the granting of such consent, Lessee shall submit to Lessor in writing the
name of the proposed assignee or subtenant, the proposed commencement date of
such assignment or subletting, the nature and character of the business of
the proposed assignee or subtenant and such financial information as shall be
reasonably necessary for Lessor to determine the creditworthiness of such
proposed assignee or subtenant. Lessor shall have the option (to be exercised
within thirty (30) days from submission of Lessee's written request), (i) to
refuse to consent to Lessee's assignment or subleasing of such space and to
continue this Lease in full force and effect as to the entire Premises; or
(ii) to permit Lessee to assign or sublet such space; subject, however, to
provision satisfactory to Lessor for payment to Lessor of any consideration
to be paid by such proposed assignee or sublessee in connection with such
assignment or subletting in excess of Base Rental otherwise payable by Lessee
and for payment to Lessor of any lump sum payment in connection with such
assignment or subletting. If Lessor should fail to notify Lessee in writing
of its election as described above within such thirty (30) day period, Lessor
shall be deemed to have elected option (i) above.
SECTION 22. TRANSFERS OF LESSOR.
PAGE 9
<PAGE>
Lessor shall have the right to transfer and assign, in whole or in
part, all its rights and obligations hereunder and in the Building and
property referred to herein, and provided Lessor's transferee assume the
duties and obligations of Lessor arising from and after the date of any such
transfer or assignment, upon such transfer or assignment Lessor shall be
released from any further obligations hereunder, and Lessee agrees to look
solely to such successor in interest of Lessor for the performance of such
obligations.
SECTION 23. SUBORDINATION TO MORTGAGE.
This Lease shall be subject and subordinate to any mortgage or deed of
trust which may hereafter encumber the Building, and to all renewals,
modifications, consolidations, replacements, and extensions thereof, which
contain (or which are included in a separate agreement) provisions to the
effect that if there should be a foreclosure or sale under power under such
mortgage or deed of trust, Lessee shall not be made a party defendant
thereto, nor shall such foreclosure or sale under power disturb Lessee's
possession under this Lease, provided always Lessee shall not be in default
under this Lease. This clause shall be selfoperative and no further
instrument of subordination need be required by any mortgagee. In
confirmation of such subordination, however, Lessee shall, at Lessor's
request, execute promptly any certificate or instrument evidencing such
subordination that Lessor may request. Lessee hereby constitutes and appoints
Lessor the Lessee's attorney-in-fact to execute any such certificate or
instrument for and on behalf of Lessee. In the event of the enforcement by
the trustee or the beneficiary under any such mortgage or deed of trust of
the remedies provided for by law or by such mortgage or deed of trust, Lessee
will, upon request of any person or party succeeding to the interest of
Lessor as a result of such enforcement, automatically become the Lessee of
such successor in interest without change in the terms or other provisions of
this Lease; provided, however, that such successor in interest shall not be
bound by (a) any payment of rent or additional rent for more than one (l)
month in advance, except prepayments in the nature of security for the
performance by Lessee of its obligations under this Lease, or (b) any
amendment or modification of this Lease made without the written consent of
such trustee or such beneficiary or such successor in interest. Upon request
by such successor in interest, Lessee shall execute and deliver an instrument
or instruments confirming the attornment provided for herein.
SECTION 24. MECHANIC'S LIENS.
Lessee will not permit any mechanic's lien or liens to be placed upon
the Premises or improvements thereon or the Building during the term hereof
caused by or resulting from any work performed, materials furnished, or
obligation incurred by or at the request of Lessee, and nothing in this Lease
contained shall be deemed or construed in any way as constituting the consent
or request of Lessor, express or implied, by inference or otherwise, to any
contractor, subcontractor, laborer, or materialman for the performance of any
labor or the furnishing of any materials for any specific improvement,
alteration, or repair of or to the Premises, or any part thereof, nor as
giving Lessee any right, power, or authority to contract for or permit the
rendering of any services or the furnishing of any materials that would give
rise to the filing of an mechanic's or other liens against the interest of
Lessor In the Premises. In the case of the filing of any lien on the interest
of Lessor or Lessee in the Premises, Lessee shall cause the same to be
discharged of record within ten (10) days after the filing of same either by
paying the amount claimed to be due or by procuring the discharge of such
lien by deposit in court or bonding. If Lessee shall fail to discharge such
mechanic's lien within such period, then, in addition to any other right or
remedy of Lessor, Lessor may, but shall not be obligated to, discharge the
same, either by paying the amount claimed to be due, or by procuring the
discharge of such lien by deposit in court or bonding. Any amount paid by
Lessor for any of the aforesaid purposes, or for the satisfaction of any
other lien, not caused or claimed to be
PAGE 10
<PAGE>
caused by Lessor, with interest thereon at the rate of eighteen percent (18%)
per annum or the highest lawful rate, whichever is the lesser, from the date
of payment, shall be paid by Lessee to Lessor on demand.
SECTION 25. ESTOPPEL CERTIFICATE.
Lessee will, at any time and from time to time, upon not less than ten
(10) days' prior request by Lessor, execute, acknowledge, and deliver to
Lessor a statement in writing executed by Lessee certifying that Lessee is in
possession of the Premises under the terms of this Lease, that this Lease is
unmodified and in full effect (or, if there have been modifications, that this
Lease is in full effect as modified, and setting forth such modifications),
and the dates to which the rent has been paid, and either stating that to the
knowledge of Lessee no default exists hereunder, or specifying each such
default of which Lessee may have knowledge, and such other matters as may be
reasonably requested by Lessor; it being intended that any such statement by
Lessee may be relied upon by any prospective purchaser or mortgagee of the
Building.
SECTION 26. EVENTS OF DEFAULT
(a) The following events shall be deemed to be events of default by
Lessee under this Lease:
(i) Lessee shall fall to pay any installment of the rent hereby
reserved or other sum of money payable hereunder when due and the
continuance of such failure for ten (10) days.
(ii) Lessee shall fall to comply with any term provision, or
covenant of this Lease, other than the payment of rent, and shall not
cure such failure within thirty (30) days after written notice thereof to
Lessee, or, if such failure cannot reasonably be cured within such thirty
(30) day period, Lessee shall not commence such actions as are necessary
to effect such cure within such thirty (30) day period and thereafter
prosecute such cure regularly and diligently to conclusion.
(iii) Lessee shall become insolvent, or shall make a transfer in
fraud of creditors, or shall commit any act of bankruptcy, or shall make
an assignment for the benefit of creditors, or Lessee shall admit in
writing its inability to pay its debts as the become due.
(iv) Lessee shall file a petition with any bankruptcy court
under any section or chapter of the National Bankruptcy Act, as amended,
or under any similar law or statute of the United States or any State
thereof, or Lessee shall be the subject of an order for relief issued
under the National Bankruptcy Act, as amended, or under any similar law
or statute, or Lessee shall have filed any petition or answer seeking any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future federal or
state act or law relating to bankruptcy, insolvency or other relief of
debtors, or Lessee shall be the subject of any order, judgment or decree
entered into by a court of competent jurisdiction approving a petition
filed against Lessee for any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any
present or future federal or state act relating to bankruptcy, insolvency
or other relief for debtors;
(v) A receiver, conservator or trustee shall be appointed for
all or substantially all of the assets of Lessee or of the Premises or
any of Lessee's property located thereon in any proceeding brought by
Lessee, or any such
PAGE 11
<PAGE>
receiver or trustee shall be appointed in any proceeding brought against
Lessee and shall not be discharged within sixty (60) days alter such
appointment, or Lessee shall consent to or acquiesce in such appointment.
(vi) The leasehold hereunder shall be taken on execution or
other process of law in any action against Lessee.
(vii) Lessee shall abandon any portion of the Premises.
(b) If an event of default shall have occurred, Lessor shall have
the right at its election, then or at anytime thereafter (and upon the
expiration of any applicable grace period, Lessee shall not be entitled to
cure same and be reinstated as "Lessee" in good standing hereunder), to
pursue any one or more of the following remedies in addition to all other
rights or remedies provided herein or at law or in equity:
(i) Lessor may terminate this Lease and forthwith repossess the
Premises and be entitled to recover forthwith repossess the Premises and
be entitled to recover forthwith as damages a sum of money equal to the
total of (A) the cost of recovering the Premises, (B) the unpaid rent
earned at the time of termination, plus interest thereon at the rate of
eighteen percent (18%) per annum or the maximum legal rate, whichever is
lesser from the due date, (c) the balance of the rent for the remainder
of the term less the fair market value of the Premises for such period,
and (D) any other sum of money and damages owed by Lessee to Lessor.
(ii) Lessor may terminate Lessee's right of possession (but not
the Lease) and may repossess the Premises by forcible entry or detainer
suit or otherwise, without demand or notice of any kind to the Lessee and
without terminating this Lease, in which event Lessor may, but shall be
under no obligation to do so, relet the same for the account of Lessee
for such rent and upon such terms as shall be satisfactory to Lessor. For
the purposes of such reletting, Lessor is authorized to decorate or to
make any repairs, changes, alterations, or additions in or to the
Premises and to incur leasing commissions that may be necessary or
convenient, and (A) if Lessor shall fall or refuse to relet the Premises,
or (B) if the same are relet and sufficient sum shall not be realized
from such reletting after paying the unpaid base and additional rent due
hereunder earned, but unpaid at the time of reletting, plus eighteen
percent (18%) interest thereon or the highest lawful rate, whichever is
lesser, the cost of recovering possession, and all of the costs and
expenses of such decoration, repairs, changes, alterations, and
additions, and leasing commissions and the expense of such reletting and
of the collection of the rent accruing therefrom to satisfy the rent
provided for in this Lease to be paid, then Lessee shall pay to Lessor as
damages a sum equal to the amount of the rent reserved in this Lease for
such period or periods, or if the Premises have been relet, Lessee shall
satisfy and pay any such deficiency upon demand therefor from time to
time, and Lessee agrees that Lessor may file suit to recover any sums
falling due under the terms of this Section 26 from time to time; and
that no delivery or recovery of any portion due Lessor hereunder shall be
any defense in any action to recover any amount not theretofore reduced
to judgment in favor of Lessor, nor shall such reletting be construed as
an election on the part of Lessor to terminate this Lease unless a
written notice of such intention be given to Lessee by Lessor.
Notwithstanding any such reletting without termination, Lessor may at any
time thereafter elect to terminate this Lease for such previous breach.
SECTION 27 LESSOR'S RIGHT TO RELET
PAGE 12
<PAGE>
In the event of default by Lessee in any of the terms or covenants of
this Lease or in the event the Premises are abandoned by Lessee, Lessor shall
have the right, but not the obligation, to relet same for the remainder of
the term provided for herein, and if the rent received through reletting does
not at least equal the rent provided for herein, Lessee shall pay and satisfy
the deficiency between the amount of the rent so provided for and that
received through reletting, including, but not limited to, the cost of
renovating, altering, and decorating for a new occupant as well as any
leasing commissions incurred in connection therewith. Nothing herein shall be
construed as in any way denying Lessor the right, in the event of abandonment
of the Premises or other breach of this Lease by Lessee, to treat the same as
an entire breach, and at Lessor's option to terminate this Lease and/or
immediately seek recovery for the entire breach of this Lease and any and all
damages which Lessor suffers thereby.
SECTION 28. LIEN FOR RENT.
In consideration of the mutual benefits arising under this Lease,
Lessee hereby grants to Lessor a lien and security Interest on Lessee's
furniture, equipment, machinery and furnishings now or hereafter placed in or
upon the Premises and such property shall be and remain subject to such lien
and security interest of Lessor for payment of all rent and other sums agreed
to be paid by Lessee herein. The provisions of this paragraph relating to
such lien and security interest shall constitute a security agreement under
the Uniform Commercial Code so that Lessor shall have and may enforce a
security interest on such property of Lessee. Lessee agrees to execute as
debtor such financing statement or statements as Lessor may now or hereafter
reasonably request in order that such security interest or interests may be
perfected pursuant to the Uniform Commercial Code. Lessor may at its election
at any time file a copy of this Lease as a financing statement. Lessor, as
secured party, shall be entitled to all of the rights and remedies afforded a
secured party under the Uniform Commercial Code in addition to and cumulative
of the landlord's liens and rights provided by law or by the other terms and
provisions of this Lease.
SECTION 29. ATTORNEY'S FEES.
In the event either party hereto institutes any legal or equitable
proceeding against the other party hereto, the prevailing party shall be
entitled to recover its reasonable attorney's fees.
SECTION 30. NO IMPLIED WAIVER
The failure of Lessor to insist at any time upon the strict
performance of any covenant or agreement or to exercise any option, right,
power, or remedy contained in this Lease shall not be construed as a waiver
or a relinquishment thereof for the future. The waiver of or redress for any
violation of any term, covenant, agreement, or condition contained in this
Lease shall not prevent a subsequent act, which would have originally
constituted a violation, from having all the force and effect of an original
violation. No express waiver shall affect any condition other than the one
specified in such waiver and that one only for the time and in the manner
specifically stated. A receipt by Lessor of any rent with knowledge of the
breach of any covenant or agreement contained in this Lease shall not be
deemed a waiver of such breach, and no waiver by Lessor of any provision of
this Lease shall be deemed to have been made unless expressed in writing and
signed by Lessor. No payment by Lessee or receipt by Lessor of a lesser
amount than the monthly installment of rent due under this Lease shall be
deemed to be other than on account of the earliest rent due hereunder, nor
shall any endorsement or statement on any check or any letter accompanying
any check or payment as rent be deemed an accord and satisfaction, and Lessor
may accept such check or payment without prejudice
PAGE 13
<PAGE>
to Lessor's right to recover the balance of such rent or pursue any other
remedy in this Lease provided.
SECTION 31. CASUALTY INSURANCE.
Lessor shall maintain fire and extended coverage insurance on the
Building. Such insurance shall be maintained with an Insurance Company
authorized to do business in Texas, in amounts desired by Lessor and at the
expense of Lessor (as a part of the Basic Costs), and payments for losses
thereunder shall be made solely to Lessor. Lessee shall maintain at its
expense fire and extended coverage insurance on all of its personal property,
including removable trade fixtures, located in the Premises and on all
additions and improvements made by Lessee and not required to be insured by
Lessor above. If the annual premium to be paid by Lessor shall exceed the
standard rates because Lessee's operations, contents of the Premises, or
improvements with respect to the Premises beyond Building standard, result in
extra-hazardous exposure, Lessee shall pay the excess amount of the premium
upon request therefor by Lessor.
SECTION 32. LIABILITY INSURANCE.
Lessor shall, at its expense as a part of the Basic Costs, maintain a
policy or policies of comprehensive general liability insurance with the
premiums thereon fully paid on or before the due date, issued by and binding
upon some solvent insurance company.
SECTION 33. INDEMNITY.
Neither Lessor, nor Lessor's agents, servants, or employees shall be
liable to Lessee, or to Lessee's agents, servants, employees, customers, or
invitees, for any damage to person or property caused by an act, omission, or
neglect of Lessee, its agents, servants or employees, and Lessee agrees to
indemnify and hold Lessor and Lessor's agents, servants, and employees
harmless from all liability and claims for any such damage. Lessee shall not
be liable to Lessor, or to Lessor's agents, servants, employees, customers,
or invitees, for any damage to person or property caused by any act,
omission, or neglect of Lessor, its agents, servants, or employees, and
Lessor agrees to indemnify and hold Lessee harmless from all claims for such
damage.
SECTION 34. WAIVER OF SUBROGATION RIGHTS.
Anything in this Lease to the contrary notwithstanding, Lessor and
Lessee each hereby waive any and all rights of recovery, claim, action, or
cause of action, against the other, its agents, officers, or employees, for
any loss or damage that may occur to the Premises, or any improvements
thereto, or any personal property of such party therein, by reason of fire,
the elements, or any other cause or origin, including negligence of the other
party hereto, its agents, officers, or employees, and covenants that no
insurer shall hold an right of subrogation against such other party.
SECTION 35. CASUALTY DAMAGE
If the Premises or any part thereof shall be damaged by fire or other
casualty, Lessee shall give prompt written notice thereof to Lessor. In case
the Building shall be damaged by fire or other casualty, but shall not be
rendered untenantable in whole or in part, Lessor shall, at its sole expense,
cause such damage to be repaired with reasonable diligence to substantially
the same condition in which it was immediately prior to the happening of the
casualty, and the Base Rental hereunder shall not be abated; however, in case
the Building shall be so damaged by fire or other casualty that substantial
alteration
PAGE 14
<PAGE>
or reconstruction of the Building shall, in Lessor's sole opinion, be
required (whether or not the Premises shall have been damaged by such fire or
other casualty), or in the event any mortgagee under a mortgage or deed of
trust covering the Building should require that the insurance proceeds
payable as a result of said fire or other casualty be used to retire the
mortgage debt, Lessor may at its option, terminate this Lease and the term
and estate hereby granted by notifying Lessee in writing of such termination
within sixty (60) days after the date of such damage. If Lessor does not thus
elect to terminate this Lease, Lessor shall within seventy-five (75) days
after the date of such damage commence to repair and restore the Building and
shall proceed with reasonable diligence to restore the Building (except that
Lessor shall not be responsible for delays outside its control) to
substantially the same condition in which it was immediately prior to the
happening of the casualty, except that Lessor shall not be required to
rebuild, repair, or replace any part of Lessee's fixtures, equipment, or
other personal property removable by Lessee under the provisions of this
Lease, and Lessor shall not in any event be required to spend for such work
an amount in excess of the insurance proceeds actually received by Lessor as
a result of the fire or other casualty. Lessor shall not be liable for any
inconvenience or annoyance to Lessee or injury to the business of Lessee
resulting in any way from such damage or the repair thereof, except that,
subject to the provisions of the next sentence, Lessor shall allow Lessee a
fair diminution of rent during the time and to the extent the Premises, or
any portion thereof, are unfit for occupancy. If the Premises or any other
portion of the Building be damaged by fire or other casualty resulting from
the fault or negligence of Lessee or any of Lessee's agents, employees, or
invitees, the rent hereunder shall not be diminished during the repair of
such damage, and Lessee shall be liable to Lessor for the cost and expense of
the repair and restoration of the Building caused thereby to the extent such
cost and expense is not covered by insurance proceeds. Any insurance which
may be carried by Lessor or Lessee against loss or damage to the Building or
to the Premises shall be for the sole benefit of the party carrying such
insurance and under its sole control.
SECTION 36. CONDEMNATION.
If the whole or substantially the whole of the Premises should be
taken for any public or quasi-public use under any governmental law,
ordinance, or regulation, or by right of eminent domain, or should be sold to
the condemning authority in lieu of condemnation, then this Lease shall
terminate as of the date when physical possession of the Premises is taken by
the condemning authority. If less than the whole or substantially the whole
of the Complex, Building or the Premises is thus taken or sold, Lessor
(whether or not the Premises are affected thereby) may terminate this Lease
by giving written notice thereof to Lessee within sixty (60) days after the
right of election accrues, in which event this Lease shall terminate as of
the date when physical possession of such portion of the (Complex or Building
or Premises is taken by the condemning authority. If upon any such taking or
sale of less than the whole or substantially the whole the Complex or
Building or the Premises this Lease shall not be thus terminated, the Base
Rental payable thereunder shall be diminished by an amount representing that
part of the Base Rental as shall property, in Lessor's reasonable judgment,
be allocable to the portion of the Premises which was so taken or sold or
affected, if any, and Lessor shall, at Lessor's sole expense, restore and
reconstruct the Complex, Building or the Premises, as the case may be, to
substantially their former condition to the extent that the same, in Lessor's
judgment, may be feasible; Lessor shall not in any event be required to spend
for such work an amount in excess of the amount received by Lessor as
compensation awarded upon a taking of any part or all of the Complex,
Building or the Premises, and Lessee shall not be entitled to and expressly
waives all claim to any such compensation.
SECTION 37. NOTICES AND CURE.
PAGE 15
<PAGE>
In the event of any act or omission by Lessor which would give Lessee
the right to damages from Lessor or the right to terminate this Lease by
reason of the constructive or actual eviction from all or part of the
Premises or otherwise, Lessee shall not sue for such damages or exercise any
such right to terminate until it shall have given written notice of such act
or omission to Lessor and to the holder(s) of any indebtedness or other
obligations secured by any mortgage or deed of trust affecting the Premises
(to the extent Lessor provides Lessee with appropriate notice addresses for
any such persons), and a reasonable period of time for remedying such act or
omission shall have elapsed following the giving of such notice, during which
time Lessor and such holder(s) or either of them, their agents or employees,
shall be entitled to enter upon the Premises and do therein whatever may be
necessary to remedy such act or omission. During the period after the giving
of such notice and during the remedying of such act or omission, the Base
Rental payable by Lessee for such period as provided in this Lease shall be
abated and apportioned only to the extent that any part of the Premises shall
be untenantable.
SECTION 38. PERSONAL LIABILITY.
The liability of Lessor to Lessee for any default by Lessor under the
terms of this Lease shall be limited to the interest of Lessor in the
Building and the land on which the Building is situated, and Lessee agrees to
look solely to Lessor's interest in the Building and the land on which the
Building is situated for the recovery of any judgment from Lessor, it being
intended that Lessor shall not be personally liable for an judgment or
deficiency. This clause shall not be deemed to limit or deny any remedies
which Lessee may have in the event of a default by Lessor hereunder which do
not involve the personal liability of Lessor.
SECTION 39. NOTICE
Any notice, communication, request, reply, or advice (hereinafter
severally and collectively called "notice") in this Lease provided for or
permitted to be given, made or accepted by either party to the other must be
in writing, and may, unless otherwise in this Lease expressly provided, be
given or be served by depositing the same in the United States mail, postpaid
and certified and addressed to the party to be notified, with return receipt
requested, or by delivering the same in person to any officer of such party,
or by prepaid telegram, when appropriate, addressed to the party to be
notified. Notice deposited in the mail in the manner hereinabove described
shall be effective, unless otherwise stated in this Lease, from and after the
expiration of three (3) days after it is so deposited. Notice given in any
other manner shall be effective only if and when received by the party to be
notified. For purposes of notice, the addresses of the parties shall, until
changed as herein provided, be as follows:
For Lessor: LAB HOLDINGS, INC.
12740 Hillcrest Road
Dallas, Texas 75230
For Lessee: Dallas Systems Corporation
12740 Hillcrest Road
Dallas Texas 75230
The parties hereto and their respective heirs, successors, legal
representatives, and assigns shall have the right from time to time and at
any time to change their respective addresses and each shall have the right
to specify as its address any other address by at least fifteen (15) days'
written notice to the other party delivered in compliance with this Paragraph
39.
PAGE 16
<PAGE>
SECTION 40. SURRENDER.
On the last day of the term of this Lease, or upon the earlier
termination of this Lease, Lessee shall peaceably surrender the Premises to
Lessor in good order, repair, and condition at least equal to the condition
when delivered to Lessee, excepting only reasonable wear and tear resulting
from normal use, and damage by fire or other casualty covered by the
insurance carried by Lessor. All movable fixtures, office equipment, and
other personal property of Lessee shall remain the property of Lessee, and
upon the expiration date or earlier termination of this Lease may be removed
from the Premises by Lessee, subject, however, to Lessor's lien for rent;
provided, however, that Lessee shall repair and restore in a good and
workmanlike manner (reasonable wear and tear excepted), any damage to the
Premises or the Building caused by such removal. Any of such movable
fixtures, office equipment and other personal property no so removed by
Lessee at or prior to the expiration date or earlier termination of this
Lease shall become the property of Lessor. All other property as a part of
the premises attached or affixed to the floor, wall, or ceiling of the
Premises (including wall-to-wall carpeting, paneling, or other wall covering)
are the property of Lessor and shall remain upon and be surrendered with the
Premises as a part thereof at the termination of this Lease by lapse of time
or otherwise, Lessee hereby waiving all rights to any payment or compensation
therefor. Notwithstanding anything herein to the contrary, Lessee's surrender
of the Premise shall in no way affect Lessee's obligation to pay rent to the
date of expiration of this Lease, whether or not the amount of such
obligation has been ascertained either as of the date Lessee surrenders the
Premises or as of the date of expiration of this Lease.
SECTION 41. CAPTIONS.
The captions of each Section of this Lease are inserted and included
solely for convenience and shall never be considered or given any effect in
construing this Lease, or any provisions hereof, or in connection with the
duties, obligations, or liabilities of the respective parties hereto, or in
ascertaining intent, if any question of intent exists.
SECTION 42. ENTIRETY AND AMENDMENTS.
This Lease embodies the entire contract between the parties hereto
relative to the subject matter hereof. No variations, modifications, changes,
or amendments herein or hereof shall be binding upon any party hereto unless
in writing, executed by a duly authorized officer or a duly authorized agent
of the particular party. All exhibits referred to in this Lease and attached
hereto are incorporated herein for all purposes.
SECTION 43. SEVERABILITY
If any term or provision of this Lease, or the application thereof to
any person or circumstance, shall, to any extent, be invalid or
unenforceable, the remainder of this Lease, or the application of such term
or provision to persons or circumstances other than those as to which it is
held invalid or unenforceable, shall not be affected thereby, and each term
and provision of this Lease shall be valid and enforced to the fullest extent
permitted by law.
SECTION 44. BINDING EFFECTS.
Subject to Section 21, all covenants and obligations as contained
within this Lease shall bind, extend, and inure the benefit of Lessor, its
successors and assigns, and shall be binding upon Lessee, its permitted
successors and assigns.
SECTION 45. NUMBER AND GENDER OF WORDS.
PAGE 17
<PAGE>
All personal pronouns used in this Lease shall include the other
gender, whether used in the masculine, feminine, or neuter gender, and the
singular shall include the plural whenever and as often as may be appropriate.
SECTION 46. RECORDATION.
Lessee agrees not to record this Lease, but Lessee agrees, on request
of Lessor, to execute a short form lease in form recordable and complying
with applicable Texas laws. In no event shall such document set forth the
rental or other charges payable by Lessee under this Lease; and any such
document shall expressly state that it is executed pursuant to the provisions
contained in this Lease and is not intended to vary the terms and conditions
of this Lease.
SECTION 47. GOVERNING LAW.
This Lease and the rights and obligations of the parties hereto shall
be interpreted, construed, and enforced in accordance with the laws of the
State of Texas.
SECTION 48. FORCE MAJEURE
Whenever a period of time is herein prescribed for the taking of any
action by Lessor, Lessor shall not be liable or responsible for, and there
shall be excluded from the computation of such period of time, any delays due
to strikes, riots, acts of God, shortages of labor or materials, war,
governmental laws, regulations or restrictions, or any act, omission, delay,
or neglect of Lessee or any of Lessee's employees or agents, or any other
cause whatsoever beyond the control of Lessor. Furthermore, the foregoing
shall in no manner release, relieve or affect the independent obligation of
Lessee to pay rent hereunder.
SECTION 49. RELATIONSHIP OF PARTIES.
Nothing contained herein shall create any relationship between the
parties hereto other than that of landlord and tenant, and it is acknowledged
and agreed that Lessor does not in any way or for any purpose intend, nor
shall this Lease be construed, to create as between Lessor and Lessee the
relation of partner, joint venturer or member of a joint or common enterprise
with Lessee.
SECTION 50. PREPAID RENT.
Lessor hereby acknowledges receipt of $170,008.00 which shall
constitute prepayment of rent to be applied to the next to the last month's
and last month's Base Rental due under this Lease.
SECTION 51. TIME OF ESSENCE.
Time is of the essence of this Lease
SECTION 52. RIDERS.
The following numbered Riders are attached hereto and incorporated
herein and made a part of this Lease for all purposes:
Rider - 1 "Special Conditions"
PAGE 18
<PAGE>
IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease in
multiple original counterparts as of the date and year first above written.
LESSOR:
LAB HOLDINGS, INC.
By: /s/ Lyle A. Baack Date: August 15, 1997
-------------------------- ---------------------------
Lyle A. Baack
Title: President
LESSEE:
Dallas Systems Corporation
By: /s/ Lyle A. Baack Date: August 15, 1997
-------------------------- ---------------------------
Lyle A. Baack
Title: President
PAGE 19
<PAGE>
RIDER 1
SPECIAL CONDITIONS
AD VALOREM TAXES
1. Ad valorem taxes for the current year 1997, shall be prorated
as of August 15, 1997 with Dallas Systems Corporation liable for payment of
such taxes up to that date and LAB HOLDINGS, Inc. liable for payment of such
taxes after that date. Upon receipt of the tax statement from the Dallas
County/City taxing authorities, Dallas Systems Corporation will make a check
payable to the Dallas County/City Tax authorities for the required amount and
deliver same to LAB HOLDINGS, Inc. at which time LAB HOLDINGS, Inc. will pay
the required tax.
It is agreed and understood that the Dallas Central Appraisal
District's 1997 Real Estate Property Tax Value, as approved by the Appraisal
Review Board of Dallas County, in the amount of $4,861,580.00 is being
contested. Dallas Systems Corporation and LAB HOLDINGS, Inc. agree to jointly
pay attorneys' fees and costs for the contest on a percentage sharing basis
based on the proration of the Property Taxes as described above. In the event
that the contest is successful, the amount of Property Taxes due and payable
by Dallas Systems Corporation, and LAB HOLDINGS, Inc. shall be reduced by the
same percentage on the basis of the proration of taxes described above.
LAB HOLDINGS, Inc. will direct and control the contest. Upon receipt
of statements for attorneys' fees and/or costs, LAB HOLDINGS, Inc. will
prepare a statement to Dallas Systems Corporation for it's percentage of
payment of such fees and costs, and Dallas Systems Corporation will make
payment on the statement within thirty (30) days of its receipt.
INSURANCE POLICIES
2. Dallas Systems Corporation and LAB HOLDINGS, Inc. agree to
cooperate in the transfer of all Insurance Policies on the Property as of the
date of closing from Dallas Systems Corporation as the Insured to LAB HOLDINGS,
Inc.
<PAGE>
PROPERTY DESCRIPTION
TRACT I
FEE SIMPLE
Being a portion of the Hiram Wilburn Survey, Abstract 1568, and also being
part of Lot 2, Block A/7466, of Hillcrest Green, Second Installment, an
addition to the City of Dallas, according to the Map recorded in Volume
80162, Page 0177, Map Records, Dallas County, Texas, described as follow,:
Commencing at the intersection of the Southerly right-of-way line of LBJ
Freeway, (IH 635, variable width right-of-way), with the Easterly
right-of-way line of Hillcrest Road (100 foot right-of-way);
THENCE South 00 degrees 06 minutes 36 seconds West, along the Easterly
right-of-way line of said Hillcrest Road, a distance of 78.16 feet to a point
for corner;
THENCE South 00 degrees 09 minutes 18 seconds West, continuing along the
Easterly right-of-way line of said Hillcrest Road, a distance of 378.41 feet
to a point for corner in the North line of said Hillcrest Green, Second
Installment;
THENCE South 89 degrees 00 minutes 00 seconds East, departing the Easterly
right-of-way line of said Hillcrest Road, and along the North line of said
Hillcrest Green, Second Installment, a distance of 889.34 feet to a one inch
iron rod found for corner at THE POINT OF BEGINNING;
THENCE South 89 degrees 00 minutes 00 seconds East continuing along the North
line of said Hillcrest Green Second Installment and along the South line of
Hillcrest-635 addition as recorded in Volume 71021, Page 2073, Map Records,
Dallas County, Texas, a distance of 340.37 feet to a one inch iron rod found
for corner in the East line of said Hillcrest Green, Second Installment, said
point also being in a curve to the left and situated in the Westerly line of
White Rock Creek;
THENCE along the Westerly line of said White Rock Greek the following:
Along the East line of said Hillcrest Green, Second Installment, with
said curve to the left, an arc length of 312.42 feet to a point of
tangency of said curve, said curve having a central angle of 29 degrees
50 minutes 00 seconds a radius of 600.00 feet, a tangent length of 159.83
feet, a chord bearing South 32 degrees 24 minutes 31 seconds East, and a
chord length of 308.90 feet, a one-half inch iron rod set for corner;
South 47 degrees 19 minutes 31 seconds East continuing along the East
line of said Hillcrest Green, Second Installment, a distance of 67.00
feet to a point of curvature to the right, a one-half inch iron rod set
for corner;
Continuing along the East line of said Hillcrest Green Second
Installment, with said curve to the right, an arc length of 173.08 feet
to the point of tangency of said curve, said curve having a central angle
of 09 degrees 55 minutes 00 seconds, a radius of 1000.00 feet, a tangent
length of 86.76 feet, a chord hearing South 42 degrees 22 minutes 01
seconds East, and a chord length of 172.86 feet, a one-half inch rod set
for corner;
South 37 degrees 24 minutes 31 seconds East, continuing along the East
line of said
EXHIBIT "A"
<PAGE>
Hillcrest Green, Second Installment, a distant of 76.73 feet to a one
inch iron rod found in the South line of said Hillcrest Green, Second
Installment;
THENCE North 88 degree, 30 minutes 09 seconds West, departing the East line
of said Hillcrest Green, Second Installment, and along the North line of
Georgetown on Hillcrest as recorded in Volume 83167, Page 4593, Map Records,
Dallas County, Texas, a distance of 726.06 feet to an one inch iron rod found
for corner;
THENCE North 00 degrees 54 minutes 04 seconds East, departing the South line
of said Hillcrest Green, Second Installment, a distance of 481.89 feet to the
POINT OF BEGINNING and containing 247,471.80 square feet or 5.68 acres of
land, more or less.
TRACT II
Easement Estate created in Easement and Maintenance Agreement, executed by
and between RREEF Mid-America Fund-I, Two Hillcrest Green, Ltd., AMSAC, Inc.,
Soclan, Inc., First National Bank in Dallas, and Hillcrest Associates, dated
September 10, 1981, filed for record on November 23, 1981 and recorded in
Volume 81229, Page 1496, Deed Records, Dallas County, Texas, covering Tract
II which is described as follows:
The North 56 feet of the following two tracts of land.
Being a tract or parcel of land situated in the City of Dallas, Dallas
County, Texas, and being a part of the Hiram Wilburn Survey, Abstract No.
1568 including but not limited to all of Lot 1, Block A/7466 of
Hillcrest-Green, an Addition to the City of Dallas, as recorded in Volume
78212, Page 1402 of the Deed Records of Dallas County, Texas and being more
particularly described as follows:
BEGINNING at a point for corner in the Easterly line of Hillcrest Road (50
feet from centerline), said point being South 00 degrees 06 minutes 36
seconds West a distance of 78.16 feet, South 00 degrees 09 minutes 18 seconds
West a distance of 378.41 feet from the intersection of the Southerly
right-of-way line of LBJ Freeway (IH 635, variable width) and the Easterly
line of Hillcrest Road (50 feet from centerline);
THENCE South 89 degrees 00 minutes 00 seconds East a distance of 413.34 feet
to a Point for corner;
THENCE South 01 degrees 28 minutes 00 seconds West a distance of 477.73 feet
to a point for corner;
THENCE North 88 degrees 00 minutes 09 seconds West along the Northerly line
of Blocks 7465 and A/7465 a distance of 413.33 feet to a point for corner in
the Easterly right-of-way line of Hillcrest Road (50 feet from centerline);
THENCE North 01 degrees 28 minutes 00 seconds East along the Easterly
right-of-way line of Hillcrest Road (50 feet from centerline) a distance
of 474.14 feet to the Point of Beginning and
containing 196,718 square feet, more or less, or 4.5160 acres.
<PAGE>
AND
BEING a tract of land situated in the City of Dallas, Dallas County, Texas,
and being a part of the Hiram Wilburn Survey, Abstract 1568, and also being
part of Lot 2 in Block A/7466, of Hillcrest Green, 2nd Installment, an
Addition to the City of Dallas as recorded in Volume 80162, Page 0177, of the
Deed Records of Dallas County, Texas, and being more particularly described
as follows:
COMMENCING at an iron rod for corner in the Easterly line of Hillcrest Road
(100 ft. wide), said point being South 00 degrees 06 minutes 36 seconds West
a distance of 78.16 feet, and South 00 degrees 09 minutes 18 seconds West a
distance of 378.41 feet from the intersection of the Southerly right-of-way
line of LBJ (IH 635, variable width) and the Easterly line of said Hillcrest
Road;
THENCE South 89 degrees 00 minutes 00 seconds East along the Southerly line
of Block A/7467 a distance of 413.34 ft. to the POINT OF BEGINNING of the
herein described tract;
THENCE South 89 degrees 00 minutes 00 seconds East along the said South line
of Block A/7467 a distance of 476.00 ft. to a point for corner;
THENCE South 01 degrees 00 minutes West a distance of 481.88 feet to a point
for corner;
THENCE North 88 degrees 30 minutes 09 seconds West along the Northerly line
of Block 7465 a distance of 479.91 feet to a point for corner;
THENCE North 01 degrees 28 minutes 00 seconds East a distance of 477.73 feet to
the POINT OF BEGINNING and containing 229,321 square feet, more or less, or
5.2645 acres.
EXHIBIT "A"
PAGE 3 of 3
<PAGE>
[illegible]
[GRAPHIC] SECOND FLOOR PLAN
FIRST FLOOR PLAN
<PAGE>
BUILDING RULES AND REGULATIONS
1. Sidewalks, doorways, vestibules, halls, stairways, and other
similar areas shall not be obstructed by tenants or used by any tenant for
any purpose other than ingress and egress to and from the leased premises and
for going from one part of the building to another part of the building.
2. Plumbing fixtures and appliances shall be used only for the
purpose of which designed, and no sweepings, rubbish, rags or other
unsuitable material shall be thrown or placed therein. Damage resulting to
any such fixture or appliances from misuse by a tenant shall be paid by him,
and Landlord shall not In any case be responsible therefor.
3. No signs, advertisements or notices shall be painted or affixed
on or to any windows or doors or other part of the building visible from the
exterior or any common area or public areas of the building. No part of the
building may be defaced by tenants.
4. Landlord will provide and maintain an alphabetical directory
board for all tenants of the Building in the first floor (main lobby) of the
Building; the size, design, and location shall determined by Landlord. No
other directory shall be allowed.
5. Except as otherwise provided in a lease between Landlord and a
tenant, no tenant shall place any additional lock or locks on any door in its
leased area without Landlord's written consent. Two (2) keys to the locks on
the doors in each tenant's leased area shall be furnished to each tenant, and
the tenants shall not have any duplicate keys made. Additional keys shall be
provided upon Tenant's request at a reasonable charge.
6. All tenants will refer all contractors, contractor's
representatives, and installation technicians tendering any service to them
to Landlord for Landlord's supervision, approval, and control before the
performance of any contractual services. This provision shall apply to all
work performed in the building (other than work under contract for
installation or maintenance of security equipment or banking equipment),
including, but not limited to installation of telephones, telegraph
equipment, electrical devices, and attachments, and any and all installations
of every nature affecting floors, walls, woodwork, trim, windows, ceilings,
equipment, and any other physical portion of the building.
7. With the exception of material regularly moved in connection
with banking or data processing operations of tenants, after initial
occupancy, movement in or out of the building of furniture or office
equipment, or dispatch or receipt by tenants of any bulky material,
merchandise or materials which requires use of the elevators or stairways, or
movement through the building entrances or lobby shall be restricted on
weekends and between the hours of 6:00 p.m. and 6:00 a.m. on weekdays. All
such movement shall be under the supervision of Landlord and in the manner
agreed between the tenant and Landlord by prearrangement before performance.
Such prearrangement initiated by a tenant will include determination by
Landlord, and subject to his decision and control, as to the method and
routing of movement and as to limitations for safety or other concern which
may prohibit any article, equipment or any other item from being brought into
the building. The tenants are to assume all risks as to the damage to
articles moved and injury to persons or public engaged or not engaged in such
movement, including equipment, property and personnel of Landlord if damaged
or injured as a result of act in connection with carrying out this service
for a tenant from time of entering property to completion of work, and
Landlord shall not be liable for acts of any persons engaged in, or any
damage or loss of any said property or persons resulting from any act in
connection with such service performed for a tenant.
8. Landlord shall have the power to reasonably prescribe the
weight and position of safes and other heavy equipment, which shall in all
cases, in order to distribute weight properly, stand on supporting devices
approved by Landlord. Any changes the tenant desires to make in his
arrangement of such load must be approved in writing by the Landlord prior to
movement. All damage done to the building by taking in or putting out any
property of a tenant, or done by a tenant's property while in the building,
shall be repaired at the expense of such tenant.
9. A tenant shall notify the building manager when safes or other
heavy equipment are to be taken in or out of the building, and the moving
shall be done under the supervision of the building manager, after written
permit from the Landlord. Persons employed to move such property must be
acceptable to Landlord.
10. Corridor doors when not in use, shall be kept closed.
11. Each tenant shall cooperate with Landlord's employees in
keeping its leased area neat and clean. Except as otherwise provided in a
tenant's lease, no tenant shall employ any person for the purpose of cleaning
other than the building's cleaning and maintenance personnel. Landlord shall
be in no way responsible to the tenant's, their agents, employees or invitees
for any loss of property from the Premises or public areas or for any damages
to any property therein from any cause whatsoever.
EXHIBIT "C-1"
<PAGE>
12. To Insure orderly operation of the building, no ice, mineral or
other water, towels, newspapers, etc., shall be delivered to any leased area
except by persons appointed or approved by Landlord in writing.
13. Should tenant require telegraphic, telephonic, annunciator or
other communication service, Landlord will direct the electricians where and
how wires are to be introduced and placed and none shall be introduced or
placed except as Landlord shall approve, which approval will not be
unreasonably withheld; provided, however, the foregoing shall not apply to
any cables or connections of any sort relative to electronic data processing
operations of a tenant. Electric current shall not be used for space heaters,
cooking or heating devices or similar appliances without Landlord's prior
written permission.
14. Tenant shall not make or permit any improper noises in the
building or otherwise interfere in any way with other tenants or persons
having business with them.
15. Nothing shall be swept or thrown into the corridors, halls,
elevator shafts or stairways. No birds or animals shall be brought into or
kept in, on or about any tenant's area.
16. Except as otherwise provided in a tenant's lease, no machinery
of any kind other than customary office or banking equipment shall be
operated by any tenant on its leased area without the prior written consent
of Landlord, nor shall any tenant use, or keep, in the building any
inflammable or explosive fluid or substance, except in connection with
duplicating operations and then only in accordance with procedures approved
by Landlord.
17. No portion of any tenant's leased area shall at any time be
used or occupied as sleeping or lodging quarters.
18. Landlord reserves the right to rescind any of these rules and
regulations and to make such other and further rules and regulations as in
its judgment shall from time to time be needful for the safety, protection,
care and cleanliness of the building, and the operation thereof, the
preservation of good order therein and the protection and comfort of the
tenants and their agents, employees, and invitees, which rules and
regulations, when made and written notice thereof is given to a tenant, shall
be binding upon it in like manner as if originally herein prescribed.
19. Landlord will not be responsible for lost or stolen property,
money or jewelry from tenant's leased area or public area regardless of
whether such loss occurs when area is locked against entry or not.
20. Tenant will not tamper with or attempt to adjust temperature
control thermostats in the premises.
21. Tenant shall, before leaving tenant's demised premises
unattended, close and lock all outside doors, and shut off all utilities;
damage resulting from failure to do so shall be paid by tenant.
22. Tenant shall give Landlord prompt notice of all accidents to or
defects in air conditioning equipment, plumbing, electric facilities, or any
part of appurtenance of tenant's demised premises.
23. In the event tenant is expressly granted rights and/or
privileges in and to parking areas or facilities under this Lease, the
following shall apply: tenant and tenant's employees shall park their cars
only in those portions of the parking garage and areas that are from time to
time designated for that purpose by Landlord. Landlord shall have the right
from time to time to relocate parking areas for use by tenant. Tenant shall
furnish Landlord in writing the make, model, color and state automobile
license number assigned to tenant's cars within ten (10) days after taking
possession of the tenant's demised premises and shall thereafter notify
Landlord in writing of any changes within five (5) days. In the event tenant,
and its employees, agents and/or licensees fail to park their cars in the
parking areas so designated from time to time by Landlord, then Landlord at
Its option shall have the right to charge tenant Ten Dollars ($10.00) per car
per day for any car parked in any area other than that so designated, or tow
such vehicle away at tenant's cost and expense. In the event Landlord should
exercise such option, the money due Landlord under the provisions of this
paragraph shall be deemed additional rental due under this Lease and same
shall be subject to all of those provisions herein pertaining to the payment
of rental.
24. Tenant shall surrender and return tenant's demised premises and
all keys, equipment, and fixtures of tenant in as good condition as when
tenant originally took possession, ordinary wear and tear, fire or other
casualty not caused by tenant's negligence or willful misconduct excepted,
promptly at the termination of this Lease by lapse of time or otherwise.
25. Canvassing, soliciting and peddling in the building or garage
facilities is prohibited.
26. There shall not be used in any space, or in the public halls of
the building, either by any tenant or by jobbers or others, in the delivery
or receipt of merchandise, any hand trucks, except those equipped with rubber
tires.
EXHIBIT "C-2"
<PAGE>
27. Tenant shall not permit any portion of the demised premises to
be used as an office for a public stenographer or typewriter, for the sale of
food, drink, liquor, or tobacco, for a barber or manicure shop, for retail
sales to the general public, for an employment bureau or travel agency, or
for auctIons or sales of personal property unless such use is specifically
described as a pad of the sole permitted use.
28. No person or contractor not employed by Landlord shall be used
to perform janitor work, window washing, cleanIng, repair or other work in
tenant's demised premises. Landlord's janitors shall not be hindered by
tenant or its agents, servants, employees or invitees after 6:00 p.m.
29. Tenant must dispose of crates, boxes, etc., which will not fit
into office wastepaper baskets.
30. Tenant shall unless otherwise expressly stipulated herein, be
required to make all repairs of any kind and character, on tenant's demised
premises during the term of such tenant's lease except such repairs as may be
required and executed by normal janitorial and maintenance operations.
31. Tenant will be responsible for any damage to carpeting and
flooring as a result of rust or corrosion of file cabinets, pot holders,
roller chairs, and metal objects or water damage due to the watering of
plants.
32. Tenants employing laborers or others outside the building shall
not have their employees paid in the building.
33. Tenant shall permit Landlord six (6) months prior to the
termination of such tenant's lease to show tenant's demised premises during
business or non-business hours to prospective lessees and advertise tenant's
demised premises for rent.
34. Tenant shall not advertise the business, profession, or
activities of tenant in any manner which violates the letter or spirit of any
code of ethics adopted by any recognized association or organization
pertaining thereto or use the name of the building for any purpose other than
that of the business address of tenant or use any picture or likeness of the
building or the building name in any letterheads, envelopes, circulars,
notices, advertisements, containers, or wrapped material, without Landlord's
express consent in writing.
35. Tenant shall not permit, erect and/or place drapes, furniture,
fixtures, shelving display cases or tables, lights and signs, and advertising
devices in front of or in the proximity of interior or exterior windows,
glass panels, or glass doors providing a view into the interior of tenant's
demised premises unless same shall have first been approved in writing by
Landlord.
36. Landlord reserves the right to close the building at 7:00 p.m.
on weekdays subject, however, to tenant's right to admittance under
regulations prescribed by Landlord; and to require all persons entering the
building after 6:00 p.m. to identify themselves to a watchman or other
representative of Landlord and establish their right to enter or leave the
building. Landlord reserves the right to install an electronic entry system
in the building. In the event Landlord so causes such an electronic entry
system to be Installed in the building Landlord will supply initial entry
devices to tenant and may impose restrictions on the use thereof and
additional rules and regulations relating thereto.
EXHIBIT "C-3"
<PAGE>
[LETTERHEAD]
February 10, 1998
Ed Holcomb
EXE Technologies
12740 Hillcrest Road
Dallas, Texas 75230
Dear Ed,
This letter is to notify that the monthly rental of EXE, which is currently
$85,004, will be increased to $86,569, effective February 15, 1998. As a
result of the addition of the addition of 1174 square feet to your lease,
which represents the space previously occupied by Graystone Travel Services.
If you have any questions, please do not hesitate to contact me.
Sincerely,
/s/ Kendall Baack
Kendall Baack
Property Manager
<PAGE>
EXHIBIT 10.16
OFFICE BUILDING LEASE
BETWEEN
MIP PROPERTIES, INC.
LANDLORD
AND
NEPTUNE SYSTEMS, INC.
--------------------------------------------------------
TENANT
<PAGE>
TABLE OF CONTENTS
1. BASIC LEASE TERMS. . . . . . . . . . . . . . . . . . . . . . . 1
2. PREMISES AND COMMON AREAS. . . . . . . . . . . . . . . . . . . 3
3. TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4. POSSESSION . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5. RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6. OPERATING EXPENSES . . . . . . . . . . . . . . . . . . . . . . 6
7. SECURITY DEPOSIT . . . . . . . . . . . . . . . . . . . . . . . 10
8. USE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
10. BROKERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
11. SURRENDER; HOLDING OVER. . . . . . . . . . . . . . . . . . . . 13
12. TAXES ON TENANT'S PROPERTY . . . . . . . . . . . . . . . . . . 14
13. ALTERATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 14
14. REPAIRS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
15. LIENS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
16. ENTRY BY LANDLORD. . . . . . . . . . . . . . . . . . . . . . . 18
17. UTILITIES AND SERVICES . . . . . . . . . . . . . . . . . . . . 18
18. ASSUMPTION OF RISK AND INDEMNIFICATION . . . . . . . . . . . . 19
19. INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
20. DAMAGE OR DESTRUCTION. . . . . . . . . . . . . . . . . . . . . 22
21. EMINENT DOMAIN . . . . . . . . . . . . . . . . . . . . . . . . 25
22. DEFAULTS AND REMEDIES. . . . . . . . . . . . . . . . . . . . . 26
23. LANDLORD'S DEFAULT . . . . . . . . . . . . . . . . . . . . . . 29
24. ASSIGNMENT AND SUBLETTING. . . . . . . . . . . . . . . . . . . 29
25. SUBORDINATION. . . . . . . . . . . . . . . . . . . . . . . . . 33
26. ESTOPPEL CERTIFICATE . . . . . . . . . . . . . . . . . . . . . 34
27. BUILDING PLANNING. . . . . . . . . . . . . . . . . . . . . . . 34
28. RULES AND REGULATIONS. . . . . . . . . . . . . . . . . . . . . 35
29. MODIFICATION AND CURE RIGHTS OF LANDLORD'S
MORTGAGEES AND LESSORS . . . . . . . . . . . . . . . . . . . . 35
30. DEFINITION OF LANDLORD . . . . . . . . . . . . . . . . . . . . 35
31. WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
32. PARKING. . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
33. FORCE MAJEURE. . . . . . . . . . . . . . . . . . . . . . . . . 38
34. SIGNS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
35. LIMITATION ON LIABILITY; REAL ESTATE INVESTMENT TRUST. . . . . 39
36. FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . 39
37. QUIET ENJOYMENT. . . . . . . . . . . . . . . . . . . . . . . . 40
38. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . 40
39. EXECUTION OF LEASE . . . . . . . . . . . . . . . . . . . . . . 41
SIGNATURE PAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(i)
<PAGE>
EXHIBITS
OUTLINE OF FLOOR PLAN OF PREMISES. . . . . . . . . . . . . . . .Exhibit "A"
RENTABLE SQUARE FEET AND USABLE SQUARE FEET. . . . . . . . . . .Exhibit "B"
WORK LETTER AGREEMENT. . . . . . . . . . . . . . . . . . . . . .Exhibit "C"
NOTICE OF LEASE TERM DATES AND TENANT'S PERCENTAGE . . . . . . .Exhibit "D"
STANDARDS FOR UTILITIES AND SERVICES . . . . . . . . . . . . . .Exhibit "E"
ESTOPPEL CERTIFICATE . . . . . . . . . . . . . . . . . . . . . .Exhibit "F"
RULES AND REGULATIONS. . . . . . . . . . . . . . . . . . . . . .Exhibit "G"
TENANT'S INSURANCE REQUIREMENTS. . . . . . . . . . . . . . . . .Exhibit "H"
(ii)
<PAGE>
OFFICE BUILDING LEASE
THIS OFFICE BUILDING LEASE ("Lease") is entered into as of the 26 day
of July 26, 1994 by and between MIP PROPERTIES, INC. ("Landlord"), and
NEPTUNE SYSTEMS, INC., A Pennsylvania corporation ("Tenant").
1. BASIC LEASE TERMS. For purposes of this Lease, the following terms
have the following definitions and meanings:
(a) LANDLORD:
MIP Properties, Inc.,
a Maryland corporation
(b) LANDLORD'S ADDRESS (FOR NOTICES):
MIP Properties, Inc.
2020 Santa Monica Boulevard
Suite 480
Santa Monica, California 90404
Attention; Mr. Philip H. Bowman
or such other place as Landlord may from time to time designate by notice to
Tenant.
(c) TENANT:
NEPTUNE SYSTEMS. INC., A Pennsylvania corporation
(d) TENANT'S ADDRESS (PREMISES):
110 Pine Avenue, Suite 820
Long Beach, CA 90802
Attention: Ray Hood
(e) DEVELOPMENT: The parcels of real property commonly known as The
Security Building located at 102 and 110 Pine Avenue and a
parking garage commonly known as the Autoport on First Avenue
between Pine and Pacific in the City of Long Beach (the "City"),
County of Los Angeles: (the "County"), State of California
("State").
(f) BUILDING: A thirteen-story office building (plus basement)
located within the Development, containing approximately 125,000
RENTABLE SQUARE FEET (subject to adjustment as provided in
EXHIBIT "B"), with the street address of 102 and 110 Pine Street,
Long Beach, California 90802.
(g) PREMISES: Those certain premises known as Suite(s) 820
1.
<PAGE>
as generally shown on the floor plan(s) attached hereto as
EXHIBIT "A", located on the eighth floor(s) of the Building, and
containing approximately 4,000 Rentable Square Feet and 3,478
Usable Square Feet (subject to adjustment as provided in EXHIBIT
"B" and EXHIBIT "D").
(h) TENANT'S PERCENTAGE: Tenant's percentage of the twelve stories of
the Building which are used for office purposes (aggregating
107,066 square feet). Tenant's percentage shall be calculated on
a Rentable Square Foot Basis, which initially is 3.74 %, subject
to final determination as provided in EXHIBIT "B" and EXHIBIT
"D".
(i) TERM: Two (2) Lease Years and Six (6) Months.
(j) ESTIMATED COMMENCEMENT DATE: September 1, 1994
ESTIMATED EXPIRATION DATE: February 28, 1997
(k) COMMENCEMENT DATE: The earlier of (i) the date Tenant occupies
all or a portion of the Premises (other than in connection with
the construction of the same), and (ii) the later of (A) the date
that the Premises are Ready For Occupancy, and (B) July 11, 1994.
(l) INITIAL MONTHLY BASE RENT: $ .90 PER square foot, subject to
adjustment as provided in SUBPARAGRAPH 1(m) below and as
otherwise provided in this Lease.
(m) ADJUSTMENT TO MONTHLY BASE RENT: Monthly Base Rent will be
adjusted in accordance with the following:
<TABLE>
<CAPTION>
LEASE YEAR OR MONTHS MONTHLY BASE RENT
-------------------- -----------------
<S> <C>
Months 1 through 12 $ .90 per square foot
Months 13 through 24 $ .95 per square foot
Months 25 through 30 $1.00 per square foot
</TABLE>
(n) OPERATING EXPENSE ALLOWANCE: Operating Expense Allowance means
that portion of Tenant's Percentage of Operating Expenses as
described in PARAGRAPH 6 below which Landlord has included in
Monthly Base Rent, which, for purposes of this Lease, will be an
amount equal a Base Year 1994.
2.
<PAGE>
(o) SECURITY DEPOSIT: $ 3,600.00
(p) TENANT IMPROVEMENTS: All tenant improvements installed or to be
installed by Landlord or Tenant within the Premises to prepare
the Premises for occupancy shall be pursuant to the terms of the
Work Letter Agreement attached hereto as Exhibit "C".
(q) TENANT IMPROVEMENT ALLOWANCE: $10.25 per Rentable Square
Foot of the Premises, to be applied as provided in the Work
Letter Agreement attached hereto as EXHIBIT "C". The total number
of Usable Square Feet of the Premises for purposes of
establishing the Tenant Improvement Allowance amount is 4,000
Rentable Square Feet. Such figure shall not be adjusted.
(r) PERMITTED USE: General Office and no other use without the
express written consent of Landlord, which consent Landlord may
withhold in its sole and absolute discretion.
(s) PARKING: 12 parking spaces subject to the terms and conditions
of PARAGRAPH 32 below and the Rules and Regulations regarding
parking contained in Exhibit "G". All parking shall be in the
Autoport.
(t) BROKER(S): Cushman & Wakefield of California, Inc.
(u) GUARANTOR(S): Ray Hood
(v) INTEREST RATE: shall mean two percent (2%) in excess of the prime
lending or reference rate of Wells Fargo Bank N.A. or any
successor bank in effect on the twenty-fifth (25th) day of the
calendar month immediately prior to the event giving rise to the
Interest Rate imposition; provided, however, the Interest Rate
will in no event exceed the maximum interest rate permitted to be
charged by applicable law.
(w) EXHIBITS: A through H , inclusive, which Exhibits are attached
to this Lease and incorporated herein by this reference. As
provided in PARAGRAPH 3 below, a completed version of Exhibit "D"
will be delivered to Tenant after Landlord delivers possession of
the Premises to Tenant.
(x) Addendum: Lease Addendum is attached to this Lease and
incorporated herein by this reference.
This PARAGRAPH 1 represents a summary of the basic terms and definitions of
this Lease. In the event of any inconsistency between the terms contained in
this PARAGRAPH 1 and any specific provision of this Lease, the terms of the
more specific provision shall prevail.
PREMISES AND COMMON AREAS.
3.
<PAGE>
(a) PREMISES. Landlord hereby leases to Tenant and Tenant hereby leases
from Landlord the Premises as improved or to be improved with the Tenant
Improvements described in the Work Letter Agreement, a copy of which is
attached hereto as Exhibit "C".
(b) MUTUAL COVENANTS. Landlord and Tenant agree that the letting and
hiring of the Premises is upon and subject to the terms, covenants and
conditions contained in this Lease and each party covenants as a material
part of the consideration for this Lease to keep and perform its respective
obligations under this Lease.
(c) TENANT'S USE OF COMMON AREAS. During the Term of this Lease, Tenant
shall have the nonexclusive right to use in common with Landlord and all
persons, firms and corporations conducting business in the Development and
their respective customers, guests, licensees, invitees, subtenants,
employees and agents (collectively, "Development Occupants"), subject to the
terms of this Lease, the Rules and Regulations referenced in PARAGRAPH 32
below and all covenants, conditions and restrictions now or hereafter
affecting the Development, the following common areas of the Building and/or
the Development (collectively, the "Common Areas"):
(i) The Building's common entrances, hallways, lobbies, public
restrooms on multi-tenant floors, elevators, stairways and accessways, loading
docks, ramps, drives and platforms and any passageways and serviceways
thereto, and the common pipes, conduits, wires and appurtenant equipment
within the Building which serve the Premises (collectively, "Building Common
Areas"), and
(ii) The parking facilities of the Development which serve the
Building (subject to the provisions of EXHIBIT "G"), loading and unloading
areas, trash areas, roadways, sidewalks, walkways, parkways, driveways,
landscaped areas, plaza areas, fountains and similar areas and facilities
situated within the Development and appurtenant to the Building which are not
reserved for the exclusive use of any Development Occupants (collectively,
"Development Common Areas").
(d) LANDLORD'S RESERVATION OF RIGHTS. Provided Tenant's use of and
access to the Premises and parking to be provided to Tenant under this Lease
is not interfered with in an unreasonable manner, Landlord preserves for
itself and for all other owner(s) and operator(s) of the Development Common
Areas and the balance of the Development, the right from time to time to: (i)
install, use, maintain, repair, replace and relocate pipes, ducts, conduits,
wires and appurtenant meters and equipment above the ceiling surfaces, below
the floor surfaces, within the walls and in the central core areas of the
Building; (ii) make changes to the design and layout of the Development,
including, without limitation, changes to buildings, driveways, entrances,
loading and unloading areas, direction of traffic, landscaped areas and
walkways, and, subject to the parking provisions contained in PARAGRAPH 32
and EXHIBIT "G", parking spaces and parking areas; and (iii) use or close
temporarily the Common Areas and/or other portions of the Development while
engaged in making improvements, repairs or alterations to the Building, the
Development, or any portion thereof.
4.
<PAGE>
3. TERM. The term of this Lease ("Term") will be for the period
designated in SUBPARAGRAPH 1(i), commencing on the Commencement Date, and
ending on the last day of the month in which the expiration of such period
occurs, including any extensions of the Term pursuant to any provision of
this Lease or written agreement of the parties. Notwithstanding the
foregoing, if the Commencement Date falls on any day other than the first day
of a calendar month then the Term of this Lease will be measured from the
first day of the month following the month in which the Commencement Date
occurs. Each consecutive twelve (12) month period of the Term of this Lease,
commencing on the Commencement Date, will be referred to herein as a "Lease
Year". Landlord's Notice of Lease Term Dates and Tenant's Percentage
("Notice"), in the form of EXHIBIT "D" attached hereto, will set forth the
Commencement Date, the date upon which the Term of this Lease shall end, the
Rentable Square Feet within the Premises and the Building, and Tenant's
Percentage and will be delivered to Tenant after Landlord delivers possession
of the Premises to Tenant. The Notice will be binding upon Tenant unless
Tenant objects to the Notice in writing within five (5) days of Tenant's
receipt of the Notice, in which case Landlord and Tenant shall cooperate in
good faith to finalize the Notice.
4. POSSESSION.
(a) DELIVERY OF POSSESSION. Landlord agrees to deliver possession
of the Premises to Tenant in accordance with the terms of the Work Letter
Agreement attached hereto as EXHIBIT "C". Notwithstanding the foregoing,
Landlord will not be obligated to deliver possession of the Premises to
Tenant until Landlord has received from Tenant all of the following: (i) a
copy of this Lease fully executed by Tenant and, if required by Landlord, a
guaranty of Tenant's obligations under this Lease, executed by the
guarantor(s) set forth in SUBPARAGRAPH 1(u); (ii) the Security Deposit and
the first installment of Monthly Base Rent; (iii) executed copies of policies
of insurance or certificates thereof as required under PARAGRAPH 19 of this
Lease; (iv) copies of all governmental permits and authorizations, if any,
required in connection with Tenant's operation of its business within the
Premises; and (v) if Tenant is a corporation or partnership, such evidence of
due formation, valid existence and authority to execute this Lease as
Landlord may reasonably require, which may include, without limitation, a
certificate of good standing, certificate of secretary, articles of
incorporation, statement of partnership, resolutions of the board of
directors or other similar documentation.
SEE LEASE ADDENDUM
(b) CONDITION OF PREMISES. Prior to the Commencement Date and in
accordance with the Work Letter Agreement attached hereto as EXHIBIT "C",
Landlord and Tenant will jointly conduct a walk-through inspection of the
Premises and will jointly prepare a punch-list ("Punch-List") of items required
to be installed by Landlord under the Work Letter Agreement which require
finishing or correction. The Punch-List will not include any items of damage to
the Premises caused by Tenant's move-in or early entry, if permitted, which
damage will be corrected or repaired by Landlord, at Tenant's expense or, at
Landlord's election, by Tenant, at Tenant's expense. Other than the items
specified in the Punch-List, by taking possession of the Premises, Tenant will
be deemed to have accepted the Premises in its condition on the date of delivery
of possession and to have acknowledged that the Tenant Improvements have been
installed as required by the Work Letter Agreement and that there are no
additional items needing work or repair. Landlord will cause all items in the
Punch-List to be repaired or corrected within thirty (30) days following the
preparation of the Punch-List or as soon as practicable after the preparation of
the Punch-List. Tenant acknowledges that neither Landlord nor any agent of
Landlord has made any representation or warranty with
5.
<PAGE>
respect to the Premises, the Building, the Development or any portions
thereof or with respect to the suitability of same for the conduct of
Tenant's business and Tenant further acknowledges that Landlord will have no
obligation to construct or complete any additional buildings or improvements
within the Development.
5. RENT.
(a) MONTHLY BASE RENT. Tenant agrees to pay Landlord the Monthly
Base Rent for the Premises (subject to adjustment as hereinafter provided) in
advance on the first day of each calendar month during the term without prior
notice or demand, except that Tenant agrees to pay the Monthly Base Rent for
the first month of the Term directly to Landlord concurrently with Tenant's
delivery of the executed Lease to Landlord. If the Term of this Lease
commences or ends on a day other than the first day of a calendar month, then
the rent for such period will be prorated in the proportion that the number
of days this Lease is in effect during such period bears to the number of
days in such month. All rent must be paid to Landlord, without any deduction
or offset, in lawful money of the United States of America, at the address
designated by Landlord on Tenant's monthly rent statement or to such other
person or at such other place as Landlord may from time to time designate in
writing. Monthly Base Rent will be adjusted during the Term of this Lease as
provided in SUBPARAGRAPH 1(m).
(b) ADDITIONAL RENT. All amounts and charges to be paid by Tenant
hereunder, including, without limitation, payments for Operating Expenses,
insurance, repairs and parking, will be considered additional rent for
purposes of this Lease, and the word "rent" as used in this Lease will
include all such additional rent unless the context specifically or clearly
implies that only Monthly Base Rent is intended.
(c) LATE PAYMENTS. Late payments of Monthly Base Rent and/or any
item of additional rent will be subject to interest and a late charge as
provided in SUBPARAGRAPH 22(f) below.
6. OPERATING EXPENSES.
(a) OPERATING EXPENSES. In addition to Monthly Base Rent,
throughout the Term of this Lease, Tenant agrees to pay Landlord as
additional rent in accordance with the terms of this PARAGRAPH 6, Tenant's
Percentage of Operating Expenses as defined below to the extent Tenant's
Percentage of Operating Expenses EXCEEDS TENANT'S OPERATING EXPENSE
ALLOWANCE; The term "Operating Expenses" means: all direct costs and expenses
of operation and maintenance of the Building and the Common Areas as
determined by standard accounting practices, calculated assuming the Building
is ninety-five percent (95%) occupied, including the following costs by way
of illustration but not limitation, but excluding those items specifically
set forth in SUBPARAGRAPH 6(c) below: Real Property Taxes and Assessments (as
defined in SUBPARAGRAPH 6(b) below) and any taxes or assessments imposed in
lieu thereof; any and all assessments imposed with respect to the Building
pursuant to any covenants, conditions and restrictions affecting the
Development, the Common Areas or the Building; water and sewer charges and
the costs of electricity, heating, ventilating, air conditioning and other
utilities; utility surcharges and any other costs, levies or assessments
resulting from sta???s or regulations promulgated by any government or
quasi-government authority in connection with the provided however, that in
no event shall the amount paid by Tenant as additional rent for Tenant's
Percentage of Operating Expenses which exceed Tenant's Operating Expense
Allowance increase in any succeeding year of the Term by an amount greater
than 5.0% over that amount paid in like manner for the immediately preceding
one year of the Term.
6.
<PAGE>
use, occupancy or alteration of the Building or the Premises or the parking
facilities serving the Building or the Premises; costs of insurance obtained
by Landlord pursuant to PARAGRAPH 19 of this Lease; waste disposal and
janitorial services; security; labor; costs incurred in the management of the
Building, including, without limitation: (i) supplies, (ii) wages and
salaries (and payroll taxes and similar governmental charges related thereto)
of employees used in the management, operation and maintenance of the
Building, (iii) Building management office rental, supplies, equipment and
related operating expenses, and (iv) a management/administrative fee
determined as a percentage of the annual gross revenues of the Building and
an administrative fee for the management of the Development Common Area
determined as a percentage of Development Common Area Operating Expenses;
supplies, materials, equipment and tools including rental of personal
property used for maintenance; repair and maintenance of the elevators and
the structural portions of the Building, including the plumbing, heating,
ventilating, air-conditioning and electrical systems installed or furnished
by Landlord; maintenance, costs and upkeep of all parking and Development
Common Areas; depreciation on a straight line basis and rental of personal
property used in maintenance; amortization on a straight line basis over the
useful life (together with interest at the Interest Rate on the unamortized
balance) of all capitalized expenditures which are: (i) reasonably intended
to produce a reduction in operating costs or energy consumption, or (ii)
required under any governmental law or regulation that was not applicable to
the Building at the time it was originally constructed, or (iii) for
replacement of any Building equipment needed to operate the Building at the
same quality levels as prior to the replacement; costs and expenses of
gardening and landscaping; maintenance of signs (other than signs of
individual tenants of the Building, but including multiple tenant signs);
personal property taxes levied on or attributable to personal property used
in Connection with the Building or the Common Areas; reasonable accounting,
audit, verification, legal and other consulting fees; and costs and expenses
of resurfacing, repairing, maintenance, painting, lighting, leaning, refuse
removal, and similar items, including appropriate reserves.
(b) REAL PROPERTY TAXES AND ASSESSMENTS. The term "Real Property Taxes
and Assessments", means: any form of assessment, license fee, license tax,
business license fee, commercial rental tax, levy, charge, improvement bond,
tax or similar imposition imposed by any authority having the direct power to
tax, including any city, county, state or federal government, or any school,
agricultural, lighting, drainage or other improvement or special assessment
district thereof, as against any legal or equitable interest of Landlord in
the Premises, Building, Common Areas or the Development, adjusted to reflect
an assumption that the Building is fully assessed for real property tax
purposes as a completed building ready for occupancy, including the following
by way of illustration but not limitation:
(i) Any tax on Landlord's "right" to rent or "right" to other
income from the Premises or as against Landlord's business of leasing the
Premises;
(ii) Any assessment, tax, fee, levy or charge in substitution,
partially or totally, of any assessment, tax, fee, levy or charge previously
included within the definition of real property tax, it being acknowledged by
Tenant and Landlord that Proposition 13 was adopted by the voters of the
State of California in the June, 1978 election and that assessments, taxes,
fees, levies and charges may be imposed by governmental agencies for such
services as fire protection, street, sidewalk and road maintenance, refuse
removal and for other governmental services formerly provided without charge
to property owners or
7.
<PAGE>
occupants. It is the intention of Tenant and Landlord that all such new and
increased assessments, taxes, fees, levies and charges be included within the
definition of "real property taxes" for the purposes of this Lease;
(iii) Any assessment, tax, fee, levy or charge allocable to or
measured by the area of the Premises or other premises in the Building or the
rent payable by Tenant hereunder or other tenants of the Building, including,
without limitation, any gross receipts tax or excise tax levied by state,
city or federal government, or any political subdivision thereof, with
respect to the receipt of such rent, or upon or with respect to the
possession, leasing, operation, management, maintenance, alteration, repair,
use or occupancy by Tenant of the Premises, or any portion thereof but not on
Landlord's other operations;
(iv) Any assessment, tax, fee, levy or charge upon this
transaction or any document to which Tenant is a party, creating or
transferring an interest or an estate in the Premises; and/or
(v) Any assessment, tax, fee, levy or charge by any governmental
agency related to any transportation plan, fund or system (including
assessment districts) instituted within the geographic area of which the
Building is a part.
(c) ITEMS EXCLUDED FROM OPERATING EXPENSES. Notwithstanding the
provisions of Subparagraphs 6(a) and 6(b) above to the contrary, "Operating
Expenses" will not include: Landlord's federal or State income, franchise,
inheritance or estate taxes; costs incurred by Landlord for the repair of
damage to the Building to the extent that Landlord is reimbursed by insurance
or condemnation proceeds or by tenants, warrantors or other third persons;
depreciation, amortization and interest payments, except as specifically
provided above, and except on materials, tools, supplies and vendor-type
equipment purchased by Landlord to enable Landlord to supply services
Landlord might otherwise contract for with a third party, where such
depreciation, amortization and interest payments would otherwise have been
included in the charge for such third party's services, all as determined in
accordance with standard accounting practices; brokerage commissions,
finders' fees, attorneys' fees, space planning costs and other costs incurred
by Landlord in leasing or attempting to lease space in the Building; costs of
a capital nature, including, without limitation, capital improvements,
capital replacements, capital repairs, capital equipment and capital tools,
all as determined in accordance with standard accounting practices (provided,
however, the capital expenditures described in SUBPARAGRAPH 6(a) above will
in any event be included in the definition of Operating Expenses); payments
for any deed of trust or other debt encumbering the Building or the
Development; costs, including permit, license and inspection costs, occurred
with respect to the installation of tenant improvements for tenants in the
Building (including the original Tenant Improvements for the Premises), or
incurred in renovating or otherwise improving, decorating, painting or
redecorating space for tenants or other occupants of the Building, including
space planning and interior design costs and fees; attorneys fees and other
costs and expenses incurred in connection with negotiations or disputes with
present or prospective tenants or other occupants of the Building (provided,
however, that Operating Expenses will include those attorneys' fees and other
costs and expenses incurred in connection with negotiations, disputes or
claims relating to items of Operating Expenses, enforcement of rules and
regulations of the Building, and such other [illegible] relating to the
maintenance of standards required of Landlord under the Lease); except for the
8.
<PAGE>
administrative/management fees described in SUBPARAGRAPH 6(a) above, costs of
Landlord's general corporate overhead; and all terms and services for which
Tenant or any other tenant in the Building reimburses Landlord (other than
through operating expense pass-through provisions).
(d) ESTIMATE STATEMENT. Prior to the Commencement Date and on or about
March 1st of each subsequent calendar year during the Term of this Lease,
Landlord will endeavor to deliver to Tenant a statement ("Estimate
Statement") wherein Landlord will estimate both the Operating Expenses and
Tenant's Percentage of Operating Expenses for the then current calendar year.
If the estimate of Tenant's Percentage of Operating Expenses in the Estimate
Statement exceeds Tenant's Operating Expense Allowance, Tenant agrees to pay
Landlord, as "Additional Rent", one-twelfth (1/12th) of such excess each
month thereafter, beginning with the next installment of rent due, until such
time as Landlord issues a revised Estimate Statement or the Estimate
Statement for the succeeding calendar year; except that, concurrently with
the regular monthly rent payment next due following the receipt of each such
Estimate Statement, Tenant agrees to pay Landlord an amount equal to one
monthly instalment of such excess (less any applicable Operating Expenses
already paid) multiplied by the number of months from January, in the current
calendar year, to the month of such rent payment next due, all months
inclusive. If at any time during the Term of this Lease, but not more often
than quarterly, Landlord reasonably determines that Tenant's Percentage of
Operating Expenses for the current calendar year will be greater than the
amount set forth in the then current Estimate Statement, Landlord may issue a
revised Estimate Statement and Tenant agrees to pay Landlord receipt of the
revised Estimate Statement, the difference between the amount owed by Tenant
[illegible] such revised Estimate Statement and the amount owed by Tenant under
the original Estimate Statement for the portion of the then current calendar
year which has expired. Thereafter Tenant agrees to pay Tenant's Percentage of
Operating Expenses based on such revised Estimate Statement until Tenant
receives the next calendar year's Estimate Statement or a new revised Estimate
Statement for the current calendar year. In the event Tenant's Percentage of
Operating Expenses for any calendar year is less than Tenant's Operating
Expense Allowance, Tenant will not be entitled to a credit against any rent,
additional rent or Tenant's Percentage of future Operating Expenses payable
hereunder. Notwithstanding anything to the contrary set forth in this
PARAGRAPH 6, Landlord may, but shall be under no obligation to, separately
account for any item of Operating Expenses and allocate the same exclusively
among such tenants of the Development as Landlord reasonably determines to
have received all or substantially all of the benefit attributable to such
item. In such event, Tenant's Percentage of such Operating Expenses shall be
a percentage of the total of such costs which is determined by dividing the
Rentable Square Footage of the Premises by the Rentable Square Footage of all
such benefitted tenants.
(e) ACTUAL STATEMENT. By March 1st of each calendar year during
the term of this Lease; Landlord will also endeavor to deliver to Tenant a
statement ("Actual Statement") which states the actual Operating Expenses for
the preceding calendar year. If the Actual Statement reveals that Tenant's
Percentage of the actual Operating Expenses is more than the total Additional
Rent paid by Tenant for Operating Expenses on account of the preceding
calendar year, Tenant agrees to pay Landlord the difference in a lump sum
within ten (10) days of receipt of the Actual Statement. If the Actual
Statement reveals that Tenant's Percentage of the actual Operating Expenses
is less than the Additional Rent paid by Tenant for Operating concurrently
with the regular monthly rent payment next due following
9.
<PAGE>
Expenses on account of the preceding calendar year, Landlord will credit any
overpayment toward the next monthly installment(s) of Tenant's Percentage of
the Operating Expenses due under this Lease.
(f) MISCELLANEOUS. Any delay or failure by Landlord in delivering
any Estimate Statement or Actual Statement pursuant to this PARAGRAPH 6 will
not constitute a waiver of its right to require an increase in rent nor will
it relieve Tenant of its obligations pursuant to this Paragraph 6, except
that Tenant will not be obligated to make any payments based on such Estimate
Statement or Actual Statement until ten (10) days after receipt of such
Estimate Statement or Actual Statement. Even though the Term has expired and
Tenant has vacated the Premises, when the final determination is made of
Tenant's Percentage of the actual Operating Expenses for the year in which
this Lease terminates, Tenant agrees to promptly pay any increase due over
the estimated expenses paid and, conversely, any overpayment made in the
event said expenses decrease shall promptly be rebated by Landlord to Tenant.
Prior to the expiration or sooner termination of the Lease Term and
Landlord's acceptance of Tenant's surrender of the Premises, Landlord will
have the right to estimate the actual Operating Expenses for the then current
Lease Year and to collect from Tenant prior to Tenant's surrender of the
Premises, Tenant's Percentage of any excess of such actual Operating Expenses
over the estimated Operating Expenses paid by Tenant in such Lease Year.
Notwithstanding anything to the contrary set forth in this PARAGRAPH 6, with
respect to the period set forth in SUBPARAGRAPH 1(n) (the "Base Year"), when
calculating the Operating Expenses attributable to the Base Year, such
Operating Expenses shall not include any increase in Real Property Taxes and
Assessments attributable to special assessments, charges, costs, or fees, or
due to modifications or changes in governmental laws or regulations,
including but not limited to the institution of a split tax roll, and
Operating Expenses shall exclude market-wide labor-rate increases due to
extraordinary circumstances, including, but not limited to, boycotts and
strikes, and utility rate increases due to extraordinary circumstances
including, but not limited to, conservation surcharges, boycotts, embargoes
or other shortages and amortized costs relating to capital improvements. The
amount of Real Property Taxes and Assessments for the Base Year attributable
to the valuation of the Development, inclusive of tenant improvements, shall
be known as "Base Taxes". If, in any comparison year subsequent to the Base
Year, the amount of Base Taxes decreases, then for purposes of all subsequent
comparison years, including the comparison year in which such decrease in
Real Property Taxes and Assessments occurred, the Operating Expense Allowance
shall be decreased by an amount equal to the decrease in Real Property Taxes
and Assessments.
7. SECURITY DEPOSIT. Concurrently with Tenant's execution of this
Lease, Tenant will deposit with Landlord the Security Deposit designated in
SUBPARAGRAPH 1(o). The Security Deposit is in an amount equal to one hundred
ten percent (110%) of the highest Monthly Base Rent amount anticipated for
the initial Lease Term. The Security Deposit will be held by Landlord as
security for the full and faithful performance by Tenant of all of the terms,
covenants, and conditions of this Lease to be kept and performed by Tenant
during the Term hereof. If Tenant fully and faithfully performs its
obligations under this Lease, including, without limitation, surrendering the
Premises upon the expiration or sooner termination of this Lease in
compliance with SUBPARAGRAPH 11(a) below, the Security Deposit or any balance
thereof will be returned to Tenant (or, at Landlord's option, to the last
assignee of Tenant's interest hereunder) within thirty (30) days following
the expiration of the Lease Term or as required under applicable law,
provided that Landlord may retain the Security Deposit until such time as any
outstanding rent or additional rent amount has been
10.
<PAGE>
determined and paid in full. The Security Deposit is not, and may not be
construed by Tenant to constitute, rent for the last month or any portion
thereof. If Tenant defaults with respect to any provisions of this Lease
including, but not limited to, the provisions relating to the payment of rent
or additional rent, Landlord may (but will not be required to) use, apply or
retain all or any part of the Security Deposit for the payment of any rent or
any other sum in default, or for the payment of any other amount which
Landlord may spend or become obligated to spend by reason of Tenant's default
or to compensate Landlord for any loss or damage which Landlord may suffer by
reason of Tenant's default. If any portion of the Security Deposit is so used
or applied, Tenant agrees, within ten (10) days after Landlord's written
demand therefor, to deposit cash with Landlord in an amount sufficient to
restore the Security Deposit to its original amount and Tenant's failure to
do so shall constitute a default under this Lease. Landlord is not required
to keep Tenant's Security Deposit separate from its general funds, and Tenant
is not entitled to interest on such Security Deposit. Should Landlord sell
its interest in the Premises during the term hereof and deposit with the
purchaser thereof the then unappropriated Security Deposit funds, Landlord
will be discharged from any further liability with respect to such Security
Deposit. Upon any and each increase to Monthly Base Rent during the Lease
term, Landlord will have the right to require that Tenant increase the amount
of the Security Deposit proportionate to such increase to Monthly Base Rent.
8. USE.
(a) TENANT'S USE OF THE PREMISES. The Premises may be used for the
use or uses set forth in SUBPARAGRAPH 1(r) only, and Tenant will not use or
permit the Premises to be used for any other purpose without the prior
written consent of Landlord, which consent Landlord may withhold in its sole
and absolute discretion. Nothing in this Lease will be deemed to give Tenant
any exclusive right to such use in the Building or the Development.
(b) COMPLIANCE. At Tenant's sole cost and expense, Tenant agrees
to procure, maintain and hold available for Landlord's inspection, all
governmental licenses and permits required for the proper and lawful conduct
of Tenant's business from the Premises, if any. Tenant agrees not to use,
alter or occupy the Premises or allow the Premises to be used, altered or
occupied in violation of, and Tenant, at its sole cost and expense, agrees to
use and occupy the Premises and cause the Premises to be used and occupied in
compliance with: (i) any and all laws, statutes, zoning restrictions,
ordinances, rules, regulations, orders and rulings now or hereafter in force
and any requirements of any insurer, insurance authority or duly constituted
public authority having jurisdiction over the Premises, the Building or the
Development now or hereafter in force, (ii) the requirements of the Board of
Fire Underwriters and any other similar body (iii) the Certificate of
Occupancy issued for the Building, and (iv) any recorded covenants,
conditions and restrictions and similar regulatory agreements, if any, which
affect the use, occupation or alteration of the Premises, the Building and/or
the Development. Tenant agrees to comply with the Rules and Regulations
referenced in PARAGRAPH 28 below. Tenant agrees not to do or permit anything
to be done in or about the Premises which will in any manner obstruct or
interfere with the rights of other tenants or occupants of the Development,
or injure or unreasonably annoy them, or use or allow the Premises to be used
for any unlawful or unreasonably objectionable purpose. Tenant agrees not to
cause, maintain or permit any nuisance or waste in or about the Premises or
elsewhere within the Development. Tenant agrees not to place a load upon the
Premises
11.
<PAGE>
exceeding the average pounds of live load per square foot of floor area
specified for the Building by Landlord's architect, with the partitions to be
considered a part of the live load. Landlord reserves the right to reasonably
prescribe the weight and positions of safes, files and heavy equipment which
Tenant desires to place in the Premises so as to distribute properly the
weight thereof. Tenant agrees to install, maintain and use Tenant's business
machines and mechanical equipment which may cause vibration or noise that may
be transmitted to the Building structure or to any other space in the
Building in a manner so as to eliminate or minimize such vibration or noise.
Tenant will be responsible for all structural engineering required to
determine structural load, as well as the expense thereof. Notwithstanding
anything contained in this Lease to the contrary, all transferable
development rights related in any way to the Development are and will remain
vested in Landlord, and Tenant hereby waives any rights thereto.
(c) HAZARDOUS MATERIALS. Except for ordinary and general office
supplies typically used in the ordinary course of business within office
buildings, such as copier toner, liquid paper, glue, ink and common household
cleaning materials (some or all of which may constitute "Hazardous Materials"
as defined in this Lease), Tenant agrees not to cause or permit any Hazardous
Materials [illegible], stored, used, handled, generated, released or disposed of
on, in, under or about the Premises, the building, the Common Areas or any
other portion of the Development by Tenant, its agents, employees,
subtenants, assignees, contractors or invitees (collectively, "Tenant's
Parties"), without the prior written consent of Landlord, which consent
Landlord may withhold in its sole and absolute discretion. Upon the
expiration or sooner termination of this Lease, Tenant agrees to remove from
the Premises, the Building and the Development, at its [illegible] cost and
expense, any and all Hazardous Materials, including any equipment or systems
containing Hazardous Materials which are installed, brought upon, stored,
used, generated or released upon, in or under the Premises, the Building
and/or the Development or any portion thereof by Tenant or any of Tenant's
Parties. To the fullest extent permitted by law, Tenant agrees to promptly
indemnify, protect, defend and hold harmless Landlord and Landlord's
partners, officers, directors, employees, agents, successors and assigns
(collectively, "Landlord Indemnified Parties") from and against any and all
claims, damages, judgments, suits, causes of action, losses, liabilities,
penalties, fines, expenses and costs (including, without limitation,
clean-up, removal, remediation and restoration costs, sums paid in settlement
of claims, attorneys' fees, consultant fees and expert fees and court costs)
which arise or result from the presence of Hazardous Materials on, in or
about the Premises, the Building or any other portion of the Development and
which are caused or permitted by Tenant or any of Tenant's Parties. Tenant
agrees to promptly notify Landlord of any release of Hazardous Materials in
the Premises, the Building or any other portion of the Development which
Tenant becomes aware of during the term of this Lease, whether caused by
Tenant or any other persons or entities. In the event of any release of
Hazardous Materials caused or permitted by Tenant or any of Tenant's Parties,
Landlord shall have the right to cause Tenant to immediately take all steps
Landlord deems necessary or appropriate to remediate such release and prevent
any similar future release to the satisfaction of Landlord and Landlord's
mortgagee(s). As used in this Lease, the term "Hazardous Materials" shall
mean and include any hazardous or toxic materials, substances or wastes as
now or hereafter designated under any law, statute, ordinance, rule,
regulation, order or ruling of any agency of the State, the United States
Government or any local governmental authority, including, without
limitation, asbestos, petroleum, petroleum hydrocarbons and petroleum based
products, urea formaldehyde foam insulation, polychlorinated
12.
<PAGE>
biphenyls ("PCBs"), and freon and other chlorofluorocarbons. The provisions
of this SUBPARAGRAPH 8(c) will survive any termination of this Lease.
9. NOTICES. Any notice required or permitted to be given hereunder
must be in writing and may be given by personal delivery (including delivery
by overnight courier or an express mailing service) or by mail, if sent by
registered or certified mail. Notices to Tenant shall be sufficient if
delivered to Tenant at the Premises and notices to Landlord shall be
sufficient if delivered to Landlord at the address designated in SUBPARAGRAPH
1(b). Either party may specify a different address for notice purposes by
written notice to the other, except that the Landlord may in any event use
the Premises as Tenant's address for notice purposes.
10. BROKERS. The parties acknowledge that the broker(s) who negotiated
this Lease are stated in SUBPARAGRAPH 1(t). Each party represents and
warrants to the other, that, to its knowledge, no other broker, agent or
finder (a) negotiated or was instrumental in negotiating or consummating this
Lease on its behalf, and (b) is or might be entitled to a commission or
compensation in connection with this Lease. Landlord and Tenant each agree to
promptly indemnify, protect, defend and hold harmless the other from and
against any and all claims, damages, judgments, suits, causes of action,
losses, liabilities, penalties, fines, expenses and costs (including
attorneys' fees and court costs) resulting from any breach by the
indemnifying party of the foregoing representation, including, without
limitation, any claims that may be asserted by any broker, agent or finder
undisclosed by the indemnifying party. The foregoing mutual indemnity shall
survive the expiration or earlier termination of this Lease.
11. SURRENDER: HOLDING OVER.
(a) SURRENDER. The voluntary or other surrender of this Lease by
Tenant, or a mutual cancellation thereof, shall not constitute a merger, and
shall, at the option of Landlord, operate as an assignment to Landlord of any
or all subleases or subtenancies. Upon the expiration or sooner termination
of this Lease, Tenant agrees to peaceably surrender the Premises to Landlord
broom clean and in a state of firstclass order, repair and condition,
ordinary wear and tear and casualty damage (if this Lease is terminated as a
result thereof pursuant to PARAGRAPH 20) excepted, with all of Tenant's
personal property and Alterations (as defined in PARAGRAPH 13) removed from
the Premises to the extent required under PARAGRAPH 13 and all damage caused
by such removal repaired as required by PARAGRAPH 13. Prior to the date
Tenant is to actually surrender the Premises to Landlord, Tenant agrees to
give Landlord reasonable prior notice of the exact date Tenant will surrender
the Premises so that Landlord and Tenant can schedule a walk-through of the
Premises to review the condition of the Premises and identify the Alterations
and personal property which Tenant is to remove and any repairs Tenant is to
make upon surrender of the Premises. The delivery of keys to any employee of
Landlord or to Landlord's agent or any employee thereof alone will not be
sufficient to constitute a termination of this Lease or a surrender of the
Premises.
(b) HOLDING OVER. Tenant will not be permitted to hold over
possession of the Premises after the expiration or earlier termination of the
term without the express written consent of Landlord, which consent Landlord
may withhold in its sole discretion. If Tenant holds over after the
expiration or earlier termination
13.
<PAGE>
of the Term, Landlord may, at its option, treat Tenant as a tenant at
sufferance only, and such continued occupancy by Tenant shall be subject to
all of the terms, covenants and conditions of this Lease, so far as
applicable, except that the Monthly Base Rent for any such holdover period
shall be equal to the greater of (i) one hundred twenty five percent (125%)
of the Monthly Base Rent in effect under this Lease immediately prior to such
holdover, or (ii) the then currently scheduled rental rate for comparable
space in the Building, in either event prorated on a daily basis. Acceptance
by Landlord of rent after such expiration or earlier termination will not
result in a renewal of this Lease. The foregoing provisions of this PARAGRAPH
11 are in addition to and do not affect Landlord's right of re-entry or any
rights of Landlord under this Lease or as otherwise provided by law. If
Tenant fails to surrender the Premises upon the expiration of this Lease in
accordance with the terms of this PARAGRAPH 11 despite demand to do so by
Landlord, Tenant agrees to promptly indemnify, protect, defend and hold
Landlord harmless from all claims, damages, judgments, suits, causes of
action, losses, liabilities, penalties, fines, expenses and costs (including
attorneys' fees and costs), including, without limitation, costs and expenses
incurred by Landlord in returning the Premises to the condition in which
Tenant was to surrender it and claims made by any succeeding tenant founded
on or resulting from Tenant's failure to surrender the Premises.
12. TAXES ON TENANT'S PROPERTY. Tenant agrees to pay before
delinquency, all taxes and assessments (real and personal) levied against (a)
any personal property or trade fixtures placed by Tenant in or about the
Premises (including any increase in the assessed value of the Premises based
upon the value of any such personal property or trade fixtures); and (b) any
Tenant Improvements or Alterations in the Premises (whether installed and/or
paid for by Landlord or Tenant) to the extent such items are assessed at a
valuation higher than the valuation at which tenant improvements conforming
to Landlord's building standard tenant improvements are assessed. If any
such taxes or assessments are levied against Landlord or Landlord's property,
Landlord may, after written notice to Tenant (and under proper protest if
requested by Tenant) pay such taxes and assessments, in which event Tenant
agrees to reimburse Landlord all amounts paid by Landlord within ten (10)
business days after demand by Landlord; provided, however, Tenant, at its
sole cost and expense, will have the right, with Landlord's cooperation, to
bring suit in any court of competent jurisdiction to recover the amount of
any such taxes and assessments so paid under protest.
13. ALTERATIONS. After installation of the initial Tenant Improvements
for the Premises pursuant to EXHIBIT "C", Tenant may, at its sole cost and
expense, make alterations, additions, improvements and decorations to the
Premises (collectively, "Alterations") subject to and upon the following
terms and conditions:
(a) Tenant may not make any Alterations which: (i) affect any area
outside the Premises; (ii) affect the Building's structure, equipment, services
or systems, or the proper functioning thereof, or Landlord's access thereto;
(iii) affect the outside appearance, character or use of the Building or the
Building Common Areas; (iv) in the reasonable opinion of Landlord, lessen the
value of the Building; or (v) will violate or require a change in any occupancy
certificate applicable to the Premises.
(b) Before proceeding with any Alterations which are not
prohibited in SUBPARAGRAPH 13(a) above, Tenant must first obtain Landlord's
written approval of the plans, specifications and working
14.
<PAGE>
drawings for such Alterations, which approval Landlord will not unreasonably
withhold or delay; provided, however, Landlord's prior approval will not be
required for any such Alterations which are not prohibited by SUBPARAGRAPH
13(a) above and which cost less than Two Thousand Five Hundred Dollars
($2,500) as long as (i) Tenant delivers to Landlord notice and a copy of any
final plans, specifications and working drawings for any such Alterations at
least ten (10) days prior to commencement of the work thereof, and (ii) the
other conditions of this PARAGRAPH 13 are satisfied, including, without
limitation, conforming to Landlord's rules, regulations and insurance
requirements which govern contractors. Landlord's approval of plans,
specifications and/or working drawings for Alterations will not create any
responsibility or liability on the part of Landlord for theft completeness,
design sufficiency, or compliance with applicable permits, laws, rules and
regulations of governmental agencies or authorities. In approving any
Alterations, Landlord reserves the right to require Tenant to increase its
Security Deposit to provide Landlord with additional reasonable security for
the removal of such Alterations by Tenant as may be required by this Lease.
(c) Alterations may be made or installed only by contractors and
subcontractors which have been approved by Landlord, which approval Landlord
will not unreasonably withhold or delay; provided, however, Landlord reserves
the right to require that Landlord's contractor for the Building be given the
first opportunity to bid for any Alteration work. Before proceeding with any
Alterations, Tenant agrees to provide Landlord with ten (10) days' prior
written notice and Tenant's contractors must obtain, on behalf of Tenant and
at Tenant's sole cost and expense: (i) all necessary governmental permits and
approvals for the commencement and completion of such Alterations; and (ii)
if requested by Landlord, a completion and lien indemnity bond, or other
surety, reasonably satisfactory to Landlord for such Alterations. Throughout
the performance of any Alterations, Tenant agrees to obtain, or cause its
contractors to obtain, workers compensation insurance and general liability
insurance in compliance with the provisions of PARAGRAPH 19 of this Lease.
(d) All Alterations must be performed: (i) in accordance with the
approved plans, specifications and working drawings; (ii) in a lien-free and
first-class and workmanlike manner; (iii) in compliance with all applicable
permits, laws, statutes, ordinances, rules, regulations, orders and rulings
now or hereafter in effect and imposed by any governmental agencies and
authorities which assert jurisdiction; (iv) in such a manner so as not to
interfere with the occupancy of any other tenant in the Building, nor impose
any additional expense upon nor delay Landlord in the maintenance and
operation of the Building; and (v) at such times, in such manner, and
subject to such rules and regulations as Landlord may from time to time
reasonably designate.
(e) The Tenant Improvements, including, without limitation, all
affixed sinks, dishwashers, microwave ovens and other fixtures, and all
Alterations will become the property of Landlord and will remain upon and be
surrendered with the Premises at the end of the Term of this Lease; provided,
however, Landlord may, by written notice delivered to Tenant concurrently
with Landlord's approval of the final working drawings for any Alterations,
identify those Alterations which Landlord will require Tenant to remove at
the end of the Term of this Lease. Landlord may also require Tenant to remove
Alterations which Landlord did not have the opportunity to approve as
provided in this PARAGRAPH 13. If Landlord requires Tenant to remove any
Alterations, Tenant, at its sole cost, agrees to remove the identified
Alterations on or
15.
<PAGE>
before the expiration or sooner termination of this Lease and repair any
damage to the Premises caused by such removal (or, at Landlord's option,
Tenant agrees to pay to Landlord all of Landlord's costs of such removal and
repair).
(f) Tenant agrees to pay Landlord, as additional rent, the
reasonable costs of professional services and costs for general conditions of
Landlord's third party consultants if utilized by Landlord (but not
Landlord's "in-house" personnel) for review of all plans, specifications and
working drawings for any Alterations, within ten (10) business days after
Tenant's receipt of invoices either from Landlord or such consultants. In
addition, Tenant agrees to pay Landlord, within ten (10) business days after
completion of any Alterations, a fee to cover Landlord's costs of supervising
and administering the installation of such Alterations, in the amount of
eight percent (8%) of the cost of such Alterations, but in no event less than
Two Hundred Fifty Dollars ($250.00).
(g) All articles of personal property owned by Tenant or installed
by Tenant at its expense in the Premises (including Tenant's business and
trade fixtures, furniture, movable partitions and equipment [such as telephones,
copy machines, computer terminals, refrigerators and facsimile machines]) will
be and remain the property of Tenant, and must be removed by Tenant from the
Premises, at Tenant's sole cost and expense, on or before the expiration or
sooner termination of this Lease. Tenant agrees to repair any damage caused
by such removal at its cost on or before the expiration or sooner termination
of this Lease.
(h) If Tenant fails to remove by the expiration or sooner
termination of this Lease all of its personal property, or any Alterations
identified by Landlord for removal, Landlord may, at its option, treat such
failure as a hold-over pursuant to SUBPARAGRAPH 11(b) above, and/or Landlord
may (without liability to Tenant for loss thereof) treat such personal
property and/or Alterations as abandoned and, at Tenant's sole cost and in
addition to Landlord's other rights and remedies under this Lease, at law or
in equity: (a) remove and store such items; and/or (b) upon ten (10) days'
prior notice to Tenant, sell, discard or otherwise dispose of all or any such
items at private or public sale for such price as Landlord may obtain or by
other commercially reasonable means. Tenant shall be liable for all costs of
disposition of Tenant's abandoned property and Landlord shall have no
liability to Tenant with respect to any such abandoned property. Landlord
agrees to apply the proceeds of any sale of any such property to any amounts
due to Landlord under this Lease from Tenant (including Landlord's attorneys'
fees and other costs incurred in the removal, storage and/or sale of such
items), with any remainder to be paid to Tenant.
14. REPAIRS.
(a) LANDLORD'S OBLIGATIONS. Landlord agrees to repair and maintain
the structural portions of the Building and the plumbing, heating,
ventilating, air conditioning, elevator and electrical systems installed or
furnished by Landlord, unless such maintenance and repairs are (i)
attributable to items installed in Tenant's Premises which are above standard
interior improvements (such as, for example, custom lighting, special HVAC
and/or electrical panels or systems, kitchen or restroom facilities and
appliances constructed or installed within Tenant's Premises) or (ii) caused
in part or in whole by the act, neglect or omission of any duties by, Tenant,
its agents, servants, employees or invitees, in which case Tenant will pay to
Landlord, as
16.
<PAGE>
additional rent, the reasonable cost of such maintenance and repairs.
Landlord will not be liable for any failure to make any such repairs or to
perform any maintenance unless such failure shall persist for an unreasonable
time after written notice of the need of such repairs or maintenance is given
to Landlord by Tenant. Except as provided in PARAGRAPH 20, Tenant will not
be entitled to any abatement of rent and Landlord will not have any liability
by reason of any injury to or interference with Tenant's business arising
from the making of any repairs, alterations or improvements in or to any
portion of the Building or the Premises or in or to fixtures, appurtenances
and equipment therein. Tenant waives the right to make repairs at Landlord's
expense under any law, statute, ordinance, rule, regulation, order or ruling
(including, without limitation, to the extent the Premises are located in
California, the provisions of California Civil Code Sections 1941 and 1942
and any successor statutes or laws of a similar nature).
(b) TENANT'S OBLIGATIONS. Tenant agrees to keep, maintain and
preserve the Premises in first class condition and repair and, when and if
needed, at Tenant's sole cost and expense, to make all repairs to the
Premises and every part thereof. Any such maintenance and repairs will be
performed by Landlord's contractor, or at Landlord's option, by such
contractor or contractors as Tenant may choose from an approved list to be
submitted by Landlord. Tenant agrees to pay all costs and expenses incurred
in such maintenance and repair within seven (7) days after billing by
Landlord or such contractor or contractors. Tenant agrees to cause any
mechanics' liens or other liens arising as a result of work performed by
Tenant or at Tenant's direction to be eliminated as provided in PARAGRAPH 15
below. Except as provided in SUBPARAGRAPH 14(a) above, Landlord has no
obligation to alter, remodel, improve, repair, decorate or paint the Premises
or any part thereof.
(c) TENANT'S FAILURE TO REPAIR. If Tenant refuses or neglects to
repair and maintain the Premises properly as required hereunder to the
reasonable satisfaction of Landlord, Landlord, at any time following ten (10)
days from the date on which Landlord makes a written demand on Tenant to
effect such repair and maintenance, may enter upon the Premises and make such
repairs and/or maintenance, and upon completion thereof, Tenant agrees to pay
to Landlord as additional rent, Landlord's costs for making such repairs
plus an amount not to exceed ten percent (10%) of such costs for overhead,
within ten (10) days of receipt from Landlord of a written itemized bill
therefor. Any amounts not reimbursed by Tenant within such ten (10) day
period will bear interest at the Interest Rate until paid by Tenant.
15. LIENS. Tenant agrees not to permit any mechanic's, materialmen's or
other liens to be filed against all or any part of the Development, the
Building or the Premises, nor against Tenant's leasehold interest in the
Premises, by reason of or in connection with any repairs, alterations
improvements or other work contracted for or undertaken by Tenant or any
other act or omission of Tenant or tenant's agents, employees, contractors,
licensees or invitees. At Landlord's request, Tenant agrees to provide
Landlord with enforceable, conditional and final lien releases (or other
evidence reasonably requested by Landlord to demonstrate protection from
liens) from all persons furnishing labor and/or materials at the Premises.
Landlord will have the right at all reasonable times to post on the Premises
and record any notices of non-responsibility which it deems necessary for
protection from such liens. If any such liens are filed, Tenant will, at its
sole cost, promptly cause such liens to be released of record or bonded so
that it no longer affects title to the Development, the Building or the
Premises. If Tenant fails to cause any such liens to be so
17.
<PAGE>
released or bonded within ten (10) days after filing thereof, such failure
will be deemed a material breach by Tenant under this Lease without the
benefit of any additional notice or cure period described in PARAGRAPH 22
below, and Landlord may, without waiving its rights and remedies based on
such breach, and without releasing Tenant from any of its obligations, cause
such liens to be released by any means it shall deem proper, including
payment in satisfaction of the claims giving rise to such liens. Tenant
agrees to pay to Landlord within ten (10) days after receipt of invoice from
Landlord, any sum paid by Landlord to remove such liens, together with
interest at the Interest Rate from the date of such payment by Landlord.
16. ENTRY BY LANDLORD. Landlord and its employees and agents will
at all times have the right to enter the Premises to inspect the same, to
supply janitorial service and any other service to be provided by Landlord to
Tenant hereunder, to show the Premises to prospective purchasers or tenants,
to post notices of nonresponsibility, and/or to repair the Premises as
permitted or required by this Lease. In exercising such entry rights,
Landlord will endeavor to minimize, as reasonably practicable, the
interference with Tenant's business, and will provide Tenant with reasonable
advance notice of any such entry (except in emergency situations). Landlord
may, in order to carry out such purposes, erect scaffolding and other
necessary structures where reasonably required by the character of the work
to be performed. Landlord will at all times have and retain a key with which
to unlock all doors in the Premises, excluding Tenant's vaults and safes.
Landlord will have the right to use any and all means which Landlord may
reasonably deem proper to open said doors in an emergency in order to obtain
entry to the Premises. Any entry to the Premises obtained by Landlord by any
of said means, or otherwise, will not be construed or deemed to be a
forcible or unlawful entry into the Premises, or an eviction of Tenant from
the Premises. Landlord will not be liable to Tenant for any damages or losses
for any entry by Landlord.
17. UTILITIES AND SERVICES. Throughout the Term of the Lease so
long as the Premises are occupied, Landlord agrees to furnish or cause to be
furnished to the Premises the utilities and services described in the
Standards for Utilities and Services attached hereto as EXHIBIT "E", subject
to the conditions and in accordance with the standards set forth therein.
Landlord may require Tenant from time to time to provide Landlord with a list
of Tenant's employees and/or agents which are authorized by Tenant to
subscribe on behalf of Tenant for any additional services which may be
provided by Landlord. Any such additional services will be provided to Tenant
at Tenant's cost. Landlord will not be liable to Tenant for any failure to
furnish any of the foregoing utilities and services if such failure is caused
by all or any of the following: (i) accident, breakage or repairs; (ii)
strikes, lockouts or other labor disturbance or labor dispute of any
character; (iii) governmental regulation, moratorium or other governmental
action or inaction; (iv) inability despite the exercise of reasonable
diligence to obtain electricity, water or fuel; or (v) any other cause beyond
Landlord's reasonable control. In addition, in the event of any stoppage or
interruption of services or utilities, Tenant shall not be entitled to any
abatement or reduction of rent (except as expressly provided in SUBPARAGRAPHS
20(f) OR 21(b) if such failure results from a damage or taking described
therein), no eviction of Tenant will result from such failure and Tenant will
not be relieved from the performance of any covenant or agreement in this
Lease because of such failure. In the event of any failure, stoppage or
interruption thereof, Landlord agrees to diligently attempt to resume service
promptly. If Tenant requires or utilizes more water or electrical power than
is considered reasonable or normal by Landlord, Landlord may at its option,
require Tenant to pay, as additional rent, the cost, as fairly determined by
Landlord, incurred by such
18.
<PAGE>
extraordinary usage and/or Landlord may install separate meter(s) for the
Premises, at Tenant's sole expense, and Tenant agrees thereafter to pay all
charges of the utility providing service and Landlord will make an
appropriate adjustment to Tenant's Operating Expenses calculation to account
for the fact Tenant is directly paying such metered charges, provided Tenant
will remain obligated to pay its proportionate share of Operating Expenses
subject to such adjustment.
18. ASSUMPTION OF RISK AND INDEMNIFICATION.
(a) TENANT'S ASSUMPTION OF RISK AND WAIVER. Tenant, as a material
part of the consideration to Landlord, hereby agrees that neither Landlord
nor any Landlord Indemnified Parties will be liable to Tenant for, and Tenant
expressly assumes the risk of and waives any and all claims it may have
against Landlord or any Landlord Indemnified Parties with respect to, (i) any
and all damage to property or injury to persons in, upon or about the
Premises, the Building or the Development resulting from any act or omission
of Landlord or of any Landlord Indemnified Party, (ii) any such damage caused
by other tenants or persons in or about the Building or the Development, or
caused by quasi-public work, (iii) any damage to property entrusted to
employees of the Building, (iv) any loss of or damage to property by theft or
otherwise, or (v) any injury or damage to persons or property resulting from
any casualty, explosion, falling plaster or other masonry or glass, steam,
gas, electricity, water or rain which may leak from any part of the Building
or any other portion of the Development or from the pipes, appliances or
plumbing works therein or from the roof, street or subsurface or from any
other place, or resulting from dampness. Notwithstanding anything to the
contrary contained in this Lease, neither Landlord nor any Landlord
Indemnified Parties will be liable for consequential damages arising out of
any loss of the use of the Premises or any equipment or facilities therein by
Tenant or any Tenant Parties or for interference with light or other
incorporeal hereditaments. Tenant agrees to give prompt notice to Landlord in
case of fire or accidents in the Premises or the Building, or of defects
therein or in the fixtures or equipment.
(b) TENANT'S INDEMNIFICATION OF LANDLORD. Tenant will be liable
for, and agrees to promptly indemnify, protect, defend and hold harmless
Landlord and Landlord's partners, officers, directors, employees, agents,
successors and assigns (collectively, "Landlord Indemnified Parties"), from
and against, any and all claims, damages, judgments, suits, causes of action,
losses, liabilities, penalties, fines, expenses and costs, including
attorneys' fees and court costs (collectively, "Indemnified Claims"), arising
or resulting from (i) any act or omission of Tenant or any of Tenant's
agents, employees, contractors, subtenants, assignees, licensees or invitees
(collectively, "Tenant Parties"); (ii) the use of the Premises and Common
Areas and conduct of Tenant's business by Tenant or any Tenant Parties, or
any other activity, work or thing done, permitted or suffered by Tenant or
any Tenant Parties, in or about the Premises, the Building or elsewhere
within the Development; and/or (iii) any default by Tenant of any obligations
on Tenant's part to be performed under the terms of this Lease. In case any
action or proceeding is brought against Landlord or any Landlord Indemnified
Parties by reason of any such Indemnified Claims, Tenant, upon notice from
Landlord, agrees to defend the same at Tenant's expense by counsel approved
in writing by Landlord, which approval Landlord will not unreasonably
withhold.
19.
<PAGE>
(c) SURVIVAL: NO RELEASE OF INSURERS. Tenant's indemnification
obligations under SUBPARAGRAPH 18(b) will survive the expiration or earlier
termination of this Lease. Tenant's covenants, agreements and indemnification
obligation in SUBPARAGRAPHS 18(a) AND 18(b) above, are not intended to and
will not relieve any insurance carrier of its obligations under policies
required to be carried by Tenant pursuant to the provisions of this Lease.
19. INSURANCE.
(a) TENANT'S INSURANCE. On or before the earlier to occur of (i)
thirty (30) days after Tenant executes the Lease, or (ii) the date Tenant
commences any work of any type in the Premises pursuant to this Lease (which
may be prior to the Commencement Date), and continuing throughout the entire
Term hereof and any other period of occupancy, Tenant agrees to keep in full
force and effect, at its sole cost and expense, the following insurance:
(i) "All Risks" property insurance including at least the
following perils: fire and extended coverage, smoke damage, vandalism,
malicious mischief, sprinkler leakage (including earthquake sprinkler
leakage). This insurance policy must be upon all property owned by Tenant,
for which Tenant is legally liable, or which is installed at Tenant's
expense, and which is located in the Building including, without limitation,
any Tenant Improvements which satisfy the foregoing qualification and any
Alterations, and all furniture, fittings, installations, fixtures and any
other personal property of Tenant, in an amount not less than the full
replacement cost thereof. If there is a dispute as to full replacement cost,
the decision of Landlord or any mortgagee of Landlord will be presumptive.
(ii) One (1) year insurance coverage for business interruption and
loss of income and extra expense insuring the same perils described in
SUBPARAGRAPH 19(a)(i) above, in such amounts as will reimburse Tenant for any
direct or indirect loss of earnings attributable to any such perils including
prevention of access to the Premises, Tenant's parking areas or the Building
as a result of any such perils.
(iii) Commercial General Liability Insurance or Comprehensive
General Liability Insurance on an occurrence form) insuring bodily injury,
personal injury and property damage including the following divisions and
extensions of coverage: Premises and Operations; Owners and Contractors
protective; blanket contractual liability (including, coverage for Tenant's
indemnity obligations under this Lease); products and completed operations,
liquor liability (if Tenant serves alcohol on the Premises); and fire and
water damage legal liability in an amount sufficient to cover the replacement
value of the Premises, including Tenant improvements, that are rented under
the terms of this Lease. Such insurance must have the following minimum
limits of liability: bodily injury, personal injury and property damage
$500,000 each occurrence, provided that if liability coverage is provided by a
Commercial General Liability policy the general aggregate limit shall apply
separately and in total to this location only (per location general
aggregate), and provided further, such minimum limits of liability may be
adjusted from year to year to reflect increases in coverages as recommended
by Landlord's insurance carrier as being prudent and commercially reasonable
for tenants of first class office buildings comparable to the Building,
rounded to the nearest five hundred thousand dollars.
20.
<PAGE>
(iv) Comprehensive Automobile Liability insuring bodily injury and
property damage arising from all owned, non-owned and hired vehicles, if any,
with minimum limits of liability of $500,000 per accident.
(v) Worker's Compensation as required by the laws of the State of
California with the following minimum limits of liability: Coverage A
- -statutory benefits; Coverage B - $500,000 per accident and disease.
(vi) Any other form or forms of insurance as Tenant or Landlord or
any mortgagees of Landlord may reasonably require from time to time in form,
in amounts, and for insurance risks against which, a prudent tenant would
protect itself, but only to the extent coverage for such risks and amounts
are available in the insurance market at commercially acceptable rates.
Landlord makes no representation that the limits of liability required to be
carried by Tenant under the terms of this Lease are adequate to protect
Tenant's interests and Tenant should obtain such additional insurance or
increased liability limits as Tenant deems appropriate.
(b) SUPPLEMENTAL TENANT INSURANCE REQUIREMENTS.
(i) All policies must be in a form reasonably satisfactory to
Landlord and issued by an insurer admitted to do business in the State of
California.
(ii) All policies must be issued by insurers with a
policyholder rating of "A" and a financial rating of "X" in the most recent
version of Best's Key Rating Guide.
(iii) All policies must contain a requirement to notify
Landlord (and Landlord's property manager and any mortgagees or ground
lessors of Landlord who are named as additional insureds, if any) in writing
not less than thirty (30) days prior to any material change, reduction in
coverage, cancellation or other termination thereof. Tenant agrees to
deliver to Landlord, as soon as practicable after placing the required
insurance, but in any event within the time frame specified in SUBPARAGRAPH
19(a) above, certificate(s) of insurance and/or if required by Landlord,
certified copies of each policy evidencing the existence of such insurance
and Tenant's compliance with the provisions of this PARAGRAPH 19. Tenant
agrees to cause replacement policies or certificates to be delivered to
Landlord not less than thirty (30) days prior to the expiration of any such
policy or policies. If any such initial or replacement policies or
certificates are not furnished within the time(s) specified herein, Tenant
will be deemed to be in material default under this Lease without the benefit
of any additional notice or cure period provided in SUBPARAGRAPH 22(a)
(iii) below, and Landlord will have the right, but not the obligation, to
procure such insurance as Landlord deems necessary to protect Landlord's
interests at Tenant's expense. If Landlord obtains any insurance that is the
responsibility of Tenant under this PARAGRAPH 19, Landlord agrees to deliver
to Tenant a written statement setting forth the cost of any such insurance
and showing in reasonable detail the manner in which it has been computed and
Tenant agrees to promptly reimburse Landlord for such costs as additional
rent.
21.
<PAGE>
(iv) General Liability and Automobile Liability policies under
SUBPARAGRAPHS 19(a)(iii) and (iv) must name Landlord and Landlord's property
manager (and at Landlord's request, Landlord's mortgagees and ground lessors
of which Tenant has been informed in writing) as additional insureds and must
also contain a provision that the insurance afforded by such policy is
primary insurance and any insurance carried by Landlord and Landlord's
property manager or Landlord's mortgagees or ground lessors, if any, will be
excess over and noncontributing with Tenant's insurance.
(c) TENANT'S USE. Tenant will not keep, use, sell or offer for
sale in or upon the Premises any article which may be prohibited by any
insurance policy periodically in force covering the Building or the
Development Common Areas. If Tenant's occupancy or business in, or on, the
Premises, whether or not Landlord has consented to the same, results in any
increase in premiums for the insurance periodically carried by Landlord with
respect to the Building or the Development Common Areas or results in the
need for Landlord to maintain special or additional insurance, Tenant agrees
to pay Landlord the cost of any such increase in premiums or special or
additional coverage as additional rent within ten (10) days after being
billed therefor by Landlord. In determining whether increased premiums are a
result of Tenant's use of the Premises, a schedule issued by the organization
computing the insurance rate on the Building, the Development Common Areas or
the Tenant Improvements showing the various components of such rate, will be
conclusive evidence of the several items and charges which make up such rate.
Tenant agrees to promptly comply with all reasonable requirements of the
insurance authority or any present or fixture insurer relating to the
Premises.
(d) CANCELLATION OF LANDLORD'S POLICIES. If any of Landlord's
insurance policies are cancelled or cancellation is threatened or the
coverage reduced or threatened to be reduced in any way because of the use of
the Premises or any part thereof by Tenant or any assignee or subtenant of
Tenant or by anyone Tenant permits on the Premises and, if Tenant fails to
remedy the condition giving rise to such cancellation, threatened
cancellation, reduction of coverage, threatened reduction of coverage,
increase in premiums, or threatened increase in premiums, within forty-eight
(48) hours after notice thereof, Tenant will be deemed in material default of
this Lease and Landlord may, at its option, either terminate this Lease or
enter upon the Premises and attempt to remedy such condition, and Tenant
shall promptly pay Landlord the reasonable costs of such remedy as additional
rent. If Landlord is unable, or elects not to remedy such condition, then
Landlord will have all of the remedies provided for in this Lease in the
event of a default by Tenant.
(e) WAIVER OF SUBROGATION. See Lease Addendum.
20. DAMAGE OR DESTRUCTION.
(a) PARTIAL DESTRUCTION. If the Premises or the Building are
damaged by fire or other casualty to an extent not exceeding twenty-five
percent (25%) of the full replacement cost thereof, and Landlord's
contractor reasonably estimates in a writing delivered to Landlord and Tenant
that the damage thereto may be
22.
<PAGE>
repaired, reconstructed or restored to substantially its condition
immediately prior to such damage within one hundred eighty (180) days from
the date of such casualty, AND Landlord will receive insurance proceeds
sufficient to cover the costs of such repairs, reconstruction and restoration
(including proceeds from Tenant and/or Tenant's insurance which Tenant is
required to deliver to Landlord pursuant to SUBPARAGRAPH 20(e) below to cover
Tenant's obligation for the costs of repair, reconstruction and restoration
of any portion of the Tenant Improvements and any Alterations for which
Tenant is responsible under this Lease), then Landlord agrees to commence and
proceed diligently with the work of repair, reconstruction and restoration
and this Lease shall continue in full force and effect.
(b) SUBSTANTIAL DESTRUCTION. Any damage or destruction to the
Premises or the Building which Landlord is not obligated to repair pursuant
to SUBPARAGRAPH 20(a) above shall be deemed a substantial destruction. In the
event of a substantial destruction, Landlord may elect to either:
(i) repair, reconstruct and restore the portion of the
Building or the Premises damaged by such casualty, in which case this Lease
shall continue in full force and effect, subject to Tenant's termination
right contained in SUBPARAGRAPH 20(d) below; or
(ii) terminate this Lease effective as of the date which is
thirty (30) days after Tenant's receipt of Landlord's election to so
terminate.
(c) NOTICE. Under any of the conditions of SUBPARAGRAPH 20(a) or
(b) above, Landlord agrees to give written notice to Tenant of its intention
to repair or terminate, as permitted in such paragraphs, within the earlier
of sixty (60) days after the occurrence of such casualty, or fifteen (15)
days after Landlord's receipt of the estimate from Landlord's contractor (the
applicable time period to be referred to herein as the "Notice Period").
(d) TENANT'S TERMINATION RIGHTS. If Landlord elects to repair,
reconstruct and restore pursuant to SUBPARAGRAPH 20(b)(i) hereinabove, and if
Landlord's contractor estimates that as a result of such damage, Tenant
cannot be given reasonable use of and access to the Premises within three
hundred sixty-five (365) days after the date of such damage, then Tenant may
terminate this Lease effective upon delivery of written notice to Landlord
within ten (10) days after Landlord delivers notice to Tenant of its election
to so repair, reconstruct or restore.
(e) TENANT'S COSTS AND INSURANCE PROCEEDS. In the event of any
damage or destruction of all or any part of the Premises, Tenant agrees to
immediately (i) notify Landlord thereof, and (ii) deliver to Landlord all
property insurance proceeds received by Tenant with respect to any Tenant
Improvements and any Alterations, but excluding proceeds for Tenant's
furniture, fixtures, equipment and other personal property, whether or not
this Lease is terminated as permitted in this PARAGRAPH 20, and Tenant hereby
assigns to Landlord all rights to receive such insurance proceeds. If, for
any reason (including Tenant's failure to obtain insurance for the full
replacement cost of any Tenant Improvements and any Alterations from any and
all casualties), Tenant fails to receive insurance proceeds covering the full
replacement cost of any Tenant Improvements and any Alterations which are
damaged, Tenant will be deemed to have
23.
<PAGE>
self-insured the replacement cost of such items, and upon any damage or
destruction thereto, Tenant agrees to immediately pay to Landlord the full
replacement cost of such items, less any insurance proceeds actually received
by Landlord from Landlord's or Tenant's insurance with respect to such items.
(f) ABATEMENT OF RENT. In the event of any damage, repair,
reconstruction and/or restoration described in this PARAGRAPH 20, rent will
be abated or reduced, as the case may be, in proportion to the degree to
which Tenant's use of the Premises is impaired during such period of repair
until such use is restored. Except for abatement of rent as provided
hereinabove, Tenant will not be entitled to any compensation or damages for
loss of, or interference with, Tenant's business or use or access of all or
any part of the Premises resulting from any such damage, repair,
reconstruction or restoration.
(g) INABILITY TO COMPLETE. Notwithstanding anything to the
contrary contained in this PARAGRAPH 20, if Landlord is obligated or elects
to repair, reconstruct and/or restore the damaged portion of the Building or
the Premises pursuant to SUBPARAGRAPH 20(a) OR 20(b)(i) above, but is delayed
from completing such repair, reconstruction and/or restoration beyond the
date which is one hundred eighty (180) days after the date estimated by
Landlord's contractor for completion thereof by reason of any causes (other
than delays caused by Tenant, its subtenants, employees, agents or
contractors) which are beyond the reasonable control of Landlord as described
in Paragraph 33, then either Landlord or Tenant may elect to terminate this
Lease upon ten (10) days' prior written notice given to the other after the
expiration of such one hundred eighty (180) day period.
(h) DAMAGE NEAR END OF TERM. Landlord and Tenant shall each have
the right to terminate this Lease if any damage to the Premises or the
Building occurs during the last twelve (12) months of the Term of this Lease
where Landlord's contractor estimates in a writing delivered to Landlord and
Tenant that the repair, reconstruction or restoration of such damage cannot
be completed within sixty (60) days after the date of such casualty. If
either party desires to terminate this Lease under this SUBPARAGRAPH (h), it
shall provide written notice to the other party of such election within ten
(10) days after receipt of Landlord's contractor's repair estimates.
(i) WAIVER OF TERMINATION RIGHT. Landlord and Tenant agree that
the foregoing provisions of this PARAGRAPH 20 are to govern their respective
rights and obligations in the event of any damage or destruction and
supersede and are in lieu of the provisions of any applicable law, statute,
ordinance, rule, regulation, order or ruling now or hereafter in force which
provide remedies for damage or destruction of leased premises (including,
without limitation, to the extent the Premises are located in California, the
provisions of California Civil Code Section 1932, Subsection 2, and Section
1933, Subsection 4 and any successor statute or laws of a similar nature).
(j) TERMINATION. Upon any termination of this Lease under any of
the provisions of this PARAGRAPH 20, the parties will be released without
further obligation to the other from the date possession of the Premises is
surrendered to Landlord except for items which have accrued and are unpaid as
of the date of termination and matters which are to survive any termination
of this Lease as provided in this Lease.
24.
<PAGE>
21. EMINENT DOMAIN.
(a) SUBSTANTIAL TAKING. If the whole of the Premises, or such part
thereof as shall substantially interfere with Tenant's use and occupancy of
the Premises, as contemplated by this Lease, is taken for any public or
quasi-public purpose by any lawful power or authority by exercise of the
right of appropriation, condemnation or eminent domain, or sold to prevent
such taking, either party will have the right to terminate this Lease
effective as of the date possession is required to be surrendered to such
authority.
(b) PARTIAL TAKING; ABATEMENT OF RENT. In the event of a taking of
a portion of the Premises which does not substantially interfere with
Tenant's use and occupancy of the Premises, then, neither party will have the
right to terminate this Lease and Landlord will thereafter proceed to make a
functional unit of the remaining portion of the Premises (but only to the
extent Landlord receives proceeds therefor from the condemning authority),
and rent will be abated with respect to the part of the Premises which Tenant
is deprived of on account of such taking. Notwithstanding the immediately
preceding sentence to the contrary, if any part of the Building or the
Development is taken (whether or not such taking substantially interferes
with Tenant's use of the Premises), Landlord may terminate this Lease upon
thirty (30) days' prior written notice to Tenant if Landlord also terminates
the leases of the other tenants of the Building which are leasing comparably
sized space for comparable lease terms.
(c) CONDEMNATION AWARD. In connection with any taking of the
Premises or the Building, Landlord will be entitled to receive the entire
amount of any award which may be made or given in such taking or
condemnation, without deduction or apportionment for any estate or interest
of Tenant, it being expressly understood and agreed by Tenant that no portion
of any such award will be allowed or paid to Tenant for any so-called bonus
or excess value of this Lease, and such bonus or excess value will be the
sole property of Landlord. Tenant agrees not to assert any claim against
Landlord or the taking authority for any compensation because of such taking
(including any claim for bonus or excess value of this Lease); provided,
however, if any portion of the Premises is taken, Tenant will have the right
to recover from the condemning authority (but not from Landlord) any
compensation as may be separately awarded or recoverable by Tenant for the
taking of Tenant's furniture, fixtures, equipment and other personal property
within the Premises, for Tenant's relocation expenses, and for any loss of
goodwill or other damage to Tenant's business by reason of such taking.
(d) TEMPORARY TAKING. In the event of taking of the Premises or
any part thereof for temporary use, (i) this Lease will remain unaffected
thereby and rent will not abate, and (ii) Tenant will be entitled to receive
such portion or portions of any award made for such use with respect to the
period of the taking which is within the Term, provided that if such taking
remains in force at the expiration or earlier termination of this Lease,
Tenant will then pay to Landlord a sum equal to the reasonable cost of
performing Tenant's obligations under PARAGRAPH 11 with respect to surrender
of the Premises and upon such payment Tenant will be excused from such
obligations. For purpose of this SUBPARAGRAPH 21(d), a temporary taking shall
be defined as a taking for a period of ninety (90) days or less.
25.
<PAGE>
22. DEFAULTS AND REMEDIES.
(a) The occurrence of any one or more of the following events will
be deemed a default by Tenant:
(i) The abandonment of the Premises by Tenant, which for
purposes of this Lease means any absence by Tenant from the Premises for five
(5) business days or longer while in default of any other provision of this
Lease and, with respect to ground floor space only, any vacation of the
Premises, which for purposes of this Lease means any absence by Tenant from
the Premises for thirty (30) days or longer whether or not Tenant is in
default under any provision of this Lease.
(ii) The failure by Tenant to make any payment of rent or
additional rent or any other payment required to be made by Tenant hereunder,
as and when due, where such failure continues for a period of three (3) days
after written notice thereof from Landlord to Tenant; provided, however, that
any such notice will be in lieu of, and not in addition to, any notice
required under applicable law (including, without limitation, to the extent
the Premises are located in California, the provisions of California Code of
Civil Procedure Section 1161 regarding unlawful detainer actions or any
successor statute or law of a similar nature).
(iii) The failure by Tenant to observe or perform any of
the express or implied covenants or provisions of this Lease to be observed
or performed by Tenant, other than as specified in SUBPARAGRAPH 22 (i) OR
(ii) above, where such failure continues for a period of ten (10) days after
written notice thereof from Landlord to Tenant. The provisions of any such
notice will be in lieu of, and not in addition to, any notice required under
applicable law (including, without limitation, to the extent the Premises
are located in California, California Code of Civil Procedure Section 1161
regarding unlawful detainer actions and any successor statute or similar
law). If the nature of Tenant's default is such that more than ten (10) days
are reasonably required for its cure, then Tenant will not be deemed to be in
default if Tenant, with Landlord's concurrence, commences such cure within
such ten (10) day period and thereafter diligently prosecutes such cure to
completion.
(iv) (A) The making by Tenant of any general assignment for
the benefit of creditors; (B) the filing by or against Tenant of a petition
to have Tenant adjudged a bankrupt or a petition for reorganization or
arrangement under any law relating to bankruptcy (unless, in the case of a
petition filed against Tenant, the same is dismissed within sixty (60) days);
(C) the appointment of a trustee or receiver to take possession of
substantially all of Tenant's assets located at the Premises or of Tenant's
interest in this Lease, where possession is not restored to Tenant within
thirty (30) days; or (D) the attachment, execution or other judicial seizure
of substantially all of Tenant's assets located at the Premises or of
Tenant's interest in this Lease where such seizure is not discharged within
thirty (30) days.
(b) LANDLORD'S REMEDIES; TERMINATION. In the event of any default
by Tenant, in addition to any other remedies available to Landlord at law or
in equity under applicable law (including, without limitation, to the extent
the Premises are located in California, the remedies of Civil Code Section
1951.4 and any successor statute or similar law), Landlord will have the
immediate right and option to terminate this Lease
26.
<PAGE>
and all rights of Tenant hereunder. If Landlord elects to terminate this
Lease then, to the extent permitted under applicable law, Landlord may
recover from Tenant:
(i) The worth at the time of award of any unpaid rent which
had been earned at the time of such termination; plus
(ii) the worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rent loss that Tenant proves could have been
reasonably avoided, plus
(iii) the worth at the time of award of the amount by
which the unpaid rent for the balance of the Term after the time of award
exceeds the amount of such rent loss that Tenant proves could be reasonably
avoided; plus
(iv) any other amount necessary to compensate Landlord for all
the detriment proximately caused by Tenant's failure to perform its
obligations under this Lease or which, in the ordinary course of things,
results therefrom including, but not limited to: attorneys' fees and costs;
brokers' commissions, the costs of refurbishment, alterations, renovation and
repair of the Premises, and removal (including the repair of any damage
caused by such removal) and storage (or disposal) of Tenant's personal
property, equipment, fixtures, Alterations, the Tenant Improvements and any
other items which Tenant is required under this Lease to remove but does not
remove, as well as the unamortized value of any free rent, reduced rent, free
parking, reduced rate parking and any Tenant Improvement Allowance or other
costs or economic concessions provided, paid, granted or incurred by Landlord
pursuant to this Lease. The unamortized value of such concessions shall be
determined by taking the total value of such concessions and multiplying such
value by a fraction, the numerator of which is the number of months of the
Lease Term not yet elapsed as of the date on which the Lease is terminated,
and the denominator of which is the total number of months of the Lease Term.
As used in SUBPARAGRAPHS 22(b)(i) AND (ii) above, the "worth at the time of
award" is computed by allowing interest at the Interest Rate. As used in
SUBPARAGRAPH 22(b)(iii) above, the "worth at the time of award" is computed
by discounting such amount at the discount rate of the Federal Reserve Bank
of San Francisco at the time of award plus one percent (1%).
(c) LANDLORD'S REMEDIES: RE-ENTRY RIGHTS. In the event of any
default by Tenant, in addition to any other remedies available to Landlord
under this Lease, at law or in equity, Landlord will also have the right,
with or without terminating this Lease, to reenter the Premises and remove
all persons and property from the Premises; such property may be removed and
stored in a public warehouse or elsewhere and/or disposed of at the cost of
and for the account of Tenant in accordance with the provisions of
SUBPARAGRAPH 13(i) of this Lease or any other procedures permitted by
applicable law. No re-entry or taking possession of the Premises by Landlord
pursuant to this SUBPARAGRAPH 22(c) will be construed as an election to
terminate this Lease unless a written notice of such intention is given to
Tenant or unless the termination thereof is decided by a court of competent
jurisdiction.
27.
<PAGE>
(d) LANDLORD'S REMEDIES: RE-LETTING. In the event of the vacation
or abandonment of the Premises by Tenant or in the event that Landlord elects
to re-enter the Premises or takes possession of the Premises pursuant to
legal proceeding or pursuant to any notice provided by law, then if Landlord
does not elect to terminate this Lease, Landlord may from time to time,
without terminating this Lease, either recover all rent as it becomes due or
relet the Premises or any part thereof on terms and conditions as Landlord in
its sole discretion may deem advisable with the right to make alterations and
repairs to the Premises in connection with such reletting. If Landlord
elects to relet the Premises, then rents received by Landlord from such
reletting will be applied: first, to the payment of any indebtedness other
than rent due hereunder from Tenant to Landlord; second, to the payment of
any cost of such reletting; third, to the payment of the cost of any
alterations and repairs to the Premises incurred in connection with such
reletting; fourth, to the payment of rent due and unpaid hereunder and the
residue, if any, will be held by Landlord and applied to payment of future
rent as the same may become due and payable hereunder. Should that portion
of such rents received from such reletting during any month, which is applied
to the payment of rent hereunder, be less than the rent payable during that
month by Tenant hereunder, then Tenant agrees to pay such deficiency to
Landlord immediately upon demand therefor by Landlord. Such deficiency will
be calculated and paid monthly.
(e) LANDLORD'S REMEDIES; PERFORMANCE FOR TENANT. All covenants and
agreements to be performed by Tenant under any of the terms of this Lease are
to be performed by Tenant at Tenant's sole cost and expense and without any
abatement of rent. If Tenant fails to pay any sum of money owed to any party
other than Landlord, for which it is liable under this Lease, or if Tenant
fails to perform any other act on its part to be performed hereunder, and
such failure continues for ten (10) days after notice thereof by Landlord,
Landlord may, without waiving or releasing Tenant from its obligations, but
shall not be obligated to, make any such payment or perform any such other
act to be made or performed by Tenant. Tenant agrees to reimburse Landlord
upon demand for all sums so paid by Landlord and all necessary incidental
costs, together with interest thereon at the Interest Rate, from the date of
such payment by Landlord until reimbursed by Tenant. This remedy shall be in
addition to any other right or remedy of Landlord set forth in this PARAGRAPH
22.
(f) LATE PAYMENT. If Tenant fails to pay any installment of rent
within five (5) days of when due or if Tenant fails to make any other payment
for which Tenant is obligated under this Lease within five (5) days of when
due, such late amount will accrue interest at the Interest Rate and Tenant
agrees to pay Landlord as additional rent such interest on such amount from
the date such amount becomes due until such amount is paid. In addition,
Tenant agrees to pay to Landlord concurrently with such late payment amount;
as additional rent, a late charge equal to five percent (5%) of the amount
due to compensate Landlord for the extra costs Landlord will incur as a
result of such late payment. The parties agree that (i) it would be
impractical and extremely difficult to fix the actual damage Landlord will
suffer in the event of Tenant's late payment, (ii) such interest and late
charge represents a fair and reasonable estimate of the detriment that
Landlord will suffer by reason of late payment by Tenant, and (iii) the
payment of interest and late charges are distinct and separate in that the
payment of interest is to compensate Landlord for the use of Landlord's
monies by Tenant, while the payment of late charges is to compensate Landlord
for Landlord's processing,
28.
<PAGE>
administrative and other costs incurred by Landlord as a result of Tenant's
delinquent payments. Acceptance of any such interest and late charge will not
constitute a waiver of the Tenant's default with respect to the overdue
amount, or prevent Landlord from exercising any of the other rights and
remedies available to Landlord. If Tenant incurs a late charge more than
three (3) times in any period of twelve (12) months during the Lease term,
then, notwithstanding that Tenant cures the late payments for which such late
charges are imposed, Landlord will have the right to require Tenant
thereafter to pay all installments of Monthly Base Rent quarterly in advance
throughout the remainder of the Lease term.
(g) LIEN FOR RENT. Tenant hereby grants to Landlord a lien and
security interest on all property of Tenant now or hereafter placed in or upon
the Premises including, but not limited to, all fixtures, machinery, equipment,
furnishings and other articles of personal property, and all proceeds of the
sale or other disposition of such property (collectively, the "Collateral") to
secure the payment of all rent to be paid by Tenant pursuant to this Lease.
Such lien and security interest shall be in addition to any landlord's lien
provided by law. This Lease shall constitute a security agreement under the
Commercial Code of the State so that Landlord shall have and may enforce a
security interest in the Collateral. Tenant agrees to execute as debtor and
deliver such financing statement or statements and any further documents as
Landlord may now or hereafter reasonably request to protect such security
interest pursuant to such code. Landlord may also at any time file a copy of
this Lease as a financing statement. Landlord, as secured party, shall be
entitled to all rights and remedies afforded as secured party under such code,
which rights and remedies shall be in addition to Landlord's liens and rights
provided by law or by the other terms and provisions of this Lease.
(h) RIGHTS AND REMEDIES CUMULATIVE. All rights, options and remedies
of Landlord contained in this Lease will be construed and held to be cumulative,
and no one of them will be exclusive of the other, and Landlord shall have the
right to pursue any one or all of such remedies or any other remedy or relief
which may be provided by law or in equity, whether or not stated in this Lease.
Nothing in this PARAGRAPH 22 will be deemed to limit or otherwise affect
Tenant's indemnification of Landlord pursuant to any provision of this Lease.
23. LANDLORD'S DEFAULT. Landlord will not be in default in the performance
of any obligation required to be performed by Landlord under this Lease unless
Landlord fails to perform such obligation within thirty (30) days after the
receipt of written notice from Tenant specifying in detail Landlord's failure to
perform; provided however, that if the nature of Landlord's obligation is such
that more than thirty (30) days are required for performance, then Landlord will
not be deemed in default if it commences such performance within such thirty
(30) day period and thereafter diligently pursues the same to completion. Upon
any default by Landlord, Tenant may exercise any of its rights provided at law
or in equity, subject to the limitations on liability set forth in PARAGRAPH 35
of this Lease.
24. ASSIGNMENT AND SUBLETTING.
(a) RESTRICTION ON TRANSFER. Except as expressly provided in this
PARAGRAPH 24, Tenant will not, either voluntarily or by operation of law, assign
or encumber this Lease or any interest herein or sublet the Premises or any part
thereof, or permit the use or occupancy of the Premises by any party other than
Tenant
29.
<PAGE>
(any such assignment, encumbrance, sublease or the like will sometimes be
referred to as a "Transfer"), without the prior written consent of Landlord,
which consent Landlord will not unreasonably withhold.
(b) CORPORATE AND PARTNERSHIP TRANSFERS. For purposes of this
PARAGRAPH 24, if Tenant is a corporation, partnership or other entity, any
transfer, assignment, encumbrance or hypothecation of twenty-five percent
(25%) or more (individually or in the aggregate) of any stock or other
ownership interest in such entity, and/or any transfer, assignment,
hypothecation or encumbrance of any controlling ownership or voting interest
in such entity, will be deemed a Transfer and will be subject to all of the
restrictions and provisions contained in this PARAGRAPH 24. Notwithstanding
the foregoing, the immediately preceding sentence will not apply to any
transfers of stock of Tenant if Tenant is a publicly-held corporation and
such stock is transferred publicly over a recognized security exchange or
over-the-counter market.
(c) PERMITTED CONTROLLED TRANSFERS. Notwithstanding the provisions of
this PARAGRAPH 24 to the contrary, Tenant may assign this Lease or sublet the
Premises or any portion thereof ("Permitted Transfer"), without Landlord's
consent and without extending any sublease termination option to Landlord, to
any parent, subsidiary or affiliate corporation which controls, is controlled by
or is under common control with Tenant, or to any corporation resulting from a
merger or consolidation with Tenant, or to any person or entity which acquires
all the assets of Tenant's business as a going concern, provided that: (i) at
least twenty (20) days prior to such assignment or sublease, Tenant delivers to
Landlord the financial statements and other financial and background information
of the assignee or sublessee described in SUBPARAGRAPH 24(d) below; (ii) an
assignment, the assignee assumes, in full, the obligations of Tenant under this
Lease (or if a sublease, the sublessee of a portion of the Premises or term
assumes, in full, the obligations of Tenant with respect to such portion); (iii)
the financial net worth of the assignee or sublessee as of the time of the
proposed assignment or sublease equals or exceeds that of Tenant as of the date
of execution of this Lease; (iv) Tenant remains fully liable under this Lease;
and (v) the use of the Premises under PARAGRAPH 8 remains unchanged.
(d) TRANSFER NOTICE. If Tenant desires to effect a Transfer, then at
least thirty days prior to the date when Tenant desires the Transfer to be
effective (the "Transfer Date"), Tenant agrees to give Landlord a notice (the
"Transfer Notice"), stating the name, address and business of the proposed
assignee, sublessee or other transferee (sometimes referred to hereinafter as
"Transferee"), reasonable information (including references) concerning the
character, ownership, and Financial condition of the proposed Transferee, the
transfer Date, any ownership or commercial relationship between Tenant and the
proposed Transferee, and the consideration and all other material terms and
conditions of the proposed transfer, all in such detail as landlord may
reasonably require. If Landlord reasonably requests additional detail, the
transfer Notice will not be deemed to have been received until Landlord receives
such additional detail, and Landlord may withhold consent to any transfer until
such information is provided to it.
(e) LANDLORD'S OPTIONS. Within fifteen (15) days of Landlord's
receipt of any Transfer Notice, and any additional information requested by
Landlord concerning the proposed Transferee's financial responsibility, Landlord
will elect to do one of the following:
30.
<PAGE>
(i) consent to the proposed Transfer;
(ii) refuse such consent, which refusal shall be on reasonable
grounds including, without limitation, those set forth in SUBPARAGRAPH 24(f)
below; or
(iii) terminate this Lease as to all or such portion of the
Premises which is proposed to be sublet or assigned and recapture all or such
portion of the Premises for reletting by Landlord.
(f) REASONABLE DISAPPROVAL. Landlord and Tenant hereby acknowledge
that Landlord's disapproval of any proposed Transfer pursuant to SUBPARAGRAPH
24(e) will be deemed reasonably withheld if based upon any reasonable factor,
including, without limitation, any or all of the following factors: (i) if the
Building is less than eighty percent (80%) occupied, if the net effective rent
payable by the Transferee (adjusted on a rentable square foot basis) is less
than the net effective rent then being quoted by Landlord for new leases in the
Building for comparable size space for a comparable period of time; (ii) the
proposed Transferee is a governmental entity; (iii) the portion of the Premises
to be sublet or assigned is irregular in shape with inadequate means of ingress
and egress; (iv) the use of the Premises by the Transferee (A) is not permitted
by the use provisions in PARAGRAPH 8 hereof, or (B) violates any exclusive use
granted, by Landlord to another tenant in the Building; (v) the Transfer would
likely result in a significant and inappropriate increase in the use of the
parking areas or Development Common Areas by the Transferee's employees or
visitors, and/or significantly increase the demand upon utilities and services
to be provided by Landlord to the Premises; (vi) the Transferee does not have
the financial capability to fulfill the obligations imposed by the transfer and
this Lease; or (vii) the Transferee is not in Landlord's reasonable opinion
consistent with Landlord's desired tenant mix. In the event Landlord withholds
or conditions its consent and Tenant or any proposed Transferee claims that
Landlord has unreasonably withheld or delayed its consent under SUBPARAGRAPH
24(f) or otherwise has breached or acted unreasonably under this PARAGRAPH 24,
their sole remedies shall be a declaratory judgment and an injunction for the
relief sought without any monetary damages, and Tenant hereby waives all other
remedies on its own behalf and, to the extent permitted under all applicable
laws, on behalf of the proposed Transferee. In any such action, each party shall
bear its own attorneys' fees. Tenant shall indemnify, defend and hold harmless
Landlord from any and all liability, losses, claims, damages, costs, expenses,
causes of action and proceedings involving any third party or parties (including
without limitation Tenant's proposed subtenant or assignee) who claim they were
damaged by Landlord's wrongful withholding or conditioning of Landlord's
consent.
(g) ADDITIONAL CONDITIONS. A condition to Landlord's consent to any
Transfer of this Lease will, be the delivery to Landlord of a true copy of the
fully executed instrument of assignment, sublease, transfer or hypothecation,
and, in the case of an assignment, the delivery to Landlord of an agreement
executed by the Transferee in form and substance reasonably satisfactory to
Landlord, whereby the Transferee assumes and agrees to be bound by all of the
terms and provisions of this Lease and to perform all of the obligations of
Tenant hereunder. As a condition for granting its consent to any assignment or
sublease, Landlord may require that the assignee or sublessee remit directly to
Landlord on a monthly basis, all monies due to Tenant by said assignee or
sublessee. As a condition to Landlord's consent to any sublease, such sublease
must provide that it is subject and subordinate to this Lease and to all
mortgages; that Landlord may enforce the
31.
<PAGE>
provisions of the sublease, including collection of rent; that in the event
of termination of this Lease for any reason, including without limitation a
voluntary surrender by Tenant, or in the event of any reentry or repossession
of the Premises by Landlord, Landlord may, at its option, either (i)
terminate the sublease, or (ii) take over all of the right, title and
interest of Tenant, as sublessor, under such sublease, in which case such
sublessee will attorn to Landlord, but that nevertheless Landlord will not
(1) be liable for any previous act or omission of Tenant under such sublease,
(2) be subject to any defense or offset previously accrued in favor of the
sub lessee against Tenant, or (3) be bound by any previous modification of
any sublease made without Landlord's written consent, or by any previous
prepayment by sublessee of more than one month's rent.
(h) EXCESS RENT. If Landlord consents to any assignment of this
Lease, Tenant agrees to pay to Landlord, as additional rent, all sums and other
consideration payable to and for the benefit of Tenant by the assignee on
account of the assignment, as and when such sums and other consideration are due
and payable by the assignee to or for the benefit of Tenant (or, if Landlord so
requires, and without any release of Tenant's liability for the same, Tenant
agrees to instruct the assignee to pay such sums and other consideration
directly to Landlord). If for any proposed sublease Tenant receives rent or
other consideration, either initially or over the term of the sublease, in
excess of the rent fairly allocable to the portion of the Premises which is
subleased based on square footage, Tenant agrees to pay to Landlord as
additional rent the excess of each such payment of rent or other consideration
received by Tenant promptly after its receipt. In calculating excess rent or
other consideration which may be payable to Landlord under this paragraph,
Tenant will be entitled to deduct commercially reasonable third party
brokerage commissions and attorneys fees and other amounts reasonably and
actually expended by Tenant in connection with such assignment or subletting if
acceptable written evidence of such expenditures is provided to Landlord.
(i) TERMINATION RIGHTS. If Tenant requests Landlord's consent to any
assignment or subletting of all or a portion of the Premises, Landlord will have
the right, as provided in SUBPARAGRAPH 24(e), to terminate this Lease as to all
or such portion of the Premises which is proposed to be sublet or assigned
effective as of the date Tenant proposes to sublet or assign all or less than
all of the Premises. Landlord's right to terminate this Lease as to less than
all of the Premises proposed to be sublet or assigned will not terminate as to
any future additional subletting or assignment as a result of Landlord's consent
to a subletting of less than all of the Premises or Landlord's failure to
exercise its termination right with respect to any subletting or assignment.
Landlord will exercise such termination right, if at all, by giving written
notice to Tenant within thirty (30) days of receipt by Landlord of the Financial
responsibility information required by this PARAGRAPH 24. Tenant understands and
acknowledges that the option, as provided in this PARAGRAPH 24, to terminate
this Lease as to all or such portion of the Premises which is proposed to be
sublet or assigned rather than approve the subletting or assignment of all or a
portion of the Premises, is a material inducement for Landlord's agreeing to
lease the Premises to Tenant upon the terms and conditions herein set forth. In
the event of any such termination with respect to less than all of the Premises,
the cost of segregating the recaptured space from the balance of the Premises
will be paid by Tenant and Tenant's future monetary obligations under this Lease
will be reduced proportionately on a square footage basis to correspond to the
balance of the Premises which Tenant continues to lease.
32.
<PAGE>
(j) NO RELEASE. No Transfer will release Tenant of Tenant's
obligations under this Lease or alter the primary liability of Tenant to pay the
rent and to perform all other obligations to be performed by Tenant hereunder.
Landlord may require that any Transferee remit directly to Landlord on a monthly
basis, all monies due Tenant by said Transferee. However, the acceptance of rent
by Landlord from any other person will not be deemed to be a waiver by Landlord
of any provision hereof. Consent by Landlord to one Transfer will not be deemed
consent to any subsequent Transfer. In the event of default by any Transferee of
Tenant or any successor of Tenant in the performance of any of the terms hereof,
Landlord may proceed directly against Tenant without the necessity of exhausting
remedies against such Transferee or successor. Landlord may consent to
subsequent assignments of this Lease or sublettings or amendments or
modifications to this Lease with assignees of Tenant, without notifying Tenant,
or any successor of Tenant, and without obtaining its or their consent thereto
and any such actions will not relieve Tenant of liability under this Lease.
(k) ADMINISTRATIVE AND ATTORNEYS' FEES. If Tenant effects a
Transfer or requests the consent of Landlord to any Transfer (whether or not
such Transfer is consummated), then, upon demand, Tenant agrees to pay
Landlord a non-refundable administrative fee of Two Hundred Fifty Dollars
($250), plus any reasonable attorneys' and paralegal fees incurred by
Landlord in connection with such Transfer or request for consent (whether
attributable to Landlord's in-house attorneys or paralegals or otherwise) not
to exceed One Hundred Dollars ($100) for each one thousand (1,000) rentable
square feet of area contained within the Premises or portion thereof to be
assigned or sublet. Acceptance of the Two Hundred Fifty Dollar ($250)
administrative fee and/or reimbursement of Landlord's attorneys' and
paralegal fees will in no event obligate Landlord to consent to any proposed
Transfer.
25. SUBORDINATION. Without the necessity of any additional document being
executed by Tenant for the purpose of effecting a subordination, and at the
election of Landlord or any mortgagee or beneficiary with a deed of trust
encumbering the Building and/or the Development, or any lessor of a ground or
underlying lease with respect to the Building, this Lease will be subject and
subordinate at all times to: (i) all ground leases or underlying leases which
may now exist or hereafter be executed affecting the Building; and (ii) the lien
of any mortgage or deed of trust which may now exist or hereafter be executed
for which the Building, the Development or any leases thereof, or Landlord's
interest and estate in any of said items, is specified as security.
Notwithstanding the foregoing, Landlord reserves the right to subordinate any
such ground leases or underlying leases or any such liens to this Lease. If any
such ground lease or underlying lease terminates for any reason or any such
mortgage or deed of trust is foreclosed or a conveyance in lieu of foreclosure
is made for any reason, at the election of Landlord's successor in interest,
Tenant agrees to attorn to and become the tenant of such successor in which
event Tenant's right to possession of the Premises will not be disturbed as long
as Tenant is not in default under this Lease. Tenant hereby waives its rights
under any law which gives or purports to give Tenant any right to terminate or
otherwise adversely affect this Lease and the obligations of Tenant hereunder in
the event of any such foreclosure proceeding or sale. Tenant covenants and
agrees to execute and deliver, upon demand by Landlord and in the form
reasonably required by Landlord, any additional documents evidencing the
priority or subordination of this Lease and Tenant's attornment agreement with
respect to any such ground lease or underlying leases or the lien of any
33.
<PAGE>
such mortgage or deed of trust. If Tenant fails to sign and return any such
documents within ten (10) days of receipt, Tenant will be in default
hereunder.
26. ESTOPPEL CERTIFICATE.
(a) TENANT'S OBLIGATIONS. Within ten (10) days following any
written request which Landlord may make from time to time, Tenant agrees to
execute and deliver to Landlord a statement, in a form substantially similar
to the form of Exhibit "F" attached hereto or as may reasonably be required
by Landlord's lender, certifying: (i) the date of commencement of this Lease;
(ii) the fact that this Lease is unmodified and in full force and effect (or,
if there have been modifications, that this Lease is in full force and
effect, and stating the date and nature of such modifications); (iii) the
date to which the rent and other sums payable under this Lease have been
paid; (iv) that there are no current defaults under this Lease by either
Landlord or Tenant except as specified in Tenant's statement; and (v) such
other matters reasonably requested by Landlord. Landlord and Tenant intend
that any statement delivered pursuant to this PARAGRAPH 26 may be relied upon
by any mortgagee, beneficiary, purchaser or prospective purchaser of the
Building or any interest therein.
(b) TENANT'S FAILURE TO DELIVER. Tenant's failure to deliver such
statement within such time will be conclusive upon Tenant (i) that this Lease
is in full force and effect, without modification except as may be
represented by Landlord, (ii) that there are no uncured defaults in
Landlord's performance, and (iii) that not more than one (1) month's rent has
been paid in advance. Without limiting the foregoing, if Tenant fails to
deliver any such statement within such ten (10) day period, Landlord may
deliver to Tenant an additional request for such statement and Tenant's
failure to deliver such statement to Landlord within ten (10) days after
delivery of such additional request will constitute a default under this
Lease. Tenant agrees to indemnify and protect Landlord from and against any
and all claims, damages, losses, liabilities and expenses (including
attorneys' fees and costs) attributable to any failure by Tenant to timely
deliver any such estoppel certificate to Landlord as required by this
PARAGRAPH 26.
27. BUILDING PLANNING. If Landlord requires the Premises for use in
conjunction with another suite or for Other reasons connected with the
planning program for the Building, Landlord will have the right, upon sixty
(60) days' prior written notice to Tenant, to move Tenant to Other space in
the Building of substantially similar size as the Premises and with tenant
improvements of substantially similar age, quality and layout as then
existing in the Premises. Any such relocation will be at Landlord's cost and
expense, including the cost of providing such substantially similar tenant
improvements (but not any furniture or personal property) and Tenant's
reasonable moving, telephone installation and stationary reprinting costs.
If, Landlord so relocates Tenant, the terms and conditions of this Lease will
remain in full force and effect and' apply to the new space, except that (a)
a revised EXHIBIT "A" will become part of this Lease and will reflect the
location of the new space, (b) PARAGRAPH 1 of this Lease will be amended to
include and state all correct data as to the new space, (c) the new space
will thereafter be deemed to be the "Premises", and (d) all economic terms
and conditions (e.g. rent, total Operating Expense Allowance, etc.) will be
adjusted on a per square foot basis based on the total number of rentable
square feet of area contained in the new space. Landlord and Tenant agree to
cooperate fully with one another in order to minimize the inconvenience of
Tenant resulting from any such relocation. However, if the new space does
not meet with Tenant's
34.
<PAGE>
reasonable approval, Tenant will have the right to cancel this Lease upon
giving Landlord thirty (30) days' notice within ten (10) days of receipt of
Landlord's relocation notification; provided, however, Landlord has the
right, by written notice to Tenant given within ten (10) days following
receipt of Tenant's cancellation notice to rescind Landlord's relocation
notice, in which event Landlord's relocation notice will be rescinded,
Tenant's cancellation notice will be cancelled and this Lease will remain in
full force and effect. If Tenant cancels this Lease pursuant to this
PARAGRAPH 27, Tenant agrees to vacate the Building and the Premises within
thirty (30) days of its delivery to Landlord of the notice of cancellation.
28. Tenant agrees to faithfully observe and comply with the "Rules and
Regulations," a copy of which is attached hereto and marked EXHIBIT "G" and all
reasonable and nondiscriminatory modifications thereof and additions thereto
from time to time put into effect by Landlord. Landlord will not be responsible
to Tenant for the violation or nonperformance by any other tenant or occupant of
the Building of any of the Rules and Regulations.
29. MODIFICATION AND CURE RIGHTS OF LANDLORD'S MORTGAGEES AND LESSORS.
(a) MODIFICATIONS. If, in [ILLEGIBLE] or entering into any
Financing or ground lease for Any portion of the Building and/or the
Development the lender or ground lessor requests modifications to this Lease,
Tenant, [ILLEGIBLE] after request therefor, agrees to execute an amendment
to this Lease incorporating such [ILLEGIBLE] modifications are reasonable and
do not increase the obligations of Tenant [ILLEGIBLE] affect the
leasehold estate created by this Lease.
(b) CURE RIGHTS. In the event of [ILLEGIBLE] Landlord, Tenant will
give notice by registered or certified mail to any beneficiary [ILLEGIBLE] or
mortgage covering the Premises or wound lessor of Landlord whose address has
been [ILLEGIBLE] Tenant agrees to offer such beneficiary, mortgagee or ground
lessor a reasonable [ILLEGIBLE] with respect to any such beneficiary or
mortgagee, time to obtain [ILLEGIBLE] and Tenant's rights hereunder, by power
of sale or a judicial if such should be necessary to effect a cure).
30. DEFINITION OF LANDLORD. The term "Landlord," as used in this Lease,
so far as covenants or obligations on the part of Landlord are concerned,
means and includes only the owner or owners, at the time in question, of the
fee title of the Premises or the lessees under any ground lease, if any. In
the event of any transfer, assignment or other conveyance or transfers of any
such title (other than a transfer for security purposes only), Landlord
herein named (and in case of any subsequent transfers or conveyances, the
theft grantor) will be automatically relieved from and after the date of such
transfer, assignment or conveyance of all liability as respects the
performance of any covenants or obligations on the part of Landlord contained
in this Lease thereafter to be performed, so long as the transferee assumes
in writing all such covenants and obligations of Landlord arising after the
date of such transfer. Landlord and Landlord's transferees and assignees
have the absolute right to transfer all or any portion of their respective
title and interest in the Development, the Building, the Premises and/or this
Lease without the consent of Tenant, and such transfer
35.
<PAGE>
or subsequent transfer will not be deemed a violation on Landlord's part of
any of the terms and conditions of this Lease.
31. WAIVER. The waiver by either party of any breach of any term,
covenant or condition herein contained will not be deemed to be a waiver of
any subsequent breach of the same or any other term, covenant or condition
herein contained, nor will any custom or practice which may develop between
the parties in the administration of the terms hereof be deemed a waiver of
or in any way affect the right of either party to insist upon performance in
strict accordance with said terms. The subsequent acceptance of rent or any
other payment hereunder by Landlord will not be deemed to be a waiver of any
preceding breach by Tenant of any term, covenant or condition of this Lease,
other than the failure of Tenant to pay the particular rent so accepted,
regardless of Landlord's knowledge of such preceding breach at the time of
acceptance of such rent. No acceptance by Landlord of a lesser sum than the
basic rent and additional rent or other sum then due will be deemed to be
other than on account of the earliest installment of such rent or other
amount due, nor will any endorsement or statement on any check or any letter
accompanying any check be deemed an accord and satisfaction, and Landlord may
accept such check or payment without prejudice to Landlord's right to recover
the balance of such installment or other amount or pursue any other remedy
provided in this Lease. The consent or approval of Landlord to or of any act
by Tenant requiring Landlord's consent or approval will not be deemed to
waive or render unnecessary Landlord's consent or approval to or of any
subsequent similar acts by Tenant.
32. PARKING.
(a) GRANT OF PARKING RIGHTS. So long as this Lease is in effect
and provided Tenant is not in default hereunder, Landlord grants to Tenant
and Tenant's Authorized Users (as defined below) a license to use the number
and type of parking spaces designated in SUBPARAGRAPH 1(s) subject to the
terms and conditions of this PARAGRAPH 32 and the Rules and Regulations
regarding parking contained in EXHIBIT "G" attached hereto. As consideration
for the use of such parking spaces, Tenant agrees to pay to Landlord or, at
Landlord's election, directly to Landlord's parking operator, as additional
rent under this Lease, the prevailing parking rate for each such parking
space as established by Landlord in its discretion from time to time. Tenant
agrees that all parking charges will be payable on a monthly basis
concurrently with each monthly payment of Monthly Base Rent. Tenant agrees to
submit to Landlord or, at Landlord's election, directly to Landlord's parking
operator with a copy to Landlord, written notice in a form reasonably
specified by Landlord containing the names, home and office addresses and
telephone numbers of those persons who are authorized by Tenant to use
Tenant's parking spaces on a monthly basis ("Tenant's Authorized Users") and
shall use its best efforts to identify each vehicle of Tenant's Authorized
Users by make, model and license number. Tenant agrees to deliver such notice
prior to the beginning of the Term of this Lease and to periodically update
such notice as well as upon specific request by Landlord or Landlord's
parking operator to reflect changes to Tenant's Authorized Users or their
vehicles.
(b) VISITOR PARKING. So long as this Lease is in effect, Tenant's
visitors and guests will be entitled to use those specific parking areas
which are designated for short term visitor parking and which are located
within the surface parking area(s), if any, and/or within the parking
structure(s) which serve the Building.
36.
<PAGE>
Visitor parking will be made available at a charge to Tenant's visitors and
guests, with the rate being established by Landlord in its discretion from
time to time. Tenant, at its sole cost and expense, may elect to validate
such parking for its visitors and guests. All such visitor parking will be on
a non-exclusive, in common basis with all other visitors and guests of the
Development.
(c) USE OF PARKING SPACES. Tenant will not use or allow any of
Tenant's Authorized Users to use any parking spaces which have been
specifically assigned by Landlord to other tenants or occupants or for other
uses such as visitor parking or which have been designated by any
governmental entity as being restricted to certain uses. Tenant will not be
entitled to increase or reduce its parking privileges applicable to the
Premises during the Term of the Lease except as follows: If at any time
Tenant desires to increase or reduce the number of parking spaces allocated
to it under the terms of this Lease, Tenant must notify Landlord in writing
of such desire and Landlord will have the right, in its sole and absolute
discretion, to either (a) approve such requested increase in the number of
parking spaces allocated to Tenant (with an appropriate increase to the
additional rent payable by Tenant for such additional spaces based on the
then prevailing parking rates), (b) approve such requested decrease in the
number of parking spaces allocated to Tenant (with an appropriate reduction
in the additional rent payable by Tenant for such eliminated parking spaces
based on the then prevailing parking rates), or (c) disapprove such requested
increase or decrease in the number of parking spaces allocated to Tenant.
Promptly following receipt of Tenant's written request, Landlord will provide
Tenant with written notice of its decision including a statement of any
adjustments to the additional rent payable by Tenant for parking under the
Lease, if applicable. No parking stalls will be allocated to Tenant with
respect to any space leased by Tenant under the Lease which consists of less
than the fill incremental amounts of Rentable Square Footage, if any,
required for parking stalls.
(d) GENERAL PROVISIONS. Landlord reserves the right to set and
increase monthly fees and/or daily and hourly rates for parking privileges
from time to time during the Term of the Lease. Landlord may assign any
unreserved and unassigned parking spaces and/or make all or any portion of
such spaces reserved, if Landlord reasonably determines that it is necessary
for orderly and efficient parking or for any other reasonable reason. Failure
to pay the rent for any particular parking spaces or failure to comply with
any terms and conditions of this Lease applicable to parking may be treated
by Landlord as a default under this Lease and, in addition to all other
remedies available to Landlord under the Lease, at law or in equity, Landlord
may elect to recapture such parking spaces for the balance of the Term of
this Lease if Tenant does not cure such failure within the applicable cure
period set forth in PARAGRAPH 22 of this Lease. In such event, Tenant and
Tenant's Authorized Users will be deemed visitors for purposes of parking
space use and will be entitled to use only those parking areas specifically
designated for visitor parking subject to all provisions of this Lease
applicable to such visitor parking use. Tenant's parking rights and
privileges' described herein are personal to Tenant and may not be assigned
or transferred, or otherwise conveyed, without Landlord's prior written
consent, which consent Landlord may withhold in its sole and absolute
discretion. In any event, under no circumstances may Tenant's parking rights
and privileges be transferred, assigned or otherwise conveyed separate and
apart from Tenant's interest in this Lease.
(e) COOPERATION WITH TRAFFIC MITIGATION MEASURES. Tenant agrees to
use its reasonable, good faith efforts to cooperate in traffic mitigation
programs which may be undertaken by Landlord independently,
37.
<PAGE>
or in cooperation with local municipalities or governmental agencies or other
property owners in the vicinity of the Building. Such programs may include,
but will not be limited to, carpools, vanpools and other ridesharing
programs, public and private transit, flexible work hours, preferential
assigned parking programs and programs to coordinate tenants within the
Development with existing or proposed traffic mitigation programs.
(f) COOPERATION RULES AND REGULATIONS. Tenant and Tenant's
Authorized Users shall comply with all rules and regulations regarding
parking set forth in EXHIBIT "G" attached hereto and Tenant agrees to cause
its employees, subtenants, assignees, contractors, suppliers, customers and
invitees to comply with such rules and regulations. Landlord reserves the
right from time to time to modify and/or adopt such other reasonable and
non-discriminatory rules and regulations for the parking facilities as it
deems reasonably necessary for the operation of the parking facilities.
33. FORCE MAJEURE. If either Landlord or Tenant is delayed, hindered in
or prevented from the performance of any act required under this Lease by
reason of strikes, lockouts, labor troubles, inability to procure standard
materials, failure of power, restrictive governmental laws, regulations or
orders or governmental action or inaction (including failure, refusal or
delay in issuing permits, approvals and/or authorizations which is not the
result of the action or inaction of the party claiming such delay), riots,
insurrection, war, fire, earthquake, flood or other natural disaster, unusual
and unforeseeable delay which results from an interruption of any public
utilities (e.g., electricity gas, water, telephone) or other unusual and
unforeseeable delay not within the reasonable control of the party delayed in
performing work or doing acts required under the provisions of this Lease,
then performance of such act will be excused for the period of the delay and
the period for the performance of any such act will be extended for a period
equivalent to the period of such delay. The provisions of this PARAGRAPH 33
will not operate to excuse Tenant from prompt payment of rent or any other
payments required under the provisions of this Lease.
34. SIGNS. Landlord will designate the location on the Premises,
if any, for one or more Tenant identification sign(s). Tenant agrees to have
Landlord install and maintain Tenant's identification sign(s) in such
designated location in accordance with this PARAGRAPH 34 at Tenant's sole
cost and expense. Tenant has no right to install Tenant identification signs
in any other location in, on or about the Premises or the Development and
will not display or erect any other signs, displays or other advertising
materials that are visible from the exterior of the Building or from within
the Building in any interior or exterior common areas. The size, design,
color and other physical aspects of any and all permitted sign(s) will be
subject to (i) Landlord's written approval prior to installation, which
approval may be withheld in Landlord's discretion, (ii) any covenants,
conditions or restrictions governing the Premises, and (iii) any applicable
municipal or governmental permits and approvals. Tenant will be responsible
for all costs for installation, maintenance, repair and removal of any Tenant
identification sign(s). If Tenant fails to remove Tenant's sign(s) upon
termination of this Lease and repair any damage caused by such removal,
Landlord may do so at Tenant's expense. Tenant agrees to reimburse Landlord
for all costs incurred by Landlord to effect any installation, maintenance or
removal on Tenant's account, which amount will be deemed additional rent, and
may include, without limitation, all sums disbursed, incurred or deposited by
Landlord including Landlord's costs, expenses and actual attorneys' fees with
interest thereon at the Interest Rate from the date of Landlord's
38.
<PAGE>
demand until paid by Tenant. Any sign rights granted to Tenant under this
Lease are personal to Tenant and may not be assigned, transferred or
otherwise conveyed to any assignee or subtenant of Tenant consent, which
consent Landlord may withhold in its sole and absolute discretion.
35. LIMITATION ON LIABILITY; REAL ESTATE INVESTMENT TRUST.
(a) In consideration of the benefits accruing hereunder, Tenant on
behalf of itself and all successors and assigns of Tenant covenants and
agrees that, in the event of any actual or alleged failure, breach or default
hereunder by Landlord, Tenant's recourse against Landlord for monetary
damages will be limited to the lesser of (i) Landlord's interest in the
Building including, subject to the prior rights of any Mortgagee, Landlord's
interest in the rents of the Building, or (ii) the equity interest Landlord
would have in and to the Building if the Building were encumbered by debt in
an amount equal to eighty percent (80%) of the value of the Building, and any
insurance proceeds payable to Landlord.
(b) Landlord operates as a real estate investment trust. The
obligations of Landlord under this Lease shall be binding only on Landlord
and not upon any of the shareholders, directors, officers, trustees,
advisors, managers or employees of Landlord in their individual capacities,
and with respect to any obligations of Landlord to Tenant, Tenant shall look
solely to the assets of Landlord and not to the assets of any such
shareholder, director, officer, trustee, advisor, manager or employee of
Landlord in the exercise of any rights or remedies under this Lease.
(c) If Landlord in good faith determines that its status as a real
estate investment trust under the applicable provisions of the Internal
Revenue Code of 1986, as heretofore or hereafter amended, will be jeopardized
because of any provision of this Lease, Landlord may request reasonable
amendments to this Lease and Tenant shall not unreasonably withhold or delay
its consent thereto, provided that such modifications do not in any way (i)
increase the obligations of Tenant under this Lease or (ii) adversely affect
any rights or benefits to Tenant under this Lease. Landlord shall pay all
reasonable costs incurred by Tenant, including without limitation, reasonable
legal fees incurred for reviewing any such proposed modifications.
(d) Tenant agrees that Landlord need not itself directly manage or
otherwise service all or any part of the Premises, and that Landlord may
cause any management, maintenance, operation, construction and other services
to be performed by Landlord's agents, who shall act as independent
contractors, provided, however, that such agreement by Tenant shall not be
deemed in any manner to release Landlord from any of its obligations set
forth in this Lease.
36. FINANCIAL STATEMENTS. Prior to the execution of this Lease by
Landlord and at any time during the Term of this Lease upon ten (10) days
prior written notice from Landlord, Tenant agrees to provide Landlord with a
current financial statement for Tenant and any guarantors of Tenant and
financial statements for the two (2) years prior to the current financial
statement year for Tenant and any guarantors of Tenant. Such statements are
to be prepared in accordance with generally accepted accounting principles
and, if such is the normal practice of Tenant, audited by an independent
certified public accountant.
39.
<PAGE>
37. QUIET ENJOYMENT. Landlord covenants and agrees with Tenant that
upon Tenant paying the rent required under this Lease and paying all other
charges and performing all of the covenants and provisions on Tenant's part to
be observed and performed under this Lease, Tenant may peaceably and quietly
have, hold and enjoy the Premises in accordance with this Lease.
38. MISCELLANEOUS.
(a) GOVERNING LAW. This Lease shall be governed by and construed
pursuant to the laws of the State of California.
(b) SUCCESSORS AND ASSIGNS. Except as otherwise provided in this
Lease, all of the covenants, conditions and provisions of this Lease shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, personal representatives, successors and assigns.
(c) PROFESSIONAL FEES AND COSTS. If either Landlord or Tenant
should bring suit against the other with respect to this Lease, then all
costs and expenses, including without limitation, actual professional fees
and costs such as appraisers', accountants' and attorneys' fees and costs,
incurred by the prevailing party therein shall be paid by the other party,
which obligation on the part of the other party shall be deemed to have
accrued on the date of the commencement of such action and shall be
enforceable whether or not the action is prosecuted to judgment.
(d) TERMS AND HEADINGS. The words "Landlord" and "Tenant" as used
herein shall include the plural as well as the singular. Words used in any
gender include other genders. The paragraph headings of this Lease are not a
part of this Lease and shall have no effect upon the construction or
interpretation of any part hereof.
(e) TIME. Time is of the essence with respect to the performance
of every provision of this Lease in which time of performance is a factor.
(f) PRIOR AGREEMENT; AMENDMENTS. Lease constitutes and is intended
by the parties to be a final, complete and exclusive statement of their
entire agreement with respect to the subject matter of this Lease. This Lease
supersedes any and all prior and contemporaneous agreements and
understandings of any kind relating to the subject matter of this Lease.
There are no other agreements, understandings, representations, warranties,
or statements, either oral or in written form, concerning the subject matter
of this Lease. No alteration, modification, amendment or interpretation of
this Lease shall be binding on the parties unless contained in a writing
which is signed by both parties.
(g) SEPARABILITY. Any provision of this Lease which shall prove to
be invalid, void or illegal in no way affects, impairs or invalidates any
other provision hereof, and such other provisions shall remain in full force
and effect.
40.
<PAGE>
(h) RECORDING. Neither Landlord nor Tenant shall record this Lease
nor a short form memorandum thereof without the consent of the other.
(i) COUNTERPARTS. This Lease may be executed in one or more
counterparts, each of which shall constitute an original and all of which
shall be one and the same agreement.
(j) NONDISCLOSURE OF LEASE TERMS. Tenant acknowledges and agrees
that the terms of this Lease are confidential and constitute proprietary
information of Landlord Disclosure of the terms could adversely affect the
ability of Landlord to negotiate other leases and impair Landlord's
relationship with other tenants. Accordingly, Tenant agrees that it, and its
partners, officers, directors, employees and attorneys, shall not
intentionally and voluntarily disclose the terms and conditions of this Lease
to any newspaper or other publication or any other tenant or apparent
prospective tenant of the Building or other portion of the Development, or
real estate agent, either directly or indirectly, without the prior written
consent of Landlord, provided, however, that Tenant may disclose the terms to
prospective subtenants or assignees under this Lease.
39. EXECUTION OF LEASE.
(a) JOINT AND SEVERAL OBLIGATIONS. If more than one person
executes this Lease as Tenant, their execution of this Lease will constitute
their covenant and agreement that (i) each of them is jointly and severally
liable for the keeping, observing and performing of all of the terms,
covenants, conditions, provisions and agreements of this Lease to be kept,
observed and performed by Tenant, and (ii) the term "Tenant" as used in this
Lease means and includes each of them jointly and severally. The act of or
notice from, or notice or refund to, or the signature of any one or more of
them, with respect to the tenancy of this Lease, including, but not limited
to, any renewal, extension, expiration, termination or modification of this
Lease, will be binding upon each and all of the persons executing, this Lease
as Tenant with the same force and effect as if each and all of them had so
acted or so given or received such notice or refund or so signed.
(b) TENANT AS CORPORATION OR PARTNERSHIP. If Tenant executes this
Lease as a corporation or partnership, then Tenant and the persons executing
this Lease on behalf of Tenant represent and warrant that such entity is duly
qualified and in good standing to do business in California and that the
individuals executing this Lease on Tenant's behalf are duly authorized to
execute and deliver this Lease on its behalf, and in the case of a
corporation, in accordance with a duly adopted resolution of the board of
directors of Tenant, a copy of which is to be delivered to Landlord on
execution hereof, if requested by Landlord, and in accordance with the
by-laws of Tenant, and, in the case of a partnership, in accordance with the
partnership agreement and the most current amendments thereto, if any, copies
of which are to be delivered to Landlord on execution hereof, if requested by
Landlord, and that this Lease is binding upon Tenant in accordance with its
terms.
(c) EXAMINATION OF LEASE. Submission of this instrument by
Landlord to Tenant for examination or signature by Tenant does not constitute
a reservation of or option for lease, and it is not effective as a lease or
otherwise until execution by and delivery to both Landlord and Tenant.
41.
<PAGE>
[SIGNATURE PAGE FOLLOWS]
42.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Lease to be duly executed
by their duly authorized representatives as of the date first above written.
LANDLORD: MIP PROPERTIES, INC.,
a Maryland corporation
By: /s/ Philip H. Bowman
-----------------------------
[Print Name] Philip H. Bowman
--------------------
[Print Title] Vice President
-------------------
TENANT: NEPTUNE SYSTEMS, INC.,
a Pennsylvania corporation
By: /s/ Raymond R. Hood
-----------------------------
[Print Name] Raymond R. Hood
--------------------
[Print Title] President
-------------------
43.
<PAGE>
[DIAGRAM]
<PAGE>
RENTABLE SQUARE FEET AND USABLE SQUARE FEET
1. The term "Rentable Square Feet" as used in the Lease will be deemed
to include: (a) with respect to the Premises, the usable area of the Premises
determined in accordance with the Method for Measuring Floor Area in Office
Buildings, ANSI Z65.1-1980 (the "BOMA Standard"), plus a pro rata portion of
the main lobby area on the ground floor and all elevator machine rooms,
electrical and telephone equipment rooms and mail delivery facilities and
other areas used by all tenants of the Building, if any, plus (i) for single
tenancy floors, all the area covered by the elevator lobbies, corridors,
special stairways, restrooms, mechanical rooms, electrical rooms and
telephone closets on such floors, or (ii) for multiple tenancy floors, a
pro-rata portion of all of the area covered by the elevator lobbies,
corridors, special stairways, restrooms, mechanical rooms, electrical rooms
and telephone closets on such floor; and (b) with respect to the Building,
the total rentable area for all floors in the Building computed in accordance
with the provisions of SUBPARAGRAPH 1 (a) above. In calculating the "Rentable
Square Feet" of the Premises or the Building, the area contained within the
exterior walls of the Building, stairs, fire towers, vertical ducts, elevator
shafts, flues, vents, stacks and major pipe shafts will be excluded.
Additionally, the first floor and basement shall be excluded for purposes of
calculating Tenant's Percentage.
2. The term "Usable Square Feet" as used in EXHIBIT "C" with respect
to the Premises will be deemed to include the usable area of the Premises as
determined in accordance with the BOMA Standard.
3. For purposes of establishing the initial Tenant's Percentage,
Tenant's Operating Expense Allowance, Monthly Base Rent, and Security Deposit
as shown in PARAGRAPH 1 of the Lease, the number of Rentable Square Feet of
the Premises is deemed to be as set forth in SUBPARAGRAPH 1(g) of the Lease,
and the number of Rentable Square Feet of the Building is deemed to be as set
forth in SUBPARAGRAPH 1(f) of the Lease. For purposes of establishing the
amount of the Tenant Improvement Allowance in EXHIBIT "C", the number of
Usable Square Feet of the Premises is deemed to be as set forth in
SUBPARAGRAPH 1(q). From time to time at Landlord's option, Landlord's
architect may redetermine the actual number of Rentable Square Feet of the
Premises, and the Building, and the actual number of Usable Square Feet of
the Premises respectively, based upon the criteria set forth in PARAGRAPH 1
AND PARAGRAPH 2 above, which determination will be conclusive, and thereupon
Tenant's Percentage, Tenant's Operating Expense Allowance, Monthly Base Rent
and the Security Deposit and the Tenant Improvement Allowance will be
adjusted accordingly.
EXHIBIT "B"
<PAGE>
WORK LETTER AGREEMENT
This Work Letter Agreement, is entered into as of the 26 day of July,
1994, by and between MIP PROPERTIES, INC. ("Landlord") and NEPTUNE SYSTEMS,
INC., a Pennsylvania corporation ("Tenant").
RECITALS
A. Concurrently with the execution of this Work Letter Agreement,
Landlord and Tenant have entered into a lease (the "Lease") covering certain
premises (the "Premises") more particularly described in the Lease.
B. In order to induce Tenant to enter into the Lease (which is hereby
incorporated by reference to the extent that the provisions of this Work
Letter Agreement may apply thereto) and in consideration of the mutual
covenants hereinafter contained, Landlord and Tenant hereby agree as follows:
1. COMPLETION SCHEDULE. Within ten (10) days after the execution of
the Lease, Landlord shall deliver to Tenant, for Tenant's review and
approval, a schedule (the "Work Schedule") setting forth a time table for the
planning and completion of the installation of the Tenant Improvements to be
constructed in the Premises, and the Commencement Date for the term of the
Lease. The Work Schedule shall set forth each of the various items of work to
be done by or approval to be given by Landlord and Tenant in connection with
the completion of the Tenant Improvements. Such Schedule shall be submitted
to Tenant for its approval and, upon approval by both Landlord and upon
Tenant, such Schedule shall become the basis for completing the Tenant
Improvement work. If Tenant shall fail to approve the Work Schedule, as it
may be modified after discussions between Landlord and Tenant or to deliver
to space planner electrical requirements, telephone requirements, plumbing
requirements, security requirements and special finishes within five (5)
working days after the date such Schedule is first received by Tenant,
Landlord may, at its option, terminate the Lease and all of its obligations
thereunder.
2. TENANT IMPROVEMENTS. Reference herein to "Tenant Improvements"
shall include all work to be done in the Premises pursuant to the Tenant
Improvement Plans described in PARAGRAPH 3 below, including, but not limited
to, partitioning, doors, ceilings, floor coverings, wall finishes (including
paint and wallcovering), electrical (including lighting, switching,
telephones, outlets, etc.), plumbing, heating, ventilating and air
conditioning, fire protection, cabinets and other millwork.
3. TENANT IMPROVEMENT PLANS. Tenant has met with Landlord's architect
and/or space planner for the purpose of preparing a space plan for the layout
of the Premises prior to lease execution. Based upon such space plan,
Landlord's architect shall prepare final working drawings and specifications
for the Tenant Improvements. Such final working drawings and specifications
may be referred to herein as the "Tenant Improvement Plans" or "Approved
Plans". The Tenant Improvements Plans must be consistent with
EXHIBIT "C" - PAGE 1
<PAGE>
Landlord's standard specifications (the "Standards") for tenant improvements
for the Building, as the same may be changed from time to time by Landlord.
Immediately after the execution of the Lease, Landlord shall cause the
space planner and Landlord's engineer to prepare detailed construction
drawings and specifications (the "Working Drawings") for the Tenant
Improvements based strictly upon the Preliminary Plans. Upon delivery of the
Working Drawings by Landlord or its representative to Tenant, Tenant shall
have five (5) business days in which to given written notice to Landlord of
Tenant's acceptance or rejection of the Working Drawings. Unless Landlord
receives Tenant's written rejection within said five (5) business day period,
the drawings shall be deemed approved by Tenant ("Approved Plans"). Such
Approved Plans shall create no responsibility or liability in the Landlord
for the completeness of such plans, their design sufficiency or compliance
with applicable statutes, ordinances or regulations. Within a reasonable
period after Tenant's approval or deemed approval of the Approved Plans,
Landlord will furnish to Tenant a final work cost based upon the Approved
Plans ("Final Cost Quotation") and an estimated Tenant Improvement
Construction Schedule. The final cost quotation shall include without
limitation, costs of standard and non-standard work, architectural and
engineering fees, governmental agency fees, Landlord's general contractor's
overhead and supervision fees, and landlord's administrative fees. If the
Final Cost Quotation is not greater than the Tenant Improvement Allowance,
Landlord shall authorize construction to commence, subject to the Tenant's
payment of the Construction Payment as defined below. Landlord has a
pre-approved selected contractor to perform work in the Building.
If the Final Cost Quotation is greater than the approved Tenant
Improvement Allowance, Tenant shall have two (2) business days in which to
give written notice to Landlord's Construction Manager of Tenant's acceptance
or rejection of the Final Cost Quotation. If Tenant rejects the Final Cost
Quotation, Tenant shall meet with Landlord, the Space Planner and Landlord's
contractor within two (2) business days to make revisions. All costs of
Tenant initiated changes requiring such revisions including charges for
attending the meeting shall be included in the cost of Tenant Improvements.
Following such revisions, Landlord shall submit to Tenant, as soon as
reasonably practicable, a new Final Cost Quotation, and the same procedure
will be followed as set forth above until Tenant has approved the Approved
Plans and the Final Cost Quotation, Tenant shall forthwith deposit with
Landlord an amount (the "Construction Payment") equal to the difference
between the Tenant's Allowance and the approved Final Cost Quotation.
Landlord shall not authorize construction to commence until Landlord has
received the Construction Payment. Any time consumed in revising the Working
Drawings or revising the Final Cost Quotation shall be considered a Tenant
Delay and shall not delay the Commencement Date of the Lease. Landlord,
through its agent, will provide construction management and will charge a
reasonable supervision fee of five (5%) percent of the construction costs
against the tenant improvements allowance of ________________________________
Dollars ($[illegible]) and for any change orders initiated by the Tenant
after the Tenant has approved the approved plans and the final cost
quotation. All supervision of construction and subcontractors shall be
performed by the general contractor. Tenant shall be responsible for any and
all change orders required to comply with any governmental and/or code
requirements.
EXHIBIT "C" - PAGE 2
<PAGE>
4. NON-STANDARD TENANT IMPROVEMENTS. In preparation of preliminary
plans and Approved Plans, no deviation shall be permitted from the Standards
with respect to entry doors and hardware, entry graphics, location of entry
graphics, ceiling systems, demising partitions, life safety systems,
electrical systems, H.V.A.C. systems and security camera locations
guidelines, or perimeter window coverings. Subject to Landlord's approval,
Tenant may deviate from other Standards, provided that no deviation shall be
of lesser quality than the Standards and Landlord has determined in its sole
discretion that the deviations are of a nature and quality that are
consistent with the overall objectives of the Landlord for the building. Any
such deviations must conform to applicable governmental regulations, must not
require additional building services, delay the Construction Schedule, or be
of a nature of quality inconsistent with Landlord's overall plan or objective
for the Building.
5. FINAL PRICING AND DRAWING SCHEDULE. After the preparation of the
Working Drawings and specifications and after Tenant's written approval
thereof, in accordance with the Work Schedule, such drawings shall thereafter
be submitted to the appropriate government body by Landlord's architect for
plan checking and the issuance of a building permit. Landlord, with Tenant's
cooperation, shall cause to be made any changes in the plans and
specifications necessary to obtain the building permit. Concurrent with the
plan checking, Landlord shall have prepared a final pricing for Tenant's
approval, in accordance with the Work Schedule, taking into account any
modification which may be required to reflect changes in the plans and
specifications required by the City of County in which the Premises are
located.
All Tenant Improvements to be constructed or installed in the Premises
shall be performed by Landlord's designated general contractor in accordance
with the Approved Plans. No work shall commence until the Approved Plans are
filed with the governmental agencies having jurisdiction thereof and all
required building permits have been obtained. Landlord shall have not
obligation to Tenant for defects in design, workmanship or materials, but
shall use its reasonable best efforts to enforce the contractor's obligations
therefor. Any changes to the construction work may be made only upon written
request by Tenant approved in writing by Landlord, or as may be required by
any governmental agency, or as may be required due to structural or
unanticipated field conditions, in each instance evidenced by a written
change order describing the change.
In the event Tenant desires any work in addition to the Base Building
Improvements and the Tenant Improvements in accordance with the Approved
Plans to be performed in the Premises (the "Additional Tenant Work"), Tenant,
at Tenant's expense, shall cause plans and specifications for such work to be
prepared by arranging therefor with Landlord's architect and pay for time and
monies extended by Landlord's construction manager to review and approve
such additional Tenant work. All plans and specifications for Additional
Tenant Work shall be subject to review and approval by Landlord to insure,
among other things, that the work is comparable with all other construction
and all electrical and mechanical systems within the Building. Upon such
written request, and approval of same by Landlord, Landlord shall submit to
Tenant, for approval, a field order describing the change, cost proposal and
Tenant Improvement Construction Schedule Adjustment. Tenant shall approve
the change order, in writing, within two (2) business days following receipt
thereof, and together with said approval shall pay Landlord the cost of such
agreed upon change. Landlord may refuse to make any changes until Tenant so
approves in writing the description thereof, the cost proposal and the Tenant
Improvement Construction Schedule Adjustment, and
EXHIBIT "C" - PAGE 3.
<PAGE>
until Tenant makes such payment. In the event Tenant fails to approve same
within the two (2) business day period, then Landlord may elect (i) to agree
to the foregoing on Tenant's behalf, Tenant to promptly pay the required
amounts to Landlord; (ii) to withdraw the change request on Tenant's behalf;
or (iii) to proceed with the Tenant Improvements, delaying any portion as
reasonably necessary to accommodate the change request. Any time consumed for
changes to the Tenant Improvements, or delays pursuant to clause (iii) above,
shall be considered a Tenant Delay and shall not delay the Commencement Date
of the Lease.
Tenant shall not engage its own contractor or subcontractor to perform
any Tenant Improvement construction. Tenant shall engage its own Landlord
approved security and telephone company. Tenant's telephone company must
coordinate all work through the Landlord's telephone vendor responsible for
the main telephone rise and cables.
6. CONSTRUCTION OF TENANT IMPROVEMENTS. After the Tenant Improvement
Plans have been prepared and approved, the final pricing has been approved
and a building permit for the Tenant Improvements has been issued, Landlord
shall enter into a construction contract with its contractor for the
installation of the Tenant Improvements in accordance with the Tenant
Improvement Plans. Landlord shall supervise the completion of such work and
shall use its best efforts to secure substantial completion of the work in
accordance with the Work Schedule. The cost of such work shall be paid as
provided in Paragraph 7 hereof. Landlord shall not be liable for any direct
or indirect damages as a result of delays in construction beyond Landlord's
reasonable control, including, but not limited to, acts of God, inability
to secure governmental approvals or permits, governmental restrictions,
strikes; availability of materials or labor or delays by Tenant (or its
architect or anyone performing services on behalf of Tenant).
7. PAYMENT OF COST OF THE TENANT IMPROVEMENTS. The Tenant Improvement
Allowance set forth in SUBPARAGRAPH 1(q) of the Lease shall be used only for:
(a) Payment of the cost of preparing the space plan and the final
working drawings and specifications, including mechanical, electrical,
plumbing and structural and structural drawings and of all other aspects of
the Tenant Improvement Plans. The Tenant Improvement Allowance will not be
used for the payment of extraordinary design work not included within the
scope of Landlord's building standard improvements or for payments to any
other consultants, designers or architects other than Landlord's architect
and/or space planner.
(b) The payment of plan check, permit and license fees relating to
construction of the Tenant Improvements.
(c) Construction of the Tenant Improvements including, without
limitation, the following:
(i) Installation within the Premises of all partitioning,
doors, floor coverings, ceilings, wall coverings and painting, millwork and
similar items.
EXHIBIT "C" - PAGE 4.
<PAGE>
(ii) All electrical wiring, lighting fixtures, outlets and
switches, and other electrical work to be installed within the Premises.
(iii) The furnishing and installation of all duct work,
terminal boxes, diffusers and accessories required for the completion of the
heating, ventilation and air conditioning systems within the Premises,
including the cost of meter and key control for after-hour air conditioning.
(iv) Any additional Tenant requirements including, but not
limited to, odor control, special heating, ventilation and air conditioning,
noise or vibration control or other special systems.
(v) All fire and life safety control systems such as fire
walls, sprinklers, halon, fire alarms, including piping, wiring and
accessories installed within the Premises.
(vi) All plumbing, fixtures, pipes and accessories to be
installed within the Premises.
(vii) Testing and inspection costs.
(viii) Contractor's fees, including but not limited to any
fees based on general conditions.
(d) All other costs to be expended by Landlord in the construction
of the Tenant Improvements, including those costs incurred by Landlord for
construction of elements of the Tenant Improvements in the Premises, which
construction was performed by Landlord prior to the execution of this Lease
by Landlord and Tenant (i.e., during or after the construction of the base
Building) and which construction is for the benefit of tenants and is
customarily performed by Landlord prior to the execution of leases for such
space in the Building for reasons of economics (examples of such construction
would include the extension of mechanical [including heating, ventilation and
air conditioning systems] and electrical distribution systems outside of the
core of the Building, wall construction, column enclosures and painting
outside of the core of the Building, ceiling hanger wires and window
treatment).
(e) The cost of each item shall be charged against the Tenant
Improvement Allowance. In the event that the cost of installing the Tenant
Improvements, as established by Landlord's final pricing schedule, shall
exceed the Tenant Improvement Allowance, or if any of the Tenant Improvements
are not to be paid out of the Tenant Improvement Allowance as provided in
PARAGRAPH 7(c)(i) above, the excess shall be paid by Tenant to Landlord prior
to the commencement of construction of the Tenant Improvements.
(f) In the event that, after the Tenant Improvement Plans have
been prepared and a price therefore established by Landlord, Tenant shall
require any changes or substitutions to the Tenant Improvement Plans, any
additional costs thereof shall be paid by Tenant to Landlord prior to the
commencement of such work. Landlord shall have the right to decline Tenant's
request for a change to the Tenant Improvement Plans if such changes are
inconsistent with PARAGRAPHS 3 AND 4 above, or if the change would, in
Landlord's opinion, unreasonably delay construction of the Tenant
Improvements.
EXHIBIT "C" - PAGE 5.
<PAGE>
(g) In the event that the cost of the Tenant Improvements
increases as set forth in Landlord's final pricing due to the requirements of
any governmental agency, Tenant shall pay Landlord the amount of such
increase within five (5) days of Landlord's written notice; provided,
however, that Landlord shall first apply toward such increase any remaining
balance in the Tenant Improvement Allowance.
(h) Any unused portion of the Tenant Improvement Allowance upon
completion of the Tenant Improvements shall not be refunded to Tenant or
available to Tenant as a credit against any obligations of Tenant under the
Lease.
(i) As used in this Work Letter Agreement, the term "Usable Area"
means Usable Square Feet of the Premises, as set forth in SUBPARAGRAPH 1(q)
of the Lease.
IN WITNESS WHEREOF, this Work Letter Agreement is executed as of the
date first above written.
<TABLE>
<CAPTION>
LANDLORD: MIP PROPERTIES,
a Maryland corporation
<S> <C>
By: /s/ Philip H Bowman
-------------------------------
[Print Name] Philip H. Bowman
---------------------
[Print Title] Vice President
---------------------
TENANT: NEPTUNE SYSTEMS INC.
a Pennsylvania corporation
By: /s/ Raymond R Hood
-------------------------------
[Print Name] Raymond R. Hood
---------------------
[Print Title] President
---------------------
</TABLE>
EXHIBIT "C" - PAGE 6.
<PAGE>
NOTICE OF LEASE TERM DATES
AND TENANT'S PERCENTAGE
To:______________________________ ("Tenant") Date:_____________
_________________________________
_________________________________
Re: Lease dated ________________, 19____ (the "Lease"),.between
_________________________________ as Landlord, and
_________________________________ as Tenant,
concerning Suite __________ located at 110 Pine Avenue,
Long Beach, California 90802 (the "Premises").
To Whom It May Concern:
In accordance with the subject Lease, we wish to advise and/or confirm as
follows:
1. That the Premises have been accepted by the Tenant as being
substantially complete in accordance with the subject Lease and that there is
no deficiency in construction except as may be indicated on the "Punch-List"
prepared by Landlord and Tenant, a copy of which is attached hereto.
2. That the Tenant has possession of the subject Premises and
acknowledges that under the provisions of the Lease the Commencement Date is
_______________, 199____, and the Term of the Lease will expire on
__________________________.
3. That in accordance with the Lease, rent commenced to accrue on
_______________, 199___.
4. If the Commencement Date of the Lease is other than the first day
of the month, the first billing will contain a pro rata adjustment. Each
billing thereafter will be for the full amount of the monthly installment as
provided for in the Lease.
5. Rent is due and payable in advance on the first day of each and
every month during the Term of the Lease. Your rent checks should be made
payable to __________________________ at
____________________________________________________________.
6. The number of Rentable Square Feet within the Premises is
____________________ square feet as determined by Landlord's architect in
accordance with the terms of the Lease.
EXHIBIT "D" - PAGE 1.
<PAGE>
7. The number of Rentable Square Feet within the Building (not including
the first floor and the basement) is 107,066 square feet as determined by
Landlord's architect in accordance with the terms of the Lease.
8. Tenant's Percentage, as adjusted based upon the number of Rentable
Square Feet within the Premises, is _____________ %.
9. Tenant shall have the right to ______________ (____) parking
space(s) in the parking garage known as the Autoport. Such space(s): shall
_____ shall not _____ be reserved. Tenant's initial parking charge per space
shall be $__________ per month, due and payable to Landlord on the first day
of each and every month during the Term of the Lease.
Sincerely,
[SIGNATURE BLOCK]
The foregoing notice terms and dates are hereby accepted by the
undersigned tenant and shall be deemed incorporated into and made a part of
the Lease.
TENANT: [SIGNATURE BLOCK]
EXHIBIT "D" - PAGE 2.
<PAGE>
STANDARDS FOR UTILITIES AND SERVICES
The following standards for utilities and services are in effect.
Landlord reserves the right to adopt nondiscriminatory modifications and
additions hereto.
Subject to the terms and conditions of the Lease and provided Tenant
remains in occupancy of the Premises, Landlord will provide or make available
the following utilities and services:
1. Provide non-attended automatic elevator facilities at all times.
2. On Monday through Friday, except holidays, from 8:00 a.m. to 5:00
p.m. (and other times for a reasonable additional charge to be fixed by
Landlord), ventilate the Premises and furnish air conditioning or heating on
such days and hours, when in the reasonable judgment of Landlord it may be
required for the comfortable occupancy of the Premises. The air conditioning
system achieves maximum cooling when the window coverings are extended to the
full length of the window opening and adjusted to a 45 DEG. angle upwards.
Landlord will not be responsible for room temperatures if Tenant does not
keep all window coverings in the Premises extended to the full length of the
window opening and adjusted to a 45 DEG. angle upwards whenever the system is
in operation. Tenant agrees to cooperate fully at all times with Landlord,
and to abide by all reasonable regulations and requirements which Landlord
may prescribe for the proper function and protection of said air
conditioning, system. Tenant agrees not to connect any apparatus, device,
conduit or pipe to the chilled and hot water air conditioning supply lines of
the Building. Tenant further agrees that neither Tenant nor its servants,
employees, agents, visitors, licensees or contractors shall at any time enter
the mechanical installations or facilities of the Building or the Development
or adjust, tamper with, touch or otherwise in any manner affect said
installations or facilities. The cost of maintenance and service calls to
adjust and regulate the air conditioning system will be charged to Tenant if
the need for maintenance work results from either Tenant's adjustment of room
thermostats or Tenant's failure to comply with its obligations under this
Exhibit, including keeping window coverings extended to the full length of
the window opening, and adjusted to a 45 DEG. angle upwards. Such work will
be charged at hourly rates equal to then-current journeyman's wages for air
conditioning mechanics.
3. Landlord will make available to the Premises, 24 hours per day,
seven days a week, during the usual business hours on business days, electric
current as required by the Building standard office lighting and fractional
horsepower office business machines including copiers, personal computers and
word processing. equipment in an amount not to exceed six (6) watts per
square foot per normal business day. Tenant agrees, should its electrical
installation or electrical consumption be in excess of the aforesaid quantity
or extend beyond normal business hours, to reimburse Landlord monthly for the
measured consumption at the average cost per kilowatt hour charged to the
Building during the period. If a separate meter is not installed at Tenant's
cost, such excess cost will be established by an estimate agreed upon by
Landlord and Tenant, and if the parties fail to agree, such cost will be
established by an independent licensed engineer selected in Landlord's
reasonable discretion, whose fee shall be shared equally by Landlord and
Tenant. Tenant agrees not to use any apparatus or device in, upon or about
the Premises (other than standard office business
EXHIBIT "E" - PAGE 1.
<PAGE>
machines, personal computers and word processing equipment) which may in any
way increase the amount of such services usually furnished or supplied to
said Premises, and Tenant further agrees not to connect any apparatus or
device with wires, conduits or pipes, or other means by which such services
are supplied, for the purpose of using additional or unusual amounts of such
services without the written consent of Landlord. Should Tenant use the same
to excess, the refusal on the part of Tenant to pay upon demand of Landlord
the amount established by Landlord for such excess charge will constitute a
breach of the obligation to pay rent under this Lease and will entitle
Landlord to the rights therein granted for such breach. Tenant's use of
electric current will never exceed the capacity of the feeders to the
Building or the risers or wiring installation and Tenants will not install or
use or permit the installation or use of any computer or electronic data
processing equipment in the Premises (except standard office business
machines, personal computers and word processing equipment) without the prior
written consent of Landlord.
4. Water will be available in public areas for drinking and lavatory
purposes only, but if Tenant requires, uses or consumes water for any purpose
in addition to ordinary drinking and lavatory purposes, of which fact Tenant
constitutes Landlord to be the sole judge, Landlord may install a water meter
and thereby measure Tenant's water consumption for all purposes. Tenant
agrees to pay Landlord for the cost of the meter and the cost of the
installation thereof and throughout the duration of Tenant's occupancy Tenant
will keep said meter and installation equipment in good working order and
repair at Tenant's own cost and expense, in default of which Landlord may
cause such meter and equipment to be replaced or repaired and collect the
cost thereof from Tenant. Tenant agrees to pay for water consumed, as shown
on such meter, and when bills are rendered, and on default in making such
payment, Landlord may pay such charges and collect the same from Tenant. Any
such costs or expenses incurred, or payments made by Landlord for any of the
reasons or purposes hereinabove stated will be deemed to be additional rent
payable by Tenant and collectible by Landlord as such.
5. Landlord will provide janitor service to the Premises, provided the
same are used exclusively as offices, and are kept reasonably in order by
Tenant, and unless otherwise agreed to by Landlord and Tenant no one other
than persons approved by Landlord shall be permitted to enter the Premises
for such purposes of the Premises are not used exclusively as offices, they
will be kept clean and in order by Tenant, at Tenant's expense, and to the
satisfaction of Landlord, and by persons approved by Landlord. Tenant agrees
to pay to Landlord the cost of removal of any of Tenant's refuse and rubbish
to the extent that the same exceeds the refuse and rubbish usually attendant
upon the use of the Premises as offices.
6. Landlord reserves the right to stop service of the elevator, plumbing,
ventilation, air conditioning and electrical systems, when necessary, by reason
of accident or emergency or for repairs, alterations or improvements, when in
the judgment of Landlord such actions are desirable or necessary to be made,
until said repairs, alterations or improvements shall have been completed, and
Landlord will have no responsibility or liability for failure to supply elevator
facilities, plumbing, ventilating, air conditioning or electric service, when
prevented from so doing by strike or accident or by any cause beyond Landlord's
reasonable control, or by laws, rules, orders, ordinances, directions,
regulations or by reason of the requirements of any federal, state, county or
municipal authority or failure of gas, oil or other suitable fuel supply or
inability by exercise of reasonable diligence to obtain gas, oil or other
suitable fuel supply. It is expressly understood and agreed
EXHIBIT "E" - PAGE 2.
<PAGE>
that any covenants on Landlord's part to furnish any services pursuant to any
of the terms, covenants, conditions, provisions or agreements of this Lease,
or to perform any act or thing for the benefit of Tenant, will not be deemed
breached if Landlord is unable to furnish or perform the same by virtue of a
strike or labor trouble or any other cause whatsoever beyond Landlord's
control.
EXHIBIT "E" - PAGE 3.
<PAGE>
ESTOPPEL CERTIFICATE
The undersigned, __________________________________________ ("Tenant"),
hereby certifies to ________________________________ as follows:
1. Attached hereto is a true, correct and complete copy of that
certain lease dated _________________, 19____, between
______________________________________________, as Landlord and Tenant (the
"Lease"), regarding the premises located at __________________________________
____________________________________________________________ (the "Premises").
The Lease is now in full force and effect and has not been amended, modified
or supplemented, except as set forth in PARAGRAPH 4 below.
2. The Term of the Lease commenced on ____________, 19___
3. The Term of the Lease shall expire on _________, 19___
4. The Lease has: [INITIAL ONE]
(____) not been amended, modified, supplemented, extended, renewed or
assigned.
(____) been amended, modified, supplemented, extended, renewed or assigned
by the following described terms or agreements, copies of which are
attached hereto:
________________________________________________________________
________________________________________________________________
________________________________________________________________
5. Tenant has accepted and is now in possession of the Premises.
6. Tenant and Landlord acknowledge that Landlord's interest in the Lease
will be assigned to __________________________________________________
__________________________________________________________ and that no
modification, adjustment, revision or cancellation of the Lease or
amendments thereto shall be effective unless written consent of ______
_________________________________________________________ is obtained,
and that until further notice, payments under the Lease may continue
as heretofore.
7. The amount of Monthly Base Rent is $__________________
The amount of the security deposit (if any) is $____________________
EXHIBIT "F" - PAGE 1.
<PAGE>
No other security deposits have been made except as follows:________
______________________________________________________________________________
9. Tenant is paying the full lease rental which has been paid in full as
of the date hereof. No rent or other charges under the Lease have been paid for
more than thirty (30) days in advance of its due date except as
follows:_______________________________________________________________________
_______________________________________________________________________________
10. All work required to be performed by Landlord under the Lease has been
completed except as follows: __________________________________________________
_______________________________________________________________________________
11. There are no defaults on the part of the Landlord or Tenant under the
Lease except as follows: ______________________________________________________
_______________________________________________________________________________
12. Neither Landlord nor Tenant has any defense as to its obligations
under the Lease and claims no set-off or counterclaim against the other party
except as follows:_____________________________________________________________
_______________________________________________________________________________
13. Tenant has no right to any concession (rental or otherwise) or similar
compensation in connection with renting the space it occupies other than as
provided in the Lease except as follows:_______________________________________
______________________________________________________________________________.
All provisions of the Lease and the amendments thereto (if any) referred to
above are hereby ratified
The foregoing certification is made with the knowledge that
___________________________________ is about to fund a loan to Landlord [or
_________________________________________ is about to purchase the Development
(or part thereof) from Landlord] and that _____________________________________
is relying upon the representations herein made by Tenant in funding such loan
[or in purchasing the Development (or part thereof)].
IN WITNESS WHEREOF, this certificate has been duly executed and delivered
by the authorized officers of the undersigned tenant as of _____________, 19___.
TENANT: [SIGNATURE BLOCK]
EXHIBIT "F" - PAGE 2.
<PAGE>
[SAMPLE ONLY]
[NOT FOR EXECUTION]
EXHIBIT "F" - PAGE 3.
<PAGE>
RULES AND REGULATIONS
A. GENERAL RULES AND REGULATIONS. The following rules and regulations
govern the use of the Building and the Development Common Areas. Tenant will
be bound by such rules and regulations and agrees to cause Tenant's
Authorized Users, its employees, subtenants, assignees, contractors,
suppliers, customers and invitees to observe the same.
1. Except as specifically provided in the Lease to which these Rules
and Regulations are attached, no sign, placard, picture, advertisement, name
or notice may be installed or displayed on any part of the outside or inside
of the Building or the Development without the prior written consent of
Landlord. Landlord will 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 are to be printed,
painted, affixed or inscribed at the expense of Tenant and under the
direction of Landlord by a person or company designated or approved by
Landlord.
2. If Landlord objects in writing to any curtains, blinds, shades,
screens or hanging plants or other similar objects attached to or used in
connection with any window or door of the Premises, or placed on any
windowsill, which is visible from the exterior of the Premises, Tenant will
immediately discontinue such use. Tenant agrees not to place anything against
or near glass partitions or doors or windows which may appear unsightly from
outside the Premises including from within any interior common areas
3. Tenant will not obstruct any sidewalks, halls, passages, exits,
entrances, elevators, escalators, or stairways of the Development. The halls,
passages, exits, entrances, elevators and stairways are not open to the
general public, but are open, subject to reasonable regulations, to Tenant's
business invitees. Landlord will in all cases retain the right to control and
prevent access thereto of all persons whose presence in the reasonable
judgment of Landlord would be prejudicial to the safety, character,
reputation and interest of the Development and its tenants, provided that
nothing herein contained will 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 or unlawful activities. No tenant
and no employee or invitee of any tenant will go upon the roof of the
Building.
4. Tenant will not obtain for use on the Premises ice, drinking water,
food, food vendors, beverage, towel or other similar services or accept
barbering or bootblacking service upon the Premises, except at such
reasonable hours and under such reasonable regulations as may be fixed by
Landlord. Landlord expressly reserves the right to absolutely prohibit
solicitation, canvassing, sales and displays of products, goods and wares in
all portions of the Development except for such activities as may be
expressly requested by a tenant and conducted solely within such requesting
tenant's premises. Landlord reserves the right to restrict and regulate the
use of the common areas of the Development and Building by invitees of
tenants providing services to tenants on a periodic or daily basis including
food and beverage vendors. Such restrictions may include limitations on time,
place, manner and duration of access to a tenant's premises for such purposes
Without limiting the foregoing, Landlord may require that such parties use
service elevators, halls,
EXHIBIT "G" - PAGE 1.
<PAGE>
passageways and stairways for such purposes to preserve access within the
building for tenants and the general public.
5. Landlord reserves the right to require tenants to periodically
provide Landlord with a written list of any and all business invitees which
periodically or regularly provide goods and services to such tenants at the
premises. Landlord reserves the right to preclude all vendors from entering
or conducting business within the Building and the Development if such
vendors are not listed on a tenant's list of requested vendors.
6. Landlord reserves the right to exclude from the Building between
the hours of 6:00 p.m. and 8:00 a.m. the following business 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 or has a pass or is properly
identified. Tenant will be responsible for all persons for whom it requests
passes and will be liable to Landlord for all acts of such persons. Landlord
will 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.
7. The directory of the Building or the Development will be provided
exclusively for the display of the name and location of tenants only and
Landlord reserves the right to exclude any other names therefrom.
8. All cleaning and janitorial services for the Development and the
Premises will be provided exclusively through Landlord, and except with the
written consent of Landlord, no person or persons other than those approved
by Landlord will be employed by Tenant or permitted to enter the Development
for the purpose of cleaning the same. Tenant will not cause any unnecessary
labor by carelessness or indifference to the good order and cleanliness of
the Premises.
9. 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 any new additional lock or bolt on
any door of the Premises. Tenant, upon the termination of its tenancy, will
deliver to Landlord the keys to all doors which have been furnished to
Tenant, and in the event of loss of any keys so furnished, will pay Landlord
therefor.
10. If Tenant requires telegraphic, telephonic, burglar alarm,
satellite dishes, antennae or similar services, it will first obtain
Landlord's approval, and comply with, Landlord's reasonable rules and
requirements applicable to such services, which may include separate
licensing by, and fees paid to, Landlord.
11. Freight elevator(s) will be available for use by all tenants in the
Building, subject to such reasonable scheduling as Landlord, in its
discretion, deems 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. Tenant's initial move in and
EXHIBIT "G" - PAGE 2.
<PAGE>
subsequent deliveries of bulky items, such as furniture, safes and
similar items will, unless otherwise agreed in writing by Landlord, be made
during, the hours of 6:00 p.m. to 6:00 a.m. or on Saturday or Sunday.
Deliveries during normal office hours shall be limited to normal office
supplies and other small items. No deliveries will be made which impede or
interfere with other tenants or the operation of the Building.
12. Tenant will 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 will have the right to prescribe the
weight, size and position of all equipment, materials, furniture or other
property brought into the Building. Heavy objects will, if considered
necessary by Landlord, stand on such platforms as determined by Landlord to
be necessary to properly distribute the weight, which platforms will be
provided at Tenant's expense. Business machines and mechanical equipment
belonging to Tenant, which cause noise or vibration that may be transmitted
to the structure of the building or to any space therein to such a degree as
to be objectionable to any tenants in the Building or Landlord, are to be
placed and maintained by Tenant, at Tenant's expense, on vibration
eliminators or other devises sufficient to eliminate noise or vibration. The
persons employed to move such equipment in or out of the Building must be
reasonably 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 will be repaired at the expense of Tenant.
13. Tenant will 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 will 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 will Tenant bring into
or keep in or about the Premises any birds or animals.
14. Tenant will not use any method of heating or air conditioning other
than that supplied by Landlord without Landlord's prior written consent.
15. Tenant will not waste electricity, water or air conditioning and
agrees to cooperate fully with Landlord to assure the most effective
operation of the Building's heating and air conditioning and to comply with
any governmental energy-saving rules, laws or regulations of which Tenant has
actual notice, and will refrain from attempting to adjust controls. Tenant
will keep corridor doors closed, and shall keep all window coverings pulled
down.
16. Landlord reserves the right, exercisable without notice and without
liability to Tenant, to change the name and street address of the Building.
Without the written consent of Landlord, Tenant will not use the name of the
Building or the Development in connection with or in promoting or advertising
the business of Tenant except as Tenant's address.
17. Tenant will close and lock the doors of its Premises and entirely
shut off all water faucets or other water apparatus, and lighting or gas
before Tenant and its employees leave the Premises. Tenant will be
EXHIBIT "G" - PAGE 3.
<PAGE>
responsible for any damage or injuries sustained by other tenants or
occupants of the Building or by Landlord for noncompliance with this rule.
18. The toilet rooms, toilets, urinals, wash bowls and other apparatus
will 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 any
violation of this rule will be borne by the tenant who, or whose employees or
invitees, break this rule. Cleaning of equipment of any type is prohibited.
Shaving is prohibited.
19. Tenant will not sell, or permit the sale at retail of newspapers,
magazines, periodicals, theater tickets or any other goods or merchandise to
the general public in or on the Premises. Tenant will not make any
room-to-room solicitation of business from other tenants in the Development.
Tenant will not use the Premises for any business or activity other than that
specifically provided for in this Lease. Canvassing, soliciting and
distribution of handbills or any other written material, and peddling in the
Development are prohibited, and Tenant will cooperate with Landlord to
prevent such activities.
20. Tenant will not install any radio or television antenna,
loudspeaker, satellite dishes or other devices on the roof(s) or exterior
walls of the Building or the Development. Tenant will not interfere with
radio or television broadcasting or reception from or in the Development or
elsewhere.
21. Except for the ordinary hanging of pictures and wall decorations,
Tenant will 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 in accordance with the provisions of the Lease pertaining to
alterations. Landlord reserves the right to direct electricians as to where
and how telephone and telegraph wires are to be introduced to the Premises.
Tenant will not cut or bore holes for wires. Tenant will 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.
22. Tenant will not install, maintain or operate upon the Premises any
vending machines without the written consent of Landlord.
23. Landlord reserves the right to exclude or expel from the
Development 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 will store all its trash and garbage within its Premises or
in other facilities provided by Landlord. Tenant will 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 is to be made in accordance with directions issued from time to time
by Landlord.
25. The Premises will not be used for lodging or 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
EXHIBIT "G" - PAGE 4.
<PAGE>
improper, immoral or objectionable purpose. No cooking will be done or
permitted on the Premises without Landlord's consent, except the use by
Tenant of Underwriters' Laboratory approved equipment for brewing coffee,
tea, hot chocolate and similar beverages shall be permitted, and the use of a
microwave oven for employees use will be permitted, provided that such
equipment and use is in accordance with all applicable federal, state, county
and city laws, codes, ordinances, rules and regulations.
26. Neither Tenant nor any of its employees, agents, customers and
invitees may use in any space or in the public halls of the Building or the
Development any hand truck except those equipped with rubber tires and side
guards or such other material-handling equipment as Landlord may approve.
Tenant will not bring, any other vehicles of any kind into the Building.
27. Tenant agrees to comply with all safety, fire protection and
evacuation procedures and regulations established by Landlord or any
governmental agency.
28. 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.
29. To the extent Landlord reasonably deems it necessary to exercise
exclusive control over any portions of the Common Areas for the mutual
benefit of the tenants in the Building or the Development, Landlord may do so
subject to reasonable, non-discriminatory additional rules and regulations.
30. Landlord may prohibit smoking in the Building and may require
Tenant and any of its employees, agents, clients, customers, invitees and
guests who desire to smoke, to smoke within designated smoking areas within
the Development.
31. Tenant's requirements will be attended to only upon appropriate
application to Landlord's asset management office for the Development by an
authorized individual of Tenant. Employees of Landlord will 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.
32. These Rules and Regulations are in addition to, and will not be
construed to in any way modify or amend, in whole or in part, the terms,
covenants, agreements and conditions of the Lease. 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 will 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 Development.
33. Landlord reserves the right to make such other and reasonable and
nondiscriminatory Rules and Regulations as, in its judgment, may from time to
time be needed for safety and security, for care and cleanliness of the
Development and for the preservation of good order therein. Tenant agrees to
abide by all such Rules and Regulations herein above stated and any
additional reasonable and non-discriminatory rules
EXHIBIT "G" - PAGE 5.
<PAGE>
and regulations which are adopted. Tenant is responsible for the observance
of all of the foregoing rules by Tenant's employees, agents, clients,
customers, invitees and guests.
B. PARKING RULES AND REGULATIONS. The following rules and regulations
govern the use of the parking facilities which serve the Building. Tenant
will be bound by such rules and regulations and agrees to cause its
employees, subtenants, assignees, contractors, suppliers, customers and
invitees to observe the same:
1. Tenant will not permit or allow any vehicles that belong to or are
controlled by Tenant or Tenant's employees, subtenants, customers or invitees
to be loaded, unloaded or parked in areas other than those designated by
Landlord for such activities. No vehicles are to be left in the parking areas
overnight and no vehicles are to be parked in the parking areas other than
normally sized passenger automobiles, motorcycles and pick-up trucks. No
extended term storage of vehicles is permitted.
2. Vehicles must be parked entirely within painted stall lines of a
single parking stall.
3. All directional signs and arrows must be observed.
4. The speed limit within all parking areas shall be five (5) miles
per hour.
5. Parking is prohibited:
(a) in areas not striped for parking;
(b) in aisles or on ramps;
(c) where "no parking" signs are posted,
(d) in cross-hatched areas; and
(e) in such other areas as may be designated from time to time by
Landlord or Landlord's parking operator.
6. Landlord reserves the right, without cost or liability to Landlord,
to tow any vehicle if such vehicle's audio theft alarm system remains engaged
for an unreasonable period of time.
7. Washing, waxing, cleaning or servicing of any vehicle in any area
not specifically reserved for such purpose is prohibited.
8. Landlord may refuse to permit any person to park in the parking
facilities who violates these rules with unreasonable frequency, and any
violation of these rules shall subject the violator's car to removal, at such
car owner's expense. Tenant agrees to use its best efforts to acquaint its
employees, subtenants, assignees, contractors, suppliers, customers and
invitees with these parking provisions, rules and regulations.
EXHIBIT "G" - PAGE 6.
<PAGE>
9. Parking stickers, access cards, or any other device or form of
identification supplied by Landlord as a condition of use of the parking
facilities shall remain the property of Landlord. Parking identification
devices, if utilized by Landlord, must be displayed as requested and may not
be mutilated in any manner. The serial number of the parking identification
device may not be obliterated. Parking identification devices, if any, are
not transferable and any device in the possession of an unauthorized holder
will be void. Landlord reserves the right to refuse the sale of monthly
stickers or other parking identification devices to Tenant or any of its
agents, employees or representatives who willfully refuse to comply with
these rules and regulations and all unposted city, state or federal
ordinances, laws or agreements.
10. Loss or theft of parking identification devices or access cards
must be reported to the management office in the Development immediately, and
a lost or stolen report must be filed by the Tenant or user of such parking
identification device or access card at the time. Landlord has the right to
exclude any vehicle from the parking facilities that does not have a parking
identification device or valid access card. Any parking identification
device or access card which is reported lost or stolen and which is
subsequently found in the possession of an unauthorized person will be
confiscated and the illegal holder will be subject to prosecution.
11. All damage or loss claimed to be the responsibility of Landlord
must be reported, itemized in writing and delivered to the management office
located within the Development within ten (10) business days after any
claimed damage or loss occurs. Any claim not so made is waived. Landlord is
not responsible for damage by water or fire, or for the acts or omissions of
others, or for articles left in vehicles. In any event, the total liability
of Landlord, if any, is limited to Two Hundred Fifty Dollars ($250.00) for
all damages or loss to any car. Landlord is not responsible for loss of use.
12. The parking operators, managers or attendants are not authorized to
make or allow any exceptions to these rules and regulations, without the
express written consent of Landlord. Any exceptions to these rules and
regulations made by the parking operators, managers or attendants without the
express written consent of Landlord will not be deemed to have been approved
by Landlord.
13. Landlord reserves the right, without cost or liability to Landlord,
to tow any vehicles which are used or parked in violation of these rules and
regulations.
14. Landlord reserves the right from time to time to modify and/or
adopt such other reasonable and non-discriminatory rules and regulations for
the parking facilities as it deems reasonably necessary for the operation of
the parking facilities.
LANDLORD RESERVES THE RIGHT TO ESTABLISH AND CHANGE PARKING FEES AND TO MODIFY
AND/OR ADOPT SUCH OTHER REASONABLE AND NON-DISCRIMINATORY RULES AND REGULATIONS
FOR THE PARKING FACILITIES AS IT DEEMS NECESSARY FOR THE OPERATION OF THE
PARKING FACILITIES. LANDLORD MAY REFUSE TO PERMIT ANY PERSON WHO VIOLATES THESE
RULES TO PARK IN THE PARKING FACILITIES, AND ANY VIOLATION OF THE RULES SHALL
SUBJECT THE CAR TO REMOVAL.
EXHIBIT "G" - PAGE 7.
<PAGE>
TENANT'S INSURANCE REQUIREMENTS
This outlines the insurance requirements of your Lease. To assure
compliance with these terms, we suggest you send a copy of this Exhibit to
your insurer or agent. Initial Certificates must be provided to Landlord
thirty (30) days after execution of the Lease, renewals ten (10) days before
expiration.
1. Comprehensive or Commercial General Liability Insurance:
$000,000 Combined Single Limit. each occurrence
$000,000 Aggregate (minimum) this location
$000,000 Products/Completed Operations Aggregate
$50,000 Fire Legal Liability Limit, per fire
Bodily Injury, Property Damage, Personal Injury and Advertising
Injury; Blanket Contractual Liability; Products and Completed
Operations Liability, Landlord as an Additional Insured; Severability
of Interest, permitting cross liability among insureds; provision
stating that tenant's insurance is primary and non-contributing with
any insurance carried by Landlord.
2. Tenant's Property Insurance:
All Risks coverage of Property owned by Tenant or for which the Tenant
is legally liable; replacement cost basis, covering no less than 90%
of all values.
3. Tenant's Business Interruption Insurance (if requested):
All Risks coverage of operations at leased premises; covering
one-years business interruption due to insured peril.
4. Tenant's Workers' Compensation and Employer's Liability Insurance (if
requested):
Statutory Limits and terms required by state of leased premises;
$500,000 Employer's Liability Limit.
5. Tenant's Automobile Insurance (if requested):
$500,000 Combined Limit per accident; covering all owned,
non-owned, hired autos (Symbol 1 - any auto).
All insurance is to be with licensed insurers having a Best's rating of "A
10" or better, and must include the following:
Waiver of Subrogation in favor of Landlord in accordance with Lease
Addendum.
EXHIBIT "H" - PAGE 1.
<PAGE>
Thirty (30) day pre-notice of cancellation/non renewal to Landlord
SEND CERTIFICATE TO:
MIP Properties, Inc.
2020 Santa Monica Boulevard
Suite 480
Santa Monica, California 90404
Attention: Philip H. Bowman
Janss Corporation
250 Pacific Avenue
Suite 321
Long Beach, CA 90802
PLEASE INCLUDE:
Tenant Name:________________________________________________
Premises Location:__________________________________________
Lease Execution Date:_______________________________________
EXHIBIT "H" - PAGE 2.
<PAGE>
LEASE ADDENDUM
This lease addendum ("Lease Addendum") is attached to and made a part of
that certain lease dated as of July 26, 1994 (the "Lease") by and between MIP
PROPERTIES, INC., a Maryland Corporation ("Landlord") and NEPTUNE SYSTEMS,
INC., a Pennsylvania Corporation ("Tenant"). If there is any conflict or
inconsistency between this Lease Addendum and the other provisions of the
Lease, then the provisions of this Lease Addendum shall control and govern in
the interpretation and construction of the Lease.
ADDENDUM TO PARAGRAPH 1(m) ENTITLED "BASIC LEASE TERMS - ADJUSTMENT TO
MONTHLY BASE RENT". Anything contained in the Lease to the contrary
notwithstanding, should the cost of completing the tenant improvements to the
Premises as provided for in the Lease which are incurred by Landlord on
behalf of Tenant exceed the aggregate Tenant Improvement Allowance as
provided in Paragraph 1(q) of this Lease, then the amount by which the cost
of the tenant improvements exceed the aggregate Tenant Improvement Allowance
shall be divided by thirty (30) and the quotient resulting therefrom shall
then be divided by 4,000 square feet and the quotient resulting therefrom
shall be then added to the Monthly Base Rent as set forth for each month in
Paragraph 1(m) hereof and the sum resulting therefrom shall be deemed the
Monthly Base Rent under this Lease.
ADDENDUM TO PARAGRAPH 4(a) ENTITLED "DELIVERY OF POSSESSION". Anything
contained in the Lease to contrary notwithstanding, if Landlord is unable to
deliver possession of the Premises to Tenant in accordance with the Work
Letter Agreement attached as Exhibit "C", Landlord shall not be subject to
any liability for the failure to so deliver possession, and such failure
shall not affect the validity of this Lease nor the obligations of Tenant
hereunder, nor extend the Term; provided however, the Monthly Base Rent
accruing from and after the Commencement Date, shall be abated in an amount
equal to two (2) days rent for each one (1) day by which the date of delivery
of possession of the Premises exceeds the date of delivery of possession of
the Premises called for in the Work Letter Agreement attached as Exhibit "C".
If and to the extent that Landlord is unable to deliver timely possession of
the Premises to Tenant in accordance with the Work Letter Agreement due to
delays by Tenant or failure by Tenant to timely provide Landlord with plans,
specifications, information, approvals, consents or the like, as required in
accordance with the Work Letter Agreement, or under this Lease, then delivery
of the Premises shall be the date on which possession would have been
delivered but for the delays and/or failures of Tenant and the Monthly Base
Rent shall accrue in accordance with the Commencement Date as provided in the
Lease and Tenant shall not be entitled to any abatement of rent. In addition,
if and to the extent that Landlord is unable to deliver timely possession of
the Premises to Tenant in accordance with the Work Letter Agreement due to
delays caused by any law, regulation, ordinance, interpretation or order of
any public agency or insurance carrier or landlord's inability
(notwithstanding Landlord's due diligence) to obtain building permits or
other delays beyond the reasonable control of Landlord, or delays due to
<PAGE>
special lead items requested by Tenant, Tenant shall not be entitled to any
abatement of rent for any delays and/or failures resulting therefrom.
If Landlord does not deliver possession of the Premises to Tenant on or
before October 3, 1994, for reasons other than (i) delays by Tenant, (ii)
Tenant's failure to timely provide Landlord with plans, specifications,
information, approvals, consents or the like as required by the Work Letter
Agreement, (iii) delays due to special lead items requested by Tenant, (iv)
delays caused by any law, regulation, ordinance, interpretation or order of
any public agency or insurance carrier, (v) delays caused landlord's
inability (notwithstanding Landlord's due diligence) to obtain building
permits, or (vi) other delays beyond the reasonable control of Landlord, then
Tenant may terminate this Lease by giving notice to Landlord on or before
October 10, 1994 and, in such event, neither party shall have any further
duty, liability or responsibility to the other on account of this Lease from
and after the date notice is given to Landlord of Tenant's termination of
this Lease.
ADDENDUM TO PARAGRAPH 22(e) ENTITLED "WAIVER OF SUBROGATION". Anything
contained in the Lease to the contrary notwithstanding, any policy or
policies of fire, extended coverage or similar casualty insurance or of
liability insurance that either party obtains in connection with the Premises
or Tenant's personal property therein shall, to the extent the same can be
obtained without undue expense, include a clause or endorsement denying the
insurer any rights of subrogation against the other party to the extent
rights have been waived by the insured prior to the occurrence of injury or
loss. Landlord and Tenant waive any rights of recovery against the other for
injury or loss due to hazards covered by insurance containing such a waiver
of subrogation clause or endorsement to the extent of the injury or loss
covered thereby.
"LANDLORD"
MIP PROPERTIES, INC.
a Maryland Corporation
Dated: 8-4-94 By: /s/ [illegible]
-------------------- ---------------------------------
Its: Vice President
--------------------------------
"TENANT"
NEPTUNE SYSTEMS, INC.
a Pennsylvania Corporation
Dated: 8-1-94 By: /s/ [illegible]
-------------------- ---------------------------------
Its: President
--------------------------------
<PAGE>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
among
EXE TECHNOLOGIES, INC.,
GENERAL ATLANTIC PARTNERS 41, L.P.,
GAP COINVESTMENT PARTNERS, L.P.,
MSD CAPITAL L.P.,
TRIPLE MARLIN INVESTMENTS LLC,
ROTHKO INVESTMENTS LLC
and
THE STOCKHOLDERS NAMED HEREIN
---------------------------
Dated as of: July 10, 1998
---------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. General; Securities Subject to this Agreement . . . . . . . . . . . . . 7
(a) Grant of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(b) Registrable Securities . . . . . . . . . . . . . . . . . . . . . . 7
(c) Holders of Registrable Securities . . . . . . . . . . . . . . . . . 7
3. Demand Registration . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(a) Request for Demand Registration . . . . . . . . . . . . . . . . . . 7
(b) Incidental or "Piggy-Back" Rights with Respect to a Demand
Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(c) Effective Demand Registration . . . . . . . . . . . . . . . . . . . 8
(d) Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(e) Underwriting Procedures . . . . . . . . . . . . . . . . . . . . . . 9
(f) Selection of Underwriters . . . . . . . . . . . . . . . . . . . . . 10
4. Incidental or "Piggy-Back" Registration . . . . . . . . . . . . . . . . 10
(a) Request for Incidental Registration . . . . . . . . . . . . . . . . 10
(b) Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5. Form S-3 Registration . . . . . . . . . . . . . . . . . . . . . . . . . 11
(a) Request for a Form S-3 Registration . . . . . . . . . . . . . . . . 11
(b) Form S-3 Underwriting Procedures. . . . . . . . . . . . . . . . . . 12
(c) Limitations on Form S-3 Registrations . . . . . . . . . . . . . . . 12
(d) Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(e) No Demand Registration . . . . . . . . . . . . . . . . . . . . . . 13
6. Holdback Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(a) Restrictions on Public Sale by Designated Holders . . . . . . . . . 13
(b) Restrictions on Public Sale by the Company . . . . . . . . . . . . 13
7. Registration Procedures . . . . . . . . . . . . . . . . . . . . . . . . 14
(a) Obligations of the Company . . . . . . . . . . . . . . . . . . . . 14
(b) Seller Information . . . . . . . . . . . . . . . . . . . . . . . . 17
(c) Notice to Discontinue . . . . . . . . . . . . . . . . . . . . . . . 17
(d) Registration Expenses . . . . . . . . . . . . . . . . . . . . . . . 18
-i-
<PAGE>
8. Indemnification; Contribution . . . . . . . . . . . . . . . . . . . . . 18
(a) Indemnification by the Company . . . . . . . . . . . . . . . . . . 18
(b) Indemnification by Designated Holders . . . . . . . . . . . . . . . 19
(c) Conduct of Indemnification Proceedings . . . . . . . . . . . . . . 19
(d) Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9. Rule 144 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
10. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(a) Recapitalizations, Exchanges, etc . . . . . . . . . . . . . . . . . 21
(b) No Inconsistent Agreements . . . . . . . . . . . . . . . . . . . . 21
(c) Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(d) Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . 21
(e) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(f) Successors and Assigns; Third Party Beneficiaries . . . . . . . . . 24
(g) Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(h) Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(i) Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(j) Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(k) Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 25
(l) Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . 25
-ii-
<PAGE>
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
THIS AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT is hereby made
on this 10th day of July, 1998 by and among EXE Technologies, Inc., a
Delaware corporation (the "Company"), General Atlantic Partners 41, L.P., a
Delaware limited partnership ("GAP LP"), GAP Coinvestment Partners, L.P., a
New York limited partnership ("GAP Coinvestment"), MSD Capital L.P., a
Delaware limited partnership ("MSD"), Triple Marlin Investments LLC, a
Delaware limited liability company, ("Triple Marlin"), Rothko Investments
LLC, a Delaware limited liability company ("Rothko"), Lyle Baack ("Baack"),
and Nigel Bahadur, Adam Belsky and Raymond Hood (the "Neptune Stockholders,"
and collectively with Baack, the "Major Stockholders").
PRELIMINARY STATEMENTS
A. The Company, GAP LP, GAP Coinvestment, and the Major Stockholders are
parties to that certain Registration Rights Agreement, dated as of September 15,
1997 (the "Prior Registration Rights Agreement").
B. GAP LP and GAP Coinvestment own all of the issued and outstanding
shares of the Company's Series A Convertible Participating Preferred Stock, par
value $0.01 per share (the "Series A Preferred Stock"), and of the Company's
Series B Convertible Preferred Stock, par value $0.01 per share (the "Series B
Preferred Stock").
C. The Major Stockholders own a majority of the issued and outstanding
shares of the Company's Class A Common Stock, (as defined below).
D. Each of MSD, Triple Marlin and Rothko have agreed to purchase shares
of the Company's Series C Convertible Preferred Stock, par value $0.01 per share
(the "Series C Preferred Stock"), pursuant to that certain Series C Preferred
Stock Purchase Agreement dated of even date herewith (the "Series C Stock
Purchase Agreement").
E. Concurrently with the execution and delivery of this Agreement, the
Company, GAP LP, GAP Coinvestment, the Major Stockholders, MSD, Triple Marlin
and Rothko are entering into an Amended and Restated Stockholders' Agreement
(the "Restated Stockholders' Agreement"), pursuant to which the parties have
agreed, among other things, to certain first offer, tag-along and preemptive
rights and corporate governance rights and obligations.
F. Each of the Company, GAP LP, GAP Coinvestment and the Major
Stockholders deems it desirable (a) to enter into this Agreement to induce MSD,
Triple Marlin
-1-
<PAGE>
and Rothko to purchase the shares of Series C Preferred Stock pursuant to the
Series C Stock Purchase Agreement and to enter into the Restated
Stockholders' Agreement, and (b) to amend and restate the Prior Registration
Rights Agreement.
IN CONSIDERATION of the foregoing and of the mutual covenants and
agreements set forth in this Agreement and for good and valuable consideration,
the receipt and adequacy of which is hereby acknowledged, the parties to this
Agreement, intending to be legally bound, hereby agree as follows:
1. DEFINITIONS. As used in this Agreement the following terms have
the meanings indicated:
"AFFILIATE" shall mean any Person who is an "affiliate" as
defined in Rule 12b-2 of the General Rules and Regulations under the Exchange
Act. The following shall be deemed to be Affiliates of GAP LP: (a) GAP LLC,
the members of GAP LLC and the limited partners of GAP LP; (b) any Affiliate of
GAP LLC, the members of GAP LLC and the limited partners of GAP LP; and (c) any
limited liability company or partnership a majority of whose members or
partners, as the case may be, are members, former members, consultants or key
employees of GAP LLC. GAP LP and GAP Coinvestment shall be deemed to be
Affiliates of one another. The following shall be deemed to be Affiliates of
MSD: (x) Michael Dell; (y) the limited partners of MSD LP; and (z) any Affiliate
of Michael Dell and the limited partners of MSD LP. The following shall be
deemed to be Affiliates of Triple Marlin: (I) the members of Triple Marlin; and
(II) any Affiliate of the members of Triple Marlin. The following shall be
deemed to be Affiliates of Rothko: (A) the members of Rothko; and (B) any
Affiliate of the members of Rothko. MSD, Triple Marlin and Rothko shall be
deemed to be Affiliates of one another.
"APPROVED UNDERWRITER" has the meaning set forth in Section 3(f)
of this Agreement.
"BAACK" has the meaning set forth in the recitals to this
Agreement.
"BOARD OF DIRECTORS" means the Company's Board of Directors.
"CLASS A COMMON STOCK" means the Company's Class A Common Stock,
par value $.01 per share, or any other equity securities of the Company into
which such securities are converted, reclassified, reconstituted or exchanged.
"CLASS B COMMON STOCK" means the Company's Class B Common Stock,
par value $.01 per share, or any other equity securities of the Company into
which such securities are converted, reclassified, reconstituted or exchanged.
-2-
<PAGE>
"CLOSING PRICE" means, with respect to the Registrable
Securities, as of the date of determination: (a) the closing price per share of
a Registrable Security on such date published in the WALL STREET JOURNAL or, if
no such closing price on such date is published in the WALL STREET JOURNAL, then
the average of the closing bid and asked prices on such date, as officially
reported on the principal national securities exchange (including, without
limitation, The Nasdaq Stock Market, Inc.) on which the Registrable Securities
are then listed or admitted to trading; (b) if the Registrable Securities are
not then listed or admitted to trading on any national securities exchange but
are designated as national market system securities by the NASD, then the last
trading price per share of a Registrable Security on such date; (c) if there
shall have been no trading on such date or if the Registrable Securities are not
so designated, then the average of the reported closing bid and asked prices of
the Registrable Securities on such date as shown by The Nasdaq Stock Market,
Inc. (or its successor) and reported by any member firm of the New York Stock
Exchange, Inc. selected by the Company; or (d) if none of (a), (b) or (c) is
applicable, then a market price per share reasonably determined in good faith by
the Board of Directors or, if such determination is not reasonably satisfactory
to the Designated Holder for whom such determination is being made, then by a
nationally recognized investment banking firm selected by the Company and such
Designated Holder, the expenses for which shall be borne equally by the Company
and such Designated Holder.
"COMPANY" has the meaning set forth in the preamble to this
Agreement.
"COMPANY UNDERWRITER" has the meaning set forth in Section 4(a)
of this Agreement.
"DELL STOCKHOLDERS" means MSD, Triple Marlin and Rothko and any
Affiliate thereof to which Registerable Securities are transferred in accordance
with Section 2.2 of the Restated Stockholders' Agreement.
"DEMAND REGISTRATION" has the meaning set forth in Section 3(a)
of this Agreement.
"DESIGNATED HOLDER" means each of the EXE Stockholders and the
General Atlantic Stockholders and the Dell Stockholders and any transferee of
any of them to whom Registrable Securities have been transferred in accordance
with the provisions of the Restated Stockholders' Agreement and Section 10(f) of
this Agreement, other than a transferee to whom such securities have been
transferred pursuant to a Registration Statement under the Securities Act or
Rule 144 or Regulation S under the Securities Act.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
-3-
<PAGE>
"EXE STOCKHOLDERS" means the Major Stockholders and any Permitted
Transferee (as defined in the Restated Stockholders' Agreement) thereof to
which Registrable Securities are transferred in accordance with Section 2.2 of
the Restated Stockholders' Agreement.
"GAP COINVESTMENT" has the meaning set forth in the preamble to
this Agreement.
"GAP LLC" means General Atlantic Partners, LLC, a Delaware
limited liability company and the general partner of GAP LP, and any successor
to such entity.
"GAP LP" has the meaning set forth in the preamble to this
Agreement.
"GENERAL ATLANTIC STOCKHOLDERS" means GAP LP, GAP Coinvestment
and any Affiliate thereof to which Registrable Securities are transferred in
accordance with Section 2.2 of the Restated Stockholders' Agreement.
"HOLDERS' COUNSEL" has the meaning set forth in Section 7(a)(i)
of this Agreement.
"INCIDENTAL REGISTRATION" has the meaning set forth in Section
4(a) of this Agreement.
"INDEMNIFIED PARTY" has the meaning set forth in Section 8(c) of
this Agreement.
"INDEMNIFYING PARTY" has the meaning set forth in Section 8(c) of
this Agreement.
"INITIAL PUBLIC OFFERING" means a firm commitment underwritten
initial public offering pursuant to an effective Registration Statement filed
under the Securities Act.
"INITIATING HOLDERS" has the meaning set forth in Section 3(a) of
this Agreement.
"INVESTOR STOCKHOLDERS" means, collectively, the Dell
Stockholders and the General Atlantic Stockholders.
"INSPECTOR" has the meaning set forth in Section 7(a)(viii) of
this Agreement.
-4-
<PAGE>
"IPO EFFECTIVENESS DATE" means the date upon which the Company
commences its Initial Public Offering.
"MAJOR STOCKHOLDERS" has the meaning set forth in the recitals to
this Agreement.
"MARKET PRICE" means, on any date of determination, the average
of the daily Closing Price of the Registrable Securities for the immediately
preceding thirty (30) days on which the national securities exchanges are open
for trading.
"NASD" has the meaning set forth in Section 7(a)(xiv) of this
Agreement.
"NEPTUNE STOCKHOLDERS" has the meaning set forth in the preamble
to this Agreement.
"PERSON" means any individual, firm, corporation, partnership,
limited liability company, trust, incorporated or unincorporated association,
joint venture, joint stock company, limited liability company, government (or an
agency or political subdivision thereof) or other entity of any kind, and shall
include any successor (by merger or otherwise) of such entity.
"PREFERRED STOCK" means, collectively, the Series A Preferred
Stock, the Series B Preferred Stock and the Series C Preferred Stock.
"RECORDS" has the meaning set forth in Section 7(a)(viii) of this
Agreement.
"REGISTRABLE SECURITIES" means each of the following: (a) any
and all shares of Class A Common Stock owned by the Designated Holders or issued
or issuable to a Designated Holder upon conversion of shares of Class B Common
Stock or Preferred Stock, including, without limitation, any shares of Class A
Common Stock issued or issuable upon conversion of any shares of preferred stock
acquired by any of the Designated Holders after the date hereof; (b) any other
shares of Class A Common Stock acquired or owned by any of the Designated
Holders prior to the IPO Effectiveness Date, or acquired or owned by any of the
Designated Holders after the IPO Effectiveness Date if such Designated Holder is
an Affiliate of the Company; and (c) any shares of Class A Common Stock or
voting common stock issued or issuable to any of the Designated Holders with
respect to shares of Class A Common Stock, Class B Common Stock or Preferred
Stock by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or
-5-
<PAGE>
other reorganization or otherwise and shares of Class A Common Stock or voting
common stock issuable upon conversion, exercise or exchange thereof.
"REGISTRATION EXPENSES" has the meaning set forth in Section 7(d)
of this Agreement.
"REGISTRATION STATEMENT" means a Registration Statement filed
pursuant to the Securities Act.
"RESTATED STOCKHOLDERS' AGREEMENT" has the meaning set forth in
the Preliminary Statements to this Agreement.
"S-3 INITIATING HOLDERS" has the meaning set forth in Section
5(a) of this Agreement.
"S-3 REGISTRATION" has the meaning set forth in Section 5(a) of
this Agreement.
"SEC" means the Securities and Exchange Commission or any similar
agency then having jurisdiction to enforce the Securities Act.
"SECURITIES ACT" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"SERIES A PREFERRED STOCK" has the meaning set forth in the
Preliminary Statements to this Agreement.
"SERIES B PREFERRED STOCK" has the meaning set forth in the
Preliminary Statements to this Agreement.
"SERIES C PREFERRED STOCK" has the meaning set forth in the
Preliminary Statements to this Agreement.
2. GENERAL; SECURITIES SUBJECT TO THIS AGREEMENT.
(a) GRANT OF RIGHTS. The Company hereby grants registration
rights to the EXE Stockholders, the Dell Stockholders and the General Atlantic
Stockholders upon the terms and conditions set forth in this Agreement.
(b) REGISTRABLE SECURITIES. For the purposes of this Agreement,
Registrable Securities will cease to be Registrable Securities when (i) a
Registration Statement
-6-
<PAGE>
covering such Registrable Securities has been declared effective under the
Securities Act by the SEC and such Registrable Securities have been disposed of
pursuant to such effective Registration Statement, (ii) the entire amount
of Registrable Securities proposed to be sold in a single sale, in the opinion
of counsel satisfactory to the Company and the Designated Holder, each in their
reasonable judgment, may be distributed to the public without any limitation as
to volume pursuant to Rule 144 (or any successor provision then in effect) under
the Securities Act or (iii) the Registrable Securities are proposed to be sold
or distributed by a Person not entitled to the registration rights granted by
this Agreement.
(c) HOLDERS OF REGISTRABLE SECURITIES. A Person is deemed to be
a holder of Registrable Securities whenever such Person owns of record
Registrable Securities, or holds an option to purchase, or a security
convertible into or exercisable or exchangeable for, Registrable Securities
whether or not such acquisition or conversion has actually been effected and
disregarding any legal restrictions upon the exercise of such rights. If the
Company receives conflicting instructions, notices or elections from two or more
Persons with respect to the same Registrable Securities, then the Company may
act upon the basis of the instructions, notice or election received from the
registered owner of such Registrable Securities. Registrable Securities
issuable upon exercise of an option or upon conversion of another security shall
be deemed outstanding for the purposes of this Agreement.
3. DEMAND REGISTRATION.
(a) REQUEST FOR DEMAND REGISTRATION. At any time after the IPO
Effectiveness Date, each of (i) the Investor Stockholders holding a majority of
the Registerable Securities held by the Investor Stockholders, acting as a group
through their written designee, and (ii) the EXE Stockholders holding a majority
of the Registerable Securities held by the EXE Stockholders, acting as a group
through their written designee (the "Initiating Holders") may make a written
request to the Company to register, under the Securities Act (other than
pursuant to a Registration Statement on Form S-4 or S-8 or any successor
thereto) and under the securities or "blue sky" laws of any jurisdiction
designated by such holder or holders (a "Demand Registration"), the number of
Registrable Securities stated in such request; PROVIDED, HOWEVER, that the
Company shall not be obligated to effect more than two (2) Demand Registrations
for the Investor Stockholders and two (2) Demand Registration for the EXE
Stockholders pursuant to this Section 3. For purposes of the preceding
sentence, two or more Registration Statements filed in response to one demand
shall be counted as one Registration Statement. If at the time of any request
to register Registrable Securities pursuant to this Section 3(a), the Company is
engaged in, or has fixed plans to engage in within thirty (30) days of the time
of such request, a registered public offering or is engaged in any other
activity which, in the good faith determination of the Board of Directors, would
be adversely affected by the requested registration to the material detriment of
the Company, then the Company may at its option direct that such request be
delayed for a reasonable period not in
-7-
<PAGE>
excess of three (3) months from the effective date of such offering or the date
of completion of such other material activity, as the case may be, such right to
delay a request to be exercised by the Company not more than once in any
one-year period. In addition, the Company shall not be required to effect any
registration within sixty (60) days after the effective date of any other
Registration Statement of the Company. Each request for a Demand Registration
by the Initiating Holders shall state the amount of the Registrable Securities
proposed to be sold and the intended method of disposition thereof. Upon a
request for a Demand Registration, the Company shall promptly take such steps as
are necessary or appropriate to prepare for the registration of the Registrable
Securities to be registered.
(b) INCIDENTAL OR "PIGGY-BACK" RIGHTS WITH RESPECT TO A DEMAND
REGISTRATION. Each of the Designated Holders (other than the Initiating
Holders) may offer its or his Registrable Securities under any Demand
Registration pursuant to this Section 3. Within ten (10) days after the receipt
from an Initiating Holder of a request for a Demand Registration, the Company
shall (i) give written notice thereof to all of the Designated Holders (other
than the Initiating Holders) and (ii) subject to Section 3(e), include in such
registration all of the Registrable Securities held by such Designated Holders
from whom the Company has received a written request for inclusion therein
within ten (10) days of the receipt by such Designated Holders of such written
notice referred to in clause (i) above. Each such request by such Designated
Holders shall specify the number of Registrable Securities proposed to
be registered and the intended method of disposition thereof. The failure of
any Designated Holder to respond within such 10-day period referred to in clause
(ii) above shall be deemed to be a waiver of such Designated Holder's rights
under this Section 3 with respect to such Demand Registration, PROVIDED that any
Designated Holder may waive its rights under this Section 3 prior to the
expiration of such 10-day period by giving written notice to the Company, with a
copy to the Initiating Holder.
(c) EFFECTIVE DEMAND REGISTRATION. The Company shall use its
best efforts to cause any such Demand Registration to become and remain
effective not later than ninety (90) days after it receives a request under
Section 3(a) hereof. A registration shall not constitute a Demand Registration
until it has become effective and remains continuously effective for the lesser
of (i) the period during which all Registrable Securities registered in the
Demand Registration are sold and (ii) 120 days; PROVIDED, HOWEVER, that a
registration shall not constitute a Demand Registration if (x) after such Demand
Registration has become effective, such registration or the related offer, sale
or distribution of Registrable Securities thereunder is interfered with by any
stop order, injunction or other order or requirement of the SEC or other
governmental agency or court for any reason not attributable to the Initiating
Holders and such interference is not thereafter eliminated or (y) the conditions
specified in the underwriting agreement, if any, entered into in connection with
such Demand Registration are not satisfied or waived, other than by reason of a
failure by the Initiating Holders.
-8-
<PAGE>
(d) EXPENSES. In any registration initiated as a Demand
Registration, the Company shall pay all Registration Expenses (other than
underwriting discounts and commissions) in connection therewith, whether or not
such Demand Registration becomes effective.
(e) UNDERWRITING PROCEDURES. If the Initiating Holders holding
a majority of the Registrable Securities held by all of the Initiating Holders
to which the requested Demand Registration relates so elect, the offering of
such Registrable Securities pursuant to such Demand Registration shall be in the
form of a firm commitment underwritten offering and the managing underwriter or
underwriters selected for such offering shall be the Approved Underwriter
selected in accordance with Section 3(f). In connection with any Demand
Registration under this Section 3 involving an underwriting, none of the
Registrable Securities held by any Designated Holder making a request for
inclusion of such Registrable Securities pursuant to Section 3(b) hereof shall
be included in such underwriting unless such Designated Holder accepts the terms
of the underwriting as agreed upon by the Company, the Initiating Holders and
the Approved Underwriter, and then only in such quantity as will not, in the
opinion of the Approved Underwriter, jeopardize the success of such offering by
the Initiating Holders. If the Approved Underwriter advises the Company in
writing that in its opinion the aggregate amount of such Registrable Securities
requested to be included in such offering is sufficiently large to have a
material adverse effect on the success of such offering, then the Company shall
include in such registration only the aggregate amount of Registrable Securities
that in the opinion of the Approved Underwriter may be sold without any such
material adverse effect and shall reduce the amount of Registrable Securities to
be included in such registration, FIRST as to the Company, SECOND as to the
Designated Holders (who are not Initiating Holders and who requested to
participate in such registration pursuant to Section 3(b) hereof) as a group, if
any, and THIRD as to the Initiating Holders as a group, pro rata within each
group based on the number of Registrable Securities included in the request for
Demand Registration.
(f) SELECTION OF UNDERWRITERS. If any Demand Registration or
S-3 Registration, as the case may be, of Registrable Securities is in the form
of an underwritten offering, the Initiating Holders or S-3 Initiating Holders,
as the case may be, holding a majority of the Registrable Securities held by all
such Initiating Holders or S-3 Initiating Holders shall select and obtain an
investment banking firm of national reputation to act as the managing
underwriter of the offering (the "Approved Underwriter"); PROVIDED, HOWEVER,
that the Approved Underwriter shall, in any case, be acceptable to the Company
in its reasonable judgment.
-9-
<PAGE>
4. INCIDENTAL OR "PIGGY-BACK" REGISTRATION.
(a) REQUEST FOR INCIDENTAL REGISTRATION. At any time after the
IPO Effectiveness Date, if the Company proposes to file a Registration Statement
under the Securities Act with respect to an offering by the Company for its own
account (other than a Registration Statement on Form S-4 or S-8 or any successor
thereto), then the Company shall give written notice of such proposed filing to
each of the Designated Holders of Registrable Securities at least thirty
(30) days before the anticipated filing date, and such notice shall describe the
proposed registration and distribution and offer such Designated Holders the
opportunity to register the number of Registrable Securities as each such holder
may request (an "Incidental Registration") PROVIDED, HOWEVER, that
notwithstanding the foregoing, the Neptune Stockholders may exercise their
rights to an Incidental Registration in respect of the Company's Initial Public
Offering for an aggregate number of shares not to exceed twenty percent (20%) of
the total number of Registrable Securities held by the Neptune Stockholders as a
group. The Company shall, and shall use its best efforts (within ten (10) days
of the notice provided for in the preceding sentence) to cause the managing
underwriter or underwriters of a proposed underwritten offering (the "Company
Underwriter") to permit each of the Designated Holders who have requested in
writing to participate in the Incidental Registration to include its or his
Registrable Securities in such offering on the same terms and conditions as the
securities of the Company included therein. In connection with any Incidental
Registration under this Section 4(a) involving an underwriting, the Company
shall not be required to include any Registrable Securities in such underwriting
unless the holders thereof accept the terms of the underwriting as agreed upon
between the Company and the Company Underwriter, and then only in such quantity
as will not, in the opinion of the Company Underwriter, jeopardize the success
of the offering by the Company. If in the written opinion of the Company
Underwriter the registration of all or part of the Registrable Securities which
the Designated Holders have requested to be included would materially adversely
affect such offering, then the Company shall be required to include in such
Incidental Registration, to the extent of the amount that the Company
Underwriter believes may be sold without causing such adverse effect, FIRST, all
of the securities to be offered for the account of the Company; SECOND, in
connection with an Incidental Registration with respect to the Company's Initial
Public Offering, 20% of the Registrable Securities to be offered for the
accounts of the Neptune Stockholders as a group pursuant to this Section 4, pro
rata within such group based on the number of such Registrable Securities
included in the request for such Incidental Registration; THIRD, the Registrable
Securities to be offered for the account of the Designated Holders (including
the Registrable Securities of the Neptune Stockholders other than those, if any,
included in such Incidental Registration pursuant to the immediately preceding
clause) pursuant to this Section 4, pro rata based on the amount recommended by
the Company Underwriter; and FOURTH, any other securities requested to be
included in such underwriting.
-10-
<PAGE>
(b) EXPENSES. The Company shall bear all Registration Expenses
(other than underwriting discounts and commissions) in connection with any
Incidental Registration pursuant to this Section 4, whether or not such
Incidental Registration becomes effective.
5. FORM S-3 REGISTRATION.
(a) REQUEST FOR A FORM S-3 REGISTRATION. Notwithstanding the
limitations on the obligations of the Company set forth in Section 3(a) of this
Agreement, in the event that the Company shall receive from (i) the Investor
Stockholders holding a majority of the Registerable Securities held by the
Investor Stockholders, acting as a group through their written designee, or (ii)
the EXE Stockholders holding a majority of the Registerable Securities held by
the EXE Stockholders, acting as a group through their written designee (the "S-3
Initiating Holders") a written request that the Company register, under the
Securities Act and the securities and "blue sky" laws of any jurisdiction
reasonably designated by such holder or holders, on Form S-3 (or any successor
form then in effect) (an "S-3 Registration"), all or a portion of the
Registrable Securities owned by such S-3 Initiating Holders, the Company shall
give written notice of such request to all of the Designated Holders (other than
the S-3 Initiating Holders) at least thirty (30) days before the anticipated
filing date of such Form S-3, and such notice shall describe the proposed
registration and offer such Designated Holders the opportunity to register the
number of Registrable Securities as each such Designated Holder may request in
writing to the Company, given within fifteen (15) days after their receipt from
the Company of the written notice of such registration. The Company shall (i)
take such steps as are necessary or appropriate to prepare for the registration
of the Registrable Securities to be registered and (ii) use its reasonable best
efforts to (x) cause such registration pursuant to this Section 5(a) to become
and remain effective as soon as practicable, but in any event not later than
ninety (90) days after it receives a request therefor and (y) include in such
offering the Registered Securities of the Designated Holders (other than the S-3
Initiating Holders) who have requested in writing to participate in such
registration on the same terms and conditions as the Registrable Securities of
the S-3 Initiating Holders included therein.
(b) FORM S-3 UNDERWRITING PROCEDURES. If the S-3 Initiating
Holders holding a majority of the Registrable Securities held by all of the S-3
Initiating Holders to which the requested S-3 Registration relates so elect, the
Company shall use its reasonable efforts to cause such S-3 Registration pursuant
to this Section 5 to be in the form of a firm commitment underwritten offering
and the managing underwriter or underwriters selected for such offering shall be
the Approved Underwriter selected in accordance with Section 3(f).
In connection with any S-3 Registration under Section 5(a) involving an
underwriting, the Company shall not be required to include any Registrable
Securities in such underwriting unless the Designated Holders thereof accept the
terms of the underwriting as agreed upon
-11-
<PAGE>
between the Company, the Approved Underwriter and the S-3 Initiating Holders,
and then only in such quantity as will not, in the opinion of such underwriter,
jeopardize the success of such offering by the S-3 Initiating Holders. If in
the written opinion of the Approved Underwriter the registration of all or part
of the Registrable Securities which the S-3 Initiating Holders and the other
Designated Holders have requested to be included would materially adversely
affect such public offering, then the Company shall be required to include in
the underwriting, to the extent of the amount that the Approved Underwriter
believes may be sold without causing such adverse effect, FIRST, all of the
Registrable Securities to be offered for the account of the S-3 Initiating
Holders; SECOND, the Registrable Securities to be offered for the account of the
other Designated Holders who requested inclusion of their Registrable Securities
pursuant to Section 5(a), pro rata which each group based on the amount
recommended by the Approved Underwriter, and THIRD, any other securities
requested to be included in such underwriting.
(c) LIMITATIONS ON FORM S-3 REGISTRATIONS. If at the time of
any request to register Registrable Securities pursuant to Section 5(a), the
Company is engaged in, or has fixed plans to engage in within thirty (30) days
of the time of such request, a registered public offering or is engaged in any
other activity which, in the good faith determination of the Board of Directors,
would be adversely affected by the requested S-3 Registration to the material
detriment of the Company, then the Company may at its option direct that such
request be delayed for a reasonable period not in excess of three (3) months
from the effective date of such offering or the date of completion of such other
material activity, as the case may be, such right to delay a request to be
exercised by the Company not more than once in any one-year period. In
addition, the Company shall not be required to effect any registration pursuant
to Section 5(a) (i) within three (3) months after the effective date of any
other Registration Statement of the Company, (ii) if within the 12-month period
preceding the date of such request, the Company has effected two registrations
on Form S-3 pursuant to Section 5(a) and all of the Registrable Securities
registered therein have been sold, (iii) if Form S-3 is not available for such
offering by the S-3 Initiating Holders or (iv) if the S-3 Initiating Holders,
together with the Designated Holders (other than the S-3 Initiating Holders)
registering Registrable Securities in such registration, propose to sell their
Registrable Securities at an aggregate price (calculated based upon the Market
Price of the Registrable Securities on the date of filing of the Form S-3 with
respect to such Registrable Securities) to the public of less than $1,000,000.
(d) EXPENSES. In connection with any registration pursuant to
this Section 5, the Company shall pay all Registration Expenses (other than
underwriting discounts and commissions), whether or not such registration
becomes effective; PROVIDED, HOWEVER, that the Company shall not be required to
pay the Registration Expenses for a registration pursuant to this Section 5 if
the Company has paid the Registration Expenses of another registration pursuant
to this Section 5 in the preceding 12-month period. All Registration Expenses
-12-
<PAGE>
incurred in connection with any registration pursuant to this Section 5 for
which the Company has no obligation to pay such Registration Expenses shall be
borne by the Designated Holders who participate in such registration on a pro
rata basis according to the number of Registrable Securities owned by the
Designated Holders that are included in such registration at the time that such
registration becomes effective.
(e) NO DEMAND REGISTRATION. No registration requested by any
Designated Holder pursuant to this Section 5 shall be deemed a Demand
Registration pursuant to Section 3.
6. HOLDBACK AGREEMENTS.
(a) RESTRICTIONS ON PUBLIC SALE BY DESIGNATED HOLDERS. If and
to the extent requested by the Company, the Initiating Holders or the S-3
Initiating Holders, as the case may be, in the case of a non-underwritten public
offering or if and to the extent requested by the Approved Underwriter or the
Company Underwriter, as the case may be, in the case of an underwritten public
offering, each Designated Holder of Registrable Securities agrees not to effect
any public sale or distribution of any Registrable Securities or of any
securities convertible into or exchangeable or exercisable for such Registrable
Securities, including a sale pursuant to Rule 144 under the Securities Act,
during the 90-day period or such shorter period agreed upon by such Designated
Holder and the requesting party beginning on the effective date of such
Registration Statement (except as part of such registration).
(b) RESTRICTIONS ON PUBLIC SALE BY THE COMPANY. The Company
agrees not to effect any public sale or distribution of any of its securities,
or any securities convertible into or exchangeable or exercisable for such
securities (except pursuant to registrations on Form S-4 or S-8 or any successor
thereto), during the period beginning on the effective date of any Registration
Statement in which the Designated Holders of Registrable Securities are
participating and ending on the earlier of (i) the date on which all Registrable
Securities registered on such Registration Statement are sold and (ii) 120 days
after the effective date of such Registration Statement (except as part of such
registration).
7. REGISTRATION PROCEDURES.
(a) OBLIGATIONS OF THE COMPANY. Whenever registration
of Registrable Securities has been requested pursuant to Section 3, Section 4 or
Section 5 of this Agreement, the Company shall use its best efforts to effect
the registration and sale of such Registrable Securities in accordance with the
intended method of distribution thereof as quickly as practicable, and in
connection with any such request, the Company shall, as expeditiously as
possible:
-13-
<PAGE>
(i) use its best efforts to prepare and file with the
SEC a Registration Statement on any form for which the Company then qualifies or
which counsel for the Company shall deem appropriate and which form shall be
available for the sale of such Registrable Securities in accordance with the
intended method of distribution thereof, and use its best efforts to cause such
Registration Statement to become effective; PROVIDED, HOWEVER, that (x) before
filing a Registration Statement or prospectus or any amendments or supplements
thereto, the Company shall provide counsel selected by the Designated Holders
holding a majority of the Registrable Securities being registered in such
registration ("Holders' Counsel") and any other Inspector with an adequate and
appropriate opportunity to participate in the preparation of such Registration
Statement and each prospectus included therein (and each amendment or supplement
thereto) to be filed with the SEC, which documents shall be subject to the
review of Holders' Counsel, and (y) the Company shall notify the Holders'
Counsel and each seller of Registrable Securities of any stop order issued or
threatened by the SEC and take all reasonable action required to prevent the
entry of such stop order or to remove it if entered;
(ii) prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus used in connection
therewith as may be necessary to keep such Registration Statement effective for
the lesser of (x) 120 days and (y) such shorter period which will terminate when
all Registrable Securities covered by such Registration Statement have been
sold, and comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such Registration Statement during such
period in accordance with the intended methods of disposition by the sellers
thereof set forth in such Registration Statement;
(iii) as soon as reasonably possible, furnish to each
seller of Registrable Securities, prior to filing a Registration Statement,
copies of such Registration Statement as is proposed to be filed, and thereafter
such number of copies of such Registration Statement, each amendment and
supplement thereto (in each case including all exhibits thereto), the prospectus
included in such Registration Statement (including each preliminary prospectus)
and such other documents as each such seller may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such seller;
(iv) use its best efforts to register or qualify such
Registrable Securities under such other securities or "blue sky" laws of such
jurisdictions as any seller of Registrable Securities may request, and to
continue such qualification in effect in such jurisdiction for as long as
permissible pursuant to the laws of such jurisdiction, or for as long as any
such seller requests or until all of such Registrable Securities are sold,
whichever is shortest, and do any and all other acts and things which may be
reasonably necessary or advisable to enable any such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
seller; PROVIDED, HOWEVER, that the Company shall not be
-14-
<PAGE>
required to (x) qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this Section 7(a)(iv), (y)
subject itself to taxation in any such jurisdiction or (z) consent to general
service of process in any such jurisdiction;
(v) use its best efforts to cause the Registrable
Securities covered by such Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary
by virtue of the business and operations of the Company to enable the seller or
sellers of Registrable Securities to consummate the disposition of such
Registrable Securities;
(vi) notify each seller of Registrable Securities at
any time when a prospectus relating thereto is required to be delivered under
the Securities Act, upon discovery that, or upon the happening of any event as a
result of which, the prospectus included in such Registration Statement contains
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which they were made, and the
Company shall promptly prepare a supplement or amendment to such prospectus and
furnish to each seller a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, after delivery to the
purchasers of such Registrable Securities, such prospectus shall not contain an
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances under which they were made;
(vii) enter into and perform customary agreements
(including an underwriting agreement in customary form with the Approved
Underwriter or Company Underwriter, if any, selected as provided in Section 3,
Section 4 or Section 5, as the case may be) and take such other actions as are
prudent and reasonably required in order to expedite or facilitate the
disposition of such Registrable Securities;
(viii) make available for inspection by any seller of
Registrable Securities, any managing underwriter participating in any
disposition pursuant to such Registration Statement, Holders' Counsel and any
attorney, accountant or other agent retained by any such seller or any managing
underwriter (each, an "Inspector" and collectively, the "Inspectors"), all
financial and other records, pertinent corporate documents and properties of the
Company and its subsidiaries (collectively, the "Records") as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's and its subsidiaries' officers,
directors and employees, and the independent public accountants of the Company,
to supply all information reasonably requested by any such Inspector in
connection with such Registration Statement. Records that the Company
determines, in good faith, to be confidential and which it notifies the
Inspectors are confidential shall not be disclosed by the Inspectors unless
(x) the disclosure of such Records is necessary to avoid or correct a
misstate-
-15-
<PAGE>
ment or omission in the Registration Statement, (y) the release of such
Records is ordered pursuant to a subpoena or other order from a court of
competent jurisdiction or (z) the information in such Records was known to
the Inspectors on a non-confidential basis prior to its disclosure by the
Company or has been made generally available to the public. Each seller of
Registrable Securities agrees that it shall, upon learning that disclosure of
such Records is sought in a court of competent jurisdiction, give notice to
the Company and allow the Company, at the Company's expense, to undertake
appropriate action to prevent disclosure of the Records deemed confidential;
(ix) if such sale is pursuant to an underwritten
offering, use its best efforts to obtain a "cold comfort" letter from the
Company's independent public accountants in customary form and covering such
matters of the type customarily covered by "cold comfort" letters as Holders'
Counsel or the managing underwriter reasonably request;
(x) use its best efforts to furnish, at the request of
any seller of Registrable Securities on the date such securities are delivered
to the underwriters for sale pursuant to such registration or, if such
securities are not being sold through underwriters, on the date the Registration
Statement with respect to such securities becomes effective, an opinion, dated
such date, of counsel representing the Company for the purposes of such
registration, addressed to the underwriters, if any, and to the seller making
such request, covering such legal matters with respect to the registration in
respect of which such opinion is being given as such seller may reasonably
request and are customarily included in such opinions;
(xi) otherwise use its best efforts to comply with
all applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably practicable but no later than fifteen
(15) months after the effective date of the Registration Statement, an earnings
statement covering a period of twelve (12) months beginning after the effective
date of the Registration Statement, in a manner which satisfies the provisions
of Section 11(a) of the Securities Act and Rule 158 thereunder;
(xii) cause all such Registrable Securities to be listed
on each securities exchange on which similar securities issued by the Company
are then listed, PROVIDED that the applicable listing requirements are
satisfied;
(xiii) keep Holders' Counsel advised in writing as to the
initiation and progress of any registration under Section 3, Section 4 or
Section 5 hereunder;
(xiv) cooperate with each seller of Registrable
Securities and each underwriter participating in the disposition of such
Registrable Securities and their
-16-
<PAGE>
respective counsel in connection with any filings required to be made with
the National Association of Securities Dealers, Inc. (the "NASD"); and
(xv) use best efforts to take all other steps necessary
to effect the registration of the Registrable Securities contemplated hereby.
(b) SELLER INFORMATION. The Company may require each seller of
Registrable Securities as to which any registration is being effected to furnish
to the Company such information regarding the distribution of such securities as
the Company may from time to time reasonably request in writing.
(c) NOTICE TO DISCONTINUE. Each Designated Holder of
Registrable Securities agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 7(a)(vi), such
Designated Holder shall forthwith discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Designated Holder's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 7(a)(vi) and, if so
directed by the Company, such Designated Holder shall deliver to the Company (at
the Company's expense) all copies, other than permanent file copies then in such
Designated Holder's possession, of the prospectus covering such Registrable
Securities which is current at the time of receipt of such notice. If the
Company shall give any such notice, the Company shall extend the period during
which such Registration Statement shall be maintained effective pursuant to this
Agreement (including, without limitation, the period referred to in Section
7(a)(ii)) by the number of days during the period from and including the date of
the giving of such notice pursuant to Section 7(a)(vi) to and including the date
when the Designated Holder shall have received the copies of the supplemented or
amended prospectus contemplated by and meeting the requirements of
Section 7(a)(vi).
(d) REGISTRATION EXPENSES. The Company shall pay all expenses
arising from or incident to the performance of, or compliance with, this
Agreement, including, without limitation, (i) SEC, stock exchange and NASD
registration and filing fees, (ii) all fees and expenses incurred in complying
with securities or "blue sky" laws (including reasonable fees, charges and
disbursements of counsel in connection with "blue sky" qualifications of the
Registrable Securities), (iii) all printing, messenger and delivery expenses,
(iv) the fees, charges and disbursements of counsel to the Company and of its
independent public accountants and any other accounting fees, charges and
expenses incurred by the Company (including, without limitation, any expenses
arising from any "cold comfort" letters or any special audits incident to or
required by any registration or qualification) and any legal fees, charges and
expenses incurred by the Company and, in the case of a Demand Registration, the
Initiating Holders and (v) any liability insurance or other premiums for
insurance obtained in connection with any Demand Registration or piggy-back
registration thereon, Incidental
-17-
<PAGE>
Registration or registration on Form S-3 pursuant to the terms of this
Agreement, regardless of whether such Registration Statement is declared
effective. All of the expenses described in this Section 7(d) are referred
to herein as "Registration Expenses."
8. INDEMNIFICATION; CONTRIBUTION.
(a) INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnify and hold harmless, to the fullest extent permitted by law, each
Designated Holder, its officers, directors, trustees, partners, employees,
advisors and agents and each Person who controls (within the meaning of the
Securities Act or the Exchange Act) such Designated Holder from and against any
and all losses, claims, damages, liabilities and expenses (including reasonable
costs of investigation) arising out of or based upon any untrue, or allegedly
untrue, statement of a material fact contained in any Registration Statement,
prospectus or preliminary prospectus or notification or offering circular (as
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto) or arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as the
same are caused by or contained in any information concerning such Designated
Holder furnished in writing to the Company by such Designated Holder expressly
for use therein. The Company shall also provide customary indemnities to any
underwriters of the Registrable Securities, their officers, directors and
employees and each Person who controls such underwriters (within the meaning of
the Securities Act and the Exchange Act) to the same extent as provided above
with respect to the indemnification of the Designated Holders of Registrable
Securities.
(b) INDEMNIFICATION BY DESIGNATED HOLDERS. In connection with
any Registration Statement in which a Designated Holder is participating
pursuant to Section 3, Section 4 or Section 5 hereof, each such Designated
Holder shall furnish to the Company in writing such information with respect to
such Designated Holder as the Company may reasonably request or as may be
required by law for use in connection with any such Registration Statement or
prospectus and each Designated Holder agrees to indemnify and hold harmless, to
the fullest extent permitted by law, the Company, any underwriter retained by
the Company and their respective directors, officers, employees and each Person
who controls the Company or such underwriter (within the meaning of the
Securities Act and the Exchange Act) to the same extent as the foregoing
indemnity from the Company to the Designated Holders, but only with respect to
any such information with respect to such Designated Holder furnished in writing
to the Company by such Designated Holder expressly for use therein; PROVIDED,
HOWEVER, that the total amount to be indemnified by such Designated Holder
pursuant to this Section 8(b) shall be limited to the net proceeds received by
such Designated Holder in the offering to which the Registration Statement or
prospectus relates.
-18-
<PAGE>
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any Person entitled
to indemnification hereunder (the "Indemnified Party") agrees to give prompt
written notice to the indemnifying party (the "Indemnifying Party") after the
receipt by the Indemnified Party of any written notice of the commencement of
any action, suit, proceeding or investigation or threat thereof made in writing
for which the Indemnified Party intends to claim indemnification or contribution
pursuant to this Agreement; PROVIDED, HOWEVER, that the failure so to notify the
Indemnifying Party shall not relieve the Indemnifying Party of any liability
that it may have to the Indemnified Party hereunder unless, and only to the
extent that, such failure results in the Indemnifying Party's forfeiture of
substantive rights or defenses. If notice of commencement of any such action is
given to the Indemnifying Party as above provided, the Indemnifying Party shall
be entitled to participate in and, to the extent it may wish, jointly with any
other Indemnifying Party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and satisfactory to such
Indemnified Party. The Indemnified Party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel (other than reasonable costs of
investigation) shall be paid by the Indemnified Party unless (i) the
Indemnifying Party agrees to pay the same, (ii) the Indemnifying Party fails to
assume the defense of such action with counsel satisfactory to the Indemnified
Party in its reasonable judgment or (iii) the named parties to any such action
(including any impleaded parties) have been advised by such counsel that either
(x) representation of such Indemnified Party and the Indemnifying Party by the
same counsel would be inappropriate under applicable standards of professional
conduct or (y) there may be one or more legal defenses available to it which are
different from or additional to those available to the Indemnifying Party. In
either of such cases, the Indemnifying Party shall not have the right to assume
the defense of such action on behalf of such Indemnified Party. No Indemnifying
Party shall be liable for any settlement entered into without its written
consent, which consent shall not be unreasonably withheld.
(d) CONTRIBUTION. If the indemnification provided for in this
Section 8 from the Indemnifying Party is unavailable to an Indemnified Party
hereunder in respect of any losses, claims, damages, liabilities or expenses
referred to therein, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the Indemnifying Party and Indemnified Party in connection with the actions
which resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative faults of such
Indemnifying Party and Indemnified Party shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied by,
such Indemnifying Party or Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action. The amount paid or payable by a party as a
-19-
<PAGE>
result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include, subject to the limitations set forth in
Sections 8(a), 8(b) and 8(c), any legal or other fees, charges or expenses
reasonably incurred by such party in connection with any investigation or
proceeding; PROVIDED that the total amount to be indemnified by such
Designated Holder shall be limited to the net proceeds received by such
Designated Holder in the offering.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 8(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No Person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
Person.
9. RULE 144. The Company covenants that it shall (a) file any
reports required to be filed by it under the Exchange Act and (b) take such
further action as each Designated Holder of Registrable Securities may
reasonably request (including providing any information necessary to comply with
Rules 144 and 144A under the Securities Act), all to the extent required from
time to time to enable such Designated Holder to sell Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by (i) Rule 144 under the Securities Act, as such rule may
be amended from time to time, or (ii) any similar rules or regulations hereafter
adopted by the SEC. The Company shall, upon the request of any Designated
Holder of Registrable Securities, deliver to such Designated Holder a written
statement as to whether it has complied with such requirements.
10. MISCELLANEOUS.
(a) RECAPITALIZATIONS, EXCHANGES, ETC. The provisions of this
Agreement shall apply, to the full extent set forth herein with respect to
(i) the shares of Class A Common Stock, (ii) any and all shares of voting common
stock of the Company into which the shares of Class A Common Stock or Class B
Common Stock are converted, exchanged or substituted in any recapitalization or
other capital reorganization by the Company and (iii) any and all equity
securities of the Company or any successor or assign of the Company (whether by
merger, consolidation, sale of assets or otherwise) which may be issued in
respect of, in conversion of, in exchange for or in substitution of, the shares
of Class A Common Stock or Class B Common Stock and shall be appropriately
adjusted for any stock dividends, splits, reverse splits, combinations,
recapitalizations and the like occurring after the date hereof. The Company
shall cause any successor or assign (whether by sale, merger or otherwise) to
enter into a new registration rights agreement with the Designated Holders on
terms substantially the same as this agreement as a condition of any such
transaction.
-20-
<PAGE>
(b) NO INCONSISTENT AGREEMENTS. The Company represents and
warrants that it has not granted to any Person the right to request or require
the Company to register any securities issued by the Company, other than the
rights granted to the Designated Holders herein. The Company shall not enter
into any agreement with respect to its securities that is inconsistent with the
rights granted to the Designated Holders in this Agreement or grant any
additional registration rights to any Person or with respect to any securities
which are not Registrable Securities which are prior in right to or inconsistent
with the rights granted in this Agreement.
(c) REMEDIES. The Designated Holders, in addition to being
entitled to exercise all rights granted by law, including recovery of damages,
shall be entitled to specific performance of their rights under this Agreement.
The Company agrees that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of this
Agreement and hereby agrees to waive in any action for specific performance the
defense that a remedy at law would be adequate.
(d) AMENDMENTS AND WAIVERS. Except as otherwise provided
herein, the provisions of this Agreement may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless consented to in writing by each of (i) the Company, (ii)
the EXE Stockholders holding Registrable Securities representing (after giving
effect to any adjustments) at least 60% of the aggregate number of Registrable
Securities owned by all of the EXE Stockholders and (iii) the Investor
Stockholders holding Registrable Securities representing (after giving effect to
any adjustments) at least 60% of the aggregate number of Registrable Securities
owned by all of the Investor Stockholders, PROVIDED, HOWEVER, that if any
amendment, supplement, modification or waiver could reasonably be expected to
have a material adverse effect on the rights of a particular class of the
Investor Stockholders, then such amendment, supplement, modification or waiver
shall not be effective unless approved by the holders of the affected class
representing (after giving effect to any adjustments) at least 60% of the
aggregate number of Registrable Securities owned by such affected class. Any
such written consent shall be binding upon the Company and all of the Designated
Holders.
-21-
<PAGE>
(e) NOTICES. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be made
by registered or certified first-class mail, return receipt requested,
telecopier, courier service, overnight mail or personal delivery:
(i) if to the Company or the Major Stockholders:
c/o EXE Technologies, Inc.
12740 Hillcrest Road
Dallas, Texas 75230
Telecopy: (972) 788-4208
Attention: Mr. Raymond Hood
with a copy to:
Pepper Hamilton LLP
1235 Westlakes Drive, Suite 400
Berwyn, PA 19312-2401
Telephone: (610) 640-7800
Telecopy: (610) 640-7835
Attention: Michael P. Gallagher, Esquire
-22-
<PAGE>
(ii) if to GAP LP or GAP Coinvestment:
c/o General Atlantic Service Corporation
3 Pickwick Plaza
Greenwich, Connecticut 06830
Telecopy: (203) 622-8818
Attention: Mr. Stephen P. Reynolds
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Telecopy: (212) 757-3990
Attention: Matthew Nimetz, Esq.
(iii) if to the Dell Stockholders:
Triple Marlin Investments LLC
145 West 67th Street, Number 40-G
New York, New York 10023
Telecopy: (212) 721-6197
Attention: Mr. John Phelan
- and to -
MSD Capital L.P.
3400 Toro Canyon Road
Austin, Texas 78746
Telecopy:_________________
Attention: Mr. Michael S. Dell
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, NY 10153
Telecopy: (212) 310-8007
Attention: Michael Nissan, Esquire
(iv) if to any other Designated Holder, at its
address as it appears on the record books of
the Company.
-23-
<PAGE>
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; when delivered by
courier or overnight mail, if delivered by commercial courier service or
overnight mail; five (5) Business Days after being deposited in the mail,
postage prepaid, if mailed; and when receipt is mechanically acknowledged, if
telecopied.
(f) SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES. This
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto. The Demand Registration rights of the
General Atlantic Stockholders, the Dell Stockholders and the Major Stockholders
contained in Section 3 of this Agreement and the other rights of each of
the General Atlantic Stockholders, the Dell Stockholders and the EXE
Stockholders with respect thereto shall be, with respect to any Registrable
Security, (i) automatically transferred, in the case of such rights of the
General Atlantic Stockholders, among the General Atlantic Stockholders, in the
case of such rights of the Dell Stockholders, among the Dell Stockholders, and,
in the case of such rights of the EXE Stockholders, among the EXE Stockholders
and (ii) in all other cases, transferred only with the consent of the Company.
The incidental or "piggy-back" registration rights of the Designated Holders
contained in Sections 3(b) and 4 of this Agreement, its Form S-3 registration
rights contained in Section 5 of this Agreement and the other rights of each of
the Designated Holders with respect thereto shall be, with respect to any
Registrable Security, automatically transferred by such Designated Holder to any
Person who is the transferee of such Registrable Security. All of the
obligations of the Company hereunder shall survive any such transfer. No Person
other than the parties hereto and their successors and permitted assigns is
intended to be a beneficiary of any of the rights granted hereunder.
(g) COUNTERPARTS. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(i) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to the principles of conflicts of law of any jurisdiction.
(j) SEVERABILITY. If any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable in any respect for any reason, then the
validity, legality and enforceability of
-24-
<PAGE>
any such provision in every other respect and of the remaining provisions hereof
shall not be in any way impaired, it being intended that all of the rights and
privileges of the Designated Holders shall be enforceable to the fullest extent
permitted by law.
(k) ENTIRE AGREEMENT. This Agreement is intended by the parties
as a final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein and in the Stock Purchase Agreements. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
subject matter including, without limitation, the Prior Registration Rights
Agreement.
(l) FURTHER ASSURANCES. Each of the parties shall execute such
documents and perform such further acts as may be reasonably required or
desirable to carry out or to perform the provisions of this Agreement.
[SIGNATURE PAGES FOLLOW]
-25-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed, or have caused to
be executed, this Agreement on the date first written above.
EXE TECHNOLOGIES, INC.
By: /s/ Raymond R. Hood
-------------------------------------------
Print Name: Raymond R. Hood
-----------------------------------
Title: President
----------------------------------------
GENERAL ATLANTIC PARTNERS 41, L.P.
By: GENERAL ATLANTIC PARTNERS, LLC,
its General Partner
By: /s/ Nancy E. Cooper
-------------------------------------------
Print Name: Nancy E. Cooper
-----------------------------------
Title: Managing Member
----------------------------------------
GAP COINVESTMENT PARTNERS, L.P.
By: /s/ Nancy E. Cooper
-------------------------------------------
Print Name: Nancy E. Cooper
-----------------------------------
Title: General Partner
----------------------------------------
MSD CAPITAL L.P.
By: /s/ Michael Dell
-------------------------------------------
Michael Dell, General Partner
<PAGE>
TRIPLE MARLIN INVESTMENTS LLC
By: /s/ John Phelan
-------------------------------------------
John Phelan, Manager
ROTHKO INVESTMENTS LLC
By: /s/ Glenn Fuhrman
-------------------------------------------
Glenn Fuhrman, Manager
/s/ Lyle Baack
----------------------------------------------
Lyle Baack
/s/ Nigel Bahadur
----------------------------------------------
Nigel Bahadur
/s/ Adam Belsky
----------------------------------------------
Adam Belsky
/s/ Raymond Hood
----------------------------------------------
Raymond Hood
<PAGE>
July 20, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
EXE Technologies, Inc.
Ladies and Gentlemen:
We have read the section titled "Changes in and Disagreements with
Accountants on Accounting and Financial Disclosure" of EXE Technologies,
Inc.'s Form S-1 and are in agreement with the statements contained therein.
Yours very truly,
PricewaterhouseCoopers LLP
<PAGE>
Exhibit 21.1
SUBSIDIARIES OF EXE TECHNOLOGIES, INC.
- - EXE Technologies, (UK) PLC
- - EXE Technologies (SEA)
- - EXE Technologies, Inc. Sdn Bhd
- - EXE Technologies (China), Ltd
- - EXE Technologies - Middle East (FZE)
- - EXE Technologies KK - Japan
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our reports dated July 10, 1998 with respect to the financial
statements of EXE Technologies, Inc. for the year ended December 31, 1997 and
the financial statements of Dallas Systems Corporation for the years ended
December 31, 1995 and 1996 and for the eight and one-half month period ended
September 15, 1997 in the Registration Statement (Form S-1) and related
Prospectus of EXE Technologies for the registration of 8,855,000 shares of
its common stock.
Ernst & Young LLP
Dallas, Texas
July 20, 1998
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated April 18, 1997,
relating to the financial statements of Neptune Systems, Inc. as of December
31, 1996 and for each of the two years in the period ended December 31, 1996,
which appears in such Prospectus. We also consent to the references to us
under the headings "Experts" and "Selected Consolidated Financial Data" in
such Prospectus. However, it should be noted that PricewaterhouseCoopers LLP
has not prepared or certified such "Selected Consolidated Financial Data."
PricewaterhouseCoopers LLP
Philadelphia, PA
July 20, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 MAR-31-1998
<PERIOD-START> JAN-01-1997 JAN-01-1998
<PERIOD-END> DEC-31-1997 DEC-31-1998
<CASH> 6,653 2,164
<SECURITIES> 0 0
<RECEIVABLES> 18,613 18,534
<ALLOWANCES> (990) (848)
<INVENTORY> 0 0
<CURRENT-ASSETS> 28,069 23,560
<PP&E> 5,334 6,534
<DEPRECIATION> (1,021) (1,441)
<TOTAL-ASSETS> 40,249 36,896
<CURRENT-LIABILITIES> 16,029 13,835
<BONDS> 17 15
0 0
25,000 25,000
<COMMON> 163 163
<OTHER-SE> (3,556) (4,108)
<TOTAL-LIABILITY-AND-EQUITY> 40,249 36,896
<SALES> 26,772 20,682
<TOTAL-REVENUES> 26,949 20,605
<CGS> 14,844 10,157
<TOTAL-COSTS> 49,651 20,361
<OTHER-EXPENSES> 385 2
<LOSS-PROVISION> 634 0
<INTEREST-EXPENSE> 158 2
<INCOME-PRETAX> (23,011) 355
<INCOME-TAX> (225) 180
<INCOME-CONTINUING> (22,786) 175
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (22,786) 175
<EPS-PRIMARY> (2.03) 0.01
<EPS-DILUTED> (2.03) 0.01
</TABLE>
